-- you are not using high-pressure pumps that they use. you don't use the energy drain. host:? is this an issue you -- are you an engineer? caller: i have done a lot of studying on this. and outside machinist working for the navy. host: that is william in washington. that is our last caller here. last caller of today's show. we will take you live to the urban taking homeland and affairs committee. a hearing today on the consumer financial protection bureau's semiannual report, richard cordray will be there testifying. that begins in a few moments here on c-span. [captions copyright national cable satellite corp. 2014] on the span.

>> the committee will come to order. here.e a quorum move, senator brown, do you have a statement? you want me to go ahead, ok. in j lerner, i move to vote nominations. mr. lerner to be inspector fdic, -- to be an

assistant secretary of the treasury. miss lisa fairfax to be a member of the securities and exchange purse ton, ms. hester be a member of the -- >> i have a few remarks. a couple of people on my side have remarks. i think the chairman for convening the session to consider these nominations for the committee. tose people have been asked take on important jobs. it is incumbent to act promptly today and on the floor. was pending for 500 days. for 400.as pending i hope we do better with nominees.

hopeful chairman shelby and all of us who support -- will go to leadership and ask them to move on this. he is qualified. he started with president bush. i would also ask that we move , thely on the nomination confirmation of the import export bank nominee. its agency can carry out entire mission. thank you. you for the courtesy. i am going to take a minute. on the blockte no of nominees. not because of three of them, but because of the two fcc nominees. i have not received answers sufficient from either nominee.

it is on the question of the disclosure of corporate political spending. this should be a priority for the fcc. citizens united open the floodgates for a deluge of dark system.to the political undisclosed, anonymous, unaccountable. the proposed rule would compel corporations to disclose if and when they are making political donations. ,t would introduce a small important degree of accountability into a system that is broken. position,ed about the they demure. to think about it and the answer was gobbledygook. i think that is false equivalency.

shareholders have a right to know how corporations spend their money. it is simple. it may factor into the decision to invest. 1.2 million commenters urged the fcc to move forward with the role. i would rather get rid of citizens united. can indicate to me that they believe the fcc has to play a role in making corporate transparent,nding i cannot support their nominations. thank you. >> thank you. believe transparency and disclosure of the shareholders is of the utmost importance. of governance and investor protection. is material tong how shareholders decide where to invest their money and how to vote and corporate elections. within the past month, during and after the committee's

nomination hearing, i asked both nominees for assurances that they understand the value of this disclosure the shareholders. after hearing and reading responses, i am concerned that confirmed, they will obfuscate on this policy matter. i have been fighting to pass my shareholder protection act. i have led a charge to protect .gainst harmful writers it is not just me and my colleagues. more than one point 2 million americans have implored the fcc to act. this issue has received more attention than any rulemaking petition and the history. i will vote against these nominees. before they are considered on the floor, we need commitments that they will stand with us and ns who2 million america

have weighed in on this issue. i think the chair for the opportunity. thank you. six years ago, the supreme court drew a steamroller over the "we the people" principle of our democracy. citizens united unleashed a wave of -- that has changed our democracy from "we the people" to "we the powerful." corporate political spending has gone unchecked. democracy has been flooded by dark money from undisclosed sources. that.time to change people should decide our elections, not pocketbooks. we urged them to work on a rule to require publicly held companies to disclose spending to shareholders. it was on their agenda.

the current chair of the fcc took it off. that is a move in the wrong direction. this type of disclosure is a critical step in fairness and transparency in political spending. fcc to makeor the this a priority and restore transparency to our democracy. additionally, if you invest your have thea company you right to know how and when that company is spending your money to influence the outcome of elections. anything other than full disclosure is stolen speech and incompatible with the freedom of speech and our constitution. it is time to stop this wave of dark money drowning out the voice of the people. i will join in voting no for the same reasons my colleagues have put forward today because the nominees for the fcc has not clarified that they understand and will advocate for the transparency that our constitution requires. i share the concerns of my

colleagues on the political spending issue. what has happened to the campaign finance system in this country is a disgrace. the fcc has the authority to help. what it does not have is the will. this is wrong. it is wrong for investors and all of america. we need an fcc that will make spending more transparent. i have concerns about ms. purse's nomination based on her views about dodd frank. it is dangerous to put anyone in a commissioner position, someone who will have to implement and enforce the law, who seems to be adamantly opposed to the financial reforms that congress put in place in the 2008 financial crisis. we saw what happened the last time we deregulated the industry. the price chart -- the price tag was a norm us. -- was enormous.

we cannot go back there. not now, not ever. >> let's vote. those in favor, say i've. -- say aye. the nomination is agreed to. >> i want to be recorded as no. >> center of new york, no. >> same. >> i am from massachusetts. we feel strongly about this. she is probably a red sox fan. >> eat your heart out. you cannot do that. >> you are either no on all of them or yes on all of them.

no on all of them. >> we might need a recorded vote. if that is what people want. do you want to do it on the fcc? we will postpone the vote and go to the regular order. mr. cordray, welcome to the committee. you have seen this before. .e welcome you i will proceed with an opening statement. on tuesday, the committee heard testimony from private sector on consumer finance

regulations. we heard a number of concerns regarding the bureau's actions in areas such as indirect auto lending, arbitration, the andumer complaint database broader critiques of the bureau's approach to regulating, including use of enforcement actions to set markets and its rather than the rulemaking process. there is concern expressed regarding the current structure and lack of accountability in it. regulatory independence should not mean independence from accountability or oversight. the drafters of dodd frank bureau from any meaningful congressional influence, leaving it free to questionable practices and unreasonable expansions of its jurisdiction. this week, a federal court of

appeals has directed the cfp be to defend the constitutionality of its basic structure. this case follows what is now becoming a string of court decisions criticizing or striking down this implementations of dodd frank provisions, including systematically imported designation of metlife, the cost-benefit analysis for the fcc, and the fcc conflict of mineral rule. to theve it will lead invalidation of many parts of dodd frank. that is where happens when a 2300 page bill is forced through congress without sufficient process and before the lessons of the financial crisis were understood. congress did not wait for the financial crisis inquiry commission's work to be completed or its report to be released before it passed. frank and created cfpb.

while the committee held hearings in the lead up to the passes of dodd frank, i can assure you the thousands of pages of text were being drafted -- were drafted before we had a single hearing. we often hear about the importance of data and data driven decision making at our hearings. i would like to highlight my can lack ofout the striking data and data driven decision making that produced the law we know as dodd frank. thisrikes me that committee approve this legislation without deposing a single participant. the committee did not subpoena a single document from a single person or financial institution. now, we are starting to see the results of this effort. there is growing concern that despite the bureau's mission, the rules and regulations

restrict access to credit, increase cost, and deny financial products to the consumers who need them. last year, the survey by the federal reserve found 47% of u.s. households are unable to come up with $400 in emergency funds without selling something, going into credit card debt, or using a short-term loan. these in itse of rulemaking, the bureau may be blocking access to financial services americans may need in a crisis very consumer protection should not mean limiting a consumer's options by substitution, substituting the bureau's judgment for the consumer's. we will hear from richard cordray so we can have what we hope will be a productive discussion on these topics and concerns. sen. brown: thank you for

holding this hearing. it is an example of how the cfpb is accountable to congress. the issue of accountability bill welders that anybody would say you are anything but that. bewilders meility that anybody would say you are anything but that. cfpb is subject to three separate annual audits. banking agencies have authority to veto cfpb rules that threaten the safety or soundness or stability of the system. continues to still be attacked. false arguments that it lacks accountability.

the industry continues to fight cfpb's existence. those in congress who are advocating for the industry join their existce, their actions. most recently by trying, unsuccessfully, to attach writers to the end of your funding legislation. this committee has gone 15 not seen one have person coming out of this committee who has been confirmed on the senate floor, yet some of my colleagues from the other side of the aisle want a commission of senate confirmed the in a dysfunctional senate banking committee and dysfunctional senate. it is strange to think that is good government. is how the opponents wanted to be, that they cannot simply act because they would not have enough senate confirmed

members. the purpose of the writers is to turn the cfpb into roadkill. me,y's hearing, excuse tuesday's hearing. one witness represented everyday americans. the business witnesses claimed cfpb is hurting people it is supposed to help. polling shows that three in four voters support the agency. the committee received petitions from hundreds of thousands of americans supporting the consumer bureau. many of you are in the room. thank you for showing your support for the cfpb. it has been a strong watchdog for consumers since it started. nearly one million people,

including 25,000 in ohio submitted complaints to the agency about their problems is with mortgages, student loans, bank accounts. at least one or two of those three corporate representatives on the panel complained about these one million people that were sending in complaints, amazingly enough. they were not industry lobbyists, i guess, that sent in the complaints. they focused on the financial industry's soundness and ignore the plight of consumers. in my view, these are complementary, not competing responsibilities. if people are treated fairly, the system is less likely to run off the rails. a former fed official claimed it actnot have evidence to against predatory lending. imagine that. foreclosuresthat

doubled from 1995 to 2000, they doubled again by 2006. according to that former fed our witnessesof thursday on the corporate side, that showed data any problems. officials begged the fed to act in 2001. the same story played out in the country. , there was nofpb place to file complaints about consumer financial products, no congress to determine what consumers were experience. no centralized place for regulators to determine when a product had become abusive that americans across the country, one million of them would file complaints about it. has exposed bad behavior by financial companies that had no federal regulator, such as auto finance. we finally have strong mortgage

rules and disclosure designed for people who have to pay the mortgage. the bureau is working on rules curb payday loans. the payday loan market is a prime example. more than one dozen states in our country do not allow payday lending. my state did not until a republican majority came in the 1994 election in ohio and in my state, it was created. even that legislature, because of abuses, a decade later, enacted a 28% rate cap. defeated the ballot initiative, even though payday lenders were outspending them in that campaign, 40-1. has caved tore those interests and it means that payday lending is alive and well in ohio again. will finishfpb

these rules soon on payday lending. i look forward to hearing from director cordray about their priorities. this is the 61st time you have testified before congress. i hope we can focus on substantive issues to allow you to do your job. thank you. shelby: your written testimony will be made part of the record. for theray: thank you opportunity to testify today about the consumer financial semiannualbureau's report to congress. i appreciate our dialogue as we work to strengthen our financial system and ensure it serves consumers, businesses, and the foundations of the american economy. build this agency, we have

made progress in our responsibilities to exert oversight over the largest banks and non-bank financial companies and to enforce financial laws enacted by the congress. our approach to risk-based supervision is leading to systematic, consumer friendly changes at these institutions and we are making progress on leveling the playing field for persistence. during this reporting period, our actions resulted in more than $95 million in her address to over 177,000 consumers. enforcement actions are based on investigations and most have identified deceptive practices by the parties involved. during this report, actions lead to approximately $5.8 billion for victims.ief these consumers are located in every one of your states across the country.

we are working to provide tools and information to provide practical skills and help people understand the choices they make to manage the ways and means of their lives. we provide guidance and response to inquiries across the spectrum of consumer finance. include paying for college, owning a home, and planning for retirement. we work together on financial education in schools, the workplace, and on behalf of older americans. responding to consumers is central to our mission. ofrefine the capabilities our office of consumer response to facilitate responses to consumer complaints. we expand our consumer complaint database which is updated nightly and is populated with half a million complaints about the broad range of consumer products and services.

we marked a milestone when we published narratives which allowed people to share their experiences in the consumer financial marketplace. reasonable regulations are essential to protect from harmful practices and ensure marketplaces operate in a transparent and fair manner. we focus on markets, like the mortgage market in particular, where consumers can shop for services and are not subject to unfair or abusive practices. during this reporting period we issued several rules or requests for information. to support industry compliance languagehed plain guides. we also modernize regulations we have inherited from other agencies. the bureau has expanded its efforts to protect consumers in

the financial marketplace. sound consumer protections in major markets are strengthening them for consumers and providers . the mortgage market has been expanding for two years. the credit card market is improved with strong consumer protections, industry performance, and consumer satisfaction. the auto lending market is supporting record sales to meet consumer demand. the growing sense of consumers that the markets can work for them without fear of traps and restoringconduct is their trust. this reflects well on the work .eing done by the bureau they are making substantial contributions to the recovery of the economy. esther chairman, ranking member brown, thank you for the opportunity to be here and discuss the work. to listen tonue our stakeholders and attend to

your oversight to ensure all sure of fair be treatment in the marketplace. i look forward to your directions. sen. brown: thank you, director cordray. i would like to summarize with the direct lending and auto lending then get your impressions. you do not have any statutory authority to regulate auto dealers. . frank prescribes that. neverrdray: we have brought any action against a single auto dealer. sen. shelby: you have the authority or indirect auto lenders? mr. cordray: not only the authority, but we deal the responsibility. you recently approved an enforcement action using the theory of the spirit -- theory of disparate impact. you argued that the lender's

policies created a significant words, resulting in disparities on race, national origin, and potentially other prohibited races. i presume you presumed the disparate impact vendor because the lender has no idea whether the borrower longs to a protected class. unlike mortgage lending, data .ollection, auto lending is not it is my understanding that the lender cannot discriminate on the basis of race because the borrower's race is unknown. my understanding is that you determined, the agencies, determined certain racial groups were being charged a higher rate on loans. hence the disparate impact. the bad act was the lender's

policy, not the fact that they intentionally discriminated, because they could not, even if they wanted to. if anyone was in a position to discriminate, it was the person selling the car. the law does not allow you to regulate the dealer, only the lender. the indirect lenders were of $162d to the tune million. or may not have been the action of someone else. your conclusion of disparate impact is valid, it would seem that this would be a poster child who rulemaking as opposed to enforcement action. did nothing to intentionally discriminate against anyone. it would appear to you treated them as such, because you do not

have the authority to go after your real target. your own press release is entitled cftp to hold auto lenders responsible. i understand you make these on a case-by-case basis, but today in this committee, tell us why you chose to go after these lenders as if they knowingly discriminated against certain individuals as opposed to presuming a rulemaking that would give the lenders clarity and certainty? mr. cordray: i put the matter somewhat differently than how you stated it. auto lenders set of lending programs. they can lend directly or indirectly. they set up the programs. the results are their responsibility. pattern is a systematic

practice in their programs of people being given higher rates based on race or ethnic origin, that is against the law. i would say that we enforce the equal credit opportunity act in the same way and with overlapping jurisdiction of the justice department. the justice department has enforcement authority. these matters have been taken jointly with the justice department and have led to disparate impact discrimination findings. nine job is to enforce the law, whatever it is. sen. shelby: follow the law? mr. cordray: this was reaffirmed by the supreme court last june -- sen. shelby: excuse me. your job is to follow the law. mr. cordray: last june they reinforced that despairate impact is the law of the land. there has been a

lot of talk before the committee and the discussion, a couple of days ago about your agency using enforcement as a tool rather than rulemaking. which, some people believe, is after money rather than justice. what do you say to that? mr. cordray: if you are enforcing the law, some with not like it. they would rather get away with breaking the law, cutting corners, and saving money. if people are breaking the law they should pay and reimburse consumers that are harmed. i know you were prosecutor, and i know you took serisly the obligation to make people follow the law. that is what we are doing. if people are used to it not being done, that is not the way it should the. sen. shelby: everyone should have respect for the law, that includes you and your agencies. mr. cordray: absolutely. sen. brown: thank you.

we heard two days ago about the arbitration study. i would like to give you a chance to talk about the study's methodology and findings. what does the bureau land to do to allow consumers to seek justice? it is important to understand the authority. congress spoke in the dodd frank act loudly on the issue of arbitration agreements in consumer contracts. what they said, this is the law of the land, is that the arbitration agreements were harmful in most market contracts and would be banned flat out in most residential mortgage contracts. , congress said, in the statute as for consumer the newg, we will task agency, our agency, with the job of studying the problem and reporting to congress about it.

based on the results of the study to consider is policy interventions are warranted consistent with the study and with the public interest to protect consumers. our first mandatory job was to conduct a study of arbitration losses in consumer finance contracts. we undertook that seriously. it took us years to do the study. we assembled and brought in data no one had looked at before. about arbitration matters, court cases, about every manner in which different disputes may be resolved in the consumer finance arena. studywere criticized the have acknowledged it was the single most comprehensive groundbreaking study that had ever been done and continues to have ever been done in the history of arbitration

agreements, which go back to the 1920's. in consumerund that finance issues, in particular, is aoften what you have small amount of harm to individual consumers on a broad basis. may millions of consumers are harmed to the two of $50 to $100. it is not worth the individual hile to pursue a court case. what we found was the arbitration agreements tends to cut off people's remedies altogether because it bans the ability to bring claims so that financial institutions who harm on a broad basis cannot be held accountable. that is what our study found. there is a lot of detail and it -- it is subject

not easily subject to a 60 second discussion. we can continue to discuss and debate. we offered to speak to the authors of one critical study, one of which was willing to speak, the other was not. allill take input from sides. we are moving forward and have indicated we are contemplating rulemaking to build on the results of the study to address the issue and expect that to be in proposal stage of this spring. our panel claimed that regulations are reducing access to products like free checking and pushing consumers into a day loans. americans have a $.5 trillion in consumer debt, $1 trillion more than six years ago. talk about the credit and the research the bureau has done. mr. cordray: i reviewed the

transcript on tuesday and there were comments on free checking that were dubious. some was penned on the german agreement. that has not been established as cause or effect. access to credit is expanding. there was loosely around dates in the testimony. some talk about things that have happened since 2008, credit being restricted. it was restricted immediately in the wake of the financial crisis. mortgages became tight. credit cards became tight. what has been happening since the dodd frank act in 2010 and the consumer bureau, which did not open since 2011, is we see .redit expanding in the mortgage and credit card markets, the federal reserve studies have shown credit is

expanding. in the credit card market in particular there is broadly increasing consumer satisfaction with the product spirit we think that is good. we're not only pro consumer protection, we are proconsumer. if they have access to responsible credit, that is good . we see that expanding across markets. the bureau announced it was considering covering loans, vehicle loans, high cost loans. ohio is attempting to block payday lending. talk about how these companies have skirted state laws, the importance of the rule, and you have commented there are states that do not allow payday lending. how have they done with small dollar credits without the access to payday lenders? mr. cordray: there has been no research to show, and it ranges

depending on the definitions states thates to 18 restrict payday lending because they have recaps in place. there's no indication that consumer welfare has been harmed. there are studies that indicate that credit scores might be higher and bankruptcies might be lowered. that is a question. the best example is one the committee can understand readily because you have been involved in the military lending act. it was passed in 2006 with the promise congress made to cut off predatory credit offered to active-duty servicemembers. the rules that were implemented either federal agencies were pathetic. they were narrow and easily circumvented. you can see to this day predatory products being offered outside military bases and

ofine at 900% rates interest. congress reopened that. the consumer bureau was part of the discussions creating new rules. we have new rules that take place in october that will bring the meaning of the military lending act to fruition here at the protections will be realized, i believe. and ifholes are allowed, rules are flimsy, the industry will circumvent the rules and they have shown their ability to do so. thank you, mr. chairman. i have privacy concerns about the big data collection efforts. the ability to reverse engineer this information. last congress i requested a review of the data collection i the government accountability office. it acknowledged the ongoing

collection of 600 million credit cards, 11 million credit reports, 700,000 auto sales, 10.7 million consumers and activers, 29 million mortgages and 5.5 million private student loans. i would like for you to verify that data. i would like to know if the data is accurate or if the numbers are higher or lower. mr. cordray: we were glad to have you commission the gao study. they made recommendations to us. they have indicated that we have successfully implemented the recommendations and they will be moving to close those out. the result has been that it improves the process as an agency. as we have discussed, the last thing i want is for the agency to mishandle data. you have been apprehensive on

this issue with legitimate reason run the beginning. we have handled the data responsibly and carefully and to theking, in response dialogue in oversight that we have had, to do sampling of data wherever possible. we're looking at how we can do that. >> i appreciate your efforts. what i was saying is i want to verify with you the data i just put out. for example, are you actually only looking at 600 million credit cards. more, less, what have you. mr. cordray: that is actually in a state of flux. we are looking to find ways that i believe we could report successfully over time that we will be doing a sampling of that data rather than comprehensive -- of october 31st, 2015, 8 mandatory data collection

requests have been issued. six of those mandatory data collection requests were sent to fewer than nine companies. that effectively avoids the review of the request by the management of budget and oncumvents public comment the information request. the feedback i received on deposited products was that it was voluminous and sought a number of data fields including advanced products, overdraft protection, and nonsufficient fees. well it would not produce personally identifiable information that directly identifies the consumer or account, i understand it requires institutions to scan customer accounts line by line for their financial behavior going back years. it seems this is a large scale

the recollection into the use of products on a transaction by .ransaction vases how many data fields were collected by the request, and how many customer accounts were scanned for the data? mr. cordray: there were different requests with different fields. the story, which i agree with, shows careful concern by us to comply with the paperwork reduction act. the fact that we would limit to a small number of institutions to get data is sampling. we are doing that because of the paperwork reduction act provides ip incentive to do sampling address of the going to 400 institutions we will go to 9. if we go to 400, there are heavier burdens to bear. we have done that from time to time. understand, but if you look

at credit cards, and this is a rough number, there are over one trillion credit -- credit card accounts in the u.s. i understand you are five of the $600 million level? mr. cordray: the credit card database is different than the 1022. where you think it circumvents, it is compliant and leads to sampling. on the credit card issues, we are going to a sampling process. we will be able to do that over to you inill report response to your oversight and concern, which i share. >> my question specifically was how many data fields were collected and how many customer accounts were scanned to get the data? mr. cordray: i'm happy to follow up on you depending on which 1022 or database you are talking

about. we will brief your staff to make sure you are satisfied. >> thank you, mr. chairman. .hank you, for your great work i work hard with my colleagues to ensure the office of affairs was included in the financial protection bureau. under your leadership it is doing a remarkable job. in 2015 we returned over $5 million to servicemen and women to their families. criticaln this was so was because when i was younger i was in a paratrooper company. most of my time was consumed fending off creditors coming after my troops based on very suspicious credit arrangements. i appreciate what you are doing and i do not think anyone in togress would object

protecting the financial well-being of the men and women wearing the uniform of the united states. i do not think there should be a difference for their brothers not wearing uniform, but being exploited. one thing that your inquiries have uncovered is a practice be, if notto growing, very disturbing. commandersontacting and threatening security clearance of an individual member of the armed forces based on a debt. this has huge ramifications. it can prevent promotions. in some cases, they may be separated. can you comment about that and what you are doing? mr. cordray: it is against the law for a debt collector to threaten anyone, let alone a service member, with consequences the debt collector

has no ability to carry out. it is common for debt collectors , those who push the envelope and don't care about compliance, to threaten arrest or imprisonment -- which they have no ability to affect. activity that many debt collectors engage in is to threaten to go to the commanding officer of the service member and threaten the security clearance, threatening their ability to remain on active duty and perhaps a dishonorable discharge. is against the law. we have taken strong enforcement actions against it. when people talk about regulation enforcement, when we take an enforcement action against a debt collector for threatening the security clearance of a service member, i hope people take that as regulation that enforcement and

every debt collector understands their at risk, violating the law, and we will come down hard if we become aware. everyone should be on notice. no one should be doing that. i appreciate that. i saw where i was getting barraged, i did that stuff for the commander. i would see letters every day of gold intowho had been buying vehicles they could not afford at extraordinary interest rates, then hounded. finally going to the commander that theirning status in the military would be impaired. what you are doing is critical. it is critical to the ability of our troops to concentrate on their jobs. thank you. through your work, we have made improvements to the military lending act. we had an act that would cap

interest rates at 36%. and found because of loopholes with the previous regulation that in fact some lenders were charging 400% for title insurance. 584% for open credit. these are two men and women in the military. efforts. for your we now have a better hold at keeping the level at 36%. withnterest is still flush the lenders, but that is the law. mr. cordray: the regulations that were first adopted in the wake of the mla were disrespectful of congress. they indicated the purpose to otect servicemembers and the rules did not get that done. i am grateful to the congress to

reopening this so we could do it right this time. i am proud of our team that worked with other agencies and the department of defense. i am proud of the department of defense to make this work -- department of defense for their determination to make this work for their servicemembers. >> thank you, mr. chairman. it is good to see you. i had written a letter. i appreciate your effort to try to make that more simplified for folks. because of the line of work i have been involved in in the past i've closed a lot of loans. most of the time i did not see the sheet until i was at the closing table. up the closing process. i know that the attempt is to make sure people know what they are doing in advance and have the opportunity to see it.

things are fluid with most loans and there are calculations that take place at the last minute for lots of reasons. what we found what is happening is that you have responsibilities and legal obligations shifting to the settlement agent, which is collecting the information in a closing statement. i was wondering, and i know that they can correct this within 60 days, but there is some confusion over something that is a clerical error and something that matters. i know that right now attorneys are litigating over this and finding sometimes people are having difficulties selling the loans in the secondary market. i wonder if you are considering making a ruling of some kind to alleviate the problems i know you are aware of that our

existing. mr. cordray: that is a great example of congressional oversight. we had that letter from you. we did respond to that letter. it may have been late last night or early this morning. that is because we knew that you would want to raise this issue .gain, or likely would the purpose of the rule, this is something congress mandated, and it was a good purpose. there used to be two different application forms. one by the federal reserve and the application stage and 2 different closing forms by each of those agencies under different statutes. it was confusing for consumers. streamline was to the forms. you had a hand in making sure this happened. agency was given

the job and we have completed it. mortgage lenders have to work with lots of others in the industry and their i.t. systems have to work together. we recognized that and said we would be understanding and and there are concerns we want to be mindful of. we convened recently leading trade associations, mortgage bankers, others, to hear about specific concerns they had that we can't address. we have held webinars. we have another one next week on these issues. we have compliance up. we want to make sure that although this is better for consumers, it works for industry. 12% ine lending was up

january from the year before. that is a good thing, something we like to see, because it is good for responsibility. ked backing times tic down in february. ellie mae folks said this was status quo. senator corker: i want to ask you another question. when you go to a point, hopefully very soon, you will be able to issue some clarifying whether so people know something is a minor area or something that is something that is major and tanks the loan. loan.nts the we will continue to do that. senator corker: trying to adhere

to the principle here. payday lending -- in our state if you continue the load ad infinitum for a year the interest rate would be 459%. we want to make sure people have access to loans at affordable rates. we have had our commissioner of banking was in yesterday talking about this, and just an observation. that ourt that you see potential outlets down the road for people whose credit has been tarnished and has issues? is it through -- what are you seeing out there? i would love to see what your thoughts are relative to people having access to loans that are different from that if they are in the capacity to execute them? mr. cordray: the payday lending

itself, which could reform in light of potential regulations at the federal level, as they have changed their practices at the state level in response to changes. nobody wants to cut off people's ability to get one or two loans when they need them. it is the debt trap when people get stuck in the loans for 8 -- understandker: i am just what i would like to understand is what is the solution so you do not cut people off. mr. cordray: want is all together. one is reform of the payday industry itself. the second is credit unions, which offer a small-dollar in law, and wed want to make sure there is room for that under regulations we would adopt. and community banks could do that. we want to allow room for that. payday-typects, not

products. there are real opportunities here, although small-dollar lending is tricky, difficult. and we will see if that develops over time. ec innovations occur, we will be mindful of that and those in the industry know that. many of them have met with us and our mindful of our role here. i came todaydez: to praise the consumer financial protection bureau, not to bury it. of what you and your colleagues at the bureau are doing is embodied in something i fought very hard as a member of this committee, which is the credit card act. the bureau noted in its most recent evaluation that since

enactment, consumers have saved more than $9 billion in over-limit fees, $7 billion in late fees, and the total cost of credit has dropped almost two percentage points, and all the while availability of credit card credit has increased. that is one example of why consumer financial protection laws and regulations create a fairer marker place. in that regard, as you know, i have been very engaged in the question of prepaid cards, which has exploded over the last few use, especially among household electric access to traditional banking services. i have introduced legislation that would require clear disclosure of fees and prohibit the most of these kinds of charges. prepaid also require cards that have fdic insurance, like a traditional bank account, and comparable protections to the account if the card is lost.

provideds have already such measures, which shows it be done. can you give us an update on the bureau on prepaid cards, and particularly because i see that the rules did not include the issue of fdic? how will we create the type of protection necessary in that regard? mr. cordray: we have had discussions around this. we have been attended legislation you introduced and to the thought and care and research that went into thinking about his issues, which we have attempted to incorporate into our own approach to these issues. that rulemaking is pending. it was out for notice and comment. we have digested those comments, and we expect to finalize that we will finalize that rule sometime this spring.

fdic, i do not want over we haveper bounds, but had conversations about it. many of these prepaid cards are of substitute bank accounts for people who are unbanked. we now have no consumer protections. this role will provide consumer protection for the first time, similar for those for bank accounts. the other thing i would say on this issue that is new is we had the rush card fiasco. was engagedmer euro in addressing that people had prepaid money on their cards and thousands of them found they cannot get their money off the cars because of an operational glitch by the company, some sort of problem, that we continue to sort through from the standpoint

of an investigation and making sure consumers are made whole. that is outrageous. people prepaid money on their card to use it when they need it, and if they cannot, then they haven't cheated of their service. that if anything shows all of want to meet the need for strong protections in this area. senator menendez: i appreciate that. i am glad to see the bureau is pursuing that. one issue is zombie foreclosures. my state of new jersey has the highest rate of zombie foreclosures, it is a bank begins a foreclosure action, but because of the low founder of the house, chooses to aboun bandon the foreclosure. can you talk to me about what steps if any the bureau has taken or is looking to take to address this issue? cap homeowners receive notice when the bank decided not to

pursue it? --tly, the national council reported 48% of the councils reported mortgage services rarely or ever provide written communications in the preferred language of a borrower with limited english proficiency. the bureau has identified this as an issue in its mortgage procedure,mination but for homeowners who encounter trouble on mortgages, it seems more is needed to ensure they receive the type of comprehensive loss mitigation assistance necessary. and you address those issues? thecordray: i will take second one first heard there was a helpful provision in the statute that said if you are selling a product and marketing in a preferred language, then you ought to follow up in all respects through the product in that when which. that is a good principle across

the board, but it was specified, and we were able to implement it . in terms of preferred language, it is something we are working on with fha and others and we recognize the issues there and the importance and the vital elements of that for communities is note affected, and it only spanish-speaking, but a wide variety of languages in different parts of the country, we have come to understand. in terms of zombie foreclosures, it is a difficult issue. it is often an issue for investor properties, and sometimes there are properties taken over by banks, and what you are talking about is starting a foreclosure, then stopping the foreclosure at some point. the consumer does not have any notice. they do not realize they will still be on the hook legally for insurance and taxes and other

payments. they may well have left the home in the meantime because if you offbeing foreclosed on, when you start examining your options and you can find it. a difficult problem. i think you are right that notice is a basic there. it often will not be effective for consumers entirely because they may have already left the home, and it is worse frankly in states where the longest foreclosure processes, because there is more of a chance of a bank starting and stopping 200, 300, 400, 500 days in, at which point the consumer may have left. there is consumer harm here. there are complexities around it, but it is lo something we are looking at. senator menendez: thank you.

senator: you talked about how the mortgage market was good news for all around, that more opportunity for consumers and a wider path to the american dream and a market made stronger by changes we have made. the evidence for a first-time homeowner is the first-time homeowner has been in decline, and that disproportionately impacts minority would be homeowners, because about 74% to 75%, a majority of population owns homes, about 45% of african-americans own homes. the question is, when you look howhe rules in dodd-frank, do we reconcile the mortgage -- is goodifically news for all around, when for first-time homebuyers who are disproportionately minority, the news is not nearly as good. what we have seen throughout the

country, and in south carolina, market is far more expensive and a growth in in nearing an all-time high in the last decade or so. mr. cordray: and i know you raise that issue. it is an important and interesting issue. i would say in terms of first-time homebuyers, if you look at this this is six in the mortgage work, you will find of owner-identified real estate, first-time homebuyers are maintaining the show they had. the difference is affecting the market is there is many more investor-owned an investor-purchased properties then there had been before the crisis. investors have seen their opportunity as prices plummeted, and they have bought up a lot of properties. this will be a problem in a number of communities, because although it helps find a bottom in certain markets and create

equilibrium, it takes inventory off the market and makes it available -- makes it unavailable. there are also inventory problems in local markets. many houses are tied up in the foreclosure process, depending on state. many houses remain underwater, so it is difficult for somebody to sell if they are underwater on their mortgage. home builders have been reluctant to come back in with a rush to the market and build new inventory, although that is starting to happen. not want to be viewed as a happy talk her, but what i seen the mortgage market is the share of the mortgage market that is taken right now by credit unions and community banks together has risen since dodd-frank, and are at the highest levels in 20 years.

that is a good things. did the besttions lending to the crisis when everyone else was deteriorating. rates.d low default we tailored rules to give them advantages and recognize their model in the mortgage market. i think that is a good thing. senator scott: it appears the consolidation within the banking space has led to more access for smaller credit unions to continue to grow, and with 1022 it says thenk, bureau can exempt any class of persons or services from any provision of this title, or from any role issue hundred this title. do you think if credit unions or community banks were being detrimentally impacted, generally speaking, by the roles of your agency -- rules of agency, this section would allow

more tailoring of your relations? do see that as a possibility you will take hold of? mr. cordray: we have been doing that since the beginning, and we tailored mortgage rules specifically, the most significant market for all players. we tailored our rules in notable ways for smaller providers, and we continue to do that. -- implemented the definition of a rural. we tend to be fairly careful about exception authorities. we do not regard congress saying you have brought exception authority, you can do whatever you want. that would be too much. but where we have evidence where we think we can build on rulemaking, such as the mortgage servicing roles, remittance rules, we will tailor for smaller institutions because that is often the right answer.

they're close to their customers, they provide goods and services. the notion we would countermand -- congress set its limits here in terms we have authority over banks over $10 billion. congress did not exempt credit unions from all laws and regulations, and i do not feel i could come in as a matter of opinion or ideology and overrule that. where i can see mortgage rules in the mortgage market, we should try to tailor our roles accordingly, we have done that, will continue to do that, and we will gladly take input on how you should be doing that, and we get that input from icba and others all the time. senator scott: i would be glad to have that conversation with you off-line. my concern, mr. chairman, is when you look at the member of households that are unbanked war

underbanked, with better information provided by -- the under is around 4 million unbanked households. the higher the cost, para cost to lower the access, and the unintended consequences is the fact that 4.4 million households are now either unbanked or underbanked then at the beginning of dodd-frank. mr. cordray: since the crisis, that number has gone up because the crisis blew up the economy for people. whether it can be pinned on dodd-frank, when we did not open our doors until july 2011, that is where i get off on the train on comments i have seen on this. the numbers were used in 2008 and immediately after the crisis --

mr. cordray: i know we would agree that the fact that credit unions reached an all-time high in membership nationally last year is a good thing. i am supportive of that. our rulesble that is are supposedly killing the credit unions, how is their membership now at an all-time high? ofator scott: the number credit unions is lower, although members is higher. banks -- and it is a consequence that comes with regulations that make it true to that act as well. mr. cordray: maybe, although that has been a consistent trend for 30 years, and i do not see that it has accelerated since dodd-frank, although there is a view that suggests that. i do not think that there's out. senator warner: mr. cordray,

great to see you, and i want to commend you for your service. lookld point out you behind you, you will see folks who are supporters of the bureau. many of them from the commonwealth of virginia, brought in by virginia organizing. it is a shorter commute for them. something needs to be done about that traffic in the region. i want to pick up on where sen. was.er there would be a bipartisan sense that some of the more egregious actions on payday lenders needs to be stopped and people are taken advantage of, and we look forward to your guidance and rulemaking. but an area as we discussed before is fintec, and there remains opportunities in this new area as we think more of

linking is going to be put at a supercommittee power you have on your front, i have looked at a member -- number of phones that are looking at tools, looking around differential ways of paying folks because of managing their finance on a regular basis fall off that cliff and end up having to resort of a payday lender or others that will put them in that debt spiral. the challenge is when you got these new technology tools, how do you balance the innovation, , get this same time, right, and what standard are we going to hold them to? they are not banking institutions, but there will be fintec.sruption from t

good, but also possibilities for abuse. mr. cordray: that is true. the nature of innovation is it is neutral, but encouraging and helpful, and some innovations have been had for consumers. the exotic mortgages developed in the lead up to the crisis were innovative. they were terrible for consumers. and i'mok at fintec, interested in these issues, and we have a team at the that is very engaged with the financial innovation community, not just in silicon valley, but across the country, and innovations within larger institutions that are constantly researching how to improve their products. we believe it would be not appropriate for new fintec sardis to get an advantage because they are arbitragi

system.egulatory they are not taking seriously with the banks have to do. -- wasorcement against remarked upon, but it was a modest action. says if you are telling your consumers you will handle data security in a certain way that is them confidence and they want to deal with you, and in fact do not, you are this evening or customers and getting an unfair advantage by doing so, and that should stop. budget be a signal to the whole market that at a minimum to live o deliver on your products. it will be interesting to see how this develops. lower cost, promote convenience, which be great. it may be the banking system in companies will converge in some ways so there is better compliance, but the benefit of the innovation.

but we are trying to stay top a lot of it because if we fall behind this could affect markets and we could think we are dealing with a market that is different from the one -- senator warner: i think there will be somewhat of a distinction. there is information that about income volatility, and some of -- and level some of that income volatility. i would point out i hope catalyst is also working with regulators around the world. this is a worldwide phenomenon. mr. cordray: our team has been leading regulators. is modeledbritain after -- raised warner: somebody this a year or so ago, and we raise it again, the different level of credit protections between debit cards and credit cards.

i do not realize it until he got into the data breach issues, and we have legislation to try to equalize those credit productions. i had to change out my daughter's cards from debit cards to credit cards -- mr. cordray: these are always the best stories. we find they are vastly more complicated than we might have hoped. this is what we are doing with prepaid cards. we are told to bring them from a standard of no protection to and notle to the cards exactly credit cards. there are specialized provisions for credit cards. you reach in your wallet, pull out a card, may not english that between what kind of card it is. usually protected in all three areas. if there is special protection for credit cards, those are applicable and may be applicable to prepay cards, something we have to under consideration. debit cards -- i am sure all the same provisions should apply to

all cards, but they should be subject to protection. sir provisions shall apply to all cards, and that something he will continue to discuss. i appreciate your interest in it, because it is a hard, but important issue. thank you. mr. cordray, i want to discuss the cfpb's actions on indirect auto lending. in this matter, since auto lenders are not permitted by law to collect race, you did not have the actual race of claimants available, is that correct? mr. cordray: we did not have that through allied zone records. ator cotton: -- mr. cordray: this is consistent with how redress is handled in this type of cases in every instance where you do not have a

granular mortgage gated, which is only for the mortgage market. and he or she would have received and information about eligibility and forth came running this forthcoming receipt? mr. cordray: and discussing what the criteria were for the eligibility and making sure they should satisfy this criteria. cotton: and this may require the return of form opting into settlements. mr. cordray: that is correct. you are correctly restating all elements. nator cotton: -- mr. cordray: there is youificity about how much

would provide. you could require them to swear under oath, everything that makes the whole transaction more complex. you know there is a drop-off rate of people who do not bother. grid they making a statement of affirmation if they did belong to a protected class? mr. cordray: they were required opt-in -- i could clarify with my set. or cotton: there are methods on "the wall street journal" -- you plug in the name, is, and out pops the statistical likelihood of race. does not have the same method you do, but then the hearing on tuesday, senator

brown revealed his zip code. the program says that senator brown is at 89% likelihood of being black. saturday shelby had a 70% probability of being black. 88%cotton has an probability of being black. using this example, senator brown financed his vehicle through allied. he fell in the short threshold you confirmed. he has no legitimate business reason to discount the apr offer. would the cfpb offered him a remediation -- remuneration check? mr. cordray: they would have had to opt in to receive the check. they would have to state they borrower.ority

i assume each of you would not do that, and otherwise you are committing fraud. what we have is we had a discrimination matter against allied financial. 325,000 or so consumers were affected. they were charged higher rates based on a pattern of practice that showed that minorities and certain categories pay higher rates -- senator cotton: i'm not disputing any of the facts. -- redress of potential mr. cordray: and what do you do with a 325 -- do you set up a system that is reasonable for get theirmply and money. if there is a large number of people who got checks from alumni, that is something we will take account of and consider responding to. 325,000 people did qualify for appropriate redress here, and i

have not seen the large number of fraud cases. it is all this hypothetical -- people have been apprehension -- otton: senator brown would have been in the second tier, and he would have had to opt in. [indiscernible] under penalty of perjury for making a false statement? mr. cordray: would you say you would have committed fraud? senator cotton: -- i am asking if they recommended it. mr. cordray: i do not recall -- ton: -- cot mr. cordray: i would not speak to any internal deliberations. we are not doing something differently than the department of justice.

we are acting together, on the same page. senator cotton: did you declined up recommendation that a penalty of perjury attached -- mr. cordray: i do not believe i did. i do not want to characterize internal discussions with them. i have no recollection of doing that. do think -- let me say i stand by and believe this was a reasonable approach to how to get relief to hundreds of thousands of consumers who were discriminated against. reaffirmed court has it is the law of the land. 330 members of the house of representatives disagree. my time has expired. thank you very much, mr. chair, and thank you, mr. cordray, for your testimony. i wanted to make sure i had the numbers right. it seems every time you come here, i am underestimating the amount of money you have

returned to consumers, either in the form of direct restitution, because of printed terry practices, principal reductions. i believe the number is now over $11 billion? mr. cordray: it is over $11.2 billion. senator: it is a phenomenal thing that so much has been returned to families who were victims of predatory financial practices. i was reading an estimate of the savings, and these are the savings that occur because of practices that were discontinued on credit cards, an estimate of fees,$16 billion in saved and i believe that is independent of the $11 billion, is that correct? mr. cordray: yes, and that was

the card act that kept $16 billion in consumers' pockets over time, but there is another point that senator warren made, which is when talking about looking backward, $11 billion was made available, or $16 billion was saved over a time. it is the case that those changes, as lasting changes, mean every month, every year going forward, people are saving the same amount of money, which over time results in tense, eventually hundreds of billions of dollars for consumers. that is meaningful. it is hard at that up. the question i was going to ask you, in terms of mortgage forms that have been undertaken the do we have an estimate of what has been saved, because people got fair deal which is rather than predatory mortgages? mr. cordray: i do not begin to know how to count that, but i will ask people about how they

might be able to do that. the mortgage market, about $10 trillion. credit cards are under $1 trillion. student loans are over $1 trillion. if there are savings from our roles, and i am sure there are, it may be hard to document, it may eat at a much higher scale for people. senator: it is a wonderful thing to have so much done for hard-working american families by having fair practices in the financial markets. sometimes it gets lost in the conversation in this committee. i want to emphasize that point. mr. cordray: people talk about about the bureau, me personally. we have about 1500 people who do this work and achieve these results that people can be very proud of. and that benefit every one of --

they benefit constituents in every one of your states. i am very proud of them. when you say nice things about the bureau, it is then you're talking about, not so much me. senator: one is you did a study of arbitration causes, it very thorough study. the ross vs. bank of america. i read through that, and it sounded like a conclusion was that contrary to what is often asserted, there were no raised in terms of the products when the use of arbitration causes was discontinued. is that a fair summary -- newly -- was a fair: it summary. it was noted in bold had institutions that we could isolate, some of whom who had arbitration clauses, some who

did not -- senator: right now across the country, citizens are so frustrated by the system that is rigged against them, from actions toited from the house and senate, the current leadership -- but this is a real example of an arbitration clause in the contract where the judge of asserting your rights when there is a predatory action goes before someone who is hired by the person on the other side of the issue and only keeps getting hired if they find in favor of the folks who are hiring them. that is a system that is rigged. i your work on arbitration. if you seconds -- let me turn to payday loans. in state after state, the states have gone to work to say these are unfair practices, and just yesterday in our chairman's state, 28-1, the state leaders weighed in, saying they want to

curtail the abuses of the payday loan industry. on the industry says this reduces access to credit and site and reduce number of loans being made after these state actions. what they do not take into account is the family that gets a fair lawn, gets one on instead of getting 10 in the course of the year and so on. i found in oregon, after we down on payday lending, and put in a cap, you still have payday lending companies operating, that citizens do not have to get continuously roll over and they get a fairer deal and still have access to credit. they have access to credit at a much lower interest rate. it is a complete win. many of the pastors in my state working with poor families see that. is that your impression as well, that the consumer gets a much better deal when they get a low interest-rate than when they get a higher interest rate?

is cordray: i think of that being simple mathematics. what i would say the point you made that is quite powerful is well,this comment made, there are not a lot of complaints about payday loans, , how iteing rolled over can damage their finances beyond repair. i would say talk to the faith community. i would like each of you to talk to ministers and leaders in your states. the storiesl you they hear where people come to them because they are not financial experts, because they care about them, and we hear her in this stories of the effects on people's lives, and they are repeated in massive volume across the country. that is a good place to start in trying to understand this issue. senator: amen to that. thank you, mr. chairman. mr. cordray, welcome back.

thanks for being here. of dodd-frank instructs the bureau to collect on small business lending. i noticed recently that the cfpb has posted a job listing with reference to section 1071. once inibed the job as a career opportunity to make the market for small business finance fairer and more transparent. so is it your attempt that the market will become fairer and more transparent by virtue of the disclosure of data? mr. cordray: that is clearly what congress had to us by mandating this -- toomey: those were your words. mr. cordray: i hope this is a

great opportunity. your --toomey: is mr. cordray: what i would say is, we do not have much authority in the small business lending area. so that is what our focus under our statute is individual consumers, products for household purposes. there are a couple places in our statute -- congress set it, not me -- we have jurisdiction over small business lending under the equal credit opportunity act, and we had this since i'm the one that you identified, which congress gave job us to set up a reporting data collection and data publishing regime for small business lending comparable to that for -- has created for the mortgage market. so muchtoomey: understanding what dodd-frank does in 1071 is exclusively about data collection.

that is the only authority i read for the cfpb with respect to small businesses in section 1071? mr. cordray: 1071 speaks for itself. implement itt to faithfully. it is a big job for us, but it is a task congress instructed us to do, so we followed the law. senator toomey: getting back to this issue of your approach to enforcement, you gave a seat before the consumer bankers association in which you were defending your enforcement approach. one of the things you said in says, any agency is bound to recognize they should develop a powerful strategy for how to deploy their limited resources. that means working toward a pattern of actions, by which i meant is enforcement actions, which create deterrence that can be understood and implemented. to me, that sounds to me like we are talking about

enforcement as a substitute for rulemaking, at least in some cases. and one of the things that concerns me about that is the an entire process that requires a level of transparency and there is a cost and of the analysis. my worry is if we are using enforcement instead of rulemaking that we are going to miss those pieces. i would be glad to speak to this, and i saw testimony on tuesday about this where people make perfunctory to root outve fraud, but should not do more than that. $11of the relief of the billion made available through enforcement actions has been in cases where one or more of the claims resolved that involved deception, lying to

customers or prospective customers. that is good law enforcement. as to the pattern of orders, i think everybody would agree asynchronous in law enforcement is that if person a or bank a said is doing these things and are found to violate the law and action has to be taken in consequence, everybody else in the market that is doing these things is also violating the law and should stop doing what they are doing. so signaling the market place clearly about each enforcement action is an important thing. but it is a basic. in the case in which you discovered discrimination on the aces a protected class, being committed by people who are not aware of the protected class status of the people who were being discriminated against, you were applying what seems to me to be a novel, new approach to

ecoa.reting the eco the justice department has never used your approach. in 1994, joint guidance was put out by the banking agencies and the justice department. we were not around that. it said this is the law of the land. so your model: would be the law of the land. model? using that mr. cordray: it goes back to the employment discrimination law. the other agencies said that, and the guidance we issued early agency, soare a new people might not know what our position is. we join our fellow agencies and departmente. the supreme court reaffirmed that was the law of the land,

and that is pretty conclusive on this subject. i'm learningy: something new, which is that the methodology you use for identifying race and people's status and these protected classes is decades old and there's nothing new there. you do not come up with a new approach, no news methodology -- mr. cordray: that is not what i said. disparate impact is the law of the land, recognized by agencies in 1994. it continues to evolve. there have been cases since then and modifications and this approach or methodology, but the law is clear -- your changing: the subject. you're describing the but a newy, methodology that was not being used before and not subject to the transparency of the rulemaking process. mr. cordray: i do not think that

is true. if you look at yourself 10 years, you are the same person, but have you changed? very likely. you may look differently, think differently, but you are the same person. disparate impact has been the law for decades. -- bridges have been evolving. people have been taking input from leaders and others and thought maybe that is a better approach and thought to refine that. we should continue to do that. you are trying to do that -- senator toomey: if you are going to develop a new methodology for people's status, it should be in a transparent process, and that is part of the way the rulemaking process is designed, is meant to achieve. you chose not to use it. game ifray: it is fair we agree if we should be as transparent as we should be, and

that is a legitimate grounds for discussion. i would be happy to have our staff talking further about what we been trying to do around transparency. to say this is a new methodology that is radically different than what happened before, it is modifications and developments on law that has been around four decades, law that was reaffirmed that the supreme court last june, and a law that we are required to enforce. we are required to enforce it design to root out discrimination, based on race, ethnic origin, and it is very un-american. it is the way that congress has developed along and the supreme court has interpreted it. warren: welcome to your 61st hearing. as you know, the payday lending billion is now doing $7 in loans. there are now more payday loan

storefronts than there are starbucks. plus all the online payday lenders. 200% interest. when emergencies arise, people need access to credit. director cordray, i know the issuing itse to payday lending roles, so i want to ask you three questions. can you describe the research and data gathering that the cfpb has done to figure out where to draw the line between preserving access to credit and trapping people in never-ending cycles of payday loans? mr. cordray: yes, here with obligation, we have engaged in comprehensive research on this marketplace. we have done two white papers,

analyzed millions of payday loans across all types of letters. what we found is that the model particularly on payday balloon loans, is to get someone in a payday balloon loan, and if they had to borrow $300 today, the notion that they will pay $340 in two weeks, is not likely. rolling over because they can pay the $45 at the end of the two weeks, but not the 345, and they can never pay the $345. you describe these products as 400% and restraints. in misery, we have seen loan products that go as high as 1950% rate of interest. you can lend where the fees amount to 75% of the face of the loan. that is a 1000 loan that becomes $18,000 or $20,000 by the end of

the first year. this is from a class action decision by an appellate court in missouri where they read out the instances of people who borrowed hundred dollars and pay back thousands of dollars and still owed thousands of dollars. that is not a recipe for financial success for people. senator warren: the cfpb would create a single national floor, so states could issue stronger payday lending restrictions if they wanted to, but they could not drop below the cfpb standard. can you explain the benefits of having a single baseline, weather than just a lot of local rules? mr. cordray: this is the same approach we took in mortgage servicing roles, where we established a baseline of requirements on services, not on states weresaid

free to add further requirements on services if they deemed it appropriate to do so. this is an approach that has been common in american law in our system of federalism. it is true of securities, environmental, and i trust law. it is true in many different areas of law where the federal government may interview to a certain degree and set requirements on individual citizens and companies. the states are free to have their regimes, and they do, and they set requirements on individuals and companies. and the two systems coexist. there is nothing unusual about this. it has been described as corporate of federalism, and it works recently well. at timesen complicated great a federal system is bound to become a gated. senator warren: thank you. the cfpb has been working in this area now for three years. yet been gathering data, draft

the different approaches, talked about it with industry. now certain members of congress have proposed imposing an additional two-year delay on your efforts. can you give us some idea about the impact of that delay and estimate how many more families will get stuck in a debt trap during that time? mr. cordray: so i feel keenly already the amount of time that it takes to embark on a federal rulemaking in an area that is researchine of no previously. it has taken us several years to do the research you asked me about and i described. it is taking us time to go through the processes in our statute, and we are now on the verge of proposing the rule. it will take time to work through it and finalize it. i feel keenly that every day that passes, if you think a rule is going to improve life, it may or may not, you would like that to happen as soon as possible.

sake means ify's there are hearts are, and our research has identified harm's conservators, a will go on, and if anybody feels that is not a big deal means they disagree with the findings around the country of what this does for people and for families. and i cannot agree with that. senator warren: perpetuating a lot of misery here. i want to thank all the people who work at the cfpb for their terrific efforts in this area. i know the payday lending industry hires a lot of lobbyists and they make a lot of political concretions to try to protect their multibillion-dollar is this. i also know that families get cheated by pele lenders did not have lobbyists and do not have political action committees, which is why the independent of the cfpb is so important.

move quickly to complete your rulemaking on payday loans. you are the best hope for millions of american families to avoid these debt traps in a future. thank you for your work. >> thank you, mr. chairman. good morning, director cordray. not too much longer and it will be good afternoon. mr. cordray: i was wondering myself. rounds: in a recent speech, you discussed your philosophy on consent orders. you had said, and i will briefly lay this out, our public enforcement actions have been marked by orders in which specify the facts and the resulting legal conclusions.

these orders provide detailed guidance for compliance officers across the marketplace about how they should regard similar practices at their own institutions. what i want to talk about a little bit, and my concern is is that the consent orders without a finding, or even an admission of guilt, the allied settlement is an example of that, could mean little more than a company's business to settle a lawsuit with minimal expense. my question is, do you agree for compliance officers to consider following a decree from another bepany, that decree should part of it a court finding or --tain an omission of guilt an admission of guilt, or if what senator toomey was alluding to, a rulemaking process laid out clearly, definitively? just results. greatrdray: allied is a

example, because we worked in partnership with the justice department, as part of their process, and they were obliged to file an order in court that the judge had to sign off on. if that is your issue, allied is not a good example. if you are trying to address harm to consumers out there in society, the number of ways you can go about it -- you can do your research and the about what you think is best and go through a process to adopt the role, but another way, and won the congress gave us very specifically and emphatically, is to investigate facts of individual circumstances, and if you find an actual violation of law, clean it up. that is what we do all the time, and what i say about rulemaking by enforcement, which is a nice slogan people like, and somehow that is a bad thing, if we find through a thorough investigation and institutions does not dispute the fact that we find

that that is a violation of law, then everybody in the country should be able to see transparently that if they have similar facts and similar practices and similar situations, they are violating the law and they should stop it right now. what i said in a speech is it is compliant malpractice for other institutions not to look carefully at our orders in these cases, whether they are entered in an administrative or court order, cannot not think about my doing the same thing, and am i violating the law, and should i clean that up? law enforcement, and people call it regulation by law enforcement. i call it good, solid law enforcement. there does not have to be an admission of guilt. he found the facts. our decree will state the facts as we know them to be. whether the institution agrees with that does not matter to me. in the end, the facts are the

facts, and if other people find the same facts in their organization, they are on notice to clean it up. when we come to supervise them, we will look to see if they have similar practices, and they will be treated similarly. the key principle here is the basic principle of justice, which is similar situations should be treated in the same way, and it should not be that and decision gets whacked other institutions go on widely doing the same things that violate the law. everybody should be treated the same. we try to be as transparent to the marketplace as quickly as we can, when we act through supervision, which is a confidential process without violating the confidentially, we put out highlights that tell you what we found at banks and other institutions, what we thought violated the law, what we did about it, and people should take account of that as well. rounds: let me slide is around with regard to the way you look at offering no action

letters. i know you finalized your rules on the no action letters, but it seems like what we are challenged with here is, do you start out by saying, has up on your fourth ashes, and that is the way we will be basically theng out the interpret and eng issues, yet when you have companies that step back in and ask for guidance -- and by that rulemakinghe bureaus it's estimated it would issue no action letters only in extraordinary circumstances. anticipating issuing one to three per year. the sec is issuing -- has issued 104 no actual letters in 2015. if companies are asking for guidance on this, wouldn't it be fair to say rather than going through the process of trying to educate i