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 did not have evidence to act against predatory lending. imagine that. it is a fact that foreclosures doubled from 1995 to 2000, they doubled again by 2006. according to that former fed official, one of our witnesses thursday on the corporate side, there was no data that showed any problems. officials begged the fed to act in 2001. the same story played out in the country. prior to the cfpb, there was no place to file complaints about consumer financial products, no place for 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. cfpb 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 to 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. ohioans defeated the ballot initiative, even though payday lenders were outspending them in that campaign, 40-1.

the legislature has caved to those interests and it means that payday lending is alive and well in ohio again. i hope the cfpb will finish 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. sen. shelby: your written testimony will be made part of

the record. mr. cordray: thank you for the opportunity to testify today about the consumer financial protection bureau's semiannual 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. as we 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 total relief for victims. 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. our tools now include paying for college, owning a home, and planning for retirement. we have developed a new partnership to work together on financial education in the schools, the workplace, and on behalf of older americans. we work together on financial

education in schools, the workplace, and on behalf of older americans. responding to consumers is central to our mission. we refine the capabilities of 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 that 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 we published plain language 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 predatory conduct is restoring their trust. this reflects well on the work being done by the bureau. they are making substantial contributions to the recovery of the economy. mr chairman, ranking member brown, thank you for the opportunity to be here and discuss the work. we will continue to listen to our stakeholders and attend to your oversight to ensure all americans can be sure of fair 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. dodd frank prescribes that.

in mr. cordray: we have never 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. sen. shelby: 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 impact, your 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 when collection, auto lending is not.

an 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. in hence the disparate impact. the bad act was the lender's policy, not the fact that they and 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 penalized to the tune of $162 million. or may not have been the action

of someone else. and assuming that your -- and assuming that your conclusion of disparate impact is valid, it would seem that this would be a poster child who rulemaking as opposed to enforcement action. the lenders 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. if there is a systematic pattern 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 departnt and have led to disparate impact discrimination

findings. my 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 disparate impact is the law of the land. sen. shelby: 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 seriously 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? mr. cordray: 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. in most residential mortgage contract. set inso said congress the statute as to the rest of consumer finance we are going to task this new agency, our agency with the job of studying this problem carefully and reporting to congress about it. and then based on the results of that study, to consider whether policy interventions are warranted consistent with the study and they gave rod latitude here consistent with the public protect consumers. our fourth -- first job was to conduct a study of arbitration clauses in consumer finance contracts. we undertook that very seriously

. it took us a couple of years to do that study. we came -- we assembled and brought in data that no one had ever had a chance to look at before about arbitration matters, about court cases were every manner in which different disputes may be resolved in the consumer finance arena. those who have criticized the study acknowledge that it was the single most comprehensive, groundbreaking study that had continues done and it -- and that continues to have ever been done in the history of arbitration agreements which go back under federal law to the 1920's. that in consumer finance issues and -- in particular, very often what you have is a small amount of harm to individual consumers on a broad basis. maybe millions of consumers are of 50 or the tune $100. that is enormously profitable for financial institutions but

it is not worth the individual consumer's while in most cases to pursue arbitration or a court case. what we found is a patrician agreements in these contracts tends to cut off people's remedies pretty much altogether. it bans their ability to group together and bring group plan so financial institution to harm on a broad basis and cannot be held accountable. that is essentially what our study found. there's a lot of detail in there and it is not easily subject to a 30 or 62nd discussion because it runs to hundreds of pages but it continues to be discussed and debated and we continue to discuss and debate it and consider all the input we have gotten. we have offered to speak to the authors of one critical study. one of them was willing to speak to us about it. the other was not. we will take input from all sides on this but we are moving forward. we have indicated that we are

contemplating a proposed rulemaking to build on the results of the study and address this issue and expect that to be in a proposal stays at some point the spring. panel claimed tuesday -- pushing consumers and to loans. americans have record 3.5 chilean dollars in consumer debt , one chilean dollars more than six years ago. talk about the availability of credit and the research the bureau has done. there were comments made about free checking that i think are dubious. i saw some of this being pinned on the durban amendment and i thought you were right to be skeptical of that claim which has not been established as a cause or effect. in fact, access to credit is expanding. alsoesult -- there was looseness around dates and some of that testimony. some of the testimony talk about since that have happened

2008. credit being restricted. credit was restricted immediately in the wake of the financial crisis because households lost $12 trillion in mortgage well. mortgages became tight. credit cards became tight. what has been happening since the dodd frank act was passed in 2010 and the card act in the consumer bureau which did not open its doors till july of 2011 is that we see credit beginning to expand again in the mortgage market and in the credit card market. the federal reserve study have shown credit is expanding. i would say in the credit card market in particular there is broad -- brought the increasing consumer satisfaction with these products. we think that is a good thing. we're not just proconsumer protection, we are proconsumer and if consumers have access to responsible credit that is very good thing and we see that expanding across markets.

>> the bureau announced it was considering proposing rules and we have talked about this in the past that would cover payday lending, vehicle title loans, other high-cost loans. our home state of ohio attempted to block payday lending. lecithin and affected -- ineffective. talk about the importance of the role and you have commented in the past that there are a dozen states that do not allow payday lending and if those dates, how have they done with small dollar credit in the states without the access to payday lenders? mr. cordray: there has been 12earch and it ranges from to possibly 18 states that restrict payday lending because they have usery caps on place. there has been no it -- research to consider the consumer welfare is harmed. there are studies indicating may be higherores and bankruptcies may a lower. that is a question.

the best example is one that this committee can understand very readily because you have been involved in the military lending act. the military lending act was passed in 2006 with the promise ofgress made to cut off some the predatory credit that was being offered to service members , active-duty service members. the rules that were implemented by the federal agencies at that were to thank. they were narrow. they were easily circumvented and you can still see to this day predatory products being offered outside military bases rate -- 900% 930% rates of interest. the bureau was part of the discussion about creating new rules and we have strong worlds in place that take effect in october that will bring the meaning of the military lending act to fruition for service members and their families across the country. protections will be realize now i believe.

if loopholes are allowed and if rules are flimsy, then the industry will circumvent those rules and they have shown their ability to do so. crapo: i have privacy and the ability to reverse engineer this information. less congress i respected an official reason -- review by the government accountability office. the report acknowledged credit off auto sales, cosigners and borrowers, 29 million active mortgages at 5.5 million private student loans. i do not want to get into it now but i would like you to verify that. i want to know if the data is

accurate or whether the numbers are higher or lower. mr. cordray: we were glad to have you commissioned the gao study. they issued their report and made a number of recommendations. they have indicated to us that we have implemented all those recommendations and they will be moving to close those out. it is good news and i think the result has been it improves our processes as we have discussed before. the last thing i want is for our agency to mishandled data and be criticized for that. you have been apprehensive on this issue with legitimate reason from the beginning. we have handled this data responsibly and carefully and we are looking in response to some of the dialogue and oversight we have had from you and members, we're looking to do sampling of data wherever possible. we are including looking at how we can do that. sen. crapo: i want to verify

with you the data i just put out. actually only looking at 600 million credit cards, are you looking at more or less or what have you. -- data i put out, mr. cordray: that is in a state of flux and where looking to find ways that we will report successfully to you over time. we will be sampling that data. sen. crapo: the bureau has data requests and six of those mandatory data collection requests were sent to fewer than nine companies. the snake -- significance is that avoids the review of the request by the omb. answer commenced the opportunity for public comment on the information request. the feedback i received from the

request was that it was voluminous and sought a number of data field including the use productsted advanced come a and nonsufficient fees. while it did include a caveat that the institution should not produce any personally thatifiable information directly identifies the consumer or the account, i understand that the data collection request required these institutions to scan customer accounts line by line for their financial behavior going back years. this is aeem that large-scale data collection into the individual consumers use of financial products on a transaction by transaction basis. how many, can you confirm how many data fields were collected and how many customer counts were scanned to get this data? mr. cordray: there were different requests with different data fields. the story you tell vindicates and shows careful concern to

comply with the paperwork reduction act. the fact that we would limit ourselves to a small number of getitutions in order to data is sampling of a kind in we are doing that in part because the paperwork reduction at provides incentive rather than going out to 400 institutions, we may go to nine. there are heavier burdens to bear and we have done that at times and go -- gone to the omb process. my understanding is there are over one trillion credit card accounts. at 600 million, that is half in i understand you may be far above the $600 million level which is why i asked for that number earlier. mr. cordray: the database is different from the 1022's.

it is income plant and leads to sampling which is a good thing. on the credit card issue we are working to go to a sampling process for that. i believe we will be able to do that over time and we will report to you. that is in response to your concern and oversight which i share. how many data fields were collected and how many accounts were scanned. mr. cordray: i am happy to follow up with you. to prefer staff to make sure you are satisfied. mr. crapo: thank you. thank for your work. i worked hard toyou ensure that the office of service and affairs were included. under your leadership and the

leadership of holly petraeus it is doing a remarkable job. returned over -- $5 million to servicemen and their families. one of the reasons was so critical to me that when i was a younger person i was in it so of a paratrooper company and most of my time was consumed fending off creditors coming after my suspiciousd on very credit arrangements of they worked out. i really appreciate what you are doing and i do not think there is anyone in this congress that object to protect the financial well-being of the men and women wearing the uniform of the united states and i would say that i do not think there should be a difference of their brothers and sisters who are not being the -- wearing the form but are being exploited by other people. one of the things that your inquiries have uncovered is a practice that seems to be if not

growing, very disturbing. that is creditors contacting commanders and threatening security clearance of an individual ember of the armed forces based on a debt. , it has huge ramifications can prevent promotions and in some cases because of their job they may be separated if this comes about. can you comment about that and what you are doing? cordray: sure. it is flatly against the law for a debt collector to threaten anyone let alone the service member, with consequences that the debt collector has no ability to carry out. for example, it is common for debt collectors, those who push the envelope and those who do not care about compliance to threaten arrest or imprisonment which they have no ability to effectuate. in the service member context, the ominous activity that many debt collectors engage iis to threaten to go to the commanding of the service member

and trend the security clearance which would threaten their ability to remain on active duty in the military and perhaps a dishonorable discharge. an second bowl couple practice. it is against the law. we have taken strong enforcement actions against them. when people talk about regulation by enforcement, when we take an enforcement action against a debt collector for doing that, threatening the security clearance of a service member, and hope people take that as regulation by enforcement and every other day collection -- collector understands they are at risk and violating the law and we will come down hard on them if we become aware of the fact that they continue to do that. everyone should be on notice in this marketplace. no one should be doing that. perspective ofhe the executive officer in an infantry company where i was getting barraged, i did that stuff for the commander.

i would see letters every day of who hadn at that point been galled into buying vehicles they could never afford at extraordinary interest rates, then hounded. finally going to the commander and threatening that their 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. there is one other thing. i must commend you about. through your work, we have made improvements to the military lending act. we had an act that would cap interest rates at 36%. people went in and found because of loopholes with the previous regulation that in fact some lenders were charging 400% for title insurance. 584% for open credit.

360% for online -- these are two men and women in the military. thank you for your efforts. we now have a better hold at keeping the level at 36%. 36% interest is still flush with cash pretty plush for the lenders but that is the law. thank you. mr. cordray: the regulations that were first adopted in the wake of the mla were disrespectful of congress. congress indicated the purpose to protect 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. sen. reed: thank you, mr. chairman. it is good to see you.

-- senator corker 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. it sped 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. and how these hearings matter. we had that letter from you. because i am testifying today we , did respond to that letter. it may have been late last night or early this morning. that is because we knew that you you probably have not seen it yet. that is because we knew that you would want to raise this issue again, or likely would. the purpose of the rule, this is something congress mandated, and

there used to be two different application forms. one by the federal reserve, and one by hud of the application -- that occurred at the application stage and 2 different closing forms by each of those agencies under different statutes. it was confusing for consumers. why am i getting to forms? the purpose was to streamline the forms. you had a hand in making sure this happened but our agency was given the job and we have completed that job. having said that that is a big position for mortgage lenders who 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 diagnostic in the early period. that has now stretched past six months.

we still feel the same way. there are some concerns that we want to be very mindful of. we convened recently, that leading trade associations, others to hear from them about specific concerns they have that we can address. we have webinars and we have compliance guides out, we want to make sure that although this is better for consumers and they tell us that that it works for industry as well. 12%gage lending was up year-over-year from a year before. that is a good thing. it is something we like to see because this is good, responsible lending and the closing times picked up -- ticked up on this and ticked back down. the ellie mae folks said that quo as far as that is concerned. not necessarily for every institution. we get that and i hear that.

>> when you get to a point hopefully very soon you will be able to issue some clarifying knowage so that people whether something is a minor area or something that is major and paints the loan, if you will. that will be helpful to industry and i appreciate your concern in responding. mr. cordray: if you're hearing things that we are not addressing we are glad to have you bring them to our attention. we are probably hearing them directly but we are glad to hear them from you. we sit up and take notice of that. lending, i know in our state if you would continue the loan ad infinitum that interest rate would be 459%. want to make sure that people have access to loans that are at affordable rates.

our commissioner of banking was in yesterday talking about this and just an observation. our is that you see that potential outlets down the road for people's credit have been tarnished and has issues, is it through, what are you saying out there, i would love to hear what your thoughts are relative to people having access to loans that are a little different from that if they are in the capacity to be able to execute on. mr. cordray: some of these we are trying to sort out and understand. there is the lending industry itself which could reform in light of potential regulations. just as they have changed responses at the state level in response to changes. no one wants to cut 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 eight to 10 --

>> i would like to understand what the solution is so you do not cut people off. mr. cordray: there are three different solutions. of the payday industry itself. a second is command he banks and credit unions, credit unions do offer a small dollar product, it is blessed in law. we think it is a good product and we want to make sure there is room for that. and community banks could do that. we want to allow room for that. responsible products, not payday type products. there are real opportunities here. although small dollar lending is tricky, it is difficult. we see if that develops over time but whatever innovations occur we want them to be consumer friendly and we will be mindful and watchful. those in the industry have met with us and they are mindful of

our role here. menendez: i came today maybe tonlike others praise the consumer financial protection bear -- euro, not to bury it. let me say that i think an example 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, as consumers have saved more than $9 billion in over-limit fees, $7 billion and late fees, and the total cost of credit has dropped almost two percentage points and all the while the bill -- availability of credit card credit has increased. that is one example of why consumer financial protection aws and regulations create

fairer marketplace. in that regard, as i think you know, i have been very engaged in the question of prepaid cards which has exploded over the last two years especially among toseholds who lack access traditional banking services. i have introduced legislation that would require clear disclosure of fees and prohibit the most abusive kinds of charges. prepaid also require cards to have fdic insurance like a traditional bank account and comparable protections to a bank account if the card is lost or stolen. many providers have voluntarily provided such measures and standards and shows it can be done but it highlights the need for strong, consistent protections across the full market. could you give us an update on the status of the bureau's work on prepaid cards, and particularly since i see that or thee did not include

best rule 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 very attentive to the legislation you have introduced and 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. on fdic, i do not want over step proper bounds, but we have had conversations about it. we understand the concern there. many of these prepaid cards are now serve as substitute bank accounts for people who are unbanked. they can be ready effective if

they have consumer protections. as you know now we now have no , consumer protections. this rule 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. the consumer bureau was very engaged in addressing -- this is 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 have been cheated of their service. that if anything shows all of the more to me 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 but because of the low value of the house chooses to abandon the .oreclosure can you talk to me about what steps if any the bureau has taken or is looking to take to address this issue? can homeowners receive notice when the bank decided not to pursue it? lastly, the national council -- -- la razaossa 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 service examination procedure,

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. can you address those issues? mr. cordray: i will take the second one first heard there was -- in terms of preferred language. 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 language. that is probably 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 that are affected, and it is not 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 -- since the property was never closed or sold for insurance and taxes and other payments. they may well have left the home in the meantime because if you are being foreclosed on, off -- often you start examining your options and you take one when you can find it. so it is 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 -- with 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 something we are looking at. can do and what others can do including state courts. 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. 55% of hispanics own homes. the question is, when you look at the rules in dodd-frank, how do we reconcile the mortgage market specifically -- is good 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, is the market is far more expensive and a growth in apartments in nearing an all-time high in the last decade or so. mr. cordray: and i know you raise that issue. i had a chance to review the transcript of the hearing and it is an important and interesting issue.

a lot of pieces to it. i would say in terms of first-time homebuyers, if you look at 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. it appears 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. to, say, you and me if we were going to try to buy a house tomorrow. 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. i do not want to be viewed as a but what i do see in 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 on frank -- dodd-frank, and are at the highest levels in 20 years. that is a good thing. those institutions did the best lending to the crisis when everyone else was deteriorating. they stayed firm. they had low default rates. 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

and dodd-frank, it says the bureau can exempt any class of persons or services from any provision of this title, or from any role issue hundred this -- any rule issued under 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? -- of regulations? do you see that as a possibility you will take hold of? do you see the need of it or not? 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. we just elected -- implemented

the definition of a rural. in a way that was very broad for smaller institutions. what i will say about the exemption authorities, we tend to be fairly careful about it. we do not regard congress saying you have brought exception authority, you can do whatever you want. despite what congress said that . 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. but not under in terms of supervising them. and the like. 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 -- they have done well and we should try to tailor our rules 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 -- staff, the number is around 4 million under and unbanked households. the regulatory burden impacts the institution. the higher the cost, higher 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. senator scott: 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. i am sure you are, too. it is notable that is our rules are supposedly killing the credit unions, how is their membership now at an all-time high? senator scott: the number of

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. i would point out you look 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. corker was. 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 fintech, and there remains opportunities in this new area as we think more of linking is going to be put at a supercomputer 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, but at the same time get this right and what standard are we going to hold them to? they are not banking institutions, but there will be some disruption from fintech. 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 bad for consumers. the exotic mortgages developed in the lead up to the crisis were innovative.

they were terrible for consumers. as we look at fintech, and i'm 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 fintech sardis to get an advantage -- startups to get an advantage because they are arbitraging the regulatory system. they are not taking seriously with the banks have to do. our enforcement against -- was 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

-- you are deceiving your customers and getting an unfair advantage by doing so, and that should stop. that should be a signal to the whole market that at a minimum to deliver on your products. it will be interesting to see how this develops. there's a lot of promise in fintech. fintech could lower cost, promote convenience, which be great. it may be the banking system in the fintech 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 the tools -- 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. a group in britain is modeled after -- senator warner: somebody raised this a year or so ago, and we raise it again, the different level of credit protections between debit cards and credit cards. and debit cards being with a younger person. i did not realize until we got into the data breach issues, and we have legislation to try to equalize those credit productions. would you like i had to change to speak to that? 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 comparable to the cards and not exactly credit cards. there are specialized provisions for credit cards. you reach in your wallet, pull out a card, may not english that -- may not distinguish 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. certain provisions shall apply to all cards, and that something we 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 ally's own records. senator cotton: -- there was a statistical determination of race using the last contact. 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 data which is only for the mortgage market. senator cotton: and he or she would have received and information about eligibility the receiptem about of a remuneration check unless they returned the notice. mr. cordray: and discussing what the criteria were for the

eligibility and making sure they should satisfy this criteria. senator cotton: and this may -- there was a second tier of a 50% to 95% likelihood of being non-white and that may require the return of form opting into settlements. mr. cordray: that is correct. you are correctly restating all elements. senator cotton: neither group, put -- respondents were not required to affirm ethnicity. mr. cordray: there is specificity about how much you would provide. there is various things you could make them do and 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. center dot in: were they required to make a statement of affirmation if they did belong to a protected class? mr. cordray: they were required to take an opt-in --

which was a statement that they belonged to the protective class. i could clarify with my set. -- my stuff for you. discovered an: i program on the wall street journal that is similar to the method you used to evaluate the race of buyers of cars and pursuit of this informant action. it plug in the zip code and -- out pops the statistical likelihood of race. "the journal" does not have the same method you do, but then the hearing on tuesday, senator brown revealed his zip code. in ohio to be 44015. shockingly, the program says that senator brown is at 89% likelihood of being black. based on that name and zip code. saturday shelby had a 70% -- a senator shelby had a 70% probability of being black. tom cotton has an 88% probability of being black. using this example, senator brown financed his vehicle

through ally. 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. in each of those three examples. they would have to state they were a minority borrower. i assume each of you would not do that, and otherwise you are committing fraud. let's go back here. what we have is we had a discrimination matter against ally financial. 325,000 or so consumers were affected. they were charged higher rates based on a pattern of practice that systematically showed that minorities and certain categories pay higher rates -- senator cotton: i'm not

disputing any of the facts. the redress of potential -- mr. cordray: and what do you do with the 325,000 -- do you set up a system that is reasonable -- difficult to comply and get their money or do you set up a system that is for them to reasonable for them to comply and get their money. if there is a large number of people who got checks from the settlement fraudulently 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 apprehensive -- senator cotton: senator brown would have been in the second tier, and he would have had to opt in. [indiscernible] >> you would have had to opt in

and senator shelby. senator cotton: [indiscernible] under penalty of perjury for making a false statement? mr. cordray: would you say you would have committed fraud? we worked with the justice department. >> did they recommend it? the obama department of justice suggested that you require on federal reforms -- federal forms. mr. cordray: i would not speak to any internal deliberations. we are not doing something differently than the department of justice. in this case. we are acting together, on the same page. thinken again i do not you committed fraud. senator cotton: did you declined that a penalty of perjury -- decline a recommendation attached -- mr. cordray: i do not believe i did. i do not want to characterize internal discussions with them. i do not believe i did. i have no recollection of doing that. i 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. under the theory i know some people disagree with but the supreme court has reaffirmed it is the law of the land. senator cotton: 330 members of the house of representatives disagree. my time has expired. >> thank you very much, mr. chairman, 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 predatory practices or principal reductions are canceled debts. i believe the number is now over $11 billion? mr. cordray: it is over $11.2 billion. in relief made available to consumers. 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 about $16 billion in saved fees, 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 to consumers. 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, -- tens, eventually hundreds of billions of dollars for consumers. that is meaningful. it is hard at that up. because of that perspective but it is very meaningful. senator: 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 -- fair deal more it 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. the largest single consumer finance market in the world. credit cards are under $1 trillion. student loans are over $1 trillion. although bones -- auto loans are under 12 in dollars. if there are savings from our rules and i am sure there are it , may be hard to document, it

be at 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 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 -- the settlement. sounded like a conclusion was that contrary to what is often asserted, there were no particular costs raised in terms of the products when the use of arbitration causes was discontinued. is that a fair summary -- significantly statistic -- statistically significant that could be identified in your study. mr. cordray: it was a fair 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 citizens united from actions to 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 applaud your work on arbitration. 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 gets one in a year

instead of getting 10 in the course of the year and so on. i found in oregon, after we cracked 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? they can be 500% or more? mr. cordray: i think of that is being simple mathematics. what i would say the point you made that is quite powerful is often this comment made, well, there are not a lot of complaints about payday loans, people being rolled over, how it 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. they can tell you the stories they hear where people come to them because they are not financial experts, because they care about them, and we hear her -- we hear horrendous stories in 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. senator: thank you, mr. chairman. senator: thank you, mr. chairman. mr. cordray, welcome back. thanks for being here. section 1071 of dodd-frank instructs the bureau to collect data on small business lending. i noticed recently that the cfpb has posted a job listing with reference to section 1071. it described the job as once in 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 -- senator toomey: those were your words. mr. cordray: i hope this is a great opportunity. senator toomey: is your -- is your intention that the bureau will work in the small lending space? 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 is a mandatory job congress gave 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. senator toomey: so my 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. we do our best to implement it 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 the speech, it 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. that reads 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 role making is 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.

mr. cordray: i would be glad to speak to this, and i saw testimony on tuesday about this where people make perfunctory not to we have to root out fraud, but should not do more than that. 90% of the relief of the $11 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. senator toomey: 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 interpreting the ecoa. the justice department has never used your approach. mr. cordray: 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. senator toomey: so your model would be the law of the land. you are using that model? mr. cordray: it goes back to the

1970's, in employment discrimination law. the other agencies said that, and the guidance we issued early on said we are a new agency, so people might not know what our position is. we join our fellow agencies and justice department. the supreme court reaffirmed that was the law of the land, and that is pretty conclusive on this subject. senator toomey: i'm learning 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. if i may, 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 -- senator toomey: your changing the subject. you're describing the methodology, but a new 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. mythological -- 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 identifying 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. mr. cordray: it is fair game if 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 because it is 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. senator warren: welcome to your 61st hearing. as you know, the payday lending industry is now doing $7 billion in loans. there are now more payday loan storefronts than there are starbucks. plus all the online payday lenders. often charging 200% interest. when emergencies arise, people need access to credit. director cordray, i know the cfpb is close to issuing its 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 here is to, it 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 $345 in two weeks, is not likely. many and that 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 missouri, 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, and said states were 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. it has been complicated at times great a federal system is bound to become a gated. -- bound to be complicated. 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 the baseline of no research 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. delay for delay's sake means if 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. i hope you will 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. senator rounds: thank you, mr.

chairman. good morning, director cordray. not too much longer and it will be good afternoon. mr. cordray: i was wondering myself. senator 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 ally 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 company, that decree should be part of it a court finding or contain an omission of guilt -- an admission of guilt, or if not, what senator toomey was alluding to, a rulemaking process laid out clearly, definitively? mr. cordray: ally is a great 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, ally 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? that is a basic 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 when decision gets whacked and 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. senator 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 laying out the guidance of how

we're going to be interpreting and enforcing the issues. when you have companies that ask for guidance, and by that i mean in the bureaus rule making it is estimated it would issue no action letters only in extraordinary circumstances in anticipation of one letter per year. by contrast the sec has issued no action letters in 2015. it looks to me if cubbies are asking for guidance on this, wouldn't it be fair then saying rather than going through the process of trying to adjudicate, i mean woody -- would you consider trying -- would you consider thinking twice? legitimatethis is a line of questioning. i'm not sure i'm satisfied where we have landed on this. there are different agencies. some of them do a lot of this.

others do very few. i don't know what the right answer is for us. i had this discussion on the other side with a representative who was very persuasive on the subject that the process not amounting to anything is not worth anybody's while. i want us to think more about that. we are leery of how much volume we can handle. we are setting up a process of trying to figure out what to do with those inquiries. question is out there and they are asking for guidance. >> it would be reasonable to try to find a way to work with them. another thing i would say on the enforcement and regulation differential, regulation is where we feel the law needs to be changed in certain ways and we have authority to do that subject to congressional authorization and oversight.

when the facts show -- >> i know the chairman's time is valuable. >> thank you. >> we can officially say good afternoon. one of your recent undertakings has been related to auto financing companies. the cfp be financed a rule define as large bank auto finance cubbies and reach several agreements with several auto finance companies to limit low and -- to limit low compensation. i have been hearing from a number of -- i just want to make sure you work with all stakeholders in this issue to make sure we get this right, to make sure there is continued

access and that everybody is treated fairly. >> i would say that in the early going we were leery about talking to auto dealers because we didn't want anybody to think we were crossing that line and enforcing that law. we have authority and therefore responsibility to address auto lenders. how we can adjust the practices of auto lenders without having an effect on auto dealers. we are willing to engage with input from dealers. as long as they are very clear we respect that line. >> like you said these are some of our small businesses that employ the small -- employ the most people in our towns. get it right with their customers as well.

a program where they had the opportunity to correct problems before we took action, that worked fairly well. bankruptciesrysler that unfolded. we worked to save dealerships that were being cut off by the manufacturers and we created procedures for them to appeal. i agree and understand the importance of auto dealers and their communities. if we find problems in the auto lender lending programs, we have to deal with them. have'm quite willing to that discussion and engage in it vigorously. i hope you will find that nobody says they are unable to talk to the consumer bureau. it's not what i intend. senator donnelly: another area i wanted to mention is important to my state. we have so much manufacturing. manufactured housing. we have previously discussed the impact of cfp be rules and i do have concerns that the new rules

would negatively impact the ability of consumers to buy sell or refinance these homes as financing for smaller balance loans is becoming more difficult. there has been a knowledge of -- there has been acknowledgment of these challenges by the cfp the -- by the cfpb. high cost manufactured housing loans have basically evaporated at this point since the rules went into effect. does that mean that lenders have reduced rates to get under the threshold? or is it that lenders have stopped taking applications that they previously accepted? mr. cordray: i don't think there was ever much high-cost lending in the manufactured housing market. i don't think it would be fair to say that there was a lot and it evaporates it. i think there never was much and people have shot away from it. -- people have shied away from it.

i do think there was a lot of pricing that comes in just under the threshold so it doesn't qualify as high-cost loans. and that is the nature of this market it seems. having said that, you have raised this issue with me and some house colleagues have raised the issue with me and we went back and did a white paper to understand it better. my background, i have seen, there are areas of the state where this is going to be the practical means of finding housing on difficult properties. topography issues and the like. white paper showed there has been a long-term decline in manufactured housing. i do not know what the causes are. i think folks did not feel they understood that what it has been true for about 20 years. senator donnelly: i was suggest a good portion of that is access to capital.

capital challenges that are out there. as you said, it's not fair to the rest of the country to think the rest of the country is all washington, d.c. townhouse that sell for $1 million. that family back in indiana, that family in ohio, they very much, just as much as a family here, want to have a place to go home and raise their family. mr. cordray: and not begin out on it -- a place to go home and not be gouged on it. senator donnelly: we agree on that. in most every case i do not assume my local community banker's out to gouge anybody. thank you, mr. chairman. senator moran: i will not ask director cordray any questions. we had a longtime exchange about this issue come in direct auto financing. i would again indicate to the

director that rulemaking, not enforcement would be a better path for the cfpb to pursue. i want to associate my remarks with you, mr. chairman in what you had to say about indirect auto financing. none of us agree that discrimination has a place -- we want discrimination out of our economy. this agreement extends the need for vigorous enforcement of equal credit opportunity act however i am concerned the cfpb auto financing bulletin has resulted in more adversarial relationships between the bureau and the industry. i wanted to highlight mr. chairman that i have introduced senate bill 2663, reforming the cfpb indirect auto finance guidance act. this is legislation identical to what passed the house and a bipartisan way 332-96 and i would encourage colleagues to join me in accomplishing that legislation.

it is an opportunity not to eliminate cfpb's indirect auto financing guidance, it is a way to improve the process and include the industry and consumers. thank you, mr. chairman. >> i know our vote has been called on the floor so i will be brief. summarizing two real areas of concern. mr. cordray, if you could give a general response and if you care to follow up in more detail perhaps in writing that would be great. first area of concern is, remittance transfers international money transfers. i think cfpb has spent a lot of time and money and man-hours on rulemaking for that.

has been criticized by gao and others for not setting to bed abuses yet. i have a three-part question. what is the summary of resources that have been spent on that? what is the response to criticism like gao about not adequately handling problems in that remittance transfer area? has your oversight quantified and looked at the widespread use of this by folks in the country and working in the country illegally and sending money overseas? which by oral accounts -- which by all accounts is a widespread practice. second area of concern is conflicts of interest involving quarry stone. as you know he is assistant director --ssistant

--he is the lead staffer on the payday rule. i'm concerned about conflicts because he was a senior executive before cfpb. was a senior executive for a company he started which sold out to a rival called micro build and they worked with folks within credit files seeking financing type payday lenders would perhaps have as customers. corey stone sold his stock in a company to his brother to avoid a conflict as he was coming to cfpb for $18,000. net stock has been valued recently at between $250,000 and $500,000. it seems to have been way

undervalued in order to allow him to get rid of it to come to cfpb. he is in charge of this rule. depending on how that rule is written, that could increase significantly the business, the market, the profitability, of his former company, his brother cross company. -- his brother's company. have you looked at those issues? mr. cordray: i have never heard any charges against mr. stone. i think this is baseless and bogus to raise it. he is one of the finest public servants i know. he has been going extra lengths to make his work at the bureau work. i do not believe there is anything to anything you have just said about him. he is a public official with great integrity and if there is more we need to talk about about this i will talk about it with you.

senator vitter: are you aware of the stock issue? mr. cordray: people who come to work at the bureau, some number of them came from the private sector. usually you all think that is a good thing. you don't want us to have -- senator vitter: are you aware of the stock valuation? mr. cordray: they divest assets when they come for fair market value. at the time he came to the bureau would've been in the wake of the crisis. the entire stock market was down more than 50% at the time so i don't know what the details are but i can assure you we will look into it if you want. everything corey does is with high integrity. senator vitter: have you looked into that issue and come to a conclusion or not? mr. cordray: our ethics department vets cost everyone's the vestige or of assets. it is a painstaking process. i don't believe there's anything to this but we will be glad to follow up with you. senator vitter: to follow up in writing would be great.

this remittance issue. mr. cordray: this was the first rulemaking we did. we were required to do it by congress. not a task we set for ourselves but a task you set for us. the rulemaking is in place. whether it's solved the ongoing abuses it may or may not have but we will take actions as needed against the industry if we find abuses. if you are aware of abuses or hearing about abuses that we should know about we will follow-up with you and be glad to hear what they are so we can consider whether to investigate them. i think it is possible our rulemaking has not solved every problem in the marketplace. and extent hasn't, we want to continue to pursue problems in the marketplace. i forgot the third part of your question. senator vitter: related to that was, does your rulemaking address and does your enforcement and tracking address what seems to be massive use of this money transfer opportunity for folks being in and working

in the country illegally and sending money overseas? mr. cordray: our rulemaking does not address that. congress did not direct us to address that. senator vitter: so you do not track any of that activity? mr. cordray: i don't believe we do. senator vitter: would the same apply if we were talking about organized crime or some illegal sector using the same remittance opportunity? mr. cordray: i don't think we tracked undocumented in any of the markets. , mortgages, etc. -- credit cards, mortgages, etc. we are not trying to dig into bank of america and ask them what kind of documentation. if those are issues for someone in the federal government they would be elsewhere. senator vitter: i'm saying with the same response of applied to illegal activities? mr. cordray: usually i come here and people are criticizing us for trying to expand our jurisdiction. we are looking at mobile cramming on cell phone companies. you're telling us you would like

us to look into organized crime? senator vitter: i'm asking -- would it be something you would care about look at? mr. cordray: that is not part of our limited consumer finance jurisdiction. senator vitter: we will follow up on this as well. thank you, mr. chairman. >> i would like to take a moment to respond to comments made earlier here at the hearing about the director to the ranking member. he is correct that aggregate credit availability has been increasing recently. but that is what you would expect in a near zero interest rate environment. this does not mean there are not specific issues in certain credit markets that may be exaggerated by some of the bureau's actions. more categories of credit may actually be in decline. multiple studies have found that small business lending has declined on the volume of loans to large businesses -- while the volume of loans to large

businesses has risen. research from harvard university finds that certain look -- -- finds that credit cards issued to certain lower income consumers have fallen by 50%. these are economic trends that i hope the bureau takes into serious consideration in your day-to-day work over there. another thing -- you want to comment? sure. mr. cordray: small business lending, we have not adopted any regulations that relate to small business lending. we have limited capacity although -- senator shelby: you lending to small business earlier. mr. cordray: we have a job we have not yet -- reporting and data collection for this. none of that small business change could be ascribed to the cfpb. as for credit cards for low income, -- the lock screen study is not a very credible study and i would

be willing to give you -- senator shelby: not a credible study because you disagree with it? mr. cordray: because it is not very well done or credible on the supposedly evidence. senator shelby: would you give us your concerns about the study? mr. cordray: i would say that on the credit cards for low income which is something mr. zywicki alluded to come he was talking about 2008 through 2012. most all of that crash it is due to households lost $12 trillion in net worth in the wake of the crash and he says at one point in a sort of muddled way it's hard to separate that out from -- from the effects of new rules. we did not come into existence until july of 2011. depend this on us as flimflam if you ask me. senator shelby: for the record, without objection i would like to enter into the record statements from the following groups that wrote the committee in junction with tuesday's

hearing on assessing the effects of consumer finance regulations. today's hearing on this consumer financial protection bureau semi annual report to congress. the statements include statements from the independent community bankers of america, the consumer bankers association, the national association of federal credit unions, the national -- the credit union national association, american financial services association, the electronic transactions association, the chamber of commerce of the united states, the national automobiles dealers association, mortgage bankers association and an article published in the american banker and finally an article from the new york post regarding highly, allies of financial expenses with bureau. mr. cordray: i would glad to be have access to those so we could consider them for improving our work. senator shelby: we will share it

with you. we want you to share with us too. mr. cordray: going back to the credit card so-called data. at the time a tsunami hit the beach. a financial crisis that somebody post garden hose might have been pouring water on the beach at the same time is hardly relevant. senator shelby: thank you for your appearance before the committee. mr. cordray: thank you. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

>> while the u.s. senate was in session, the house continues on their three-week spring break, turning to legislative business on tuesday. members are meeting with constituents back in their home districts. and a republican tweeted out -- peters fromic scott

california sent this message -- you can find out more about that .t student cam.org here's more about one of the winners of the competition. >> this month we showcase our student cam winners, c-span's annual documentary competition for middle and high school students. this year's theme is wrote to the white house -- is wrote to the white house, and the question is what issues do you want presidential candidates to discuss? california -- want residential candidates to discuss social security in their video titled "a sense of one significant

issue still remains, it is an issue that hasn't garnered much attention, an issue that the candidates must address. only a few months or mental a few months remain until ballots are cast for the presidential election. security hassocial largely been ignored. >> the government report has been disconcerting. [indiscernible] >> we all need to work together to address these issues. hama there is no way to move forward. -- >> there is no way to move forward.

social security was designed to provide general welfare to the american society and and sure as -- social security still continues to pour a large number of [indiscernible] almost one in six americans depend on the social security system. supports arity variety of groups. providing supplemental security and medicaid for americans alike. over the years social security has been able to support a large number of its recipients, and being funded by the payroll taxes of americans, it has remained relatively stable. security -- social anurity has experienced immense demographic change. in 1935 there was 61% supporting social security repairs