community not just in silicon valley but across the country and innovations occurring within larger institutions researching how to improve their products. what i would say is we believe it would be not appropriate for new vin-tech start-ups to be getting an advantage in the marketplace because they're arbitraging the system. they're not complying. they're not taking seriously or as seriously what the banks and regulated institutions have to do. our enforcement action against d dwala, it said that if you're telling your perspective customers and consumers to handle data security in a certain way that gives them confidence and then they want to deal with you and in fact you're not then you're deceiving your customers and that should stop. and that should be a signal to the whole market that that at a minimum deliver on your promises to your customers.

but i do think we're going -- it's interesting to see how it develops. the's promise in vin-tech. it could lower costs in some areas. it could promote convenience. may well do that. that's great for people. that's a different kind of cost for them. it may be that the banking system and the vin-tech companies converge in some ways so that there's better compliance but also we get the benefit of the innovation. we'll see but we're trying to stay on top of it because if we fall behind it it could affect markets over time and we could end up thinking that we are dealing with a market that's very different from the one -- >> i guess i think there will be somewhat of a distinction. there's a lot of research out now about income volatility. close to half of americans and some of the tools that could, you know, even and level some of that income volatility. i guess i would simply point out i hope catalyst is also working with regulators around the rest of the world.

this is a worldwide phenomenon. >> i think our -- project sand box in britain -- >> i want to stay close to the timeline and get in the last question. someone raised a year or so ago and you had a response. i'd like to reraise it again. the different level of protections between debit cards and credit cards and i didn't realize until we got into the data breach issues and we've got legislation to try to equalize those credit productions. would you like to speak to that? i had to try to teach my daughter's credit cards from debit cards to credit cards. >> these are the best stories talking about some specific issue in our lean lives and we find it to be vastly more complicated than we might have hoped. this is what we're doing with prepaid cards, as well. trying to bring them from a standard of no protection to comparable to debit cards and not exactly credit cards. there's some specialized provisions for credit cards. but there should be -- you reach

in your wallet, you pull out a card and may not distinguish that well between the card it is. you should be protected in all three areas. and if there's some special protections for credit cards, those are sometimes applicable, might be in some cases to prepaid cards, something we have under consideration. debit cards. again, i'm not sure that all the same provisions should apply to all the cards but they should be subject to protection, certain provisions should apply to all cards and that's subject we can continue to discuss and i appreciate your interest in it because it's a hard issue but it's an important one. >> senator khan? >> thank you. i want to discuss the cfpb's actions on the ally case. >> okay. >> so in this matter, since auto lenders are not permitted by law to collect race, you didn't have the actual race of potential claimants available.

is that correct? >> we didn't have it through ally's own records, that's correct. >> okay. so in administering the funds you used a two-tier approach to inform customers last name and address. is that correct? >> so -- and this is consistent with how redress is handled in these types of cases in every instance where you don't have, say, the granular mortgage data true only for the market, yes. >> so yes. as i understand, if someone had a 95% chance of being nonwhite by the model there's a mailing information informing them of el jikt for receipt of a remuneration check. >> and discussing what the criteria were for eligibility and making it plain to satisfy those criteria, yes. >> and then there was a second tier threshold of a 50 to 95% likelihood of being nonwhite and

requiring them to opt in to the settlement. >> i think you're accurately stating all pieces of this thus far, yes. >> neither group individuals required to affirmatively identify the protected race or ethnicity to when they belonged? >> how much specificity do you want them to provide? there's various things you could make them do and you could also require them to swear under oath and other things. everything that makes the whole transaction more complex, you know there's a dropoff rate of people who don't bother. >> since you raised that, were they required to make a statement or affirmation under penalty of perjury they did belong to a protected class under the settlement? >> required to make an opt-in. a statement that they belonged to the protected class. >> did they have to make that statement under penalty of perjury or -- >> i don't believe that's the case. i could clarify with my staff for you if i had that wrong. >> i discovered a program on

"wall street journal" similar to the methods that you used to evaluate the race of buyers of cars and pursuit of this enforcement action. plug in the name and zip code and out pops the likely statistical of race. the website caveats they don't have the exact method and the address is more reliable than the zip code but at a hearing on tuesday senator brown revealed his zip code in ohio 44105. shockingly, the program says that senator brown is an 89% likelihood of being black based on that name is zip code. senator shell sbi a 70% possibility of being black. tom cotton in this zip code is 88% probability of being black. senator brown financed the vehicle through ally and he had no legitimate business reason existed to discount the apr he

was offered with the cfpb sent him a check? >> let's take the specific examples and also take it back to what we're talking about. in each of the three examples, they to affirmatively opt in -- >> they would have to state -- >> respond and state that they were a minority borrower. i assume that each of you would not do that. and otherwise you're committing fraud. but let's go back here. we have a discrimination matter against ally financial. 325,000 or so consumers were affected. they were charged higher rates based on a pattern or practice that showed that minorities in certain categories paid higher rates and then the question -- >> i'm not disputing -- no, no. i'm not disputting any of the underlying facts. the redress. >> sure. what do you do for the 325,000

people? do you set up a system difficult to comply or a system that's reasonable to comply and get the money? if it's a large number of people who fraudulently got checks under the settlement, that's something to take very close account of and consider responding to. but 325,000 people did qualify for appropriate redress here and, you know, i haven't seen the large number of fraud cases. it's just all hypothetical people have an apprehension, people think -- >> hypothetical like your model. >> there's nothing hype critical -- >> senator brown in the second tier and would have had to opt in. >> and you would have had to opt in and senator shelby. i assume -- >> no statent under penalty of perjury or other -- >> you tell me. would you have committed fraud simply because -- >> department of justice recommend you require some kind of oath or affirmation --

>> we worked with the justice department -- >> i didn't ask you that. i asked if they recommended it. >> i don't recall an -- >> the obama department of justice suggested you require -- you're routinely required on federal forms. >> i would speak to internal deliberations -- >> house financial services -- >> we're not doing something that the justice department. we're on the same page. i don't think you would have -- >> did you personally decline the department of justice recommendation that a penalty of perjury attach -- >> i don't believe i did. i'd be happy to have my staff follow up with you. i don't believe i did. i have no recollection of having done that. i don't believe that's the case. >> i would like -- >> i do let -- i stand by and believe this was a reasonable approach to how to get relief to hundreds of thousands of consumers who were discriminated against that i know some people disagree with and the supreme court reaffirmed the law of the

land. >> 330 members of the house of representatives a enthe congressional black caucus disagree. my time is expired. >> okay. i thank you very much, mr. chairman. thank you, mr. cordray, for your testimony. i wanted to make sure i have the numbers right. it seems like every time you come here i'm underestimating the amount of money you've returned to consumers either in the form of direct restitution after -- because of predatory principles or canceled debts but i believe that number is now over $11 billion? >> i believe it's also true that every time i come here my age gets a little older but now it i believe $11.2 billion in relief made available to consumers. >> it's a pretty phenomenal thing that support for fairness in financial transactions have returned so much to hard working american families who are

victims of predatory financial practices i also was reading estimate of the savings and these are the savings that are -- that occur because of practices were discontinued on credit cards and estimate of about $16 billion in saved fees and they believe's independent from the 11 billion. is that correct? >> yes and, in fact, that was the card act that put or kept $16 billion in consumers' pockets over a period of time. there's another stam that is very powerful which is when we look back ward, $16 billion saved to consumers, it's also the case that the changes as lasting changes mean that every month every year going forward people are saving the same amount of money. which over time results in tens -- eventually hundreds of billions of dollars for consumers. that's really meaning of.

it's hard to add that up. >> yes. >> it's very meaningful. >> leads into the question i was going to ask you was in terms of the mortgage reforms that have been undertaken, do we have an estimate of what has been saved because people got fair deal mortgages rather than predatory mortgages? >> i actually don't begin to know how to count that but i'll ask the office of research who are smarter about such things how they might be able to go about doing that. clearly the mortgage market when you compare markets about $10 frl. credit cards are under a trillion. student loans are a little over a trillion and auto loans are around a trillion. so, if there's save frgs the rules, i'm sure there are, but it may be hard to document them, they're at a much higher scale for people. >> sure is a wonderful thing to have so much good done for hard working american families having fair practices in the financial

markets and seems to be lost in the conversation in the committee and wanted to -- >> briefly one other thing. people often talk about and been true in this hearing at times the bureau, you, meaning me personally, we have about 1,500 people who do this work and achieve these results that people can be very proud of. and that benefit every one of your constituents. not -- they benefit in every one of your states. and i'm very proud of them and when you say nice things about the bureau it's them you're talking about, not so much me. >> thank you. i have two more questions and only a minute and a half and try to be very quick here but one is you did a study of arbitration causes, very thorough study. ross versus bank of america settlement. i read through that and it sounded like the conclusion was that contrary to what's often asserted there were no particular costs if you will

raised in terms of the products when the use of arbitration clauses was discontinued. is that a fair summary of -- statistically significant. >> it is and it was notable. some institutions with arbitration clauses. some had a while and then stopped in particular -- >> let me just make the point here that right now across the country citizens are so frustrated by the system that is rigged against them from citizens united on to the actions of the house and the senate, current leadership. it's -- and but this is a real example and arbitration clause and a contract where essentially the judge of asserting your rights when there's a predatory action goes before someone who is hired by the person on the other side of the issue and only keeps getting hired if they find

in favor of the folks who are hiring them. that's the system that's rigged. i applaud your work on arbitration. i have a few second. let me turn to payday loans. in state after state after state, the states have gone to work to say these are unfair practices. by the way, just yesterday in our chairman's state, 28-1, the state weighed in, the state legislators weighed in and said we absolutely want to curtail the abuses of the payday loan industry. and often the payday loan industry says this reduces access to credit and they cite a reduced number of loenls being made after the state actions. but what that doesn't take into account is a family that gets a fair loan gets one loan instead of getting ten in the course of a year and so on and so forth. i have found in oregon, after we cracked down on payday lending and put an interest rate cap on it, a rollover cap, that we still have payday loan companies operating but citizens don't have to get -- continuously

rolled over and a much fairer deal and they still have access to credit but they have access at a much lower interest rate and a complete win and the pastor that testified this week noticed that and certainly many of the pastors of my state working with poor families see that. is that your impression, as well, that the consumer getting a much better deal with a low interest rate than high interest rate? >> i think some is simple mathematics but i would say that i think a point you made that is quite powerful is there's often this comment made, well, there aren't a lot of complaints about payday loans. people going in and being treated well by being rolled over, rolled over, rolled over, can damage the finances beyond repair but talk to the faith community. i'd like each of you to talk to ministers and leaders in your states. they can tell you the stories they hear where people come to

them, not because they're financial experts but they care about them and we hear horrendous stories of the affects of this on people's lives. and they are repeated in massive volume across the country. that's a good place to start to trying to understand this issue. >> amen to that and thank you, mr. chairman. >> senator toomey? >> thank you, mr. chairman. mr. cordray, welcome. >> thank you. >> -- back. thanks for being here. as you know, dodd-frank instructs the bureau to collect data on small business lending and i noticed recently the cfpb listed a job listing and it described the job as, and i quote, once in a career opportunity to make the market for small business finance fairer and more transparent. end quote.

so is it -- is it your intent that the market will become fairer and more transparent by virtue of the disclosure of data? is that -- >> i think that's clearly what congress said to us by mandating this task. >> it is your words in the job description so that's why i want to understand your intent. >> i think it is a great opportunity and i hope you'll recommend candidates to us. >> so -- so my question is, is your intention that the bureau will limit the work in the small business lending space to the compilation of data? >> we don't have much authority in the small business lending area and so that is what our focus under our statute is individual consumers -- >> right. >> products for household purposes but there are a couple of places in our statute, you know, congress said it. not me. >> right. >> we have jurisdiction over small business lending under the equal credit opportunity act and a 1071 you identified here which

is a mandatory job. congress gave us. >> yeah. >> to set up a reporting, data collection and data publishing regime for small business lending comparable to that for -- created for the mortgage market, yes. >> so my understanding is that what dodd-frank does in section 2071 is exclusively about data collection. that's the only authority that i read for the cfpb to respect to small businesses in section 1071? >> we're doing our best to implement it faithfully. it is a task congress instructed us to do and so we follow the law. >> yeah. getting back to this issue of your approach to enforcement. you gave a speech before the con surmers banking association in which you're essentially defending your enforcement approach and one of the things you said in the speech and i'll quote, it says any agency is

bound to recognize that they should develop a thoughtful situation for how to deploy the limited resources, working towards a pattern of actions by which i think is meant enforcement actions. >> correct. >> that conveys a deterrents that's understood and implemented. that reads to me, that sounds to me like we're talking about enforcement as a substitute for rule making. at least in some cases. and one of the things that concerns me about that is that the rule making is a -- an entire process that requires a level of transparency and gets input and there's a cost benefit analysis and my worry is that if we're using enforcement instead of rule making that we're going to miss those pieces. what is -- what is your response to that? >> if i may, i'd be glad to speak to this.

i saw a lot of testimony on tuesday about this where people make sort of perfunctory nods to of course we have to root out fraud but shouldn't do much more than that. 90% of the relief -- $11 billion in relief made available through our enforcement actions has been in cases where one or more of the claims involved deception. lying to customers or perspective customers. that is good, solid law enforcement as far as i'm concerned. now, as to the pattern of orders, i think everybody would agree that basic fairness in law enforcement is that if person "a" or institution or bank "a," say is doing these things and found to violate the law and action has to be taken in consequence that everybody else in the market that is doing these things -- >> yeah. >> -- is also violating the law and should stop doing what they're doing. signaling the marketplace very clearly around each enforcement action is an important thing but

it's a basic. >> yeah. i'm going to run out of time here but in the case in which you guys discovered discrimination on the basis of protected class being committed by people who were not aware of the protected class status of the people they were supposedly discriminating against, you're applying a -- what seems to me a novel, new approach to interp t interpreting the ecoa, a law since 1974. the justice department never took your approach that i'm aware of. >> that's not true. >> they use your methodology? >> in 1994, joint guidance put out by the banking agencies and the justice department. we weren't around then. that said this is the law of the land that we would -- >> your model would be the law of the land? you're using that mod snell. >> yeah. disparate impact is the law of land. >> and determining the probability of the people's race, that's all from 1994, is it? >> it actually goes back to the

'70s and employment discrimination law and the like. but the other agencies all said that and the guidance we issued early on simply said we're a new agency so people might not know what our position is. we join our fellow agencies and the justice department in believing the law of the land and then challenged up to the supreme court. and the supreme court reaffirmed that it's the law of the land and to me that's pretty conclusive on the subject. >> so okay. so, so i'm now learning something new which is that the methodology you learned for identified race and identify people's status in these protected classes is decades old and nothing new there. you didn't come up with a new approach, no new models or methodolo methodology. >> that's not what i said. >> so it is new then. if i may. disparate impact is the law of the land and recognized -- >> that's not what i'm talking about. >> recognized by agencies in 1994. it continues to evolve. there have been cases since then

and since -- and there have been modifications. but the law is clear and people who want to -- >> no. you're changing the subject. the point is you developed a new methodology. you described it as a revolution. that's fine. but it is a new methodology not being used before and not subject to the transparency of a rule making process. >> i don't think that's true. if you looked at yourself ten years ago, you're the same person then you are now but have you changed in certain ways between then and now? very likely. you may look a little different. you're the same person. disparate impact is law of the land for decades. it is reaffirmed by the supreme court. approaches evolved over the time. people adjusted to the case law. people have taken input of congressional leaders and others and thought maybe that's a better approach and thought to refine that. we should certainly continue to do that i would think. you're trying to do that with me today. >> all i'm suggesting is if

you're going to do that and develop a new methodology for identifying people's status in a protected class it's in a process and part of the process is designed and meant to achieve and you chose not to use it. >> it's fair game whether you think and others think that we agree and transparent as we should be and that's always a legitimate grounds for discussion. i'd be happy to have our staff talk with you further but to say it's a brand new methodology that's radically different from anything done before, it's modifications and developments on law that's been around for decades, law that was resoundingly reaffirmed by the supreme court just last june and this law that i believe we're required to enforce and why are we required to enforce it? to root out discrimination against individuals based on gender and very un-american and

this is the way in which congress developed this law and the supreme court has interpreted it and we believe that it is our job to do to enforce it. >> thank you, mr. chairman. >> senator warren? >> thank you, mr. chairman. thank you for being here today, director cordray. as you know, the payday lending loaning is doing $7 billion in loans. there are more store fronts than starbucks and the online payday lenders. often chargie ining 200%, 300%, interest. when emergencies arise, people need access to credit but payday lenders that build business models of trapping people in a never ending cycle of debt are throwing bricks to a drowning man. i know the cfpb is close to issuing the payday lending rules. i want to ask you three questions about the process. first, can you describe the

research and data gathering that the cfpb has done to try to figure out where to draw the line between preserving access to credit and trapping people in never ending cycles of day ppay loans? >> yes. we have engaged in the research ever done by anyone on this marketplace. we have done two significant white papers analyzed millions, millions of payday loans across all types of lenders. and what we found is that the model here is to in particular on payday balloon loans is to get someone into a payday balloon loan and if they had to borrow $300 today, the notion they're going to be able to repay $345 two weeks from now is not very likely and do and great for them. many others end up rolling it over and rolling it over and they can pay $45 but not the $345 and they can never pay the

$345. by the way, you describe these products as 200%, 300%, 400% interest rates. in missouri, we have seen loan products as high as $1,950% rate of interest. you can actually lend where the fees is 75% of the face value of the loan. that's a $1,000 this becomes $18,000 or $20,000 by the end of the first year and goes on from there and this is from a class action decision by a missouri appellate court in which they read out of the record some of the actual instances of people borrowing $100 and paid back thousands of dollars and still owed thousands of dollars. that is not a res poor for success for people. >> thank you very much. states currently have different standards for regulating and the cfpb would create a single national floor. so states could still issue

stronger issues if they wanted to but not drop below the cfpb standard. can you explain the benefits of having a single baseline rather than just a lot of different local rules? >> yeah, sure. in fact, same approach of a mortgage servicing rules establishing a baseline of requirements on mortgage servicers. not on states by the way but on mortgage servicers and said states were free to add further requirements if they deemed it appropriate to do so. and by the way, this is an approach that's been common in american law in our system of federalism. it's true of securities law, true of environmental law and anti-trust law. it's true in many different areas of law where the federal government may intervene to a certain degree and set certain requirements on individual citizens and companies. the states are free to have reser regimes and they do and set requirements on individuals and

companies and coexist. there is nothing unusual about this. it's been described as cooperative federalism and it works reasonably well. it can be a little comply kalted at times i suppose but a federal system is bound to be a little complicated at times. >> all right. good. thank you. and let me ask my third question here. the cfpb is working in this area now for three years. you have been gathering data as you've described, drafted approaches, talked about it with industry. now certain members of congress proposed imposing an additional two-year delay on the efforts. can you give us some idea about the impact of that delay and estimate how many more families will get stuck in a debt trap during that time? >> so, i feel keenly already the amount of time it takes to embark on a federal rule making in area baseline of no research previously. taken several years to do the

kind of detailed research you asked me about and i described and taking the time to go through the processes in our statute and a small business review panel and rereport and now on the verge of actually proposing the rule. and it will take time to work through it and finalize it. i feel keenly that every day that passes if you think a rule is going to improve life, may or may not, if you think it does, you like it to happen as soon as possible. and delay for delay's sake simply means that if there are harms here and our research has identified harms to consumers, then they'll go on. and that anybody should feel like that's no big deal means that they simply disagree with the findings around the country of what this does for people and for families. >> okay. >> and i can't agree with this. >> all right. we are talking about per pech waiting a lot of misery here. >> yes. i want to thank you and the people that work at the cfpb for terrific efforts in this area. you know, i know that the payday

lending industry hires a lot of lobbyists and they make a lot of political contributions to try to protect their multi. billion dollar business. i also know that families that get cheated by payday lenders don't have lobbyists an they don't have political action committees which is why the independence of the cfpb is so important. you know, i hope you will move quickly to complete your rule making on payday loans. you are the best hope for millions of american families to avoid these debt traps in the future. thank you for your work. >> thank you, mr. chairman. good morning, director cordray. >> good morning. >> it's not too much longer and it will be good afternoon. >> i'm wondering myself. didn't know. >> director cordray, in a recent

speech before the consumer bankers association one which senator toomey alluded to earlier, you discussed your philosophy on consent orders. you'd said that -- and i'll briefly lay it out. our public enforcement actions have been marked by orders in which -- which specify the facts and the resulting legal conclusions. these orders provide detailed guidance for compliance officers across the marketplace about how they should regard similar practices at the own institutions. what i'm -- want to talk about a little bit, my concern is that the consent orders without a finding or even an admission of guilt, the ally settle is an example of that. could mean little more than a company's business decision to settle a lawsuit with minimal expense. my question is, do you agree

that for compliance officers to consider following a decree from another company, that decree should be a part of either a court finding or contain an admission of guilt or if not come from as senator toomey was alluding to perhaps a rule making process laid out clearly definitively? i'm just -- your thoughts on it. >> sure. first of all, ally is a great example because we worked there in partnership with the justice department. and they, as part of their process, obliged to file a motion in the court. let's say this. if you're trying to address harm to consumers out there in society, number of ways to go about it. you can do your own research and try to think about what you think is best and then go through a process to adopt a rule. but another way and one tool that congress gave us very, very specifically, emphatically to

investigate facts of individual circumstances and if you find an actual violation of law clean it up. and that's what we do all the time in enforcement. what i say about sort of rule making by enforcement, a nice slogan people like and that's a bad thing, if we find through a thorough investigation and the institution typically doesn't dispute the facts that we find, that that's a violation of law, then everybody in the country should be able to see transparently that if they have similar facts and similar practices and similar situations they're violating the law and they ought to stop it right now and what i said in that speech and i stand by it it is compliance malpractice for other institutions not to look carefully at our orderers in these cases, in administrative order or court order and not to think about am i doing the same thing. and am i violating the law? should i clean that up? that's a basic of consistent, uniform law enforcement.

and people can call it regulation by enforcement. i call it good, solid law enforcement. >> even though there was no admission of guilt in this particular case? >> that doesn't have to be an admission of guilt. we did a thorough investigation. we found the facts. our decree state it is facts as we know them to be, whether the institution agrees doesn't matter to me. in the end, the facts are the facts and if other people find the same facts in their organization, they're on notice to clean it up. and when we come to super vise them, we'll be looking to see if they have similar practices and they will be treated similarly. the key principle here is a basic principle of justice which is similar situation should be treated in the same way and it shouldn't just be that one institution gets whacked and others go blithely on doing the same things that violate the law. everybody should be treated the same. we try to be transparent to the marketplace as quickly as we can through orders and acting through supervision, a

confidential process without violating the confidentiality for individual institutions periodically we put out supervisory highlights to tell you what we found in general at banks and other institutions, what we thought violated the law, what we did about it and people should take account of that, as well. >> okay. let me slide this in a little bit of a different approach and with regard to the way you have looked at offering no action letters and -- >> okay. >> i know you foinlized the rules on the no-action letters but it seems like what we're challenged with here is do you start out by saying, look, heads up on your enforcement actions? this's the way we're going to be basically laying out the guidance of how we're going to interpret and enforce the issues? and yet, when you have companies that step back in and ask for guidance and by that i mean, in the bureau's rule making it's

estimated that it would issue no action letters, only in extraordinary circumstances and anticipated issuing one to three letters a year. s.e.c. with four no-action letters in 2015. looks to me that if companies are asking for guidance on this, wouldn't it be fair to say, rather than going through the process of trying to adjudicate it -- i mean, would you consider it thinking twice about really not issuing no-action letters as a -- >> yeah. i actually think this is a legitimate line of questioning and i'm not sure that i'm satisfied with where we appear to have landed on this but we issued it to get something going in the area. there are different agencies. we looked at a lot of agencies. some of them do a lot of this like irs. they do them by the hundreds. others do very, very few. the banking agencies tend to do very, very few. i don't know the right answer for us and i feel keenly and had

this conversation with representative hekt and the process that's not amounting to anything isn't worth anybody's while. i want to think about that. we're leary of how much volume to handle but we have begun to get inquiries and setting up a process for how to figure out what to do with the inquiries and see where we can -- >> questions out there and asking for guidance on it, seems reasonable to find a way to try to work with them rather than be in adjudication process in front of a court. >> yeah. another thing i would say on the differential, regulation is something more where we feel the law needs to be changed in certain ways and we have authority to do that subject to congressional authorization and oversight. enforcement is more the law is what it is. and it's applying it to specific facts and finding specific facts and facts are powerful. you know, when the facts show that in the -- >> i hate to cut you off but i

know the chairman's time is valuable, as well. i appreciate your patience with me, sir. >> thank you. senator don nelly. >> thank you, mr. chairman. we can now officially say good afternoon, mr. cord rare. >> all right. thank you. >> one of your recent undertakings is related to auto financing companies. there's a rule to super vise large nonbank auto finance companies and reach separate agreements of several auto finance companies. i've been hearing from a number of auto dealers in my state with concerns on this issue and i just want to ask to make sure that you work with all of the stakeholders involved this issue including auto dealers to make sure we get this right to make sure there is continued access and that everybody be treated fairly in this process. >> okay. and by the way, i would say that in the early going, we were kind of leary of talking to auto dealers because we didn't want

anybody to think we were crossing that line to enforce the law against auto dealers but we have understood ourselves, we have authority and responsibility to address auto lenders. i wouldn't necessarily have drawn the statute up with a distinction of the two and tend to work together in the marketplace but i don't see how we can address practices of auto lenders without an affect on dealers. so we're quite willing to take input from dealers as long as they're clear we respect that line. >> understood. but like you said, these are some of our small businesses that employ the most people in the towns, friends and neighbors. >> yep. >> and they want to get it right for their customers, as well. >> i work with them in ohio. i was the ohio attorney general. we had a program where they had the opportunity to correct problems before we took action that worked fairly well. we had the general motors and chrysler bankruptcies that

unfolded while i was attorney general. we worked to save dealerships across the state who were being cut off by the manufacturers and we created procedures for them to appeal and many of them were saved. i understand and very much agree with you on the importance of auto dealers and the local communities. at the same time, if we find problems in auto lender lending programs we have to deal with them. that's part of our job. we are a law enforcement agency. i'm quite willing to have that discussion and engage in it vigorously and i hope you'll find that nobody says that they're unable to talk to the consumer bureau if they have a concern. that's not what i intend. >> another area i wanted to mention is an area important to my state because we have so much manufacturing in this area and that would be manufactured housing. we have previously discussed the rules of cfpb rules on manufactured housing and new rules would negatively impact the ability of consumer to buy,

sell, refinance these homes for smaller balance loans is more difficult. i have -- there's been a seeming acknowledgment of some of the challenges by the cfpb so the 2014 hmda mortgage data shows manufactured housing loans basically evaporated at this point. my question is, does that mean that lenders have reduced rates to get under the threshold do you think or is it that lenders just stopped taking applications that they previously accepted? >> i don't think there's ever much high-cost lending in the manufactured marketing. so i don't think it's fair to say there was a lot and evaporated. i think there's a lot of pricing that does as you said exactly what you just said, comes in just under the threshold and doesn't qualify as high cost loans. and that is the nature of this

market it seems. having said that, you've raised this issue with me and some house colleagues have raised the issue with me and we went back and did a white paper to try to understand it better because we realized we didn't understand it as well as we would like and i would acknowledge in ohio i have seen the background and drew in indiana and many states areas of the state where this is going to be the practical means of finding housing on difficult properties, rural properties, topography issues and the like. the white paper shows there's a long-term decline in manufactured housing. i don't know what all the causes are. i think the folks didn't really feel that they understood that but it's been true for about 20 years. >> yeah. i would suggest that a good portion of that as you look at the white paper is access to capital, capital challenges that are out there. because as you said, it's not fair to the rest of the country to think the rest of the country is all washington, d.c.

townhouses that sell for million dollars of. >> agreed. >> that family back in indiana, that family in ohio, they very much just as much as a family here -- >> absolutely. >> -- wants a place to call home and raise their family. >> yep. wants to have a place to call home and not be gouged on it. that's important, too. >> yeah. >> but how to balance those things is an ongoing issue. >> we agree on that. and in most every case, i don't assume my local community banker is out to gouge anybody. >> i would agree with that although there's sharp practices in the manufactured housing market we have seen. >> thank you. >> i know we're out of time. i'll be very brief and won't ask director cordray any questions. we have had a long time exchange in these settings about this issue that seems to be getting attention. today in this hearing. and i would again indicate to the director rule making not enforce systematic a better path for the cfpb to pursue.

and then i want to associate my remarks with you, mr. chairman, in what you had to say about indirect auto financing. none of us agree that discrimination has a place. we want discrimination out of our economy. this agreement extends the need for vigorous enforcement of the equal credit opportunity act and i'm searched that the cfpb bulletin resulted in more adversarial relationships of the bureau and the industry, and i wanted the highlight finally, mr. chairman, that i have introduced senate bill 2663 reforming the cfpb indirect auto finance guidance act and this is legislation identical to what passed the house in a bipartisan way 332-96 and i would i would encourage my colleagues to accomplishing that legislation and it is simply an opportunity not to eliminate cfpb's indirect

auto financing guidance. it's a way to improve the process and include the industry in consumers, members of congress in the process. thank you. >> thank you. mr. vitter? >> thank you, mr. chairman. thank you, mr. cordray. i know our vote has been called on the floor so i'll be brief. >> okay. >> summarizing two real conceraf concern. mr. cordray, if you could give a genre response and if you care to follow up in writing in more detail, that would be great. >> okay. >> first area of concern is remittance transfers, international money transfers. i think cfpb has spent a lot of time and money and man hours on rule making for that. but has been criticized by jao and others for not setting to bed abuses yet. and so, i have a three-part question. when's the summary of resources

that have been spent on that? number one. number two, what's the response to criticism like jao about not adequately handling problems in that remittance transfer area? and number three, has your oversight quantified and looked at the widespread use of this by folks in the country and working in the country illegally and sending money overseas which by all accounts is a very widespread practice? second area of concern is conflicts of interest involving cory sfoen. as you know, he is assistant director office of deposit cash collections and reporting markets at cfpb. and he's the lead staffer on the payday rule. now, i'm concerned about conflicts there because he was a

senior executive before cfpb, was a senior executive for a company he started which sold out to a rival called micro mic. and then worked with folks within credit files seeking financing, type payday lenders would perhaps have as customers. cory stone sold his stock in that company to his brother to avoid a conflict as he was coming to cfpb, for $18,000. that stock has been valued recently at between $250,000 and $500,000. seems to have been way under valued in order to allow him to get rid of it, to come to cfpb, that's number one. number two, he is in charge of this payday rule. and depending on how that rule is written, that could increase

significantly the business, the market, the profitability of his former company, his brother's company. have you looked at those serious conflict issues? >> so i will take that one first. i had never heard any charges against mr. stone. i think this is baseless. i think it's bogus to raise it. if you want our staff to talk to you about that situation, we will be glad to do so. he is one of the finest public servants i know. he has been commuting and gone extra lengths to make his work at the bureau work. i do not believe there's anything to anything you have just said about him. he is a public official with great integrity. and if there's more that we need to talk about, i will happy to talk with you. >> are you aware of the stock issue? >> look, people who come to work at the bureau, some number of them came from the private

sector. usually, you think that's a good thing. you down the want us to have anybody not come from the private sector. and they divest -- >> are you aware of the stock value? >> they divest assets when they come and they divest them for fair market value. at the time he came to the bureau it was in the wake of the crisis. the entire stock market was down more than 50% at that time. so i don't know what the details are. but i can assure you, we will be glad to look into it. everything cory does is with high integrity. >> what i'm asking is, have you looked into that issue and come to a conclusion or not? >> our ethics department vets everybody's divestiture of assets before they are hired. it's a painstaking process. i don't believe there's anything to this. but we will be glad to follow up with you if you want to pursue it. >> follow up in yiwriting that would be great. this remittance issue. >> this was the first rule making we did. we were required to do it by congress. again, not a task that we set

for ourselves but a task you set for us. the rule making is in place. whether it solves all the ongoing abuses, it may or may not have. we will take enforcement actions as needed against the industry if we find abuses. if you are aware of abuses or hearing about abuses that are specific that we should know about, we will follow up with you and be glad to hear what they are so that we can consider whether to investigate them. but i do think it's quite possible a rule making hasn't solved every problem in the marketplace. we want to continue to pursue problems in the marketplace. i forgot the third part of your question. >> related to that was, does your rule making address and does your enforcement and tracking address what seems to be massive use of this money transfer opportunity for folks being in and working in the country illegally and sending money overseas? >> our rule making does not address that. congress did not direct us to address that.

those would be issues i would assume for other parts of the federal government, not for us. >> so you don't track any of that activity? >> i don't believe we do, no. >> would the same apply if we were talking about organized crime or some illegal sector using the same remittance opportunity? >> i don't think we track undocumenteds in any of the markets, credit cards, mortgages. we're not trying to dig into bank of america and ask them what kind of documentation you ask for. if those are issues for someone in the federal government it would be elsewhere. >> i'm saying for you would the same response apply to illegal activity, say organized crime? >> usually, i come here and people are criticizing us for trying to expand our jurisdiction. we're looking at mobile cramming on cell phone companies. you are telling us you would like us to look into organized crime and undocumenteds? that's not typically -- >> would be something you would care about or look at. >> that is not part of our

limited consumer finance jurisdiction. >> thank you. we will follow up on this as well. thank you. >> yes, sir. thank you, senator vitter. i would like to take a moment to respond to comments made earlier at the hearing by the director to the ranking member. he is correct that aggregate credit availability has been increasing recently. but that is what you would expect in a near zero rate environment. this does not mean there aren't specific issues that may be exaggerated by some of the bureau's actions. for example, more categories of credit may be in decline. multiple studies have found that small business lending has declined while the volume of loans to large businesses has risen. in addition, research from harvard university finds that credit cards issued to certain lower income consumers have

fallen by 50%. these are economic trends that i hope the bureau takes into serious consideration in your day to day work over there. another thing -- >> i would -- >> you want to comment? >> sure. small business lending, you know, we haven't adopted any regulations that relate to small business lending. we have limited capacity there. we will be -- >> but you alluded to small business lending earlier. but we ha >> we have a job congress gave us to develop the reporting and data collection for this. none of that small business change could be ascribed to the cfpb. as for credit cards for low income, i want to take issue with this in i believe it was mr. zawicki's testimony -- >> take issue with the harvard study that i alluded to? >> if that's the lux green study, it's not a good study. >> is it not credible because you disagree with you or you just -- >> it isn't very well done.

it isn't very credible on the supposed evidence. >> would you furnish your concerns about the study? >> be glad to do that. i would say on the credit cards for low income, they were talking about 2008 through 2012. most all of that crash is due to the fact that households lost $12 trillion in net worth in the wake of the crash. he says at one point in a muddled way, it's hard to separate that out from the effects of new rules. we didn't come to existence until july of 2011. trying to pin all this on us is pretty flim flam if you ask me. >> just for the record now, without objection i would like to enter into the record statements from the following groups that wrote the committee injunction with tuesday's hearing on assessing the affects of consumer finance regulations and today's hearing on this consumer financial protection bureau semi-annual report to

congress. the statements include statements from the independent community bankers of america, the consumer bankers association, the national association of federal credit unions, the credit union national association, the american financial services association, the electronic transactions association, the chamber of commerce of the united states, the national automobile dealers association, the mortgage bankers association, an article by leonard chanin and finally, an article from the new york post regarding allies financial experiences with the bureau. without objection, it's so ordered. >> i would be glad to have access so we can consider them for improving our work. >> we will have a public record. we will share it with you. we want you to share with us, too. >> again. going back to that credit so-called data, at the time of a

tsunami hit the beach, the financial crisis, somebody's garden hose might have been pouring water on the beach is very relevant, in my view. >> mr. cordray, thank you for your appearance before the committee. >> thank you.

[ no audio ] he had a couple of meals and a steam shovel. i think again it's one of the other ironies to be so anti-government and owe your entire fortune to the government. >> sunday night on q & a, author and investigative journalist sally denton talks about her book which takes a look at the bectal corporation, one of the largest construction companies in the world. >> if not them, who? who else is the united states government going to get to build these projects throughout the world?

i think it's fine for it to be bechtel. if the american taxpayer is paying for it it would seem the american taxpayer should have some access to information about the contracts, the amount of money, the worker safety, the political relationships. >> sunday night at 8:00 eastern on c-span's q & a. saturday night at 10:00 eastern, a look back at presidents giving their last speeches at the white house correspondents dinner. >> i have even had time to watch the oscars. i was a little disappointed in that movie "the last emperor." i thought it was going to be about don regan. >> george w. bush has got a bran