recognized to give an oral presentation of your testimony, thank you. mr. cordray: thank you, mr. chairman, ranking member waters -- members of the committee, thank you for the opportunity to testify about the semiannual report to congress. i appreciate your 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 on our core responsibilities to exert supervisor 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 supervision is leading to more systematic changes at these institutions and we're making progress on leveling the playing field for all participants. it resulted in institutions providing more than $95 million in relief to over 177,000

consumers. our enforcement actions have 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 approximately $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 to develop practical skills and help people understand the choices they'll be making to manage the ways and means of their lives. our ask cfpb resource provides guidance to inquiries across the entire spectrum of consumer finance. our major moment in time decisional tools include paying for college, owning a home and planning for retirement. we developed the new partnership with the financial services round table to work together on financial education in the schools, in the work plates and on behalf of older american which is proving to be productive.

listening and responding to consumers is central to our mission. we continue to refine the capabilities of our office of consumer response to receive, process and respond to consumer complaints, including those referred to us by your offices. we also continue to expand our consumer complaint database ask which is now populated about over half a million complains -- complaints. we marked a milestone for consumer empowerment when we began to publish consumer complaint narratives which allow people to share in their own words their experiences in the consumer financial marketplace. reasonable regulations are essential to protect consumers from harmful practices and ensure that consumer financial markets operate in a fair, transparent, competitive manner. we focus on markets like the mortgage market where consumer 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 proposed rules, final rules, o requests for information. to support industry compliance with our rules, we published plain language compliance guides and other resources to aid in their implementation. we're also seeking to streamline, modernize and harmonize regulations we've inherited from other agencies. over this reporting period, the bureau continued to expand its efforts to support and protect consumers in the financial marketplace. recent data end dates that sound consumer protections in our major markets 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 um improved with stronger consumer protections and increasing consumer satisfaction. the auto lending market is supporting record sales of cars and trucks to meet consumer demand. the growing sense of consumers

that 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 reflect well on the work being done by the consumer bureau and taken as a whole, they're making substantial contributions to the continued gradual recovery in the american economy. mr. chairman, ranking member waters an members of the committee, thank you again for the opportunity to testify today and to discuss all the work we're doing on behalf of consumers. we will continue to listen closely to all of our stake holders, and we will attend carefully to your oversight in order to ensure that all americans can be assured fair treatment in the consumer financial marketplace. i look forward to your questions. mr. hensarling: the chairman recognizes himself for five minutes for questions. as you are well aware, in late 2013, the buy row entered a suit with allied financial based upon a legal theory of disparate impact. at the time, ally had an important yet unrelated pending approval.

the c.e.o. of ally said the charges were, quote, trumped up that your bureau brought against ally. the went on to say that ally had been strong armed by the cfpb and the cfpb, quote, absolutely knew they had leverage over us. 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? mr. cordray: i read the interview -- mr. hensarling: just a simple yes or no. were you aware or not aware of the pending application prior to the consumers. mr. cordray: we pursued this for well over a year before ally themselves -- mr. hensarling: were you aware or were now not aware.

mr. cordray: we pursued this for more than a year before they brought it to our attention. mr. hensarling: so you were aware. isn't it true they were in discussions with both the federal reserve and the fdic on how to -- thousand the determination of an ecoa violation could adversely impact their application, is that true? mr. cordray: we had no decision making authority over those matters. we were attempting to conclude our investigation. mr. hensarling: but were they in discussion? was senior staff with the fair lending of the cfb in discussion with the federal reserve and the fdic regarding this application? mr. cordray: i believe there were consultations about them. mr. hensarling: you say consultation, we say discussion. pull up slide number six, please. i believe on october 7, 2013, a

decision memorandum was prepared for you, i'm not sure you saw this but it has the operative phrase, staff is in a dialogue with both the federal reserve board and fdic. it begs the question, what does this have to do with a potential violation of eoca? now i'm also led to believe -- did you receive this memo? do you know? mr. cordray: i do not know. mr. hensarling: go to the next slide, please. what is also interesting is that the last sentence of the previous slide was deleted. instead we have somebody with the initials of p.a.f., perhaps patrice fickland, saying let's refrain from this discussion and instead, quote from the securities filing which seems to me that either senior staff attempted to cover up the

discussions or they tried to withhold this information from you. did senior staff try to withhold this information from you prior to the determination? mr. cordray: i don't believe so. i think you've got the entire matter exactly backwards, mr. chairman. mr. hensarling: 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 it says, this could have a material adverse effect on ally's business, result of operation in financial position, and seemingly you initialed this. are you at least familiar with this report? mr. cordray: i think you've got this matter exactly backwards. mr. hensarling: 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.

mr. cordray: again, i think you have this backwards i would be glad to explain. mr. hensarling: you will have ample opportunity within this hearing but i wanted to know. if you saw this memo. so i have another question. in employing your -- in determining the racial characteristics of borrowers in auto lending contexts, you don't actually have the racial characteristics that you know for a fact. mr. cordray: we use the same that's used in discrimination cases. mr. hensarling: 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 addresses and match names using your own surname geocoding, what

we have discovered is that you pay black employees almost $16,000 less than their white counterparts. which would suggest that either, one, you are presiding over a racist organization, and if you are not, mr. cordray, should not the same disparty 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 characteristics of your employees, i invite you to do your own analysis, but should disparate impact analysis be applied to the cfpb? mr. cordray: i have no idea what analysis you're referring to. disparate analysis was upheld by the u.s. supreme court last june in an important decision. and if you're going to do that analysis you need to correct for pay bands and different jobs, i have no idea whether you did that or not so i would not -- mr. hensarling: i would invite you to do your own analysis.

i'm not sure there's any justice taking place here. i fear we are seeing shake couns for headlines. the chair is way beyond his time and now recognize the ranking member. ms. waters: 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 and the opposite side of the aisle are truly interested in discrimination. there's nothing in their work or their 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 on the opposite side of the aisle, we know that these operations have targeted minority communities and poor communities and people are getting hooked on these payday loans and i want to talk about for a minute what is happening here in florida. but before i do that, i have asked my staff to get me more information about where they are locating and how many are locating and 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 lend bug even after so-called reforms, loopholes and other gaps remain, still leaving vulnerable borrowers susceptible to exorbitant interest rates and cycles of debt. for example, even after florida's reform, florida januarys still take out an average of about nine loans a year, according to the center for responsible lending with an annual interest rate of about 312%. according to one report an investigation into florida auto lenders who expanded dramatically after florida's so-call red form, one florida consumer appeared to have renewed her loan 17 times in one and a half years. another woman borrowed $3,100 and made $2,600 in payments and after rolling her loan over seven time she is 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 these borrowers have to take out multiple loans shows that the loans are not affordable. they are trapped borrowers. 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? mr. cordray: what we have discovered, and this is through careful and comprehensive research into the payday lending industry is that the description you provided is substantially correct and accurate. about half of payday loans in the united states today are made to borrowers trapped in a cycle of 10 or more loans. that's about half the loans being made nationwide. that's what we found in our research that looks into millions of such transactions. and 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 those massive rates of interest and difficult collection practices and the like that we've seen that creates a tremendous amount of consumer harm. ms. waters: according to the work you have done, research you have done, is this a profitable industry? are they making money? are they making large sums of money? what's keeping them going? mr. cordray: it's actually a difficult product economically. there's high costs involved in defaults, high costs involved in customer acquisition. so there are not super normal profits being made in that area. but what keeps them going, the business model for the average payday lender is rolling the

customer into loan after loan after loan so that eventually you have recovered 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 owes in the end more than they borrowed to begin with. that's a normal part of this business. ms. waters: this is why they're referred to as debt traps. people get trapped. they can't get out. they keep rolling them over. is that what this is all about? mr. cordray: yes. industry objected to that notion but it's the best description i've seen of what happens in the marketplace. ms. waters: thank you, i yield back. mr. hensarling: the chair recognizes the gentleman from texas, chairman neugebauer for five minutes. mr. neugebauer: this committee spent a considerable amount of time studying the short-term, small dollar marketplace. recently, your deputy director testified at my subcommittee on this issue. many of my colleagues did not

walk away with much confidence in the direction you're headed with the rule making particularly on the issue of state and tribal sovereignty. at issue are roughly 38 states who allow these products to be offered in some form and the federal preemption that will occur if your rule goes forward as outlined by the bureau, i have a few questions. i'll use some slides during that questioning, i hope you will be brief and forthright in your answers. slide number one, 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? mr. cordray: states have authority in this area and the federal government has authority in this area as well. mr. neugebauer: you didn't find anybody who didn't have the authority? states have the authority to regulate? mr. cordray: as is true in many areas of law, states have authority and the federal government also has authority.

mr. neugebauer: slide two, please. can you list the states that have laws in place that have contributed to the problem that you have identified? which states have failed to protect their citizens? mr. cordray: what i can say is, as you indicated, approximately 37 states or so 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 -- with 10 or more loans in a row. mr. neugebauer: which states are allowing the debt trap? mr. cordray: all the areas, all the states that were examined in the study. mr. neugebauer: do you have a list of those states? mr. cordray: it would be all the areas where payday lending is authorized. mr. neugebauer: you looked at all the states?

mr. cordray: we looked at millions of transactions nationwide in every state. mr. neugebauer: so you mentioned there's a floor, is anything below that void? mr. cordray: we don't have a rule, we have an initial framework and this kind of input is relevant to our process but as with our mortgage services rule which is are final, we did not preempt 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 consume brother text not a ceiling. mr. neugebauer: you do not think you're preempting state law? mr. cordray: we are not preempting state law. typically the federal government when it's active in an area could seek to occupy the field that would be broad preemption,

we're not doing that. they could also seek to preempt state law in specific respects, we're not doing that. whatever we do in this area will coexist with state law. there will continue to be state regulation of payday lend, there will now be federal regulation as well. that's true of many areas of law, telecommunications law, environmental law -- mr. neugebauer: but the attorney general disagrees with you. mr. soler disagrees with you. mr. cordray: i know the indiana attorney general, we served together, we have both been interested and concerned about issues of federal preemption going back to our time in state government and for myself i spent 20 years in state government. so -- mr. neugebauer: if one state has a five-day cooling off period and the rule comes out that you require a 60 day, have you preempted the state that says

five days is appropriate cooling off period and you say 60 is, isn't that preempting that state ? mr. cordray: a common aspect of federalism in our system is that there may be federal regulation and state regulation. mr. neugebauer: what is your definition of preemption then? mr. cordray: preemption is when the froth overrides state law and invalidates state law. mr. neugebauer: so my state has a five-day cooling off period you say that 60 is the new norm, then haven't you preempted my state? mr. corcray: you could say the same about securities law, states have securities laws to protect people that are investing, the federal government have laws as well. they coexist. they don't necessarily jive in every particular. mr. neugebauer: so here's the question, these 37 states have gone out there, they've had hearings, they've had, you know, debates on the floor, they've passed laws, what do you know

that they don't know? mr. cordray: you could say anything about any of these laws, the telecommunications act, states regulated that for years and the federal government had authority, congress gave authority and they acted -- mr. neugebauer: i'm sorry, mr. chairman. one last. if you brought those attorneys general of these states and the various groups of the state, if you brought them in to have a discussion about them? mr. cordray: i have talked to them all the time. mr. neugebauer: have they had an opportunity to comment? mr. cordray: i speak to them in meetings, i have spoken to them individually, i have spoken to attorney general zoeller. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentlelady from new york, mrs. maloney. mrs. maloney: welcome, mr. cordray. my question concerns the credit card bill of rights the second bill president obama signed into law.

and rahm emanuel, his former chief of staff told me that it's one of the most popular thing he is ever did because it touches so many consumers. in that card act we require you, the bureau, conduct a review every two years of whether the act was having the effects that we intended. so 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 extend 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 or unexpected interest rate hikes that are hidden? the bill wanted to crack down on unfair and abusive tactics by card companies on consumers. and your report found that the card act has dramatically improved the credit card market, making it fair, more

transparent, and even as the cost and availability have improved. i for one think it's useful to have this type of regular review of a major bill and my question is, are there lessons that you've learned from your two card act report that was been useful to the bureau in writing other rules and have you used those lessons going forward? also, two celebrated reviews, one by the pew foundation, said that the card act saved consumers $10 billion a year. the n.y.u. review with others said it was anywhere from $16 billion to $20 billion a year and have you conducted any reviews similar to what they have done to see whether it is as good a stimulus package as -- actually 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 things.

mr. cordray: we have had a chance to review the credit card market and do that on a biannual basis to report to congress. i would 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 assessment of amounts that consumers have been saved in terms of previously exploited -- exploitive fees rang from $16 billion to whatever. but it's porn to recognize that this is going forward every year and every year consumers are saving. the second piece is, this shows, and by the way my experience gos back to when i was in state government before the card act was pass and we would hear tremendous complaints and concerns about the credit card product at that time. and i'm now in the federal government, since the card act was passed and we are doing a regular review of this and watching the j.d. power consumer surveys which

show increasing customer satisfaction in this marketplace, year in and year out. it's a tremendous success story. and it show what is can be done with serious, substantive, even-handed 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 are being more careful with cards coming "out of practice" of the financial crisis. so that's important. it shows that if we work together in a balanced and reasonable way we can improve those markets so consumers can get more value from them and that's what we all should want. mrs. maloney: also in your report you highlighted the so-called deferred interest promotions and i quote, impose significant costs on many consumers, end quote. i think that's really important and my question is, what, if anything, should be done to address the risk the bureau has identified in deferred interest promotions? and also your comments on the overdraft, you know, we have also a bill that i offered on overdrafts, bills on the credit

card bill of rights, your comments on where we stand on that rule making. mr. cordray: we did indicate we 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 upfront by definition, and it's confusing and harmful to consumers because they think they're making a deal and having certain terms and it turns out it's going to be changed after the fact in a way that was not disclosed to them. deferred interest operates much in that same fashion so that's something we spotlighted in our most recent report. it's an issue we're looking at carefully and we'll be taking actions as appropriate. i think that credit card issuers would be mind -- should be mindful of thinking about their deferred interest products and the harm that's hp happening to a number of consumers who end up with back end pricing that is very different from what was represented to them upfront. that's an ongoing concern.

mr. hensarling: the time of the gentlelady has expired. mr. hensarling: the chair recognizes the gentleman from michigan. mr. huizenga: thank you, mr. chairman. i appreciate it. and director cordray, i have 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. usually there's an understanding that we're going to try and solve that problem, not create the conflict. and i just couldn't let that pass as my colleague from texas was asking you about the lending -- mr. cordray: do you want me to respond to that? mr. huizenga: very briefly, sure.

why would you want to create additional conflict? mr. cordray: i spent years in state government. in the state legislature, state attorney general, state treasurer. it was very common across many fields of law for us to be administering and enforcing state law in conjunction with common administration of federal law. it happens all the time. mr. huizenga: i did that as well. but you don't have, in what we typically have, for example in environmental law is you have preemptive state law that goes in. first it has to clear that hurdle. i served in the state legislature as well. that's not the direction i want to continue to ask. i want to pursue a little bit about orb tration agreements and i know -- arbitration agreements and i know that was brought up earlier. in march of 2015, the bureau released a report on the use of arbitration agreements and disputes between consumers and financial product providers. however, the 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 megged odds on which the study was conducted, including the processes that developed the study that were not, quote, fair, transparent or comprehensive. i'd like to submit the letter for the record without without objection, mr. speaker. mr. hensarling: without objection. mr. huizenga: it also noted the precedent of dispute resolution which exists in streamlining the american judicial system. 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 log jam. i'm very curious, do you really believe that's just -- that report reflects accurately how these consumers use these tools? mr. cordray: if i may. our report has been widely recognized as the single most

comprehensive and informative report on this issue ever done. had access to new data from the american arbitration association and others and it is an outstanding report. i have seen and we have tended closely to criticism of that report. the been mostly incident. we 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 of that. mr. huizenga: where does the study estimate the transaction costs associated with the consumers pursuing a claim in federal court versus arbitration? mr. cordray: 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 in that context. in more recent times it's been used to cut off access to -- mr. huizenga: does the study compare ability of consumers to pursue a claim without a lawyer in federal court versus

arbitration? mr. cordray: the study comprehensively addresses many aspects of the jish process, many aspects of the -- judicial process, many aspects of the arbitration prospects and compares outcome between the two. mr. huizenga: for those watching on c-span and the rest, the answer to both of those questions is no. mr. cordray: my answer is to describe what our study did. it's the most comprehensive study ever done. nobody disputes. mr. huizenga: i understand it's comprehensive but there's a number of people involved in that space that believe that there were major flaws in the data and how it was used. mr. cordray: we've looked at what they had to say and the not particularly credible, frankly. mr. huizenga: so, you would have no problem then asking or heeding the requests that over 80 members of congress and the house and the senate had of saying, ok, bead like to open this up and -- we'd like to open this up and express some of our concerns in this? mr. cordray: i'm going to continue to enforce the law. congress asked us to do a broad comprehensive study. we spent years three years on it. we're now moving ahead with congress' direction. mr. huizenga: 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. 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 that arbitration actually benefits the consumer as much as it benefits anybody else in that process. because it streamlines it. it sounds to me that you're trying to protect the trial. mr. cordray: virtually no relief to consumers in the arbitration process. billions of dollars of relief to consumers in the judicial process. that's the comparison. mr. huizenga: as long as attorneys are paid. mr. hensarling: the gentleman's time has expired. the chair recognizes the gentlelady from new york. ms. velazquez: thank you, mr. chairman. mr. cordray, we have seen some

indications from the cfpb 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, can you elaborate on the nature of those circumstances? mr. cordray: 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 debt on their credit cards, so that's why the card act becomes so important. because it actually protects not just vids but also many -- individuals but 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. if i had my way, i don't have my way, on many things, we would do what i did when i was a attorney general and seek to protect not only individual consumers as the statute authorizes but also small businesses who often operate in a 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 businesses that start out as individuals, a very small number of individuals, and seek to grow. ms. velazquez: one area where i'm concerned is regarding online lending. 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? mr. cordray: we are very interested in financial innovation. and so-called fintech. we've had marketplace lenders in to talk to us because we have jurisdiction over them. the treasury has convened both a set of actors and is working on a white paper in this subject. the 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. ms. velazquez: thank you for answering my letter. dr. cordray, to date five attorney generals 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 complaints and investigating the depth of the problem we're hearing about? mr. cordray: 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. ms. velazquez: 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? mr. cordray: i'm not sure if this is the 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 and it's 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 prohibited classes are not being discriminated against under that statute. ms. velazquez: thank you. i yield back. mr. hensarling: the gentlelady yields back the balance of her time. the chair now recognizes the gentleman from new jersey, mr. garrett, chairman of the capital markets subcommittee. mr. garrett: thank you, mr. chairman. i'm just coming in, i'm over in budget right now. 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 is the

study was done -- mr. cordray: i'm sorry, what law is that? mr. garrett: the federal arbitration act. mr. cordray: ok. 1929 or so. mr. garrett: are you familiar with that law? mr. cordray: i am. mr. garrett: is that still the law of the land? mr. cordray: it is. mr. garrett: you disparage it by saying 1929.

mr. cordray: no. in 2010 congress passed the dodd-frank act which changed arbitration, including outlawing arbitration clauses in -- mr. garrett: it's still the law of the land. mr. cordray: although the been modified by congress in several respects now. mr. garrett: it is now your agency's decision to, what, upend that law through a comprehensive action? mr. cordray: no. congress has now intervened and superseded the federal arbitration act in specifics. mr. garrett: has congress ended the ability for arbitration? that's a yes or no question. mr. cordray: in several respects, yes. they have. mr. garrett: i didn't say in several respects. mr. cordray: under the military lending act, they barred arbitration clauses and lending contracts to service members. under dodd-frank they did for residential mortgage contracts. mr. garrett: we totally eliminated arbitration? mr. cordray: no. but they gave us then authority, congress, congress -- i'm not making it up. mr. garrett: -- [inaudible] -- eliminate arbitration? cord considered because congress specifically said and we carry out the will of congress, congress said that we should issue a report, do a study, issue a report, and then act in terms of addressing arbitration in light of that study and report. mr. garrett: -- [inaudible] -- 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?

mr. cordray: i pay close to attention to what members of congress tell me. it's my job to enforce the law that congress has enacted. mr. garrett: when 80 members of congress ask you a question, do you believe you have the responsibility to respond and answer those questions? mr. cordray: i respond to individual members of congress but i enforce the laws that congress enacts. mr. garrett: so the answer is no. mr. cordray: the answer is yes. mr. garrett: we sent a letter back on june 17 of last year. we're still waiting for let answer -- complete answers. you have disclosed all topics that have been covered by this study? that's a yes or no. mr. cordray: i'm not sure what back and forth cords there has been. i know we responded to that letter. we'd be happy to work with you

further. mr. garrett: i also -- you also failed to provide the general public with any meaningful opportunities to provide input for the thing. was there a reason why you decided that certain information would be held confidential and not disclosed to the public? mr. cordray: some of the information, depending on how we obtain it from the american arbitration association and others, businesses have deemed confidential, may involve trade secret information and the like. those would be the obstacles. wouldn't be any desire on my part. mr. garrett: are those the only sections that are precluded from being public? the trade secrets? or is it a broad swath of areas? mr. cordray: i'd be glad to have my staff who are expert in this area deal with your staff -- mr. garrett: here we are in march. we're still looking for complete answers. mr. cordray: we have responded to the letter and if that response was deemed insufficient, we'd be glad to work with you further to get you more information. mr. garrett: it goes back to your initial answer to the question. whether you feel that it's your responsibility to answer to 80 members of congress, when you were first came to this committee, i asked you, i guess the seminal question, if the house of representatives said you shouldn't do something, are you accountable to them? the response was no. when i said, if the senate said you should be doing something, should you respond to them and

respond? your answer was no. i said, if the president asked whether or not that you should be doing something, the answer was no.

mr. cordray: i don't remember it in that way. mr. garrett: the final question was, are you accountable to anyone and the answer to this letter and that question back then was -- mr. cordray: that's not what i'm saying and that's not a legitimate characterization of this. i respond to members -- mr. garrett: that's on the record. mr. cordray: i have a responsibility to enforce laws enacted by congress. not by individual members. mr. garrett: the law of 1929 has been enacted by congress. mr. cordray: so has the law of 2010. yes. mr. hensarling: the gentleman's time has expired. the chair now recognizes the gentleman from new york. mr. meeks: meeks thank you, mr. chairman. good morning, mr. cordray. the director cordray. great to see you this morning. 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 consumer, for the work you've been doing to help our veteran, to help our students, to help our mortgagees, and especially for the work that you do for low-income and minority communities that are always the most victimized. it's those on the bottom. and the work that you're doing to try to make sure that there is a level playing field. 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 of, especially, most of them in low-income and communities of color. leaving behind banking deserts which are neighborhoods with 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 hear my colleagues talking about that and prepaid call providers, ette. of which, you know, i just think about my parents, i was poor, lived in public housing, went to a bank at that time, some banks -- they were not bankable. but they needed to have options.

so they used other options. back then, some of the options are dark. we don't want folks to go to the dark. it would seem to me, your agency is a god send to me, is not to wipe out all of those businesses, but to try to make sure that 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 know my dad needed an extra few dollars to make it to the next month, until the next paycheck came. we need that kind of service but we don't want it where people are caught in that forever. i think that would be good for both sides. nobody should want that. we don't want anybody taking advantage of it. so if we have an agency like yours that can put in some rules and regulations so 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. 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 poor folks and low-income areas would have some opportunities to continue to bank. is that correct? mr. cordray: i found myself sitting here thinking that you're saying a lot of things that i try to say 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. mr. meeks: let me just give 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 in high

cost loans, it amazes me that we're still finding institutions thrivinging from this egregious practice. can you please discuss with us in the little time left what is going on in those cases and what the bureau has done to address it? mr. cordray: we've seen a lot of things over the past few years. 90% or more of our enforcement actions involve deceptive conduct by financial institutions. which is discouraging in some ways. we were somewhat surprised to see what we thought was very blatant red lining occurring. this is the enforcement action that we and the justice department jointly took involving hudson city savings bank. and the patterns when they were mapped were very clear. and 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 have gone down that road in any respect. mr. meeks: i only have seven seconds to i yield back.

mr. hensarling: the gentleman yields back the balance of his time. the chair now recognizes the gentleman from missouri, mr. luetkemeyer, chairman of our housing and insurance subcommittee. mr. luetkemeyer: thank you, mr. chairman. mr. cordray, you and i have had a number of discussions in regards to trip. and certainly i 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 an enforcer of this, as well as, you have had any enforcement actions taken against anyone at this point? mr. cordray: 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 1 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 in dying not tick, not punitive, as we saw this implementation period, and it was open ended. it remains open ended. we are now midway through march today and it remains open ended. we've taken no enforcement actions. i don't expect us to take enforcement actions unless somebody's 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 really trying to exploit consumers here. this is just a matter of getting these forms right and getting them correct. by the way, the whole purpose behind this is 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. that's what we have done here. mr. luetkemeyer: are you going to issue additional guidance on this? or you feel everybody's doing ok with what's going on? mr. cordray: 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 to make sure we do that. mr. luetkemeyer: we will. trust me. also, along a different line, the federal trade commission act grants the federal trade -- the f.t.c. and pranking -- banking regulators with the power to pursue regulations. dodd-frank marked an unprecedented expansion of the authorities for the cfpb including for the first time the

term abusive. expanded series of powers for c.p.b. has become a primary enforcement tool. i realize the last week you spoke to the consumer banker association, rejected the notion that you're regulating by enforcement. i beg to differ. when it comes to cfpbing the authority, you have issued little to no guidance, regarding any financial institution from any sort of predictability. you use your authority on a case by exace basis. isn't that the definition of regulation by enforcement? mr. cordray: we're doing the very same thing that the federal trade commission does and that the state attorneys general do. it is difficult to know how to do more than case by case when you're talking with cases of fraud. or deceptive conduct. but we attempt to give guidance to the entire market by very specific orders that are issued in these cases, so that everyone knows that if they're doing this, they should stop. if that's called regulation by enforcement, i think it's a strong deterrence and it's important as a law and order mechanism for signaling to other actors. mr. luetkemeyer: 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 enforced. but a proposed rule. mr. cordray: what matter are we talking about? mr. luetkemeyer: encore. mr. cordray: ok. debt collection. mr. luetkemeyer: and this was based on not a rule that was enforced but it was a proposed rule you thought you made down the road, have enforced. so that they had a formula that's noncompliance. is that not regulation by enforcement? mr. cordray: i don't think that's what we did in that matter. we did a careful investigation, thorough investigation of the facts. we found that there were violations of either federal debt collection practices act or of the unfair and deceptive prong that were given by congress. and we enforced against that. the notion that because we may issue a rule on debt collection several years down the road or maybe next year, whenever it will be, that in the meantime we

can't stop people from engaging in an unfair and deceptive conduct i just don't think is the right approach for us. mr. luetkemeyer: my time's expired. i yield back the balance of my time. mr. hensarling: the gentleman's time has expired. the chair now recognizes the gentleman from texas, mr. hinojosa. mr. hinojosa: thank you very much, chairman hensarling, and ranking member waters. for holding this important hearing. on the cfpb's semiannual 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 unanimous consent to enter my opening statement into today's record. mr. hensarling: without objection. mr. hinojosa: 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 the 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? mr. cordray: again, we were given authority by congress to address this marketplace among others. in fact, it was specifically called out in the consumer protection act of 2010. the dodd-frank act. we have 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 10 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, ening 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. mr. hinojosa: thank you for your response. i strongly support your efforts to rein in those harmful payday loan 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? mr. cordray: i can't speak to what may be in the final rule. we're just coming up on a proposal stage here.

we're going to continue to take input from many different stakeholders and of course they have very dramatically conflicting input. 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 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 the extent we can, squash predatory products that are amassing enormous consumer harm. mr. hinojosa: according to the

fdic, nearly 50 million -- fdic, nearly 50 million americans are 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 they can still purchase medicines and groceries and other necessities. q.m.rules affected mortgage -- how have the q.m. rules affected mortgage lending by community financial institutions? mr. cordray: 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

large banks in particular. this is exactly the point that i think mr. meeks just made, which is that if you have evenhanded, sensible regulation of a market, the more responsible actors should be able to thrive because they're freed from unfair competition 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 in highly irresponsible lending and ended up blowing up the mortgage market. so community banks and credit unions, contrary to much of what is said, their market hair has -- share has increased and that's a good thing. mr. hensarling: the gentleman's time has expired. the chair recognizes the gentleman from wisconsin, mr. duffy. mr. duffy: 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 requests that this committee has made to the cfpb. that's with a back drop 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 in regard to the backdrop that 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 complains, 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. i want to -- mr. cordray: do you me to speak to that? mr. duffy: in a second. you're aware that a report came out from this committee in regard to indirect auto lending. and you would note that there was 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? mr. cordray: i can't speak to individual documents, don't know which ones you're referring to. mr. duffy: the ones in the report. mr. cordray: over the course of the last several years in response to numerous requests -- mr. duffy: i'd like you to

answer my question. i'm talking about the report that thank we did on indirect auto lending. i'm sure you read that. you made some calls to the hill. did you provide those documents to us? mr. cordray: i can't out of context here place individual documents over the last several years. i've been very responsive to your request. you've gotten tens of thousands of pages of documents. mr. duffy: you can send me tens of thousands, if you don't send me the ones i asked for, just like hillary clinton can send thousands emails, but if you don't send the 10 that are relevant, if you want to talk about recordings in watergate, you could send hours or days of recordings, but if you miss a few minutes, it's those that are relevant. mr. cordray: we continue to work with -- mr. duffy: you know you didn't send us these documents. even after this report came out, we've again asked you for the documentation in this report and you've refused to comply with our request. that is incredit incredibly frustrating when you've made

commitments to being open and transparent. mr. cordray: i'll be glad to work with you on those. mr. duffy: we've been trying to work together for years. mr. cordray: i still am trying to work with you. and will continue to try to work with you. mr. duffy: working is easy. give us the documents. send them to us. send us what we asked for. mr. cordray: we'll be glad to sit down and talk further. mr. duffy: i want to highlight some of the -- before we go there. in the allied settlement, let's talk 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? mr. cordray: 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 disparity im-- dispar aye at impact -- disparate impact. mr. duffy: what percent of accuracy do you have? mr. cordray: it depends on what we're talking about. the auto market, the mortgage market. mr. duffy: auto market. mr. cordray: a high degree of accuracy. mr. duffy: what is the percent? mr. cordray: i can't give you specific percentages. mr. duffy: it's fair to say that you are not 100% accurate, is that right? mr. cordray: i don't know if anybody's ever 100% accurate. mr. duffy: is it fair to say there are some white borrowers who may be included in your analysis that will get checks from the ally settlement? mr. cordray: if you're administering any redress to consumers, and this is across the entire spectrum of what we do, what attorneys general do, what courts do, it is always possible that redress will find its way -- mr. duffy: so disparate impact checks will go to white borrowers potentially. that's fine. mr. cordray: there's nothing unique in this area. mr. duffy: in your analysis i'm

sure that 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? mr. cordray: what we saw was systemically african-americans and/or hispanic borrowers in certain -- mr. duffy: is it your testimony that nobody paid less than the white average? mr. cordray: i don't know that i would say that. mr. duffy: is someone who paid less than the white average, are they also getting a disparate impact check? mr. cordray: i'm not sure ma what matter you're talking about or what data you're talking about. what i would say is -- disparate impact discrimination is something that's been under attack. mr. hensarling: the gentleman's time has expired. pursuant to clause 2-4 of committee rule 3, the gentleman from wisconsin is recognized for an additional five minutes. mr. duffy: thank you. we're talk about the ally settlement. you're well aware of that. i'm talking about the numbers that you used for that settlement. so i'm asking you a simple question.

are white borrowers getting disparate impact money? you're stonewalling me here. you're not answering my question. this is a pretty simple line of questions. if you want to be open and transparent, be it here. answer my questions. that was one that you're trying to waffle on. mr. cordray: i'm ready to do it. mr. duffy: the next question is, you have individuals who probably, 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? mr. cordray: if you want to specify someone to me, we can look at it. 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. it is getting -- mr. duffy: you haven't sent me the information on ally. but we do have the information in regard to toyota.

this comes from a document dated november 19, 2004, it was initialed by you and on page, i believe it's 15, is a chart that shows nonsubvented african-americans, the total number of affected at 116,500. do you have the document in front of you? mr. cordray: no. mr. duffy: look at the screen. you can see that right there. the number of harm prohinted -- harm prohibited basis borrowers is 66,000. so the 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? mr. cordray: i'm not easily able to analyze these numbers. mr. duffy: you signed off on the document.

if you want to go down to the subvented african-americans, the number that were affected was 7,559. but the number that had prohibited or were harmed was 2,668. so meaning, on the subvented class of african-americans, only 35% paid more than the white average. 65% paid less. these are your documents. i want to be clear, if you're not going to give me the ally documents, we'll use toyota. mr. cordray: subvented auto loans can behave differently from normal auto loans. and that is something we take account of in our analysis. mr. duffy: 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. mr. cordray: i would disagree with your conclusions there. we did pursue a matter with toyota. we thoroughly analyzed the

underlying facts. the automaker lender -- mr. duffy: that would show 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 bans. you want to make sure that we consider what information you might have that could account for that disparity. in regard to indirect auto lending, did you take into account credit scores, trade-ins and trade-in values? whether the car was new or used, the amount financed, the length of the term finance sthd this wag up a -- this was all information that the auto lenders tried to get you to

consider but you refused to do it. when the role was reversed and mr. hensarling asked you those questions -- mr. cordray: i wouldn't agree with that. mr. duffy: we'll do it in writing. i want to hand you a document. this was provided to us in response for a subpoena, number 20e and 22. this was the only document that was in compliance with our subpoena. this is in regard to records in the final remuneration plan in regard to ally. do you have that document in front of you? mr. cordray: no. mr. duffy: your staff has it. this is basically a computer print-out, if you'd hand it to the director, please, this is a computer precipitation-out. this is the only document that you've given us to show us what the plan is. could you read this document for the committee so we can understand what this document says? in your sunshine in compliance with the committee? mr. cordray: do you want me to just start down here and read it?

is that what you'd like? confidential? mr. duffy: cap equals 900 -- what does this mean? this doesn't mean anything. mr. cordray: if you ask for documents in an area, we give you the responsive documents that we can. and it may be that you aren't in a position to interpret this document. i don't know about that. mr. duffy: are you? mr. hensarling: the gentleman's time has expired. the gentleman's time has expired. pursuant to the committee's rules for extended questioning, the ranking member is now recognized for an additional five-minute question period. ms. waters: thank you very much, mr. chairman. at the beginning of this hearing, we started talking about the cfpb's work and racial discrimination in auto lending and specifically the cfpb's $9 million settlement with ally. i also mention -- $98 million settlement with ally. 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 you're 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? mr. cordray: sure. 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. ms. waters: did ally do this? mr. cordray: they could have, but they did not. ms. waters: they did not. did toyota do this? mr. cordray: they did not. ms. waters: honda? mr. cordray: they did not. ms. waters: 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? mr. cordray: certainly. ms. waters: thank you very much. 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 settlement. isn't it true that the cfpb was investigating racial discrimination at ally financial prior to any knowledge of ally's desire to change its stat news is mr. cordray: 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 in to potential discrimination in auto lending more than a year, maybe a 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 much that was a decision that 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 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 an appropriate resolution that the company agreed to and was willing to enter into. and 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 a matter and we did so. that's all there is to it as far as i'm concerned.

ms. waters: isn't it true that cfpb only consulted with the fdic and fed regarding ally status after ally themselves informed the cfpb of their desire to change their status? mr. cordray: i believe that is correct. ms. waters: isn't it also true that the cfpb had evidence that ally financial's policies surrounding discretionary dealer markup resulted in widespread racial discrimination? mr. cordray: that is certainly correct. ms. waters: can you speak more about your veffings ally and how you came to that settlement? i know you just did, but i want you to reiterate. because i think that my colleague on the opposite side of the aisle 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. mr. cordray: i would say quite the opposite.

the law of the land reaffirmed the by the supreme court last -- 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. 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, to work with the entity, to try to resolve the matter if we can by consent. if we can't, by litigation. and if we work with the justice department on these matters, they're our active partner and we work together on them and we see eye-to-eye. mr. hensarling: the gentlelady's time has expired. the chair recognizes the gentleman from california, mr.

royce, chairman of the house foreign affairs committee. mr. royce: thank you, mr. chairman. on the question of exemptive authority, as it applies, as it applies to your ability, you argued in a recent speech that it was not plausible for you to use such authority to override congress' own judgment on such a broad-based policy matter. as you know, section 1022 of the dodd-frank act gave the cfpb the authority to adopt regulations, by allowing it to exempt any class of entity from its rulemakings.

just this week 329 members of this house wrote to you, it was mr. stivers' letter, actually, wrote to you to tailor regulations for community banks and credit unions citing section 1022 exemptive authority specifically. do you believe that section 1022 gives you the ability to tailor regulations for community financial institutions, and does a letter -- this would be over 3/4 of congress, does such a letter change your view of congressional intent? mr. cordray: i would say two things. first of all, we have routinely tailored our rules to take account of different circumstances of small lenders as opposed to large lendsers. we did that with our mortgage origination rule. we did it with our mortgage servicing rule. we did it with our remittance rule. we will continue to do it where appropriate. second, i always attempt to be responsive to letters from members of congress.

i was in a more humble station, a member of the state legislature in ohio, and i have understood the legislative role and i respect it. i would also say that i think -- what i think i know here, i may not know as much as you all do about the legislative process in the congress, and i wasn't around for the dodd-frank debates, but both of the major credit union trade associations have said publicly that they sought a broad exemption from regulation or oversight of any kind, when dodd-frank was being debated. in both cases apparently it was rejected by the congress. it was not written into the law. what was written in was differential treatment of banks under -- and credit unions under $10 billion in assets as opposed to those above. we've gone beyond that and at times provided special dispense sations or special provisions for smaller creditors, often those of $2 billion in assets or below. and we will continue to do that where we find that to be appropriate on the facts.

but in terms of a broad overriding what have congress made a judgment about in that statute, which was not to simply exempt all credit unions from everything having to do with consumer protection, i feel that congress has spoken on that. mr. royce: let me ask you another question. in november, 2015, you released your updated rulemaking agenda indicating that you expect to issue a final rule on prepaid cards in the spring of twick. i would ask if that's still accurate. mr. cordray: i think that is still roughly accurate. i would comment that the spring starts next week and will extend until the third week in june or so. mr. royce: in proposing this rule governing prepaid cards, was it the bureau's intent to prohibit issuers from offering overdraft protection to card users? if customers want and like overdraft protection for their prepaid card, is it the bureau's

position that they should still be denied the opportunity to choose such a feature? mr. cordray: in the proposal for the rule, that is not what we did. we could have done that. we could have sought to ban overdraft. there were a number of stakeholders who suggested that to us and actually urged us to do so. we opted for more of a middle ground, which was that overdraft could be provided on prepaid products. but if so, it should be subject to the same regulations approach as is used with credit cards, which is an accepted approach that's been in place for credit cards for many years. and that's what we proposed. we will be finalizing that rule roughly on the time frame you described. and we continue to consider how to approach that issue, among others.

by the way, i would say one thing that's happened since the last time i testified here on that shows me we need strong consumer protections for prepaid cards for which none exists today. mr. hensarling: the gentleman's time has expired. the chair now recognizes the gentleman from missouri, mr. clay, ranking member of the financial institution subcommittee. mr. clay: thank you, mr. chairman. and thank you, director cordray, for attending today. just to expand on my friend's inquiry from california. can you give us a sampling of what cfpb rules -- can you give us an example of what cfpb rules are supposed to be finalized this year? mr. cordray: it's hard for me to hazard a guess on what exactly will be finalized when because the process, it's kind of like a judicial opinion. it's under advisement and it

just gets done when it gets done. i think we clearly expect to finalize our prepaid rules this year. i think we clearly expect to finalize further amendments to the mortgage servicing rules this year. i think we are under way on a number of other rulemakings and i just couldn't really hazard a productive guess at this point as to exactly when those will be completed. mr. clay: thank you for that. switching subjects. it has recently come to my attention that some of my constituents are offered loans by lenders that are notlanded to operate in missouri. my understanding is that a customer will click on the online ad of a lead generator, with the customer doing so under the assumption that they are dealing with a licensed entity. but instead their information may be sold to an unlicensed tribal or offshore lender.

in march, 2015, missouri attorney general shut down eight online payday lenders that were operating illegally and whose illegal lending practices impacted more than 6,000 missouri residents. in one instance a missouri resident was charged a $500 origination fee on a $1,000 loan, which was immediately rolled into the principal of the loan where she was then charged a $194 -- a 194% annual percentage rate, eventually paying $4,000 for $1,000 loan. can you share insight on -- mr. cordray: i've heard some horrific stories from the state of missouri on lending that is occurring at sbtr rates

effectively 1,950% annualized. i've read this in a court opinion from a missouri court of appeals case in which they gave some examples from the record. what i would also say is that attorney general with whom i served when i was the attorney general in ohio is absolutely right here. anybody who seeks to make loans without being licensed in a state is violating state law. we believe that if they attempt to collect on those loans under federal law, they may be violating the federal debt collection practices act. and we have -- and federal unfair and deceptive practices. we have open matters on that in the courts. and i think that that's all quite appropriate. mr. clay: and so missouri has caught your attention as far as the abuses are concerned of consumers? mr. cordray: very definitely. mr. clay: thank you for that. as it relates to estimating the racial or ethnic impact of auto discrimination, to your knowledge, do any statistical

methodologies exist at eliminating all false positives and false negatives? mr. cordray: i'm not a social scientist but it seems to me unlikely that in any field of social science or natural sciences that that's easily possible. i wouldn't claim to be an expert. mr. clay: ok. if republicans have concerns about using estimates for race or ethnicity, shouldn't congress just tell auto finance companies to start collecting this data as hmda does for mortgages? wouldn't that eliminate the need for estimation? mr. cordray: actually it would, yes, i believe so. mr. clay: or proxy -- are proxy methodologies used in other civil rights enforcement contexts? mr. cordray: have been for decades. mr. clay: well, i appreciate your response.

mr. chairman, i yield back. mr. hensarling: the gentleman yields back the balance of his time. the chair now recognizes the gentleman from new mexico, mr. pearce. mr. pearce: thank you, mr. chairman. don't want to catch you off balance, mr. cordray. but i would like to thank -- over here. i would like to thank you for the past couple of years, your staff's been working with the coalition to save several financing, basically streamlining the rules under title 14 of dodd-frank. just pertains to the financing. that's something that we've discussed in one of our meetings. i appreciate whatever's going on there. there's some sense that we'll come to resolution there. at what level do you think that people who are using payday loans are trapped? in other words, how many loans in a row does that -- does constitute that?

mr. cordray: i don't know if there's a hard and fast definition but i guess from what we have seen, if half of the loans being made in that marketplace, more than half of the loans being made in that marketplace are going to people -- mr. pearce: i'm trying to get an idea -- mr. cordray: for whom the market is a short-term 14-day loan, more than half the loans are going to people who have rolled them 10 or more times. seems like that crossed the line somewhere along the way. mr. pearce: that's not the direct i'm going but i appreciate that input. do you have a figure, the problem payday loans, about how much the people owe when they get to be problems? in other words, if somebody owes $100, is that a problem? or does it need to get to $1,000 or $10,000? mr. cordray: talk about tribal payday loans in particular? mr. pearce: yes. mr. cordray: i wouldn't have a specific figure to put on that. mr. pearce: is there a figure at which you identify people having

payday loans, that they're kind of in trouble? mr. cordray: i would say the overwhelming consensus of a lot of people who look at it, rolling loans in long sequences, where you pay more in fees than you are in the first place. mr. pearce: with all respect, would you tell me people have many different ideas, you're the top regulator in the dadgum country, i'm asking you what is your opinion, and you can't give me an answer. mr. cordray: my opinion of my authority, we are working through these issues, we've issued a very -- mr. pearce: you're going after an industry and trying to shut them down. there are people in my district who use them and say, if it weren't for that i wouldn't have been able to pay my rent this month. forget that. let's go to exploitation. you've talked about exploitation, so at what level are feing exploit tative? mr. cordray: we are not seeking to shut an industry down.

mr. pearce: you're doing a pretty good job of it. i'm limited in time i would like to move on. i think your actions speak louder than your words by far. but at what level is exploitation a problem? in other words is 5% per month

is that -- what that be an exploit tative fee? mr. cordray: i don't have a particular comment on that. mr. pearce: but you made comments you're trying to stop exploitation. how do you determine if it's exploitation? mr. cordray: again, i would say and most reasonable people would agree that if you are offering a loan that you know more than half of the loans will involve rolling the loan over 10 times, owing, paying more in fees than you borrowed in the first place and owing more at the end than you borrowed in the first place that gets a lot of consumers into a lot of trouble. mr. pearce: we've discussed that multiple times today, i was hoping to have a substantive conversation, i don't think that's going to happen, i'm sorry about that. so the 5% per month fee comes straight from the i.r.s. webpage. you're going to pay 5% per month when you're late. and that to me, i think crosses into the exploitation category so you and i discussed this before, i'll ask you once more for the record, do you ever deal with exploitation on the part of the u.s. government? mr. cordray: we don't have authority to address that. mr. pearce: that's fine. do you have any authority over student loans? student loans charge 5% where wall street bankers pay less than .5%, state of the union loans pay 5%. do you deal with student loans? mr. cordray: i think there are issues that could be looked at there, that might be for the congress. mr. pearce: there are issues you haven't looked at, you're

looking at other issues. you established a q.m. rule and the q.m. rule was supposed to protect consumers but what it actually did was drive 95% of the loans into the g.s.e.'s, which are exempt according to the legislation that you tried to impact. 95% are driven into the g.s.e.'s and you have no action that you're taking on g.s.e.'s, yourself come do you think here picking on people making loans to people trying to pay their rent on the end of the month. but when you drive them inside of government your answer is, here we cannot do anything to back the government off, we don't deal with the i.r.s., don't deal with government loans and what you do is driving people into a market where you don't care if they're being exploited or not. mr. hensarling: the time of the gentleman has expired. the chair now recognizes the gentleman from georgia, mr. scott. mr. scott: thank you very much, mr. chairman, over here, mr. cordray. first of all, mr. cordray, it's

very important, for the cfpb, for this nation to know that there are democrats on this side of the aisle that have serious, serious concerns and issues about how you're dealing going forward with this racial situation at the cfpb. we have legitimate concerns. and i have expressed those. but here is the most dramatic fact with the auto dealers, and that is this. your methodology. now fair is fair. and when you start talking about discrimination and you start talking about giving people checks because they've been discriminated against, but then you use a methodology that is flawed, totally, based upon the last names of people, so now

what we have, and you know this for a fact, you have many white people out here whose last names are johnson or williams or robertson or smith or scott or whatever. who are getting checks. and they're standing there at the mailbox wondering, wow, where did i get this check from? that is an unintended consequence that needs to be corrected. yet, you ignore that glaring fact and continue that process. the other area is this. if an african-american customer gos into a dealer and he tells that dealer that mr. dealer, i can only afford a $350 a month payment for an automobile. and that dealer looks at that

and he decides that he will go in and cut his own retail margin end of the deal and lower that discount rate to meet the demands of that african-american's budget, and yet your rule, your situation, would deny that dealer, would deny that african-american customer, who the bank won't deal with, many of whom don't even have a credit card. there's 60 million unbanked, underbanked people in this country. and a huge percentage of them are african-americans. when you discriminate, that is discrimination against

african-americans when your rule and your action denies them access to that car. how are they going to get to a job? these are the unintended consequences. this is a legitimate business reason to allow the dealer to come in there and either meet or beat that. these dealers in communities, where they know families, in the rural areas especially, those car dealers are everywhere in a community. and they have relationships. why deny this african-american the opportunity because he doesn't have that budget? and here's the other point. the department of justice, which is indeed the legal and lawful arm of jurisdiction under which the dealers come, not you, you

deal with the financial end, the lenders. but the unintended consequence of this is you're strangling the poor dealer and denying the very customers that you're supposedly trying to put this in view of to try to help. and then much of the money that you are getting out there for this is going to white people. now, that is as plain as the nose on our face. and we need protection from abuses. but this entanglement improperly was reflected with the overwhelming support of the congress and it wasn't just republicans. 92 democrats also stood up because of this basic reason.

so my point is that when you are willing, when you are willing and open to look at the whole picture, not just this narrow aspect -- i guess my time is up, but i hope you understand the reason that both democrats and republicans, this is an issue of soaring magnitude. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentleman from florida, mr. posey. mr. posey: thank you, mr. chairman. director cordray, it's no secret i'm still a little apprehensive about the cfpb. mr. cordray: i'm trying to help you get through that. mr. posey: despite the great sounding name, the consumer financial protection bureau, that sounds great, it's going to

be just another way to punish political enemies and bully law-abiding citizens like lois lerner and the i.r.s. for example. i'd like to think that other agencies like the i.r.s. already do enough of that. one of the many, many reasons that made me feel that way is your opposition to my proposed legislation which would allow businesses and individuals to ask whether a particular transaction complies with your rules. otherwise they may be left playing a guessing game as to how the cfpb might react or act toward what they are doing or not doing. do you think it's important for the bureau to communicate with the companies they regulate? mr. cordray: we do all the time. all the time. mr. posey: is that a yes? mr. cordray: yes.

mr. posey: do you think it's important that businesses understand the regulations you enforce on them? mr. cordray: we try very hard to make that happen, yes. mr. posey: do you think the cfpb has a role in helping companies understand and recomply with the rules? mr. cordray: i think we have been by far the most active regulator ever in doing that mr. posey do you think consumers fare better when more businesses understand how to comply with your regulations? mr. cordray: yes, if the rules don't get implemented, they're not worth anything. mr. posey: i'd like to think you feel the way you said which is why i was so disappointed in the bureau's no action policy. here's an excellent opportunity to provide clarification to companies and individuals who are faced with a constant dream of regulations. in my office, i've kept the register for the last five

years. it's become a little bit of a tourist spot to have people come in and have their picture take within the regulations, administration, federal agencies, not elected people, but unelected people have had in the last five years. i asked people to guess how high the pile is? the closest i got was seven feet. the reality is, it's seven stacks over seven feet. yet it's my understanding that the bureau is still expecting merely one to three requests per year and that the policies set up is the expectation that there's only one to three requests fer year.

mr. cordray: i intend for taos do more than that. we opined that we thought we might get as few as one to three applications a year, i think we may get more. we also said that we would work to try to accommodate greater demand if there is a greater demand. the purpose, as i had in mind of having a no action letter policy and it took some time and effort to work through that was to try to capture some of the spirit of the bill that you're talking about in terms of people being able to get their questions answered and have some clear space to go forward. by the way, we also do this on a daily basis. we get thousands of questions a year. mr. posey: reclaiming my time, i'm limited here. have you had any inquiries yet? mr. cordray: i think the policy has just taken effect. i don't know if the effective date has yet passed. so i don't know the answer to that at the moment. we'd be glad to keep your staff informed. mr. posey: if resources were taken off the table if money

wasn't an issue for the cfpb, which it's not. would you then have action to -- objection to making the no letters policy more expansive? mr. cordray: money is an issue for us, we have a hard budget cap set by congress we have to comply with, so we always have to think about how we're allocating resources to different things and they borrow against each other. we don't have an unlimited budget. mr. posey: the frustration i see is the only time we're concerned about money is when it benefits the public, communicating with these people and letting them know what to expect. mr. cordray: we're concerned about money all the time. mr. posey: we had your assistant come in here, someone from oh other side asked how much money she made she refused to tells. mr. cordray: money is an issue for us all the time. mr. hensarling: the time of the gentleman has expired this echair recognizes the gentleman from texas, mr. green, ranking member of the oversight and investigation subcommittee.

mr. green: thank you, mr. chairman. i thank the witness for appearing as well. also i thank the ranking member. mr. cordray, you and i and a good many other people are well aware of what this is all about. there are people who want to immas cue late now the cfpb and ultimately eviscerate the cfpb. it's over the airwaves, all sorts of things are being said. there was even an allegation made that i had some concerns with the cfpb to the extent that it was alleged in a sort of sketchy way that i was supportive of emasculating the cfpb. not in those words but that's what this is all about. there are people who really would like to have a financial protections bureau, not a consumer financial protection bureau. so all of these things are done

to give the cfpb a bad image. i want to go on record as making it very clear, i support the cfpb. i support what you're doing to help in the areas of auto lend, to help with payday lending. i support these things. i wish we could do more. i don't believe that all dealerships are engaged in invidious discrimination. i don't think that all payday lenders are bad people. but those that are ought to be properly regulated and they ought to be penalized for what they do. let's talk quickly about ally. it is true that ally settled that case for about $80 million, i believe. is that correct? mr. cordray: and they've paid out more since to remediate further problems year by year. mr. green: and it is true that ally was prepared, in the sense court, which is the american way, that's why we have an independent judiciary, but they

were prepared, they were in court and they chose to set they -- settle the lawsuit, correct? mr. cordray: i assume so. mr. green: with them settling this lawsuit, i assume they thought this was in their best interest to do so. what i marvel at is how these major dizzes can lose in court but come to congress to win. because that's really what this is all about. they want to now change the rules of the game so that they can continue to perpetrate these kinds of invidious acts upon people who need the money they have, are barely making it, and still find themselves being discriminated against and having money taken out of their pocket. everybody, it seems, wants to fight discrimination until they have to fight it. and then when they get to the point of having to do something

about discrimination, invidious discrimination, i might add, that's when none of the tools seem to work for them. using testing doesn't work for them. which is probably one of the best ways to determine whether discrimination takes place because you can send people out and those that come back with empirical evidence can share that with you, show they were discriminated against. then disparate impact. another tool. just doesn't seem to work for them. any tool that we design doesn't work for them. everybody wants to fight invidious discrimination until they have to fight it or find a way to do it. unless it's at the cfpb. if it's at the cfpb then all sorts of specious allegations are made, attempts to do everything that they possibly

can to besmirch the cfpb because they've already said, and i admire them for being honest if ever they get a president, they're going to do things to eviscerate, they don't use that terminology, but that's what is meant, to eviscerate the cfpb. it will be taken away from us. i'm reminded of what ben franklin said when he came out of constitution hall and someone queried, what type of government a monarchy or a republic? and he said a republic, if you can keep it. we have a cfpb, if we can keep it. i'm not sure we're going to be able to keep it, to be quite candid with you. i'm going to fight on my watch but i know there are many watches to come and just as the same people who are against the cfpb, the same people who want to do something about social security, they want to privatize it, all of this in my opinion goes back to something the supreme court did in citizens united versus s.e.c. the supreme court said that money talks. money is talking right now. right now today. money talks. these big corporations now know

that they have an edge because they can do whatever they want and challenge us if we challenge them. it makes a difference in the lives of little people, people who are not as big like the corporations. and we have got to do something about it. i thank god for what you're doing. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentleman from ohio, mr. stivers. mr. stivers: thank you, mr. chairman. appreciate you being here, like to welcome you before the committee, mr. cordray. mr. cordray is my constituent so it's always good to have a constituent in the room. and you probably, i know you answered the question to mr. royce of california earlier, sent you a letter with 329 members of congress, bipartisan a massive majority of members of congress and mr. royce asked you a little bit about it and left a little bit out. did you read the letter? mr. cordray: i don't think it's come to me yet. it came over yesterday and i have not seen it. mr. stivers: the bottom line --

mr. cordray: i read all the letters, i just haven't seen that one. mr. stivers: they found that community financial institutions had to discontinue or limit access to services as a result of your regulations and you have the authority under section 1022 of dodd frank to modify your regulations and sort of adapt them to the people they're applied. so i would urge you to do that and i'm a very visual person, i have a visual display for you, and jessie is going to hand you a t-shirt. could you hold that up and take a look at it real quick. is it a nice t-shirt? well-designed? mr. cordray: i'm not an expert on t-shirts.

>> but it looks -- could you try to put it on? what size are you? mr. cordray: i'm kind of reluctant. mr. stivers: does it look like a big or a small t-shirt? mr. cordray: that's looks like a small. mr. stivers: that's a 2t. fits a 2-year-old. the two ways you could fit in that, are go on a massive diet and restrict yourself, what a lot of community financial institutions are doing to make themselves smaller to serve clients less, or they could strain the t-shirt and break the t-shirt, the t-shirt being the regulation. i'll give you time in a moment. take a look at your authority, you talked earlier about your authority. you took your authority

seriously in another rem when you were talking to one of my colleagues and said we take our authority very seriously. take your authority under 1022 seriously too. so what are you doing to -- going to do about that, i'll give you 20 or 30 seconds to tell me what you're going to do to help the folks under -- you admitted you haven't read it, you probably can't tell me but i guess, are you going to read it and take it seriously? mr. cordray: let me also talk about the facts here. for example, they have economists that present facts in reports and then they also write certain opinion pieces that don't jive with the facts. credit union membership last year in the wake of four years of the cfpb is at a new all-time high in the nation. that's good news, i think. but it's not consistent with this notion that we're killing credit unions. credit unions share of the mortgage lending market where supposedly our rules are stifling them and driving them out of business is at its highest level than it's been for

the last 20 years of keeping track. they're doing better in a marketplace that rewards responsible lenders. it is also the case that we have contoured our rules in ways that give advantages or give differential treatment to smaller lenders, whether community banks or credit unions, because that's consistent with the data coming out of the crisis that they had lower defaults than other lenders. they should be able to continue their relationship lending model and our rules provided specifically for that. we will continue to think about those things on a case-by-case basis but the argument that everybody is being driven out of business, they're stopping products, isn't consistent with the data that shows that total number of mortgage lenders were up last year that credit union membership is at all-tile highs and that credit union mortgage lending in particular has increased its share of the market at the expense of large banks. those are the facts.

mr. stivers: the problem is the number of small credit unions is going down because your regulations are making it difficult for small credit unions, they're having to merge and i had it happen in my district. three credit unions merged into one bigger credit union because of the regulatory burden. we're seeing it all over this country, same with small banks and the regulatory climate is speeding it up, it's not the only cause but it's speeding it up. mr. cordray: that's been happening since the 1920's. mr. hensarling: the time of the gentleman has expired. the chair recognizes the gentlelady from ohio, ms. beatty. mrs. beatty: thank you, mr. chairman, ranking member, and thank you mr. cordray for being here today. there are some benefits in being last. you get to hear all the information, good or bad -- mr. cordray: i noticed you sat through the entire hearing. mrs. beatty: i did. let me say how proud i am that you are from ohio. i associate myself with all the

words that have saluted you for protecting those folks we need to protect. which is in your charge. let me also say that we have not talked about the billions of dollars that you and your agency have been able to recover for those who have been wrongly defrauded. now, a lot of controversial issues here today. and i've been a part of some of it. but what is amazing to me, being a black woman, is how we talk about protecting consumers and we pick and choose when we want to use the words disparity and discrimination and sometimes for me it's been very political. that people are using it, whether it's you, whether it's president obama, whether it's anybody that's helping those folks who look more like me. i've looked on websites, pages of some of my congressional folks here and it's all about destroying you, it's all about

racism, but we only seem to do it when we're protecting those folks. now here's what i think. i'm trying to look at both sides. so if we take one of the most controversial votes that, for me, and i'm all with you, i'm supporting, but here's my issue. i think we've wasted a lot of time in here. a lot of time arguing without resolve. and i was always taught if you complain you should have resolve. so if we take the house bill that came up that we had black dealers who were against it, we had dealers who, let's say, were more majority but there were some minority in there that were supportive of it. but here's the wonderful document and i think we all have it, mr. chairman, i'd like to enter it into the record. it's about what you do. mr. hensarling: without objection. mrs. beatty: it talks about fair credit compliance. you can take the black folk the white folk the come by narkse -- combination all signed off on

this document. then we get this legislation that we're all in a tiff about and the legislation really doesn't resolve the problem so whether you're for it or against it, it doesn't make any sense. because here's the issue that i'm going to allow you the last half of my left to answer. when i think about those african-americans and minorities who walk into a dealership, do i think some of them are discriminated against? yes. i think some of the people who walk in this room that look like me are discriminated against because of all the stereotypes we know about and unfortunately we've heard in this room. on the other side, do i think somebody walks in a dealership and looks like me and is not discriminated against or don't automatically get a higher rate? well, what's the difference? it might just be that i was more aware, had a better credit score, nobody is talking about the real systemic issues in the problem. and it starts, because we can't change the color that you go ,

in but we need to make sure we put practices and things in place beyond names and zip codes. but here's the other thing. if we start together on financial literacy, the issue you have done more than any other person on financial literacy in that state. my question is, we got to create dodd-frank, i'm all for dodd-frank, i wasn't here. there's a part of the dodd-frank legislation that talks about real financial literacy. and we're not doing enough -- in this committee, that's charged with looking at the banking industries, looking at the financial industry, looking at the credit union, industry, but we're not talking about a program, even from the minority dealers in their letter to me, it says, we're not dealing with the real issue of the transparency of the people's credit and we're not coming up with any legislation.

so dodd-frank mandates that the cfpb's office of financial education shall, not maybe think about it, but shall develop and implement a strategy to improve financial literacy of consumers. it doesn't say consumers who go into a candy store, so that means a consumer who goes into an automotive dealership. they have to have financial counseling, information to assist with the evaluation of a credit product. let's say that product is a car. and the understanding of credit histories and scores. lastly, i had a member, an african-american person, tell me that they got that high interest rate and thank god they did because they could go to work, they could have a car and they could feed their family. and i'm sorry i don't have enough time for you to answer. mr. hensarling: the time of the gentlelady has expired. the chair -- ms. waters: can we enter into the record the national minority automobile dealers.

mr. hensarling: without objection, the chair now recognizes the gentleman from south carolina, mr. mulvaney. mr. mulvaney: thank you, mr. cordray, i'm over here. i want to follow up on some of the discussions that mr. neugebauer from texas had with you about the interplay between federal regulation and state regulation. i think mr. neugebauer is asking you specifically about some of your proposed rules on short-term, what people call payday lening aened how it interacts with state action in the same field. during the questioning, seriously, despite what you may think, in this particular circumstance i'm not trying to put words in your mouth but i think -- mr. cordray: i always take your

comments at face value. mr. mulvaney: you said you -- mr. neugebauer asked you which states, you said all 37 that still allow payday lending, so i'll ask the question again and see if we get a clean answer. if your research as you prepared to produce these new rules on short-term lending, which states have you determined have failed to protect consumers? mr. cordray: maybe i wasn't clear in trying to respond to the question before, that's not how we approach the issue. it's not my job to control states or tell state officials what to do. it is my job -- it's not my job to control states or tell state officials what to do. it is my job -- mr. mulvaney: that's fair. mr. cordray: but it is my job to look at harm occurring in the mark place and look at ways to intervene to address certain predatory prackities of lenders. mr. mulvaney: is it fair to