equipped by nato to overthrow gadhafi used the resources and the training to kill our ambassador and kill three other americans. because their objective was not to establish democracy in libya. their objective was to take over the government, establish the caliphate, establish sharia law, and as soon as they got rid of gadhafi, they were going to get rid of the u.s. and guess what? they succeeded. the u.s. left an we're now in a position where we are bombing in libya because they have established a caliphate, there's 5,000 jihadists estimated to be in libya who are now exporting fighter, equipment and ideology into northern africa. where do they send their ideology and fighters and weapons first? come on, you know. syria.

people have reported weapons, fighters. libya has a history of exporting fighters to syria through turkey. it was flush with weapons. nato flooded libya with weapons. uae, qatar, they flooded libya with weapons. the arms caches were liberated. they went turkey into syria. we were more encouraging of it than stopping it. why? s a said needed to gop he's an evil man. but we called the book one of

the things that mubarak, kwa dar fi -- i need to give him credit for that. i was talking to him about libya and talking about libya and keeping the radical jihadists down. kind of like keeping the lid on the garbage can. mubarak, gadhafi, assad, they were imperfect, but they kept the lid on the garbage can. they were concerned and fighting radical jihadists. we created an environment for radical jihadists to grow, embracing the muslim brotherhood. it's not just over there. we're completing a report and we're going to be putting a book out often this as well in the

near future. we not only have embraced the muslim brotherhood, the people that want to destroy an undercut western democracy all around the world. but we've embraced them and we have allowed representatives of the muslim brotherhood to come into the united states, their frond organization and we have allowed them access into our federal government agencies and into the white house, which is absolutely unconscionable. these people want to destroy the united states and they have access now to the highest levels of our government to inform, to, quote, unquote, inform our foreign policy. this is where we are today. the end result is in the next week or so we're going to have another report out from ipt. look at the evidence. from 2001 to 2006 radical

jihadists on a global basics weres s bs b s bs by dispersed. from 2007 so 2011, that number increased to somewhere in the high 3,000s. okay? 2012-2013, we went from 35, 3,700 per year on average to over 9,000. it's starting to concentrate. we've gone from 9,000 to 28,000 per year victims of radical jihadists attacks. those attacks are now concentrated in two areas, primarily. primarily in the middle east and in africa.

as bob will remember, when we were in congress, we said -- and this was the whole strategy about going into afghanistan. nobody know where is afghanistan is, right? right? they were trained to attack us. we're going to go into the end of the world. the joke about afghanistan, afghanistan was formed when all the countries around it decided what territory they didn't want and they drew the boundaries and what was left was afghanistan. but we were willing to go to afghanistan to make sure there was not a safe place for these people to plan and prepare and train to attack america. we would go to afghanistan. well guess what. they now have a relatively -- sure, we're bombing. the problem is our planes fly over and too many times they come back with the bomb still on, but we've given them a big scare because we' gloen over them. but, you know, they've now got a

safe haven in somewhat of a safe haven where they've organized with the caliphate in syria and iraq. they've got a safe haven until more recently in libya. what's going to happen here. what are our predictions that the investigative project on terrorism for 2016, '17 and '18. fatalities are going to go up, because we don't have effective strategies. the second thing we predict is that in the middle east with what was going on with syria, iraq, yemen, watch out what's going to happen with turkey, watch out what's going to happen with jordan, watch out what's going to happen with saudi,

watch out what's going to happen in egypt and watch out what's going to happen in israel. okay? it is -- it's just a rat's next right now. we don't have the strategies to confront it and contain it. look at africa, nine of the countries now -- back in 2001, it was ten countries dispersed widely. now it's 18 countries there's a relatively high level of terrorist activity. the middle east, concentrated in the middle east and africa, nine countries in africa. that number is going to grow. because again they've got a base where they can train, prepare and attack other places. you're going to see africa get to be a bigger hot spot.

if you've got the middle east and libya and northern africa. through turkey, last year diane and i were in budapest. we got on a train saturday morning and typical russian efficiency. you got in one line to go into another line to get into a line to buy your ticket. we took the train from budapest to prague. we got to prague the next morning and turned on tv. the station that we were in the day before was not surrounded by 5,000 to 10,000 refugees and migrants. you've got this getway.

now you have these fighters going into europe. you've got the gateway from libya. why? because it's not that far. across the mediterranean. and you can get to the soft underbelly of europe. europe is at risk. i think that the security services in europe are going to be absolutely stressed with the new folks coming in with the folks they've already had here. you're going to see an increase of terrorism and violence in europe in the next 18 to 24 months. there's no way that they can stop it. they're going to expand into asia. they are on the move. they have the momentum right now. and we as americans and the west fail to realize it and admit it and confront it. this doesn't look like winning

to me, folks. when you see that we've got failed states in libya, syria, iraq. when you take a look at it and go back to what we talked about when we started which is that when it break, it's very, very hard to put together. it's going to take a long time. the northeast is broken. africa is broken. large portions of africa are broken. europe is on the verge of breaking. and for europe to get back to the europe we knew 10 to 15 years ago, i'm not sure it's even possible. but the question is how far will it go? and how far will it deteriorate before they actually put in place? and what you'll see in many of these countries is -- and we look at this very, very closely.

there is now a break between the populist and the governed. we see the same thing here. there's a disconnection, you know? you've got governments in europe saying come on in, welcome in. you've got people in the community saying uh-uh, this isn't working for us. we need to -- if we're going to do that, we question. we've got to do some kind of assimilation process or whatever or we're going to lose our germanness. youive' gotta break. here in the united states, we face some of those same kinds of issues. how many of you have heard about legislation that a lot of states are considering, american law for american courts.

is that something we're working on in colorado? no. and people say why would you have to do that? in many parts of europe, there are little enclaves or area where is they allow for sharia law. if we talk about -- think about it. we don't talk -- people who are talking about american law for american courts don't mention any other kind of thing, we just want to reaffirm that in america, think about it, in america, we want to affirm that if you go to court, you will be judged by american law and nothing else. if you're espousing those kinds of ideals it's hate speech. no it's not. that's a speech that say is love america. i kind of like our system. it's imperfect, but it's better

than anything else out there. i want to make sure that people here recognize that if you're in america, you will live under american law. do we really want to embrace some of the philosophy and ideology out there in some of the other places. i'm sorry, it's not the values that i em brags, that we in america embrace. their treatment of men, treatment of kids. human rights, basic human rights and human values. no, we have to eare enforce who we are and what we have to do. i encourage you, the threat to america is real and it's today.

this is not something that we can leave to our kids and our grand kids. this is when i talk to a lot of my friends in europe, it's kind of like we wish that we had talked about this and addressed this 15 years ago. the second lesson that they tell us is learn from us and don't make the same mistakes we made. america is strong, we are the greatest, we are exceptional. and the question that we now have is what are we going to do to make sure that we keep that exceptionalism and we continue to be the right hope of the world. does that mean everybody has to be like us? no. for everybody to get where we want to be, we would love that to happen. we're not going to employ our military to make that happen. we're going to set our example for who we are so people want to aspire to what we are and who we are and when they see who we are, they will want it and make that change for themselves.

that is the challenge we face. i believe we're losing today is that we need a national dialogue to move this forward. we need to get rid of republican and democrat labels on this. we need to embrace and come together once again as americans and talk about what it means to be americans and develop a long-term strategy. we can no longer have a foreign policy that shifts dramatically every time we put a new person into the white house. this is to determine who america is and from one president to the next, we may tweak our foreign policy, but never again will we so dramatically change our foreign policy that, your know, we are in the mess that we are today. our enemies no longer fear us, our friends no longer trust us.

this is not brain surgery, folks. assad has looked at mubarak and said this is a guy that did everything that the americans asked him to do for 30 years and the americans threw him under the bus. the bus kept going from cairo to tr tr tr tripoli and it rode over him next. gadhafi lived six months longer than bin laden before we killed him. what is the lesson to assad or anybody else out there? that's a good idea. i think i'll negotiate with the americans. if i really change my behavior,

if i improve human rights or go after radical jihadists and work with em them, they're going to be with me. i don't think so, that's not going to work. a shared vision for where we want to go, how we're going to promote them in the future. the good things that we've done, with that, i'm more than willing to take whatever questions you want to throw my way. >> are there any -- two-part question. are there any democrats that could give that same kind of speech to a room? and if not, if you were in this room with a group of democrats, what would they be throwing back at you?

>> yeah, i think there are. there are some. there's not a lot of democrats, but there are some who clearly see the threat from radical jihadists. what will they throw back at me? hillary clinton was talking about -- this amazes me. she talked ability in one of the debates said libya is the best example of the the use of smart power. i was like you've got to be kidding me. but that's what they believe. you mentioned in the front row here, racist, islamaphobe, you just don't see the world clearly. what i do in the book is outline a series of what i think are realistic foreign policy and outline. foreign policy is not black and

white. most of the world that i dealt with in foreign policy, it's gray. to move forward, you sometimes have to do business with bad people. and there's a whole series of things like that. they're racist, they're scared and those kinds of things. i would have left gadhafi in place. i would have left as sad in place. i would have left mubarak in place. and if we had left those three governments in place, the middle east would be a whole lot different today. why would i say that. when you go in and break it, it's really, really hard to put back together. >> it seems like we're playing

this game of whack-a-mole. we take them out and more show up in the vacuum. it seems like maybe our best strategy is just to support a few strongmen, even though that seems, you know, unpleasant in itself. people in the west were unwilling to put resources and those types of things to keep the lid on. you see failed states. the other thing i report will show, where do you see the graetdest number of terrorist attacks? the failed states. where are the failed states. the ones we're more active in. >> paul cohen 2016, denver, colorado. sir, you describe a change you would like to see in the political dynamic such that

foreign policy doesn't go through theetz abrupt changes between administrations, especially different parties. >> just a whole new level of maturity back into the political process. >> we're not going to have -- so we're all going to mature all of a sudden? >> no. i'm not -- you're asking how it could happen. i'm not saying it will happen. >> how you see it happening. what can we do to make it happen? >> i'm very pessimistic, okay? i listen to the campaigns today on both sides of the aisle and i see a lot of phrases thrown around that provide the american people with the hope and the expectation that there are easy answers to these, what i see as deep enduring problems. and it's kind of like no, this is not. this is hard, this is not

political. you're using this for political advantage. and so i'm very pessimistic, and i see the real opportunity that as you go from one -- what we've seen over the last 12 to 14 years, we're going to see for the next 12 to 14 years are foreign policy is a political hot button. it is a leverage point to win elections. and it's going to flow back and forth. foreign policy is really, really hard. people are going to make mistakes, and the other political party is going to leverage that for their political advantage. and we as americans are going to suffer. i'm pessimistic about us actually developing the maturity to have the kind of discussions we need on foreign policy. i'm sorry i wish i had an optimistic answer but i don't. i lived through it when i was on the intel committee.

there was all this discussion about black sites. republicans and democrats all knew that these things were going on. we were brief, we were briefed in detail about what enhanced interrogations were where they were being used, who they are being used on. it was a gang of eight type of thing. and then i started seeing it in the press. and i know where it came from. it didn't come out of the intel community. it came out of congress. and it was using it for political advantage. they thought that they could destroy the other political party and use it to gain advantage in the next election. and you know what, they were right. and they hurt america because of it. and that doesn't mean i agree with every one of those policies. but every single republican and democrat in that room had the opportunity to stand up and say no. and i never saw one of them do it. until they had an opportunity to talk to the press anonymously.

>> congressman, maybe my question plays on what you just said. in the back there, there's a sign that says big government sucks. and we've heard a number of previous speakers say some variant of big government sucks. but the fact remains, i think if you look at this country's history, the war is the health of the state, and if we're going to go to war, you can not run a war on the basis of big government spungs wars mean higher taxes, they mean larger debts. they mean more government power, and they mean less freedom for individuals. it's just part of the way we deal with emergencies when wars happen. and i think that's something that maybe this program needs to think about. >> yeah. okay. >> congressman, i'm jack graham from fort collins. i've heard many people talk

about the fact that we're not fighting a military war, we're also finally a ideology in ism, radical terrorism. similar with naziism, stalinism and imperialism. do you agree with that? and if you do, how do we fight it? >> absolutely. i just got a -- someone sent it to me this morning where someone asked about regit gabriel from act for america. yeah, it is an ideological war, as well as a military war. and you have to fight both of them. she does it much better than i do, the question was, aren't most muslims peace loving? it's kind of like yeah, most germans were peace loving and we still ended up fighting a war that cost millions of lives. many people in -- most people in russia are peace loving. and they still went through a process where they killed 20 million people. most japanese are peace loving, but they went through a killing swath across much of asia.

so yeah, we have to fight the ideology. a protestant in mumy can't fight the ideological war. i'm reading about these interfaith dialogue with christians, muslims and jews and these types of things. yes, that's good. you know what they ought to be talking about? let's have this dialogue and let's go help the christians and the jews and the other religious minorities in the northeast. that's the issue right now. it's not about whether you can put a mosque on this corner but go help us save the azidis in iraq today. help us save the caldians in iraq today make an impact. that is the fight that they need to be having. that's what the interfaith alliance needs to be talking about and the dialogue is how do we save the lives of these people being butchered and

massacred and crucified all across the middle east? and the peace loving muslims need to fight and need to be the tip of the spear to take this and fight in ideology within their religion. >> roger, last question. >> class of 2014 for lpr, quantity fiably the best class ever. i wanted to ask you to do something, which might be tough for you. i imagine a lot of us are going to leave here kind of going, what the heck is going through the mind of barack obama as president of the united states. so i'm going to ask you to do something. channel him, if you don't mind. and tell us what you're thinking. >> no, i think only by watching what he's doing, okay?

and i can't -- does he love america? i'm not going to get into that. he fundamentally believed that by engaging with the folks that, quote, unquote, were enemies of the united states, that because he was president they would see us differently and they would change their behavior. okay? they did not give up their self-interest. the muslim brotherhood wants to destroy us today as much as they did eight or neen years ago or 20 years ago or 80 years ago. they want to establish the caliphate by engaging with them we provided them an opening to make more progress in the last eight years than they made in the 50 years before that. okay? engaging -- this president wanted to deal with iran the day he came into office. we got a deal with iran. it doesn't tell you about the quality of the deal, but we got a deal. i think we're going to regret

that agreement. and they didn't change one -- the frustrating thing with iran, they got a deal and they didn't change their behavior. they never paid reparations to the victims of their terrorist attacks. $150 billion, some of which is going to be used to fund terrorist attacks against israel, against the united states and our friends throughout the middle east. they haven't -- they're not changing their behavior. and now this engagement with cuba. and what are the headlines about this? in the face of obama going to cuba, there's a crackdown on dissidents. and then he may give them gitmo. i think this is why i really argue for experience especially in foreign policy.

this is really, really hard. i think this president went into it naively, believing that we change our behavior, they will change theirs. and what i think we found is that we changed our behavior dramatically. in almost all these cases, we asked for no change in behavior and we didn't get in change in behavior. and so that's where we are today. i just appreciate you giving me the time to be here and share these thoughts with you. and isle be here for the rest of the conference then. for those of you who didn't get your questions answered, i'll be around and you can take a shot at me later. again, thank you very much. and thanks for all the good work you do. >> the supreme court is vested

with this outside amount of power. and with comes greater responsibility. it just doesn't pass the smell test when it doesn't come to a modern democracy. >> gabe roth fixed the executive director talks about changes he would like to see in the supreme court, including opening up oral argument to cameras. requiring justices to adhere to the same code of et ecks that other federal justices follow. >> all americans are aware of the third branch of government. and in the last 10, 15 years, the third branch of government has become so powerful. the idea that issues on voting and marriage and health care and immigration and women's rights, pregnancy discrimination. i could go on and on. these issues that maybe 20, 30 years ago, congress and the executive branch would get together and figure out a

compromise and put together a bill. the buck stop with the supreme court in a way that is unprecedented in our history. and given the fact that the supreme court is making these very impactful decisions in our lives, the least we as the public can do is press them to comport with modern dpptations with transparency and accountability. >> sunday night at 8:00 eastern on c-span's q&a. >> every weekend on american history tv on c-span 3, feature programs that tell the american story. some of the lights for this weekend include saturday at 8:00 p.m. eastern. dickinson college professor david o'connell discusses presidential legacies and the factors that contribute to a successful presidential term. then at 10:00 a.m. on real america, in september of 1963, two months prior to his death, president kennedy travelled across the united states to promote conservation of natural resources for future generations.

on road to the white house rewind, a 19834 democratic debate in atlanta includes former vice president walter mondale, senators gary hart of colorado, and john len of ohio. former presidential nominee george mcgovern and reverend jesse jackson. for the complete weekend schedule, go to cspan.org. >> on wepz, the head of the consumer financial protection brewer roe richard cordray spoke at the house financial services committee.

>> the share is authorized to declare a recess at anytime. i now recognize myself for three minutes to give an opening statement. not that we need a reminder, but if there's one thing that the presidential campaigns of both parties have shown us that the american people are indeed angry and they have a right to be angry after seven years of obamanomics, they are still in a failed economic recovery, the slowest and worst in our lifetimes. this is indisputable. americans are even angrier, though, at having their lives increasingly ruled by out of touch washington elites. every day they see their liberty slipping away as washington grows larger, more intrusive, more distance and more arrogant. as thomas jefferson once warned, government agencies are sending quotes of swarms of officers to harass our people and eat out their substance. today, the poster child of

jefferson's lant is the cfpb, his director our witness is neither elected or accountable to the american people. yet when it comes to consumer financial products he is vested with the awesome power of the entire united states congress. this is amazing, this is frightening and this is tragic. soon he will presume to decide for all americans whether he will allow them to take out small dollar loans to keep their utilities from being cut off or to keep their car on the road so they can make it to work. already mr. cordray has decided who in america will be able to receive a mortgage under his qualified mortgage rule, which when fully implemented will disqualify almost one fourth of

all americans who qualified for a home mortgage just a few years ago. already, he has decided that countless americans should pay more for auto loans based upon junk science and a dubious legal theory of statistical unintentional discrimination. all the while his agency reels from countless accusations of actual discrimination. apologists for the bureau frequently cite the tens of millions of fines they have posed as proof they are indeed protecting consumers. but the bureau operates as legislature, cop on baerkt prosecutor, judge and jury all rolled into bun -- one. in short, congress has made mr. cordray a dictator. when it comes to the well being and liberty of american consumers, he is not a particularly b lly benevolent o.

congress has outsourced much of its authority and cfpb in particular. it's compromised our co-equal granchs of government, checks and balances, due process and justice for all. congress must reclaim its article 1 authority and reclaim it now. there's no better place to start than cfpb, an agency that abused its power that it never should have had in the first place. it's time to uphold our duty to the constitution and return the representatives to we the people. i know recognize the ranking member for five minutes. >> thank you, mr. chairman. and thank you, director cordray for joining us again to discuss the consumer financial protection bureau's semiannual report to congress. the bureau's accomplishments under your leadership have helped more americans participate in a financial

system that is fair and strong. the work that you do is so important because it means that consumers can access the financial products and services they need to live prosperous lives without the risk of deceptive or abusive practices. it also means that consumers can have recourse when they' been wronged and recoup any finances they may have lost. those accomplishments are reflective in the $11.2 billion you have returned to 25.5 million americans. they are reflected in the 830,000 consumer complaints you have handled on issues from debt collection to credit reporting. they're reflected in the increased share of mortgages made to minority borrowers in recent years and the expansion of access to credit cards. despite republican claims to the contrary. director cordray you are helping

consumers succeed to the benefit of the entire financial system. i would like to highlight a few of these particularly important efforts. i'm encouraged by the bureau's work so far on payday lending, including soliciting input from small businesses on the fourth coming regulations. we need rules that will protect low income and minority communities from unreasonable loan terms and unaffordable rates, despite modest efforts by some states to curb predatory practices. most payday loans are simply used to help pay off another payday loan. we must stop this debt trap. and we must fight any efforts to weaken, roll back or stop the cfpb's upcoming rule. the bureau has also a charge against discrimination that still exists in the auto lending industry. we should be doing all we can to prevent minority borrowers from being charged higher interest

rates and from overpaying on their auto loans. unfortunately, too many members of congress have been misled by republican arguments against the data and methodology used by the cfpb in this important work. while republicans are attempting to protect lenders, the bureau has fined banks and captive lenders such as toyota, honda and fifth third bank for discriminatory practices. additionally, in months since its last report, the bureau has successful won a case against an unscrupulous for-profit college that deceives students into taking out expensive private loans and engaging in illegal debt collection practices. as you know, i've worked on this issue my entire career. just recently, the department of education announced a proposal to ban arbitrary arbitration in

student lending. i hope the bureau will follow in their footsteps by offering this protection, not only to students, but also to americans that have found these unfair clauses in their credit cards, prepaid cards, bank accounts and mobile phone contracts. despite a successful track record of helping consumers whether to looking to buy a car, own a home or attend college, republicans have turned the cfpb into a political punching bag, attempting to undermine its work at every turn. this tactic is at odds with the public's support for the cfpb and the bureau's efforts to remain accountable and transparent. i would like to remind my colleagues the cfpb has now testified 59 times before congress since it was created, issued more than 40 reports on its activities in the last year

alone and provided tens of thousands of documents in response to a never-ending list of republican fishing expeditions. director cordray, i'm thankful for the work that you are doing. i look forward to hearing your testimony on how the bureau continues to help consumers and improve our economy. thank you so much. and i yield back the balance of my time. >> the chair now recognizes the gentleman from texas, chairman of the financial institution subcommittee for two minutes. >> thank you, mr. chairman. today i want to use this opening statement to address an issue that director cordray said before the consumer bankers conference. the director highlighted the virtues of bringing market changing enforcement actions instead of going through a transparent and formalized rule making process. some call this practice regulation by enforcement. further he critiqued his critics saying their concerns were

misguided. after hearing these comments, i feel it necessary to respond. businesses of all sizes deserve certainty from the largest financial institution to the three-office title lender. regulatory risk drives up cost and stunts economic growth. federal agencies that are authorized to enforce federal law act appropriately when they take actions to hold unlawful actors accountable. however, when the federal agencies take enforcement actions with the sul purpose of changing the entire market behavior, it begins to look like a deliberate invasion of public notice and comment. public notice and comment is crucial check on the regulatory overreach and abuse of regulatory power. not only does it allow public to provide unique business insight into the marketplace, but it diversifies and balances the decision making. at the cfpb, this point is all the more important given the agency's current structure, a single unelectriced individual who can unilaterally authorize an agency action.

this practice is most concerning in the auto industry market. this pushback chose to strong arm lenders into changing certain practices through media driven enforcement headlines. it chose to do this instead of allowing a transparent and process-driven by public comment. some even say they purposefully invaded the public dialogue. unfortunately this highlights the very problem with regulation by enforcement. it allows regulators to exert regulatory awe authority out of structured process. it provides regulatory overreach and abuse. in closing, the director told consumer bankers association when you push back, we welcome your input. the director should expect continued and aggressive congressional pushback to

continue his regulation by enforcement. >> time of the gentleman has expired. today we welcome the testimony of the honorable richard cordray. director cordray has previously testified before our meeting. i believe he leaves no other introduction. your written statement will be made a part of the record. you're now recognized to give an oral presentation of your testimony. thank you. >> thank you, mr. chairman, ranking member waters, members of the committee, for the opportunity to testify today about the consumer financial protection bureau's semiannual report to congress. i appreciate our continued dialogue as we work together to strengthen our financial system and ensure that it serves consumers, responsible businesses and the long-term foundations of the american economy. as we continue to build this new agency, we made considerable progress in our core responsibilities to exert superadvisory oversight over the nation's largest banks and nonbank financial companies and to enforce the consumer financial laws enacted by the

congress. our analytical approach to risk-based intervention is leading to changes in these financial institutions. and we're leveling the playing field for all market participants. our superadvisory actions resulted in financial institutions providing more than $95 million in relief to over 177,000 consumers. our enforcement actions are based on careful and thorough investigations and most have identified deceptive practices by the parties involved. during this reporting period, the orders entered in our enforcement actions led to $5.8 billion in total relief for consumers victimized by violations of the law. these consumers are located in every one of your districts nationwide. we're also working to provide tools and information for practical skills and help people understand the choices to understand the ways and means of their lives. the resource provides guidance and responds to inquiries across

the entire spectrum of consumer finance. our major moment in time includes paying for college, owning a home and planning for retirement. we developed a new partnership with the financial services round table to work together on financial education in the schools in the work place and on behalf of older americans which is proving to be productive. listening and respond ing respo including those referred to us by your offices. we also continue to expand our public consumer database, which updates nightly and is populated by over half a million complaints from consumers about the broed range of consumer financial products and services. we marked a milestone for consumer empowerment when we began to public consumer complaint narratives which allows people to explain in their own words their experience in the marketplace.

we focused our efforts on promoting functional markets, such as the all important mortgage market in particular where consumers can shop effectively for financial products and services and are not subject to unfair deceptive or abusive acts or practices. during this reporting period, we issued several propose rules, final rules or requests for information. to support industry compliance with our rules, we publish plain language compliance guides and other resources to aid in their implementation. we're also seeking to streamline, modernize and harmonize financial regulations we've inherited from other agencies. over this reporting period, the bureaus continue to expand and protect consumers over the financial marketplace. recent data indicates sound consumer protection are strengthening them for consumers and providers alike. the mortgage market has been expanding briskly for two years

now since our major rules took effect. the credit card market is greatly improved with strong consumer protections, better industry perform performance and increasing consumer satisfaction. the auto lending market is reporting record seefls cars and trucks to meet consumer demand. the growing sense of consumers these markets can actually work for them without fear of tricks and traps and other predatory conduct is stoking their confidence and restoring their trust. these developments reflebt well on the work being done by the consumer bureau and they're making substantial contributions to the continued gradual recovery in the american economy. mr. chairman, ranking member waters and members of the committee, thank you again for the opportunity to testify today and to discuss all the work we're doing on maf of consumers. we will continue to listen closely to all of our stakeholders, and we will attend carefully to your oversight in order to ensure that all americans can be assured of fair treatment in the consumer financial marketplace. i look forward to your questions. >> the chair recognize himself for five minutes for questions.

director cordray as you're aware, the bureau entered into a consent order with allied financial over alleged violations that equal opportunity credit act based upon a legal theory of despaired impact. at the time, allied had an important yet unrelated application before the federal reserve to become a financial holding company. and february 21st of this year, michael carpenter, former ceo of allied said the charges were, quote, trumped up, that your bureau brought against allied. he went on to say that ally had been quote, unquote, strong armed by the cfpb and that the cfpb, quote, absolutely knew they had tremendous leverage over us, unquote. isn't it true that you and senior staff in the office of fair lending knew ally was seeking to achieve financial holding company status prior to the settlement? >> i read the interview with mr. carpenter who is no longer --

>> it's just a simple yes or no question. were you aware, were you not aware of the pending application prior to the consent order. >> we had pursued this investigation against ally for well over a year before ally themselves made us aware of their situation. >> rite's a simple yes or no question. >> were you aware or were you not? >> as i said, we pursued this investigation for more than a year before ally brought that to our attention. >> so you were aware, that's the answer to the question. isn't it true that the senior staff were in discussions with both the federal reserve and the fdic on how cfpb's determination of an ecoa violation could adversely impact their application, is that true? >> we had no decision making authority over those other matters. we were simply attempting to conclude our investigation and get -- >> the question is, were they in discussion? was senior staff of the fair lending division in the cfpb in

discussion with both the federal reserve and the fdic regarding this application. >> i believe there were some consultations about them wanting to know if we -- >> okay, you say consultation. we say discussion. we pull up slide number 6, please. >> i believe on october 7, 2013, a decision memorandum was prepared for you there was a dialogue with the federal reserve board and the ffdic. what does this have to do with a potential describe lags of ecoa? did you receive this memo, do you know? >> i do not know. >> go to the next slide, please. what's also interesting is that the last sentence of the

previous menu -- the previous slide was deleted. and instead we have someone with the initials of p.a.f. say let's refrain from this discussion and instead, quote, from the securities filing, which seems to mean that either senior staff attempted to cover up these discussions or they tried to withhold this information from you. did senior staff try to withhold this information from you prior to the determination? >> no, yols. i think you've got the entire matter exactly backwards, mr. chairman. >> regardless of whether you saw this october 7 memorandum. you certainly saw the one on october 17. i believe these are your initials, decision memorandum for the director. and in it, this says this could have a material adverse effect on ally's business results of operations in financial position

and seemingly you initialled this. are you at least familiar with this report? >> again, i think you've got this matter exactly backwards. the question is did you initial this memorandum? and if so, it would seem to indicate that you knew ahead of time that you had advantage over ally and you used it. >> again, i think you have this exactly backwards, i would be glad to explain. >> you will have ample opportunity within this hearing, but i wanted to know -- >> should we do it now? >> so i have another question. in employing -- in determining the racial characteristics of borrowers in auto lending context, you don't actually have the racial characteristics that you know for a fact. instead the bureau uses surname geocoding, is that direct? >> we use the same approach that's used in employment discrimination cases -- >> okay, so surname geocoding.

we have the names and salaries of the bureau's employees in our possession. and our committee has used a public search tool to match home addreed addresses and match nam your own basean improved surname geocoding. you pay black employees almost $16,000 less than their white counterpart, which would suggest that either one, you are presiding over a racist organization, and if you are not, should not the same impact analysis you apply to others be applied to you. and if you don't believe our analysis, i would assume you actually know the racial character ikss of your employ employees. i invite you to do your own analysis. should the impact analysis be implied to the cfpb. >> i have no idea what analysis

you're referring to or how thoroughly it was done. it was upheld by the supreme court last june in an important decision. if you're going to do that analysis, you would need to correct for pay bands and different jobs. i have november idea whether you did that or not. >> i would invite you to do your own analysis. and i must admit, the evidence is fairly overwhelming. i'm not sure there's any justice taking place here, and i fear what we're seeing is shakedowns for headlines. the chair is way beyond his time. now recognize the ranking member. >> thank you very much, mr. chairman. mr. cordray, i do not want you to be intimidated or to be made to feel bad by these accusations that are being made by the chairman. i would like to think that the chairman on the opposite side of the aisle are truly interested in dis-christmas fact. there's nothing in their work or history that shows they are.

and so you continue to do your work and make sure that the work that you do on disparate impact analysis is work that will benefit all of the people who are being harmed by it. and so let's get on with the real issues. let's talk about payday lending. despite the fact there is substantial support for payday operations, we know that these operations have targeted minority communities and poor communities and people are getting hook ed on these payday loans and i want to talk for a minute about what's happening in florida. before i do that, i've asked my staff to get me more information about where they're locating and

how many are locating, and in what areas they're locating. we do know this. as it has been said by the federal reserve in st. louis, there are more payday loan operations than there are mcdonald's stores. so a number of states like florida and ohio have attempted to reform payday lending. but even after so-called reforms, loopholes and other gaps remain. for example, even after florida's reforms, floridians still take out and average about nine loans a year according to the center for responsible lending with an annual interest rate of about 312%. ainvestigation into florida auto lenders who expanded dramatically at the florida so-called reforms, one florida consumer appeared to have renewed her loan 17 times in

1 1/2 years. another woman borrowed $3,100 and made $2,600 in payments and after rolling her loan over seven times, she still owed $3,900. i can give more examples of this, but what i'm giving examples of is how poor people get hooked on payday loans. the fact that borrowing have to take out multiple loans shows that the loans multiple loans s they are trapped into a cycle of debt. tell me why you are issuing guidance on payday loans. what have you discovered about them and how they work? >> so what we've discovered, and this is through careful and comprehensive research into the payday lending industry, is the description you just provided is substantially correct and accurate. about half of payday loans in the united states today are made

to borrowers who are trapped in a cycle of ten or more loans. that is about half of the loans being made nationwide. that's what we found in our research that looked into millions of such transactions. it's difficult to see how that assists a consumer in improving their financial well-being. now, there are plenty of payday borrowers who get in and get out with one or two or three loans. and that's perfectly great. and we are not attempting to cut off any such lending. but it is the debt trap being stuck in the debt cycle, living your life off of these massive rates of interest and difficult collection practices and like that we've seen that creates a tremendous amount of consumer harm. >> according to the work that you have done, the research you've done, is this a profitable industry? are they making money? are they making large sums of money? what's keeping them going? >> it's actually a difficult

product economically. there's high costs involved in defaults. there's high costs involved in customer acquisition. so there are not super normal profits being made in that area. but what keeps them going, what is at the heart of the business model for the average payday lender is rolling the customer into loan after loan after loan so eventually they recover more in fees than they borrowed in the first place. and your example was an apt one of someone who takes out a loan, pays back more in the end than they borrowed to begin with and still ends up with more than they borrowed to begin with. >> this is why they are referred to as debt traps. >> yes. >> people get trapped. they can't get out. they keep rolling them over. is that what this is all about? >> industry has objected to that notion but it is the best description i've seen of what actually happens in the marketplace. >> thank you. i yield back.

>> chairman recognizes the chairman from texas mr. neugebauer, chairman of the financial subcommittee for five minutes. >> director cordray, this committee spent a considerable amount of time studying the short-term small dollar marketplace and most recently your deputy director testified at my subcommittee on this issue. i will say this. many of my colleagues did not walk away with much confidence in the direction you're headed in the rule making, particularly on the issue of state and travel sovereignty. at issue are roughly 38 states that allow these products to be offered in some form and the federal pre-emption that will occur if your rule goes forward as outlined by the bureau. i have a few questions. and i'll use some slides during that question. and i hope that you will be brief and forthright in your answers. slide number 1, please. so after reviewing the current regulatory framework does any state -- did you find any state that does not have the authority to enact and regulate short-term

small dollar loans? >> so what i would say is states have authority in this area and the federal government has authority in this area as well. >> so you didn't find anybody that didn't have the authority. so the states have the authority to regulate that. is that your answer? >> again, as is true in many areas of the law, securities law, antitrust law, telecommunications law, states have authority and the federal government also has authority. >> so slide 2, please. and so can you list the states, then, that have laws in place that have contributed to the problem that you have identified and which states have failed to protect their citizens? >> so what i can say is as you indicated it's approximately 37 or so states nationwide that allow some form of payday lending with different degrees of regulation. and our study that analyzed millions of such transactions nationwide showed that repeatedly in this business across the country many consumers fall into the debt trap. more than half of the loans are made to people who take ten or

more loans in a row. >> which states are allowing the debt trap? >> it would be all of the areas, all of the states that were examined in the study. >> so do you have a list of those states? >> it would be all the areas where payday lending is authorized in this country. >> you looked at every state? >> we've looked at millions of transactions nationwide that occurred in all of the states. >> so in your rule you've talked about -- and you've mentioned that there's a floor. does a floor mean that anything below that standard is void? >> we don't have a rule at this point. we have an initial framework and we're working toward a proposal. it's all in process and this kind of input is relevant to our process. but as with our mortgage servicing rules which are final we did not pre-empt state law there. we did provide a federal policy judgment about mortgage servicing practices and indicated in line with the

statute that congress enacted that gives us authority in the area that our rules would be a floor for protection not a ceiling. >> so you do not think you're pre-empting state law? >> we are not pre-empting state law. typically 9 federal government could seek to occupy the field. that would be broad pre-emption. we're not doing that. they could also seek to pre-empt state law in specific respects. we're not doing that. whatever we do in this area will co-exist with state law. there will continue to be state regulation of payday lending. there will now be federal regulation as well. that's true of many areas of law. telecommunications law, energy law, environmental law. >> i understand it's your position. but the attorney general, mr. zoeller, disagrees with you. >> i'm sorry. say that again? >> mr. zoeller disagrees with you. >> i know the indiana attorney general. we served together. i was a bordering state attorney general of his in ohio. we have he both been interested

and concerned with issues of pre-emption going back know time in state government. for myself i spent 20 years in state government. >> so if one state has a five-day cooling off period and the rule comes out that you require a 60-day cooling off period, so haven't you then pre-empted the state that says five days is an appropriate cooling off period and you say 60? isn't that pre-empting that state? >> again, a common aspect of federalism in our system is that there may be federal regulation and there may be state regulation of individuals and they co-exist. >> what is your definition of pre-emption, then? >> pre-emption is when the federal government overrides state law and invalidates state law. >> so if my state has a five-day cooling off period and you say that 60 is the new norm, haven't you pre-empted my state? >> you could say the same thing about securities law. states have securities laws that protect people who are investing. and the federal government has

securities laws as well. and they co-exist. they don't necessarily jibe in every particular. they co-exist. >> here's the question. these 37 states have gone out there, they've had hearings, they've had debates on the floors. they've passed these laws. what do you know that they don't know? >> you could say the same thing about any law. telecommunications law congress passed in 1996. states had regulated that for years. congress gave it authority and they acted and those co-existed. >> i'm sorry, mr. chairman. one last -- so if you brought those atoernltorney generals ofe states and various groups in to have a discussion about this -- >> i talk to them all the time. those are my former colleagues. >> have you had a forum where they've had an opportunity to comment? >> i've spoken to them at national attorney general meetings. i've spoken to them individually. i had an tount speak to attorney general zoeller since he testified in your committee. >> time.

>> including enforcement actions -- >> time. the chairman recognizes the j t gentle lady from new york ms. maloney. >> welcome mr. cordray. the question concerns the credit card bill of rights which is the second bill that president obama signed into law and rahm emanuel his former chief of staff told me that it's one of the most popular things that he ever did because it touches so many consume consumers. and in that card act we required you, the bureau, to conduct a review every two years of whether the act was having the effects that we intended. first of all, i want to know, what is the response to the card act when you get complaints, are you getting complaints about credit cards? to the extent you were before the card act went into effect. and what about the clear and transparent disclosures? has that worked?

and no more hidden fees are expected, interest rate hikes that are hidden. the bill wanted to crack down on unfair and abusive tactics by card companies only consumers. your report found that the card act has dramatically improved the credit card market, making it fair, more transpafrnt and even as the cost and availability have improved i for one think it's useful to have this regular review of a major bill. and the question is are there lessons you've learned from your two card act reports that have been useful to the bureau in writing other rules and have you used those lessons going forward? also two celebrated reviews run by the pew foundation said the card act saved consumers 10 billion a year. the nyu review with others said it was anywhere from 16 to 20 billion a year.

and have you conducted any reviews similar to what they've done to see whether it is as good a stimulus package. it's a stimulus package that president obama signed into law because it keeps the money in the consumers' hands. so your comments, please, on the card act and those various -- >> sure. we have had a chance to review the credit card market and we do that on a biannual basis to report to congress. i would start by -- i could congratulate the congress. the congress did an excellent piece of work in passing the card act. and it has made an enormous difference for consumers. different assessments of amounts that consumers have been saved in terms of previously exploitative knees range from $16 billion -- but it's important to recognize this is going forward year by year and every year consumers are saving. so that's quite important. the second piece is this shows -- by the way, my experience goes back to when i

was in state government before the card act was passed and we would hear tremendous complaints and concerns about the credit card product at that time. i'm now in the federal government since the card act was passed and we're doing a regular review of this and watching the j.d. power consumer surveys which show consistent satisfaction in this marketplace year in and year out. it's a tremendous success story and it shows what can be done with serious substantive evenhanded regulation. better performance by the industry, which there is. and i give them credit for that. especially on their customer service in the credit card industry. and better consumer performance. people being more careful with cards coming out of the financial crisis. so that is important and it shows if we work together in a balanced and reasonable way we can improve these markets so that consumers can get more value from them. >> also in your report you highlighted the so-called deferred interest promotions,

and i quote, "imposed significant costs on many consumers." i think that's really important. and my question is what if anything should be done to address the risks the bureau has identified in deferred interest promotions and also your comments on the overdraft. also a bill i have drafted on credit card rights. your comments on where we stand with that rulemaking. >> we did have significant concerns about deferred interest products. the reason is the core principle of the card act was back end pricing, which is never transparent to the consumer up front by definition and it's confusing and harmful to consumers because they think they're making a deal and they'ring having certain terms and it turns out it's going to be different, it's going to be changed after the fact in a way that was not disclosed to them. that's very harmful. deferred interest operates much in that same fashion. that's something we spotlighted in our most recent report and it's an issue we're looking at

very carefully and we're going to be taking actions as appropriate. and i think that credit card issuers should be mindful of thinking about their deferred interest products and the harm that's happening to a number of consumers who end up with back end pricing that is very different from what was represented to them up front. that's an ongoing concern. >> the time to the gentle lady has expired. the chair recognizes the gentleman from michigan, mr. huizenga. >> i've got to tell you i'm a little surprised, a little stunned. you just have laid out a case where you are intentionally trying to create conflict between state law and federal law. now, a number of my colleagues over on the other side have been working on a slightly different issue that i'm sure you're familiar with. medical marijuana law not lining up with federal law. and how that has affected banking. and usually there's an

understanding we're going to try to solve that problem, not create the conflict. i couldn't let that pass as my colleague from texas was asking you about the lending -- >> do you want me to respond to that or not? >> very briefly, sure. why would you want to create additional conflict? >> i spent years in state government in the state legislatu legislature, as state attorney general, as state treasurer. it was very common across many fields of law for us to be administering and enforcing state law in conjunction with concomitant administration of federal law. it happens all the time. >> i did that as well. but you don't have -- what we typically have, for example, in environmental law is you have pre-emptive state law that goes in. first it has to clear that hurdle. i served in the state legislature as well. but that's not the direction i want to continue to ask. i want to pursue a little bit about arbitration agreements,

and i know it was brought up earlier. in march of 2015 the bureau released a report on the use of arbitration agreements in disputes between consumers and financial product providers. however, their report was criticized by a number of academics and industry for completely ignoring major pieces of data. on june 17 of 2015 over 80 members of congress including me signed a letter asking that the bureau reopen the arbitration study citing issues with the methods with which the study was conducted including the processes that developed that study that were not "fair, transparent or comprehensive." and i'd like to submit the letter for the record without objection. >> no objection. >> the letter also noted the historical precht in favor of arbitrating dispute resolution. one of the complaints i hear all the time is we're bogged down in court. arbitration was a tool introduced to streamline that. not to eliminate anybody's

rights. not to eliminate a fair hearing. but purely to start to break the logjam. because i'm very curious. do you really believe this report reflects accurately how consumers use these tools? >> so if i may, our report has been widely recognized as the single most comprehensive and informative report on this ever done. had access to the american arbitration association and others. and it is an outstanding report. i have seen and we have attended closely to criticism of that report. it's been mostly incidental. we actually sat down with the authors of the one critical study. one of them agreed to sit down with us and talk it through. the other did not. but we have looked at all -- >> i've got a question specifically. where does the study estimate the transaction costs associated with a consumer's pursuing a claim in federal court versus arbitration? >> so what we looked at was how the judicial process compared to the arbitration process in terms of outcomes and the like. and what we found, by the way, was as a matter of history what

you say is somewhat correct in terms of arbitration started off as a business to business dispute resolution mechanism and it is reasonable but it's in more recent times it's been used to cut off access to justice by -- >> does the study compare ability of consumers to pursue a claim without a lawyer in federal court versus arbitration? >> the study comprehensively addresses many aspects of the judicial process, many aspects of the arbitration process, and compares outcomes between the two. >> so for those watching on c-span and the rest the answer to both those questions is no? >> my answer is to describe what our study did. it's the most comprehensive studiy ever done -- >> i understand it's comprehensive but there's a number of people involved in that space that believe there were major flaws in the data and how it was used. >> and we've looked at what he had had to say and it's not particularly credible frankly. >> so you would have no problem, then, asking -- or heeding a request that over 80 members of

congress and the house and the senate had of saying okay, we'd like to open this up and express some of our concerns in this? >> i'm simply going to continue tone force the law. congress asked us to do a broad comprehensive study. we spent three years on it. we're moving ahead to engage in policy intervention based on that report. >> what i need to know is how you can make a meaningful comparison between class actions and arbitration in this report. i don't see that. and many others in the space do not see that. and that ultimately is the concern that i have. is somebody receiving a check for 25 cents being part of a class action suit, which often happens as these major class action suits go on. the trial lawyers and the attorneys are all paid up. they're the ones that make the money. it's not the consumers. and i would argue arbitration benefits the consumer as much as it benefits anybody else in that process because it streamlines -- so it sounds like to me you're just trying to protect -- >> that's not what our report showed. and it's a comprehensive study

to np virtually no relief to consumers in the arbitration process. billions of relief to consumers in the judicial process. that's the comparison. >> time. >> as long as the attorneys are paid. >> time to the gentleman has expir expires. chair recognizes the gentle lady from new york, ms. velazquez. >> thank you, mr. chairman. mr. cordray, we have seen some indication from the cspb that the lines between what is consumer lending and what is commercial lending are blurred. can you explain your views on how the agency distinguishes between consumer lending and commercial lending? are there circumstances in which a loan to a small business could be a consumer loan? and if so could you elaborate on the nature of those circumstances? >> sure. there are areas where the line between commercial lending and consumer lending is blurry. for example, a lot of startup small businesses are being

financed by individuals by putting data on their credit cards. so that's why the card act becomes so important p because it actually protects not just individuals but also many fledgling small businesses. it's also the case that home equity loans are often used to get capital to start businesses or improve businesses or grow businesses. you know, if i had my way dish don't have my way in many things. we would do what i did when i was ohio attorney general and seek to protect not only individual consumers as their statute authorizes us to do but also smaum businell businesses operate in the marketplace with no greater clout than an individual household does. if the congress sees fit to give us that authority, we will aggressively pursue that. and it would help small businesses across the country. as it is, again, as you say, the protections that we put in place for consumers often will end up helping certain individual small business that's start out as individuals or a very small number of individuals and seek to grow. >> mr. cordray, one area where

i'm concerned is regarding online lend iing. this is an increasingly popular choice for small businesses to quickly access capital. yet the regulatory environment has yet to catch up. what role do you see the cfpb playing in the small business online lending marketplace? >> so we are very interested in financial innovation. and so-called fin tech. we've had the major marketplace lenders in to talk with us because we do have jurisdiction over them. the treasury has convened both a set of actors and is working on a white paper on this subject. it's something i think we're all interested in because it is a new source of capital for small businesses but needs to be subject to certain oversight and protections as well. so that's something we'll continue to work on. i think we have -- i'm hearing from you a great deal of interest in this area. others have a great deal of interest as well. >> thank you for answering my letter. >> yeah. okay.

>> thank you. >> dr. cordray, to date five atoernlgz have issued consumer alerts about deceptive advertising practices by rooftop solar companies and a handful of settlements were reached in arizona last year alone. is the cfpb presently working with various state regulatory bodies, interviewing complainants and investigating the depth of the problem we're hearing about? >> so i can't speak to specific enforcement activity being engaged in by the bureau, but across the country when there is consumers complaining about harm done to them or perceived mistreatment in the marketplace, that's the kind of thing that gets identified to us through our consumer complaint line and those are things we prioritize for investigation and potential action. i think i can say that much. >> thank you. in may 2015 the cfpb issued a bulletin providing guidance to help lenders avoid

discriminating against applicants participating in the section 8 housing choice voucher home ownership program. can you explain this bulletin and how it will help increase access to credit for eligible consumers? >> i'm not sure if this is a direct answer to your question but under the equal credit opportunity act it is illegal for lenders to discriminate against potential borrowers based on the fact that they're receiving public assistance income. that is good income. it is supposed to be part of the calculation. we've had several actions now where we found that lenders were not taking appropriate account of that kind of income and they've made corrective actions accordingly. in general, this is our approach to the equal credit opportunity act is one of the statutes that both we and the justice department administer. and we will do that faithfully and vigorously to make sure people are being protected and that prohibited classes are not being discriminated against under that statute.

>> thank you. >> the gentle lady yields back. the chair now recognizes the gentleman from new jersey mr. garrett, chairman of the capital markets subcommittee. >> thank you, mr. chairman. i'm just coming in. i'm over in budget right now. but i just want to follow up on the issue of arbitration. so congress passed a law -- passed a bill. it was signed into law. and the president signed it. which validated the use of arbitration. my understanding now was a study was done. >> what law was that? >> the federal arbitration act. >> okay. of 1929 or so. >> yep. >> are you familiar with that law? >> i beg your pardon? >> are you familiar with it? >> i am. >> is that still the law of the land? >> it is still the law of the land. >> you disparage it by saying 1920 -- >> no, i'm just saying in 2010 congress passed the dodd frank act and made a number of changes in terms of how arbitration will -- including outlawing arbitration clauses in

residential mortgage contracts. >> the federal arbitration act which allows for arbitration is still the law of the land. >> it's been modified by congress in several respects since then. >> and is now your agency's decision to what? upend that law through a comprehensive action. >> so congress has now intervened. under the military lending act -- >> has congress ended the ability for arbitration? >> in the military -- >> that's a yes or no question. >> in several respects, yes. they have. >> they've ended -- i didn't say in several respects. >> yes. in several respects they have. >> have they ended the use of arbitration? >> under the military lending act they barred arbitration clause cans and lending contracts to service members. under dodd frank they barred residential mortgage contracts for the most part -- >> have they totally eliminated arbitration? >> no, but they -- >> okay. >> -- they gave us then authority, congress conferred on us, i'm not making it up -- >> is it your -- to eliminate

arbitration? >> because congress specifically said and we merely carry out the will of congress. congress said we should issue a report, do a study, issue a report, and then act in terms of addressing arbitration in light of that study. >> your intention to perform the will of congress. when 80 members of congress write to you and ask for a specific question, do you believe that you should answer those questions? yes or no? >> i pay close attention to what members of congress tell me. it's my job tone force what congress has enacted. >> when 80 members of congress ask you a question, do you believe you have the responsibility to respond and answer those questions? >> i respond to individual members of congress but i enforce the laws that congress enacts. >> so the answer is no since you did not say -- >> no, that's not correct. the answer is yes. >> you do. well, we sent a letter back on june 17th of last year. we're still waiting for a complete answer. the bureau with regard to that so-called comprehensive study. the bureau ignored requests to disclose the topics that would be covered by the study.

have you disclosed all topics that have been covered by the study? that's a yes or no. >> i'm not sure what all back and forth correspondence has been. i know we responded to that letter. if you think that response was insufficient we'd be happy to work with you. >> you also failed to provide the general public with any meaningful opportunities to provide input for the topic because materials were kept behind closed doors. the final arbitration study included entire section that's were not included in the preliminary report that was provided to the topic. was there a reason why you decided that certain information would be held confidential and not disclosed to the public? >> some of the information depending on how we obtain it from the american arbitration association and others, businesses have deemed confidential. may have involved trade secret information and the like. those would be the obstacles. wouldn't be any desire on my part. >> are those the only sections that are precluded from being public, the trade secrets, or is it a broad swath of areas -- >> i'd be glad to have my staff who are expert in this area deal with your staff and specifically -- >> since we're talking about a letter from june and here we are

in march, we're still looking for complete answers. >> we have responded to the letter and if that response was deemed insufficient we'd be happy to work with you further to get you more information. >> it goes back to your initial answer to the question, as whether we feel it's your responsibility to answer to 80 members of congress. when you were -- first came to this committee i asked you the seminal question. if the house of representatives said you shouldn't do something, are you accountable to them? and the response was no. and i said if the senate said that you should be doing something, should you respond to them and respond? your answer was no. i said the president asked whether or not you should be doing something. his answer was no. final answer was -- >> i certainly don't remember it in that way. >> that was my series of questions. the final question was are you accountable to anyone? and the answer to this letter and that question back then was -- >> it's not what i'm saying and it's not a legitimate, you know,

charact characterization of this. >> actually, that's on the record. >> but i have a responsibility to enforce laws enacted by congress. >> the law of 1929 has been enacted by congress. and it would appear -- >> and so has the law of 2010. >> time for the gentleman has expired. the chair now recognizes the gentleman from new york, mr. meeks. thank you, mr. chairman. >> good morning, mr. cordray. director cordray. great to see you this morning. and let me first join many of my colleagues i know on the democratic side, i think it should be on both sides, because we all should be thanking you for all the work that you've been doing to help the american consum consumer. for the work to help our veterans, to help our students. to help our mortgagees. and especially for the work you do for low-income and minority communities that are always the

most victimized. it's those that are on the bottom. and the work that you're doing to try to make sure that there is a level playing field. and i would think that given the scenario both sides of the aisle should be appreciative of the agency and the work it does. i see there's room that we can work collectively together. for example, what's important is that since the financial crises a number of financial services have closed. there's been over 5,000 branches of closures, especially most of them in low-income and communities of color, leaving behind banking deserts, which are neighborhoods with basically no mainstream financial services. but the people in those neighborhoods cannot live without access to financial services. and therefore, to meet those great needs there are alternative products.

such as short-term lenders. and i hear my colleagues talking about that. and prepaid car providers. et cetera. of which, you know, i just think about my parents. i was in poor -- lived in public housing. went to a bank. at that time some banks were not bankable but they needed to have options. so they used other options. back then, you know, some of the options are dark. we don't want folks to go to the dark. so it seemed to me your agency is a godsend to me, is not to wipe out all of those businesses but to try to make sure we have -- we regulate them. so that there is a good practice so that people are not being ripped off. so that there is a strong and functioning alternative financial services so they're not being denied access to financial products also as they would have. sometimes i knew my dad needed an extra few dollars to make it to the next month, till the next paycheck came. and we need that kind of but we

don't want it where people are caught in that forever. and i think that would be good for both sides. nobody should want that. we don't want anybody taken advantage of. so if we have an agency like yours that can then put in some rules and some regulations so that we can make sure that the consumers are not getting ripped off but also -- and i think that would be good for those who are providing good services. they would want that also. because we want to get rid of the bad folks. we don't want to get rid of everybody. we want to get rid of the bad folks. that would seem to me to be the goal. i think that is the right approach that we should take. and i think that that's the approach that you're trying to take in this. not just eliminating an entire -- but eliminating the bad guys. and let's make sure that we uplift the good so that poor folks in low-income areas would have some opportunities to continue to bank. is that correct? >> i found myself sitting here thinking that you're saying a lot of things when i'm sitting here in this seat testifying. and i think you may have just said it better. i would just agree with you.

>> so now let me just give you -- in the little time i have left. what i was concerned, i saw about the bureau's latest enforcement and findings because i'm shocked, here we are in 2016 and there's still red-lining going on. and the red-lining especially in the mortgage lending, in the steering of consumers and high-cost loans. it amazes me that we're still finding institutions thriving from this egregious practice. can you please discuss with us in the little time i have left what is going on in those cases and what the bureau has done to address it? >> so we've seen a lot of things over the last few years, and frankly, again, 90% or more of our enforcement actions involve deceptive conduct by financial institutions, which is discouraging in some ways. but even -- we were somewhat surprised to see what we thought was very blatant redlining occurring. this is the enforcement action that we in the justice department jointly took involving hudson city savings bank and the patterns when they were mapped were very clear. so it's a significant resolution

and a shot across the bow to the entire marketplace that this is not acceptable behavior, it is not acceptable approach and people need to review what they're doing and correct it if in fact they've gone down that road in any respect. >> i only have seven seconds, so i'll yield back. >> gentleman yields back. chairman now recognizes the gentleman from missouri, mr. luetkemeyer. >> you and i have had a number of discussions with regard to trib. and i certainly appreciate your willingness to discuss it with us. as we've seen, you've delayed the implementation of the rule until october. and since then we've seen a lot of concern by the industry. they're struggling with this rule. some of the software programs that they've utilized have not been as good in implementing this as they would have liked to have seen and they're still struggling. so my question is what do you

see from your position as the enforcer of this as well as are you -- have you had any enforcement actions taken against anyone at this point? >> yeah. so i think we see and hear much the same things that you're describing. i think the i.t. problems here have been much larger than maybe people would have expected in particular because a mortgage lender can't control the i.t. systems of realtors or title agents or settlement agents and others and they have to all work together. so i know there was a bill in congress proposing to have a hold harmless period through february 1st of this year. what i had said, and i've worked with the other regulators to jointly say was we were going to be corrective and diagnostic, not punitive as we oversaw this implementation period. and it was open-ended. it remains open-ended. we're now march 6th -- midway through march today, and it remains open-ended. we have taken no enforcement actions. i don't expect us to take enforcement actions unless somebody's just blatantly failing to try to implement the new rule.

and to the extent that they are making some mistakes but trying to get it right, we're attempting to provide more clarification to them, which is something industry is asking us for. and also recognizing nobody is trying to exploit consumers here. this is just a matter of getting these forms right and getting them correct. and by the way, the whole purpose behind this was something congress wanted. and it's a positive purpose, which is taking what used to be two bureaucratic forms at the application stage and streamlining them into one and the same at the closing stage. and that's what we have done here. >> are you going to issue any additional guidance on this? or you feel that everybody's doing okay with what's going on? >> we have been monitoring this very closely. the last thing i want is for any of our rules to cause a jam-up in the market beyond anything that anybody would intend. i think we're getting more guidance inquiries every day but the trade associations are working together to provide some joint questions that they think are most important. we will attempt to be responsive to that. and you feel free to keep after us. >> we will, trust me.

>> also along a different line the federal trade commission act grants the federal trade -- the ftc and banking regulators with the power to pursue enforcement actions based on unfair and deceptive acts or practices, udap. dodd frank marked an unprecedented expansion of udap authorities for the cfpb including for the first time the term abusive. expanded powers for the cfpb has become a primary enforcement tool. i realize last week you spoke to the consumer banker asxoefgs rejected the notion that you're regulating by enforcement. i beg to differ, sir. and when it comes to cfpb udap authority you have issued little to no guidance preventing any financial institution from any sort of unpredictability. you use it on a case-by-case basis. isn't that the definition of regulation by enforcement? >> we're doing the very same thing the federal trade commission does and the state atoernlgz do. it is difficult to know more than case by case when you're talking about cases of fraud or

deceptive conduct. we're attempting to give guidance to the entire market about very specific orders issued in these cases so that everyone knows if they're doing this they should stop. if that's called regulation by enforcement, i think it's just strong deterrence. and it's a law enforcement mechanism for sing nalg to other actors. >> along that line the last time you were here i asked the question just before we got finished up with regards to a debt collection company that you wound up settling a situation for $12 million based on a proposed rule. not a rule that's in force but a proposed rule. >> i'm sorry. what matter are we talking about? >> well, encore. >> okay. debt collection. >> debt collection. and this was based on not a rule that was in force but a proposed rule that you thought you may down the road have in force and said they have a formula that's non-compliant. is that not regulation by enforcement? >> i don't think that's what we did in the encore matter. we did a careful investigation,

thorough investigation of the facts. we found that there were violations of the either federal debt collection practices act or the unfair and deceptive prong that we're given by congress and we enforced against that. the notion that because we may issue a rule in debt collection several years down the road or maybe next year whenever it may be, that in the meantime we can't stop people from engaming in unfair and deceptive conduct i don't think is the right approach for us. >> i think my time has expired. i yield back the balance of my time. >> the time of the gentleman has expired. the chair now recognizes the gentleman from texas, mr. hinojosa. >> thank you. thank you very much, chairman hensarling and ranking member waters for holding this important hearing on the cfpb's semi-annual report. director cordray, i want to thank you for your appearance here today and for your exemplary leadership at the consumer financial protection bureau. before i proceed with my questions, i wish to voice my

strong support for cfpb and its mission of protecting american consumers. mr. chairman hensarling i ask umts consent to enter my opening statement into today's record. >> without objection. >> with that i'll be able to move right into my questions. director cordray, many argue that the bureau issues a payday lending rule in line with a released outline, that if you do that it will eliminate a crucial source of lending for many low-income people that have no other options. why does the bureau see the need to regulate payday lenders, and why do you believe consumers will be better off with cfpb oversight? >> so again, we were given authority by congress to address this marketplace among many others. in fact, it was specifically called out in the consumer

protection act of 2010. the dodd frank act. we've done extensive research. we've assessed and analyzed millions of transactions. and again, what we found was a significant portion of the customer base, half of the total loans being made, payday loans nationwide, go to customers who are in a sequence of ten or more loans. that is, a debt trap. i don't know what else to call it. it creates tremendous harm for consumers. it's the exact point that was being made earlier. in the ranking member's example of someone taking out x dollars in loans. ending up repaying more in fees than they ever borrowed in the first place and still owing more at the end of all that than they borrowed in the first place. >> thank you for your response. i strongly support your efforts to rein in those harmful payday practices. in my community we've seen some programs that cost 1/10 of what payday lenders charge but there

just aren't enough of these programs. tell me about the 5% option included in the proposed rule and will it be included in the final rule? >> i can't speak to what may be in the final rule. we're just coming up on a proposal stage here. so again, we're going to continue to take input from many different stakeholders. and of course they have very dramatically conflicting input. and that's something we try to sort through. what i can say is that in approaching this rule we're attempting to both address significant and actual harms to consumers and we're also trying to make sure that there are ample avenues that remain for small dollar lending to be available to consumers. and you know, community banks. credit unions have a product now that we want to make sure that we are protecting and giving latitude for. and other products that may arise around the country.

we don't want to squash innovation in this area. we do want to, as to the extent we can squash predatory products that are amassing enormous consumer harm. >> according to the fdic, nearly 50 million americans are either unbanked or underbanked. consumers sometimes need access to at least $100 or less to smooth the transition between paychecks when their balance is low so that they can still purchase medicines and groceries and other necessities. how have the qm rules affected mortgage lending by community financial institutions? >> so this is important because i often see facts alleged that are not accurate in this area. the share of the market of mortgage lending by consumer bank -- community banks and credit unions has grown since dodd-frank was enacted. it is larger now. it is larger now than it was in

the mid '90s. this has come at the expense of large banks in particular. this is exactly the point that i think mr. meeks -- congressman meeks just made, which is if you have evenhanded sensible regulation of a market the more responsible actors should be able to thrive because they're freed from unfair xheegs by the bottom-feeding, law-violating actors, many of which came into the mortgage market in the middle part of the last decade and engaged if highly irresponsible lending and ended up blowing up the mortgage market. so credit unions their market share has increased and that's a good thing. >> my time -- >> time of the gentleman has expired. the chair now recognizes the chairman from wisconsin mr. duffy chairman of the investigation oversight subcommittee. >> thank you, mr. chairman. welcome, mr. cordray. as you know, i've expressed some of my frustration with regard to the lack of compliance with the

document request that this committee has made to the cfpb. that's with the backdrop of barack obama telling us this would be the most transparent and open administration ever. that's with elizabeth warren indicating that sunshine would flow into the cfpb. that's with regard to the backdrop you've given with regard to openness and transparency. it gives us great concern that for a number of our subpoenas they go back several years and there's been a lack of compliance. as you know, there's been a recent subpoena three months ago that have compiled all of our document requests, and we get limited compliance from you. >> do you want me to speak to that? >> in a second. you'll have plenty of time. i want to direct your attention. you're aware a report came out from this committee in regard to indirect auto lending. and you would note that there were some documents that we included. quotes in that report from the consumer financial protection bureau. did you provide those documents before this report to this committee? >> i can't speak to individual

documents. i don't know which one you're referring to. but what i can say -- >> the ones in the report. i'm referring to the -- >> over the course of the last several years in response to numerous requests -- >> i'd like you to answer my question. so i'm talking about the report that we did on indirect auto lending the one that came out on november 24th. i'm sure you read that because you made some calls to the hill. did you provide those documents to us? ? i can't out of context here place individual documents over the last several years. >> i'm talking about the documents -- >> we've been very responsive to your requests. we've gotten tens of thousands of pages of documents. and if there are particular ones you're looking for -- >> director cordray, i love -- you can send me tens of thousands. you can send me tens of millions of documents. if you don't send me the ones that i ask for, just like hillary clinton can send thousands of e-mails but if you don't send the ten that are relevant -- >> sure. >> if you want to talk about recordings in watergate, you can send hours of recordings, days of recordings but if you miss a few minutes it's those that are relevant. >> we continue to work with you on those responses. we'd be glad to continue to work with you -- >> i know you know what i'm talking about with regard to this report.

and you know you didn't send us these documents. and even after this report came out we've again asked you for the documentation in this report and you've refused to comply again with our request. and that, sir, is incredibly frustrating. when again you've made commitments to being open and transparent. >> i continue to be glad to work with you on those, congressman duffy. >> mr. director, we've been trying to work together for years. >> i still am. i still am trying to work with you. and will continue to try to work with you. >> working is easy. give us the documents. send them to us. send us what we asked for. >> we'll be glad to sit down and talk further. i know our people are talking further. >> i want to just kind of highlight some of the -- well, before we go there in the allied settlement. let's talk specifically about that. you used your proxy data. in regard to your analysis on proxy data what percentage of accuracy do you have in regard to ally? >> so it depends on -- look, it

depends on what you're talking about. there's different degrees of accuracy for different things. we work to provide a high degree of accuracy in terms of potential charges of disparate impact discrimination under the law as has been confirmed by the -- >> disparate impact, what percentage of accuracy do you have? >> again, it depends on what we're talking about. we're talking about the auto market, the mortgage market -- >> we're talking about auto market. >> a high degree of accuracy. >> what is the percent? >> i can't give you specific percentages but if you want my staff to work with your staff on specifics there we can do that. >> it's fair to say that you are not 100% accurate, is that right? >> i don't know if anybody's ever 100% accurate. >> so is it fair -- >> we get as close as we can. >> are there some white borrowers who may be included in your analysis that will get checks from the ally settlement? >> i would say that if you're administering any redress to consumers, and this is across the entire spectrum of what we

do, what attorney generals do, what courts do, it is always possible that redress will find its way -- >> so dispirited impact checks will go to white borrowers potentially. >> there's nothing unique in this area. >> great. in your analysis i'm sure you saw some african-americans who paid higher rates than the white average and some african-americans who paid less than the white average. is that right? >> what we saw was systematically african-americans and/or hispanic borrowers who -- >> is it your testimony nobody paid less than the white average? >> i beg your pardon? >> is it your testimony no one paid under the white average, less than the white average? >> i don't know that i would say that. >> my question for you -- >> what we're talking about -- >> is someone who paid less than the white average, are they also getting a dispirited impact check? >> i don't know what matter you're talking about or what data you're talking about. but what i would say is impact discrimination is something i know has been under attack in certain quarters. >> are you familiar -- >> time. the time of the gentleman has

expired. pursuant to clause d-4 of committee rule 3 the chairman recognizes the gentleman from wisconsin for an additional five minutes. >> thank you 34rrks chairman. we're talking about the ally settlement. we're well aware of that. and i'm talking about the numbers you used for that settlement. so i'm asking you simple questions. are white borrowers getting disparate impact money? you're stonewalling me here. you're not answering my question. and i think it's pretty -- this is a pretty simple line of questions. if you want to be open and transparent be it here. if you're not going to give me the documents answer my questions. >> sure. >> that was one you're trying to waffle on. the next question is -- >> i'm ready to do it. >> hold on. and the next question is you have individuals who probably, and i know this for a fact, paid less than the white average. do those african-american borrowers get disparate impact checks as well? or are you only sending checks to african-americans who paid more than the white average? >> if you want to specify someone to me we can look at it. what i know is that we set up a process here working with the

justice department, who has experience in these matters going back decades, and that is a process that everyone has confidence in. >> so you haven't -- >> and -- >> i'll reclaim my time. >> hundreds of thousands of consumers. >> director cordray, you haven't sent me the information on ally but we do have information with regard to toyota. this comes from a document dated november 19th, 2004. it was initialled by you. and on page i believe it's 15 is a chart that shows non-subvented african-americans. the total number affected at 16,500. if you want to -- do you have the document in front of you? >> no, i don't. >> look at the screen. you can see that right there. and the number of harm prohibited basis borrowers is 66,000. so it's my reading of this document that there are 56% of african-americans who paid more than the white average and 44% who paid less.

fair enough? in the toyota study. >> i'm not easily able to analyze these numbers -- >> you signed off on the document. >> but go ahead with your question. >> if you want to go down to the subvented african-americans, the number that were affected were 7,559. but the number that had prohibited -- or were harmed was 2,268. so meaning on the subvented class of african-americans only 35% paid more than the white average. 65% paid less. these are your documents, sir. >> so what i would say -- >> i want to be clear. if you're not going to give me the ally document we'll use toyota. >> what i will say is subvented auto loans can behave differently from normal auto loans and that is something we take account of in our analysis. >> that's why i gave them both to you. look at the chart. in this document you don't show great disparity between african-american rates and white

rates. >> so i would disagree with your conclusions there. we did pursue a matter with toyota. we thoroughly analyzed the underlying facts. the automaker, lender had access to the same underlying facts -- >> i'm going to reclaim my time. in regard to the analysis that you've done i find it interesting when the chairman brought up, when they did their own statistical analysis on the cfpb and that would show based on that analysis that you pay african-americans $16,000 less than white employees at the cfpb. before the chairman cut you off i think you were trying to say but, but it doesn't take into account pay bands. if doesn't take into -- >> i didn't have any analysis -- >> you want to make sure that we consider what information you might have that could account for that disparity. so in regard to indirect auto lending did you take into account credit scores, tradeins

and trade-in values, whether the car was new or used, the amount of the finance, the length of the term financed? because this was all information that the auto lenders tried to get you to consider but you refused to do it. but when the role was reversed and mr. hensarling asked you those questions you wanted to make sure -- >> i wouldn't agree with that. i wouldn't agree with that characterization. but i'm happy to explain if you want me to. >> well, i'll just -- i won't have you explain it. maybe we'll do it in writing. maybe i'll get some documents from you. i want to pull up another exhibit -- actually, i'm not going to put it up. i'm going to hand you a document. this was provided to us in response to our subpoena number 20 and 22. this was the only document that is in compliance with our subpoena. and this is in regards to records memorializing the final remuneration plan with regard to ally. do you have that document in front of you? >> no, i do not. >> i believe you have it -- your staff has it. this is basically a computer printout. if you'd hand it to the director, please.

this is a computer printout. this is the only document you've given us to show us what the remuneration plan is. could you read this document for the committee so we can understand what this document says? and your sunshine and compliance with the committee. >> what do you want me to do? you want me to just start down here and read it -- >> yeah, read it for me. >> for official use only? is that what you would like? confidential. not for distribution. >> compute space. cap equals 9 period. money sign. dash term. what does this mean? this doesn't mean anything, director. >> all i know is if you ask for documents in an area we give you the responsive documents that we can. >> this is the one that you sent us. >> and it may be -- it may be that you aren't in a position to interpret this document. i don't know about that. >> are you? >> time. time of the gentleman has expired. the time of the gentleman has expired. pursuant to the committee's rules for extended questioning the ranking member is now recognized for an additional five-minute question period. >> thank you very much, mr.

chairman. at the beginning of this hearing we started talking about the cfpb's work and racial discrimination and auto lending and specifically the cfpb's 98 million settlement with ally. and i also mentioned in my opening statement that the bureau has fined banks and captive lenders such as toyota, honda, fifth third bank for discriminatory practices. these banks and auto lenders that you have fined, if they don't think that they are correct, if they want to oppose you, if they want to fight you, can they go to court? can they sue? can they defend themselves in some way? >> sure. and there are a number of institutions that have required us to take them to court, not responded to the results of investigations, and if so we pursue it and the courts have the ability to make that

determination. >> did ally do this? >> they could have but they did not. >> they did not. did toyota do this? >> they could have but they did not. >> did honda do this? >> they could have but they did not. >> so while they are pretty big companies, they have the right to sue, they have the right to go to court, and even though they have friends on the opposite side of the aisle who would like to serve as their lawyers, they could have gone to court if they had wanted to. is that right? >> certainly. >> thank you very much. now, let's go further. the republicans are alleging that the cfpb used ally's desire to change its status to a bank holding company to leverage the settleme settlement. isn't it true the cfpb was investigating racial discrimination at ally financial prior to any knowledge of ally's desire to change its status? >> so i'm glad to have the chance to correct the record on that. some of the members who asked those questions are not present in the hearing room i understand. but maybe they'll see the

transcript. we opened an investigation against ally into potential discrimination in auto lending more than a year, maybe year and a half before the matter was resolved. as often happens, parties that are being investigated, it moves slowly. they're not eager to resolve the matter. and sometimes they drag their feet. sometimes it just takes a while. at one point ally wanted to move more quickly to resolve the matter. that was a decision they made and that was a choice they were making for their own reasons. i wasn't familiar with why those were. they then explained to me why they wished to proceed in that fashion. our purpose all along was to complete and resolve an investigation into discrimination in auto lending. that was our job. that is our job to enforce the law. that is what we did. and we reached a -- an appropriate resolution that the company agreed to and was willing to enter into and as you

say could have fought in court if they wished to do so. that was up to them. those were choices they made. those were not choices i was making. our choice was we were trying to enforce the law. we were seeking to complete an investigation and resolve the matter. and we did so. that's all there is to it as far as i'm concerned. >> isn't it true that cfpb only consulted with the fdic and fed regarding ally's status after ally themselves informed the cfpb of their desire to change their status? >> i believe that is correct. >> isn't it also true that the drchlt fpb had evidence that ally financial's policies surrounding discretionary dealer markup resulted in widespread racial discrimination? >> that is certainly correct. >> can you speak more about your investigation of ally and how you came to that settlement? i know you just did, but i want you to reiterate because you know, i think that my colleague on the opposite side of the aisle is -- has framed this in

such a way that you have been unfair, that somehow you're not following the law, and that somehow you leveraged their desire to change their status. would you please go ahead and -- >> so i would say quite the opposite. the law of the land reaffirmed by the supreme court last june is that disparate impact discrimination is against the law. it is a violation of fair lending laws. given that that is so, our responsibility is to enforce the law. it's a law that congress enacted. again, that we have a job to enforce the laws congress enacted. we approach every investigation in the same way. some of them start with exams that then lead to developing facts and conclusions that may lead to enforcement actions. some of them start as enforcement investigations. we approach them all the same way. to comprehensively establish the facts. to determine legal conclusions. o