Protecting Consumers During The Pandemic? An Examination of the Consumer Financial Protection Bureau, House hearing transcript (July 30, 2020), GovInfo CHRG-116hhrg43343, PDF
Summary
This printed edition (Serial No. 116-106) records the House Committee on Financial Services hybrid hearing of July 30, 2020 with Consumer Financial Protection Bureau Director Kathleen L. Kraninger, the only witness. Chairwoman Maxine Waters said a record number of people had filed complaints about financial institutions with the CFPB during the COVID-19 crisis and criticized the Director's final rule rolling back safeguards for payday, car title and installment loans. Kraninger testified that from January 1, 2020 through July 26, 2020 consumers submitted more than 270,000 complaints to the Bureau, of which more than 14,000 referenced the coronavirus. The appendix holds the Director's prepared statement, additional submitted material and written answers to members' questions.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
PROTECTING CONSUMERS DURING
THE PANDEMIC? AN EXAMINATION
OF THE CONSUMER FINANCIAL
PROTECTION BUREAU
HYBRID HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
JULY 30, 2020
Printed for the use of the Committee on Financial Services
Serial No. 116–106
(
U.S. GOVERNMENT PUBLISHING OFFICE
43–343 PDF WASHINGTON : 2021
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HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK MCHENRY, North Carolina,
NYDIA M. VELÁZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York PETER T. KING, New York
WM. LACY CLAY, Missouri FRANK D. LUCAS, Oklahoma
DAVID SCOTT, Georgia BILL POSEY, Florida
AL GREEN, Texas BLAINE LUETKEMEYER, Missouri
EMANUEL CLEAVER, Missouri BILL HUIZENGA, Michigan
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANDY BARR, Kentucky
BILL FOSTER, Illinois SCOTT TIPTON, Colorado
JOYCE BEATTY, Ohio ROGER WILLIAMS, Texas
DENNY HECK, Washington FRENCH HILL, Arkansas
JUAN VARGAS, California TOM EMMER, Minnesota
JOSH GOTTHEIMER, New Jersey LEE M. ZELDIN, New York
VICENTE GONZALEZ, Texas BARRY LOUDERMILK, Georgia
AL LAWSON, Florida ALEXANDER X. MOONEY, West Virginia
MICHAEL SAN NICOLAS, Guam WARREN DAVIDSON, Ohio
RASHIDA TLAIB, Michigan TED BUDD, North Carolina
KATIE PORTER, California DAVID KUSTOFF, Tennessee
CINDY AXNE, Iowa TREY HOLLINGSWORTH, Indiana
SEAN CASTEN, Illinois ANTHONY GONZALEZ, Ohio
AYANNA PRESSLEY, Massachusetts JOHN ROSE, Tennessee
BEN MCADAMS, Utah BRYAN STEIL, Wisconsin
ALEXANDRIA OCASIO-CORTEZ, New York LANCE GOODEN, Texas
JENNIFER WEXTON, Virginia DENVER RIGGLEMAN, Virginia
STEPHEN F. LYNCH, Massachusetts WILLIAM TIMMONS, South Carolina
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESÚS ‘‘CHUY’’ GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
CHARLA OUERTATANI, Staff Director
(II)
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CONTENTS
Page
Hearing held on:
July 30, 2020 ..................................................................................................... 1
Appendix:
July 30, 2020 ..................................................................................................... 75
WITNESSES
THURSDAY, JULY 30, 2020
Kraninger, Hon. Kathleen L., Director, Consumer Financial Protection Bu-
reau (CFPB) .......................................................................................................... 5
APPENDIX
Prepared statements:
Kraninger, Hon. Kathleen L. ........................................................................... 76
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Waters, Hon. Maxine:
‘‘Consumer Financial Protection in the COVID-19 Crisis: An Emergency
Agenda,’’ by Richard Cordray, Diane E. Thompson, and Christopher
L. Peterson .................................................................................................... 90
Written statement of the National Association of Consumer Advocates
(NACA) ........................................................................................................... 100
Written statement of U.S. PIRG ..................................................................... 102
Budd, Hon. Ted:
Written statement of the Heritage Foundation ............................................. 130
McHenry, Hon. Patrick:
Written statement of the Association of Credit and Collection Profes-
sionals (ACA) ................................................................................................. 119
Written statement of the Consumer Bankers of America (CBA) ................. 122
Written statement of the National Association of Federally-Insured Credit
Unions (NAFCU) ........................................................................................... 127
Mooney, Hon. Alexander X.:
Written statement of the American Bar Association (ABA) ......................... 147
Kraninger, Hon. Kathleen L. :
Written responses to questions for the record submitted by Chairwoman
Waters ............................................................................................................ 156
Written responses to questions for the record submitted by Representa-
tive Cleaver ................................................................................................... 204
Written responses to questions for the record submitted by Representa-
tive Kustoff .................................................................................................... 212
Written responses to questions for the record submitted by Representa-
tive Tipton ..................................................................................................... 214
(III)
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PROTECTING CONSUMERS DURING
THE PANDEMIC? AN EXAMINATION
OF THE CONSUMER FINANCIAL
PROTECTION BUREAU
Thursday, July 30, 2020
U.S. HOUSE OF REPRESENTATIVES,
COMMITTEE ON FINANCIAL SERVICES,
Washington, D.C.
The committee met, pursuant to notice, at 12:38 p.m., in room
2128, Rayburn House Office Building, Hon. Maxine Waters [chair-
woman of the committee] presiding.
Members present: Representatives Waters, Velazquez, Sherman,
Clay, Cleaver, Himes, Foster, Heck, Vargas, Gottheimer, Gonzalez
of Texas, Lawson, Tlaib, Porter, Axne, Casten, McAdams, Wexton,
Lynch, Adams, Garcia of Illinois, Garcia of Texas, Phillips;
McHenry, Wagner, Lucas, Posey, Luetkemeyer, Huizenga, Stivers,
Barr, Tipton, Williams, Hill, Emmer, Zeldin, Mooney, Davidson,
Budd, Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil,
Gooden, Riggleman, and Taylor.
Chairwoman WATERS. The Financial Services Committee will
come to order.
Without objection, the Chair is authorized to declare a recess of
the committee at any time.
Before we begin today’s hearing, I want to remind Members of
a few matters, including some required by the regulations accom-
panying House Resolution 965, which established the framework
for remote committee proceedings.
First, I would ask all Members on the Webex platform to keep
themselves muted when they are not being recognized by the
Chair. This will minimize disturbances while Members are asking
questions of our witnesses. Members on the Webex platform are re-
sponsible for muting and unmuting themselves. The staff has been
instructed not to mute Members except when a Member is not
being recognized by the Chair, and there is inadvertent background
noise.
Members on the Webex platform are reminded that they may
only attend one remote hearing at a time, so if you are partici-
pating today, please remain with us during the hearing. Members
should try to avoid coming in and out of the hearing, particularly
during the question period.
If, during the hearing, Members wish to be recognized, the Chair
recommends that Members identify themselves by name, so as to
facilitate the Chair’s recognition.
(1)
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I would also ask that Members be patient as the Chair proceeds,
given the nature of the online platform the committee is using.
In addition, the Chair informs the Members participating in per-
son that in enforcing order and decorum in the hearing room, the
Chair has a duty to protect the safety of the Members.
The attending physician provided the following guidance: ‘‘For
U.S. House of Representatives meetings in a limited enclosed
space, such as a committee hearing room, for greater than 15 min-
utes, face coverings are required.’’ Accordingly, the Chair will treat
wearing masks as a matter of order and decorum, and all Members
should wear masks.
The Chair has a strong preference for Members to wear masks
even while being recognized. Members who do not wish to wear
masks may participate virtually through the Webex platform.
Today’s hearing is entitled, ‘‘Protecting Consumers During the
Pandemic? An Examination of the Consumer Financial Protection
Bureau.’’
I will now recognize myself for 5 minutes for an opening state-
ment.
I would like to welcome Director Kraninger to what I hope will
be her last appearance before this committee as Director of the
Consumer Financial Protection Bureau (CFPB).
Ten years after we passed the Dodd-Frank Act to end the preda-
tory and discriminatory practices that caused the financial crisis,
we find ourselves in the midst of an economic and health crisis
caused by incompetence and exacerbated by narcissism, that once
again hits the most vulnerable Americans the hardest. The scale of
the crisis is unprecedented.
Today, we learned from the Bureau of Economic Analysis that
the gross domestic product (GDP) decreased at an annual rate of
32.9 percent in the second quarter of 2020, which is the largest
drop ever recorded. Our consumers need a strong Consumer Bu-
reau that provides robust protections on their behalf and holds fi-
nancial institutions accountable when they commit abuse. A record
number of people have filed complaints about financial institutions
with the CFPB during the COVID-19 crisis.
We know that consumers are reporting major hardships in work-
ing with payday lenders, mortgage servicers, credit card companies,
and the credit reporting bureaus. They are reporting long wait
times, inconsistent information from consumer representatives, and
a lack of follow-up.
Unfortunately, our witness today, CFPB Director Kathy
Kraninger, has done next to nothing of substance about any of this.
Instead, she has focused the Consumer Bureau on weakening crit-
ical consumer protections, relaxing enforcement against financial
institutions, and undermining the agency from the inside.
Director Kraninger, let’s review some of the harmful actions you
have taken since March, when the pandemic began. You issued a
final rule, rolling back key safeguards for payday, car title, and in-
stallment loans, exposing consumers to high-cost predatory loans.
It is shameful to open the floodgates to predatory loan products to
trap consumers in a cycle of debt at any time. But to do so during
a pandemic is egregious. It is hands-down the most anti-consumer
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action you have taken as Director, and given your record, that is
saying a lot.
You also weakened the reporting requirements under the Home
Mortgage Disclosure Act (HMDA), willfully hindering the ability of
the Consumer Bureau researchers, journalists, advocates, and the
public to detect redlining and patterns of discrimination in mort-
gage lending.
An investigation by Reveal News found evidence of modern-day
redlining in 61 metropolitan areas across the country, using the
public data set that you are now degrading. It is deeply irrespon-
sible and malicious to undermine this important tool.
In addition, you have issued an Advance Notice of Proposed
Rulemaking (ANPR) to make substantial changes to the agency’s
Qualified Mortgage (QM) rule, which is the rule implementing the
standards with which lenders first demonstrate that a borrower
can repay a loan before signing mortgage documents.
It is, unfortunately, all too fitting that you seek to undermine the
standard on the 10-year anniversary of Dodd-Frank. You may not
remember the financial crisis, but I and the members of this com-
mittee do. We included the standard in Dodd-Frank because the
proliferation of unaffordable and predatory mortgage loans was an
essential driver of the 2008 financial crisis, and caused millions of
families, and especially borrowers of color, to unfairly lose their
homes.
These actions are just the latest that you have carried out to sab-
otage the very agency you have been entrusted with leading. Your
actions are betrayals of the consumers you are tasked with pro-
tecting.
And so, having said that, I am a little bit disturbed that I am
missing the television portrayal of the funeral of John Lewis, with
magnificent speakers there today, but we have to carry on with the
business.
And I now recognize the ranking member of the committee, the
gentleman from North Carolina, Mr. McHenry, for 5 minutes for an
opening statement.
Mr. MCHENRY. Thank you, Madam Chairwoman. I would point
out that the Majority schedules the timing of these hearings. But
the partisan nature of the Chair’s opening comments, I think, be-
lies the seriousness of our current politics in the midst of this pan-
demic, sadly.
But, Madam Chairwoman, I want to welcome Director Kraninger
for the first of what I hope are many appearances before the com-
mittee in the coming years. If I were not wearing a mask, you
would see that I say that with a smile and in an attempt to be
lighthearted in the midst of what is a pretty disastrous political
discussion we are having here in Washington.
Look, to me, Democrats are asking questions. The CFPB is pro-
tecting consumers both during and outside of the pandemic. If you
look at the facts in a fair-minded way, and recent actions by the
Bureau, I can safely answer my colleagues’ questions with, yes,
they are. Despite what the Democrats say to score political points,
this CFPB, under your leadership, Director Kraninger, has worked
diligently to provide resources, guidance, and protection for con-
sumers most at risk in these unsettling times.
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The reorder has encouraged financial institutions to work with
borrowers; provided increased flexibility for supervision enforce-
ment activity; clarified guidance to mortgage servicers to comply
with the Coronavirus Aid, Relief, and Economic Security (CARES)
Act forbearance requirements; created an elder fraud prevention
response network development guide; released an updated COVID-
19 consumer complaint data bulletin; and outlined the roles and re-
sponsibilities of credit reporting companies and furnishers to create
a consumer relief guide for mortgage payment forbearance and
foreclosure protection.
Pretty darn good work, I must say, and at the same time, keep-
ing your workforce safe. These are just a few of the CFPB’s pan-
demic-related initiatives.
Apart from its response to the pandemic, this Bureau, under
your leadership, has approached difficult and polarizing topics with
a steady hand over the last year-and-a-half. And I want to thank
you for that.
You have increased clarity in the market for consumer lending.
One example is the Bureau’s recent rulemaking to revise the 2017
small-dollar lending rule.
We know that small-dollar loans are a lifeline for millions of
Americans in need. They help consumers cover unexpected ex-
penses or income shortfalls during periods of economic stress, like
we are currently experiencing now.
The decision to revise that 2017 rule is a necessary step to in-
crease clarity and access in a market that serves millions of Ameri-
cans trying to make ends meet. We must continue to review and
right-size burdensome regulations that inhibit lending into the real
economy at a time when the American people need it most, and
they can at least afford that inhibited lending.
Lastly, Director Kraninger, as we have discussed in the past, my
colleagues and I believe you have too much power.
The structure of the Bureau is unchecked by Congress and the
President. And you have even agreed with me on that consistently,
both before and after your confirmation. And since Dodd-Frank’s
enactment, Republicans have argued that the Bureau’s structure is
unconstitutional; the funding mechanism leaves it unaccountable to
anyone. This past June, the Supreme Court agreed with what Re-
publicans have been saying all along.
In striking down a structure created by the Democrats in 2010,
the Supreme Court found that the Director holds too much power
and violates the separation of powers.
We now have a real opportunity to work together on necessary
statutory reforms to the Bureau, reforms that will benefit con-
sumers and bring clarity and clear guidance. A leader in that effort
is my colleague and friend, Blaine Luetkemeyer.
Director Kraninger, I want to thank you for your leadership. And
I want to yield the balance of my time to Mr. Luetkemeyer.
Mr. LUETKEMEYER. Thank you.
Thank you, Ranking Member McHenry, and thank you, Director
Kraninger for being here today. Just a few weeks ago, the Supreme
Court confirmed that the structure of the CFPB is unconstitutional.
The Director can be fired at will by the President of the United
States. The structure and in-person authority of the CFPB have
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turned into a political football that will no doubt swing back and
forth, on a political pendulum, creating uncertainty and confusion
for financial institutions and consumers for decades to come.
That is why I have introduced legislation that changes the lead-
ership structure of the CFPB from a single Director who can be
fired at will, to a bipartisan five-member commission.
Last Congress, this legislation enjoyed bipartisan support in this
committee. However, in the 116th Congress, this solution only gar-
ners support from my side of the aisle. Changing the leadership
structure and increasing government oversight of the CFPB are
vital to protect businesses and consumers.
I look forward to discussing these issues with you today.
With that, Madam Chairwoman, I yield back.
Chairwoman WATERS. It is now time to hear from Director Kathy
Kraninger. Director Kraninger has testified before the committee
previously, so I believe she needs no further introduction.
You will have 5 minutes to summarize your testimony. When you
have one minute remaining, a yellow light will appear, and at that
time, I will ask you to wrap up your testimony so we can be re-
spectful of the committee members’ time. And without objection,
your written testimony will be made a part of the record.
You will now be recognized for 5 minutes to present your oral
testimony.
STATEMENT OF THE HONORABLE KATHLEEN L. KRANINGER,
DIRECTOR, CONSUMER FINANCIAL PROTECTION BUREAU
(CFPB)
Ms. KRANINGER. Chairwoman Waters, Ranking Member
McHenry, and members of the committee, thank you for this oppor-
tunity to provide you with an update on the fantastic work the
CFPB has been doing since we last met.
I appear before you as the country is engaged in the national
conversation on racial inequality and confronting the unprece-
dented pandemic. Today, I would like to discuss both of these topics
with you.
Under my leadership, the CFPB is taking steps to help create
real and sustainable changes in our financial system so that Afri-
can Americans and other minorities have equal opportunities to
build wealth and close the economic divide.
Earlier this week, I authored a blog outlining the Bureau’s im-
portant fair lending work. We also issued a request for information
on how best to create a regulatory environment that prevents cred-
it discrimination in all aspects of the transaction and expands ac-
cess to credit. The information that is submitted will help us En-
force the Equal Credit Opportunity Act (ECOA).
Among the topics the public can comment on are how to better
protect consumers with limited English proficiency, as well as ap-
plicants who derive income from any public assistance program. I
encourage the public to respond so that we can build a financial
system that treats everyone fairly and provides clear rules of the
road.
Having clear standards helps us identify any violations in fair
lending laws. Recently, the Bureau filed a lawsuit alleging a lender
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had violated ECOA by discouraging African Americans from apply-
ing for loans through its advertising.
The Bureau also announced a settlement last year with the mort-
gage corporation that violated the Home Mortgage Disclosure Act
and Regulation C by intentionally submitting years of mortgage
loan data that contained errors in the fields of race, ethnicity, and
sex.
Since my last testimony before the committee, I have requested
critical authority from Congress to allow the Bureau to compensate
whistleblowers. In our enforcement work, we have seen firsthand
that whistleblowers can provide key information on fair lending
violations.
I want to thank Congressman Green for introducing legislation
similar to what I requested. I stand ready to work with Congress
to secure this important authority.
Now, let me take a moment to discuss how we are protecting con-
sumers during the pandemic.
We have worked to expand our reach to consumers to provide
them with actionable, useful information about their rights, op-
tions, and expectations in the market for consumer financial prod-
ucts and services. We have produced over 70 blogs and videos that
have been accessed directly by more than 3 million users.
Through our social media reach, staff estimates our materials
have been sent to 41 million unique users. These materials are
available in seven different languages and have been constantly
updated to adapt to the changing dynamics.
We have also promoted our consumer complaint system. When
consumers submit complaints to the Bureau, they help inform our
work in supervision, enforcement, regulation, and education. Spe-
cifically, in response to complaints and other market and stake-
holder feedback, we worked with interagency partners to quickly
address a student loan-related credit reporting issue, as well as
CARES Act mortgage forbearance lump sum payment concerns.
From January 1, 2020, through July 26, 2020, consumers have
submitted more than 270,000 complaints to the Bureau, of which
more than 14,000 complaints specifically referenced the
coronavirus. Each month, from March through June, set a new
monthly record for complaints. Our consumer contact center and
our online portal have operated efficiently and effectively through-
out the pandemic to take those consumer complaints and refer
them to companies for response and ensure those responses are re-
ceived.
We also partnered with other Federal agencies to develop and
launch a unified housing website to provide consumers with com-
prehensive and accurate information on their rights during this
time.
The Bureau has also developed a new targeted supervisory ap-
proach called Prioritized Assessment to focus on those markets and
institutions that pose the greatest risk to consumers as a result of
pandemic-related issues.
We remain fully engaged in the execution of the Bureau’s critical
mission, including continued progress on our regulatory agenda,
which is relevant to the pandemic and ultimate economic recovery,
as well as our supervisory and enforcement work.
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We work closely with partners and stakeholders, recognizing the
important roles that others play in supporting our consumer pro-
tection mission and preventing harm.
I am particularly proud of the Bureau staff’s excellent work dur-
ing these challenging and unprecedented times. And thank you
again for allowing me the opportunity to testify today. I look for-
ward to the questions.
[The prepared statement of Director Kraninger can be found on
page 76 of the appendix.]
Chairwoman WATERS. Thank you very much. I now recognize
myself for 5 minutes for questions.
Director Kraninger, under your leadership, the Consumer Bu-
reau has brought fewer lending enforcement options, rolled back
consumer protections against predatory and payday lending, scaled
back data used to combat discriminatory practices like redlining,
and engaged in inappropriate personnel practices, such as allowing
political appointees like Thomas Ward to burrow into the Agency
and take what should be a nonpartisan career position, and in hir-
ing Eric Blankenstein, who has well-documented racist views, and
Paul Watkins, who was affiliated with an anti-LGBTQ hate group.
Director Kraninger, when we were in a financial crisis more than
a decade ago, Congress determined that consumers needed an
agency solely dedicated to protecting them from the abusive prac-
tices and products that contributed to the crisis.
When Congress passed the Dodd-Frank Act and created the Con-
sumer Bureau, we clarified the rules of the road and tasked the
Agency with enforcing the law and protecting consumers in the fi-
nancial marketplace. The pandemic has only heightened the need
for the Consumer Bureau to protect struggling consumers.
Unfortunately, the Consumer Bureau has engaged in deregula-
tion without facts or reasoning and seems to be protecting the in-
terest of industry over the interest of consumers.
Director Kraninger, what proactive supervisory and enforcement
steps has the Consumer Bureau taken to protect consumers who
have lost income due to COVID-19 and are struggling through no
fault of their own? How are you utilizing the authorities at the
Consumer Bureau’s disposal to protect consumers against bad ac-
tors that are taking advantage of our communities during this cri-
sis? What have you done?
Ms. KRANINGER. Chairwoman, our supervisory and enforcement
work continues through the pandemic. I will say briefly about su-
pervisory actions, because I think it is a very different approach
than we have had. Typically, examiners go to an institution and
look at loan files from 2 years ago, and assess compliance against
the law, which is important.
We instituted, as a result of the pandemic, a prioritized assess-
ment process. We are going to hundreds of institutions across the
spectrum in a risk-based approach to look at what they are doing
with respect to the pandemic.
What are their operational challenges? Are they following the
guidance to accommodate their customers? Are they following the
CARES Act processes? Are they providing clear information to con-
sumers? And we are looking to again prevent consumer harm by
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addressing that right at the issue and right at the point where that
activity—
Chairwoman WATERS. Director Kraninger, after you do all of
those reviews and ask those questions, then what do you do?
Ms. KRANINGER. Chairwoman, if we find violations, we will act
on them. But I will say that the vast majority—
Chairwoman WATERS. Give us an example of one of those actions
you have taken?
Ms. KRANINGER. I’m sorry, Madam Chairwoman, I didn’t under-
stand that.
Chairwoman WATERS. After you have done your reviews making
sure that people are doing what they are supposed to do, when you
find that they have not been doing it, what do you do, and give us
an example of one that you have taken care of?
Ms. KRANINGER. That is a confidential process through the exam-
ination, but we do get restitution for consumers through super-
vision. There are a bunch of examples in the semi-annual report of
the amount of restitution that has been gotten through supervision.
We also certainly believe there are bad actors or if this is a sus-
tained issue with respect to violations, that is referred to enforce-
ment. We also independently take enforcement actions. And in the
pandemic, we have been incredibly active with all of our law en-
forcement partners from State Attorneys General to the Justice De-
partment and the FTC and—
Chairwoman WATERS. Director Kraninger, are those enforcement
options that you have taken available to Members of this Congress?
Can we see what you have documented that you have done when
you have done your reviews and discovered that you have people
in departments who are not doing what they are supposed to do?
Can we review what you have done?
Ms. KRANINGER. Yes, Madam Chairwoman—
Chairwoman WATERS. Thank you. Let the record indicate that
the chairwoman is interested in reviewing actions taken by the Di-
rector of the Consumer Financial Protection Bureau after she has
done reviews in which she has determined that those who have not
been following the rules, the laws, the procedures, et cetera, so we
can understand exactly what she has done.
Also, while I have a few minutes here, consumer complaints dur-
ing the COVID-19 period have surged. Nearly half of all com-
plaints, 46 percent, were related to credit reporting. Nevertheless,
in April, the Consumer Bureau announced that it would allow
much greater flexibility in how long credit reporting agencies may
take to investigate consumer report disputes.
Do you think it is appropriate for the Consumer Bureau to an-
nounce that it would weaken enforcement of the Fair Credit Re-
porting Act’s requirements for credit reporting agencies, like
Equifax, to investigate disputes in a timely fashion?
My time is up. You do not have time to answer that. I will sub-
mit that question to you in writing for further answers.
The gentleman from North Carolina, Ranking Member McHenry,
is recognized for 5 minutes.
Mr. MCHENRY. Thank you, Director Kraninger, for being here,
and thank you for managing this process. I know it is awkward to
speak with a mask on and to sit behind, effectively, a salad guard,
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9
or whatever those things are that you are behind, but we are try-
ing to do our best.
And there are a couple of broad things I want to talk about. Ob-
viously, a Supreme Court decision, which is something I brought
up in my opening statement—you have consistently said that you
believe that the Director is given too much power, and that Con-
gress should remedy this. And I appreciate the fact that you have
continued to have that same view, even though you have this enor-
mous power and it sort of lacks accountability standards as well.
Has your view of your role shifted since the Supreme Court deci-
sion?
Ms. KRANINGER. Congressman, certainly, we reviewed the case.
I was very gratified that the Supreme Court took up that case and
made the decision on it. It created a lot of uncertainty in the Agen-
cy’s enforcement actions and around the Agency’s mission. And I
think that is incredibly helpful to the process.
I will say with respect to additional changes in structure or oth-
erwise, I leave those in the hands of Congress. To the extent that
you all decide to make changes to that, and that it becomes law,
we will certainly work to institute those changes.
Mr. MCHENRY. I also mentioned a small-dollar lending rule.
There are details of this that I agree with, and there are details
of it with which I disagree. But why did you take the action on the
small-dollar lending rule?
Ms. KRANINGER. Congressman, there was a lot of concern. Frank-
ly, we were in litigation over that rulemaking. There was a lot of
concern about the dramatic impact that would have on the avail-
ability of small-dollar credit.
We know there is significant demand and need and interest in
small-dollar credit. That has been documented, and Congress has
even taken action, funding a small-dollar program through CDFI.
So, trying to promote competition in that space is an important
aspect of it. And there were a lot of issues with respect to the pay-
day rule that were undermining that.
Most pointedly, though, we followed the Administrative Proce-
dure Act and noted and documented that the initial rule did not
have the robust evidence and legal basis given that dramatic im-
pact on small-dollar credit availability.
Mr. MCHENRY. So, there are benefits in terms of credit avail-
ability and benefits for certainty, right? Regulatory certainty? And
that will have a positive impact on consumers and their access.
Will you continue to ensure that there is diligent oversight of the
industry?
Ms. KRANINGER. Absolutely. Our enforcement actions have con-
tinued apace in this industry as in others. We know there are bad
actors in every market. And so, we will continue to enforce the law
and engage in examinations of payday lenders, which we have
done.
But in addition to that, we are doing work on disclosure testing
to ensure that consumers do understand this product. There is a
lot of evidence that they understand it, but let’s actually continue
to do the disclosure testing as well. So, there are a lot of different
aspects of this.
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Mr. MCHENRY. Director Kraninger, I want to thank you for re-
viewing Section 1033 of Dodd-Frank, and reaching out to the indus-
tries about this, and consumers. That section focuses on consumers’
ability to access their financial information. I know Congress, we
want to do our work for data privacy for our jurisdictions. I think
there is consensus between all parties on the need, and then we
can dial down in terms of changes.
But this statutory requirement is interesting in light of the mas-
sive change that is happening in banking, and the feedback we
have gotten.
For example, Fintech companies offer improved personal finan-
cial management, faster loan underwriting, and better payment
services. And those are positive developments. And I want to make
sure that we continue to foster that exact sort of innovation.
Is that the reason why you are undertaking this? What are the
benefits for review of the regulatory framework?
Ms. KRANINGER. Certainly, one key priority and principle of the
activity is continuing to promote innovation in this case. And we
had a symposium just a few months ago to talk through this issue
and bring experts together. It was truly a robust conversation.
The Agency has allowed the industry and all stakeholders and
the public to continue to take advantage of those innovations in the
marketplace. But we are at the point now where we really should
examine the way in which that data transmission occurs, and that
is why we are moving to an advance notice of proposed rulemaking.
Mr. MCHENRY. And let me close by saying, thank you. You have
been a good public servant, and you continue to act in accordance
with the law, you have been open to feedback, and I appreciate
that. I very much appreciate it.
Madam Chairwoman, I ask unanimous consent to insert into the
record two letters. The first is a July letter to the Financial Serv-
ices Committee from the Consumer Bankers Association articu-
lating a number of thoughts on the CFPB’s rulemaking and ac-
tions. And the second is a July letter from the Association of Credit
and Collection Professionals opining on the CFPB’s rulemaking as
it relates to the Fair Debt Collection Practices Act.
Chairwoman WATERS. Without objection, it is so ordered.
Mr. MCHENRY. Thank you, Madam Chairwoman.
Chairwoman WATERS. The gentlewoman from New York, Ms.
Velazquez, is now recognized for 5 minutes.
Ms. VELAZQUEZ. Thank you, Madam Chairwoman, and Ranking
Member McHenry, for holding this important hearing, especially at
this time.
Director Kraninger, earlier this month the CFPB finalized its re-
vision to the payday lending rule, keeping out a key provision of
the regional rule developed by Dr. Cordray, the ability-to-repay re-
quirement.
Do you believe the Bureau’s revised rule will leave low-income
borrowers and those of color more or less protected from unscrupu-
lous payday lenders during this pandemic?
Ms. KRANINGER. Congresswoman, the mandatory underwriting
provisions are having the impact of a substantial reduction in the
availability of small-dollar credit for all communities, and particu-
larly the communities you mentioned, vulnerable communities who
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are really in need of access to responsible products for small-dollar
loans. And that was the primary consideration. If protections con-
tinue with respect to the payments provision—
Ms. VELAZQUEZ. I hear you. I disagree with you in terms of ac-
cess to credit. Basically, smaller institutions are the ones that are
providing loans to individuals and small businesses, not the—so
how would you respond to the president of the Center for Respon-
sible Lending, Mike Calhoun, who said that the pain caused by the
CFPB regarding the payday rule will be felt most by those who can
least afford it, including communities of color who are dispropor-
tionately targeted by payday lenders?
Ms. KRANINGER. Congresswoman, the availability of credit had—
and that rulemaking did have a broader impact. The number of
banks that are issuing small-dollar products was substantially lim-
ited. There are no mitigating factors to support that—
Ms. VELAZQUEZ. You are saying that Mr. Calhoun is wrong, but
you are right?
Director Kraninger, a review of the CFPB’s consumer complaint
database shows that consumer complaints have increased dramati-
cally in the start of the pandemic. However, CFPB rules still allow
companies up to 60 days to respond to a consumer complaint.
Given the rising number of complaints and the economic uncer-
tainty many individuals and households are facing, why has the
CFPB not started to shorten this response time?
Ms. KRANINGER. Congresswoman, I should, off the top of my
head, have the response time, but it is substantially shorter than
that. I believe we are basically in a week for most turnarounds.
The 60-day allowance is really because of some of these more com-
plicated issues, in terms of what the complaint is and making sure
it is addressed. So, I think we have a fantastic record of actually
getting a meaningful response—
Ms. VELAZQUEZ. So, why not shorten the 60-day requirement, or
the 60 days timeline, given the fact that consumers are suffering
in this country? These are people who are in trouble right now, so
why not shorten the 60 days?
Ms. KRANINGER. Congresswoman, the vast majority—we will get
back to you with an actual number—
Ms. VELAZQUEZ. It would be great to have some empathy.
Director Kraninger, mortgage-related concerns represent the
highest percentage of COVID-related complaints received by the
Bureau. Earlier this month, we held an Oversight Subcommittee
hearing in which we learned that some mortgage servicers are fail-
ing to notify borrowers of their right of forbearance under the
CARES Act.
Is the CFPB concerned that some servicers are failing to accu-
rately represent borrowers’ rights under the CARES Act? How is
the CFPB working to address this issue?
Ms. KRANINGER. We have produced a significant amount of mate-
rial in cooperation with HUD and FHFA scripts for servicers so
they have very clear messages that they are supposed to provide
to their customers. We have done videos for customers. And, in
fact, many of the servicers are pulling the information off the
CFPB’s website and sending it to their customers in multiple lan-
guages. This is all available—
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Ms. VELAZQUEZ. Do you have any data as to any complaints com-
ing from individuals who feel that their rights have not been pro-
tected?
Ms. KRANINGER. There were complaints right around the CARES
Act passage about concerns about being able to pay their mort-
gages, and concerns about the messages that they were getting. We
acted expeditiously, really, since March-April complaints and ad-
dress them through a lot of different actions and they have gone
down substantially since that time.
We are certainly still monitoring, and if we see an increase, or
if we see any bad action, working really closely with FHFA, actu-
ally, we were looking at all of this, and we are acting.
Ms. VELAZQUEZ. Thank you.
Chairwoman WATERS. Thank you.
The gentlewoman from Missouri, Mrs. Wagner, is recognized for
5 minutes.
Mrs. WAGNER. Thank you, Madam Chairwoman.
And welcome back, Director Kraninger. I want to just first thank
you for your service to our country and for your service to all of
the consumers in Missouri’s Second Congressional District. I appre-
ciate your leadership now, and I look forward to it in the future.
Before I begin my questions, I also wanted to thank you for all
the work that you have done, not only increasing transparency at
the CFPB, but also streamlining and tailoring regulations to better
protect and provide, I think, clarity for consumers and the private
sector. So, thank you for that.
While I am proud of your efforts to increase transparency and ac-
countability, the CFPB issues regarding its structure go beyond
that of any one Director. Now that the Supreme Court has made
its decision regarding the structure of the Bureau, it is time for
Congress to work together to put the Bureau on a budget, overseen
by Congress, and run by a bipartisan board.
Director Kraninger, would you please discuss how the credit re-
porting provisions in the CARES Act are working to protect con-
sumers who have been impacted by COVID-19?
Ms. KRANINGER. That is a very important issue, and I think we
are in a much better position than we were after the financial cri-
sis in recognizing the importance of the credit reporting system,
and our ability to act very quickly on issues as they occur, and ad-
dress them so that they don’t impact consumers.
The CARES Act provision first requires that those who are af-
fected by the pandemic be reported as, ‘‘current,’’ when they are in
a forbearance program under the CARES Act. And that is some-
thing that we are monitoring. I mentioned earlier the prioritized
assessment that includes a constant presentation that the CFPB
has with the national credit reporting agencies. We are looking at,
specifically, what they’re doing with the information that comes in.
We are also doing examinations of furnishers on the other side to
make sure they are reporting the right way.
Of course, ‘‘current,’’ is not the only thing that is in the data that
gets transmitted by the furnishers. There are a lot of different de-
tails about how precisely you continue to comply with FCRA in
terms of accuracy and otherwise. But we are all working very close-
ly together to keep that intent of Congress implemented.
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Mrs. WAGNER. Recently, the Bureau announced that it would be
issuing an advance notice of proposed rulemaking regarding con-
sumer-authorized access to financial records. How does the Bureau
intend to address privacy and security concerns in an environment
where many unregulated or underregulated companies are eager
to, as we know, obtain and resell consumers’ financial data?
Ms. KRANINGER. Section 1033 is, of course, what you are ref-
erencing, and Congress anticipated there might be a need for rule-
making. We are still looking at that. The primary driver is that the
consumer should be the one who authorizes the data use. But to
your point, privacy and security issues are intertwined with that,
and are incredibly important.
The means by which many of the data aggregators have been ac-
cessing that data is by consumers providing their banking creden-
tials. And that, of course, means the entity can go in and screen
scrape the data and take it out. That has caused a lot of concerns
by those who believe they are stewards of that data.
So, we have a lot of technical data access issues there with re-
spect to how that happened. And it was not pre-decided that there
needs to be a rule, but it will be a challenging rulemaking to take
precisely the privacy and security, and make it lasting so that it
doesn’t change based on technology changes as well. So, we are
really looking to do that right.
Mrs. WAGNER. I think so, too. How will the Bureau ensure that
the password’s enhanced data portability does not lead to consumer
exploitation or an uneven playing field between depositing holding
institutions and potentially underregulated Fintech companies? I
have concerns about that, too, as you move forward.
Ms. KRANINGER. No, you are outlining precisely the challenge
here. Again, the consumer is front and center in Section 1033, but
there also needs to be information to that consumer about what
they might be opening up.
Mrs. WAGNER. Okay. Thank you. My time has expired, and I
yield back.
Chairwoman WATERS. Thank you. The gentleman from Cali-
fornia, Mr. Sherman, who is also the Chair of our Subcommittee
on Investor Protection, Entrepreneurship, and Capital Markets, is
now recognized for 5 minutes.
Mr. SHERMAN. I have five quick, easy questions. First, paced
loans: Congress passed a law in 2018 requiring regulations, includ-
ing the ability to repay. In March 2019, you issued a proposed rule.
In October 2019, and February 2020, I had a chance to ask you
about the status. We need to protect the consumers. When do we
get the regulations?
Ms. KRANINGER. Congressman, I can give you a slightly better
answer than I did in February. The data collection that we need
to predicate that notice of proposed rulemaking will begin in Sep-
tember, early September. The Paperwork Reduction Act require-
ment does take a significant amount of time. But by early Sep-
tember, that data collection will happen. We will have the data this
year.
Mr. SHERMAN. So, the work you promised in February will start
in September. Next, I want you to be as quick as possible on that.
Ms. KRANINGER. Understood.
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Mr. SHERMAN. Next, consumer credit scores: People lose their
jobs because of COVID. They have negative—they are unable to
pay this or that bill. Is that a fair entry on their credit report and
a good predictor of how well they will be able to pay their bills once
the crisis is over?
Ms. KRANINGER. Congressman—
Mr. SHERMAN. Can we prevent these negative items during the
COVID crisis from being on the credit report?
Ms. KRANINGER. I know you are asking a critically important
question that you in Congress are actually thinking about and look-
ing at now.
Mr. SHERMAN. You could solve the problem for us. You could sim-
ply prohibit—I hope you will look at preventing these negative
items from being on the credit report.
But one particular area where Congress has acted, the CARES
Act, said that mortgage forbearance is allowed to homeowners and
prohibits negative credit reporting from using that forbearance.
But FHFA charges premiums on mortgages to borrowers who
have accessed the forbearance, which means that that is being re-
ported and it is disadvantaging the homeowner.
What can you do to make sure that the forbearance that the
CARES Act indicates should not be on the credit report, is not re-
ported in a way that causes FHFA to raise the premiums?
Ms. KRANINGER. I can’t speak to the premium aspect, Congress-
man, but I can in the overall context of this. We are working very
closely with the NCRAs and with the furnishers to understand
what else they are reporting—
Mr. SHERMAN. Can you call the folks over at the FHFA and say,
‘‘Hey, it is my job to make sure that you don’t get this information
on the credit report, so where are you getting it?’’
Ms. KRANINGER. We will talk about this because you are the first
person to mention the premium issue, so I will go back and look
at that, and we will certainly get back to you on what the decision
is there.
Mr. SHERMAN. The next issue is Facebook. The entities you regu-
late are supposed to make sure they don’t discriminate based on
age, gender, race, et cetera. Facebook has this complicated algo-
rithm, so that when you buy an ad on Facebook, you don’t quite
know whom you are reaching.
Facebook probably isn’t going to reveal its algorithms. But if one
of the entities being regulated by your Agency gets a certification
from Facebook saying, you have opted for an ad campaign that we
are making sure does not discriminate against the people you are
not supposed to discriminate against, would that be adequate, or
do the entities that you regulate have to not be on Facebook unless
Facebook reveals the algorithm?
Ms. KRANINGER. There are a lot of facts and circumstances be-
hind, obviously, the premise to your question. And I wouldn’t want
to answer that in this unique case. I will tell you overall that we
do engage in fair lending examinations of the institutions. That
certainly includes looking at their advertising. And beyond that, I
can’t get into too much more depth here, that—
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Mr. SHERMAN. I hope you will look at the specifics. Back in the
old days, you would put an ad in the newspaper, and that would
be the way—the town had one big newspaper.
Now, you have so many different choices. When you advertise
with Facebook, it is one big entity, but you have thousands of dif-
ferent advertising campaigns you can ask for. And I would assume
that you would create a circumstance where if you specify non-
discrimination, that it is on Facebook if they violate that.
One last thing is these Fintech companies that ask you to give
them all of your information so they can access your bank account
and your brokerage statement, and then, they can sell the informa-
tion they know about you; they are providing this free service at
the cost of your privacy.
What is your perspective? What can we do to protect consumer
privacy?
Ms. KRANINGER. Certainly, we have some limitations on our
oversight of privacy. But I will say on this point, we do have Sec-
tion 1033 to look at what the data aggregators are telling con-
sumers in terms of the product what they are getting from it.
And there are a number of things that we are doing on that front
for the disclosure and access.
Mr. SHERMAN. Thank you.
Chairwoman WATERS. The gentleman from Oklahoma, Mr.
Lucas, is recognized for 5 minutes.
Mr. LUCAS. Thank you, Madam Chairwoman.
Director, can you detail the resources that CFPB has provided to
consumers experiencing financial hardship during the COVID-19
pandemic?
Ms. KRANINGER. Certainly. We have announced public enforce-
ment—in terms of educational resources, I will admit, my mind
went to money. But I will say, educational resources are extensive.
We have issued over 70 blogs and videos in multiple languages, ex-
tensive information on how to manage your finances and think
about them, and what questions to ask your servicers.
As soon as the CARES Act was passed, we issued that video and
that information within a week, which was a significant accom-
plishment in moving mountains here to make sure we clearly and
concisely told consumers what they were entitled to. And we have
had millions of people watch that video in English and in Spanish,
and that is something that I think we are particularly proud of in
terms of, again, making sure consumers understand their rights.
And I commend the financial institutions and other consumer ad-
vocates, and Members of Congress, who are also sharing that very
same information with their constituents or with their customers.
Mr. LUCAS. It is important, because many of our constituents
have never faced the kind of challenges they are facing economi-
cally as a result of a pandemic, just as virtually no one alive has
had to deal with this kind of a circumstance before.
Continuing my line of questioning, you mentioned in your testi-
mony that the Bureau will launch a website with HUD and FHFA
for consumers to find accurate information about relief options. Do
you outline what consumers should expect when seeking out a for-
bearance or mortgage relief as provided in the CARES Act?
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Ms. KRANINGER. Yes, Congressman, that website is launched. It
has a lot of the resources I just talked about on it. Consumers can
expect that they can contact their servicer and say, I have experi-
enced a hardship, and therefore they are entitled to forbearance if
it is either a federally-backed loan or a GSE-backed loan. So, that
is clear to them.
In addition, even those that are privately-funded loans, certainly,
they have direction from all of us as regulators to accommodate
their customers, and many of them are also providing different
kinds of forbearance, again, consistent with their contractual obli-
gations and abilities.
But a significant, overwhelming number of institutions are pro-
viding options to their customers, and the first step is having those
customers contact them.
The second is to come to us, the CFPB, if they have any issues
or questions or complaints, and we are expeditiously addressing
those.
Mr. LUCAS. I very much appreciate that, Director. As I men-
tioned earlier, there are many of my constituents, our constituents
out there who are facing the kind of economic challenges we have
never faced before, and this is a whole new terrifying experience
to them.
With that, Madam Chairwoman, I yield back the balance of my
time.
Chairwoman WATERS. Thank you.
The gentleman from Missouri, Mr. Clay, who is also the Chair
of our Subcommittee on Housing, Community Development, and
Insurance, is recognized for 5 minutes.
We will move on. I think there is some technical difficulty with
the gentleman from Missouri.
The other gentleman from Missouri, Mr. Cleaver, who is also the
Chair of our Subcommittee on National Security, International De-
velopment and Monetary Policy, is recognized for 5 minutes.
Mr. CLEAVER. Thank you, Madam Chairwoman.
I appreciate very much this subject today with Director
Kraninger, because I don’t know if there are very many other
issues that are in the same area of importance.
I am wearing my protective gear because someone close to me
has now contracted the virus, and so I am trying to be as protective
of others as I can possibly be.
Director Kraninger, I have a couple of questions, and I will try
to make them as clear as I can. I think everybody has already been
mentioning about how things are difficult economically.
And so, I am concerned about minority consumers, who are
frankly, hemorrhaging, right now and are at heightened risk of at-
tack by financial predators. There is a saying that a sign of blood
in the water is a sign that someone can be attacked, especially be-
cause they are already in a weakened state, and that is the case
right now.
Last Friday, July 24th, the CDC released a report, and the first
sentence read, ‘‘Longstanding systemic health and social inequities
have put many people from racial and ethnic minority groups at in-
creased risk of getting sick and dying from COVID-19.’’
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The report goes on to highlight discrimination as a primary fac-
tor and the heightened rate of death of minorities, and especially
noted housing and financial discrimination.
We know that the access to emergency relief to help communities
of color who are being disparately impacted is not being equitably
distributed.
A national online survey of 500 African Americans and Latinx
who owned small businesses conducted by the Global Strategy
Group released a report, and they said that after the second round
of funding for the program was allocated, they found that just 12
percent received the full assistance they requested, and two-thirds
reported that they had not received any.
If you go to the Center for Responsible Lending, 100 percent of
businesses owned by people of color were shut out of the Paycheck
Protection Program, and of the pending evictions, that 40 million
Americans may have been evicted.
So, I think the first issue is, it would be helpful for me to find
out your belief as it relates to systemic racial discrimination. Direc-
tor, do you believe that it exists in this country?
Ms. KRANINGER. Yes, Congressman, I know that it exists in this
country, but it is abhorrent, and it is certainly part of my duty to
root that out in the financial system.
Mr. CLEAVER. Yes, I agree with you, and thank you. Do you
think that consumers of color and women have been experiencing
this disparate impact during the crisis, or do you think they have
been harmed by discrimination?
Ms. KRANINGER. Certainly, the evidence that you stated does
show that they are not starting in precisely the same place.
And we have been doing everything we can to make sure that
they do. And I will say that CFPB, specifically, is supporting our
fellow agencies in trying to get the word out on economic impact
payment entitlement, and on forbearance options, to limited
English proficiency groups, and to African-American communities.
And even on the Paycheck Protection Program, again, I have had
significant outreach as well with communities of color to make sure
that they have the information they need, and then we can in-
crease access to these programs.
Mr. CLEAVER. I believe my time is running out. But maybe, you
understood that the enforcement and supervisor authority of the
Office of Fair Lending and Equal Opportunity, that that might be
an adequate response to the problems we are having. What say
you?
Ms. KRANINGER. I’m sorry, Congressman. I didn’t quite catch the
last question.
Mr. CLEAVER. Have you considered restoring the supervisory and
enforcement authorities of the office?
Ms. KRANINGER. I’m sorry, you are asking about the supervisory
enforcement activities we are doing in fair lending, is that—
Mr. CLEAVER. Yes, of the Office of Fair Lending and Equal Op-
portunity.
Ms. KRANINGER. The Supervision, Enforcement, and Fair Lend-
ing Division still engages very deeply in supervisory enforcement
matters across-the-board, including fair lending, and we can get
you some more information on that.
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Mr. CLEAVER. I think my time is up. Thank you.
Chairwoman WATERS. Thank you.
The gentleman from Florida, Mr. Posey, is recognized for 5 min-
utes.
Mr. POSEY. Thank you very much, Madam Chairwoman, for call-
ing this hearing, and I thank the ranking member as well.
For a number of years now, I have tried to get the CFPB to issue
advisory opinions. [inaudible] Pretty much [inaudible] Filing that
[inaudible] I am afraid to ask that [inaudible] Comply [inaudible]
Rules and regulations of the agency. [inaudible] What they are
asked to deal with [inaudible] Eliminate so many problems of the
plans with them. As we [inaudible] Emphasis should be on the re-
covery, the economic woes [inaudible] And our hard-working Ameri-
cans [inaudible].
Regulation should not be a burden to society, [inaudible] Recov-
ery before this vicious virus brought so much [inaudible] Imposed
for the nation’s economy [inaudible] Across this nation.
President Trump’s policies to reduce taxes and regulations, we
are finally bringing, coming back from the long stop national
luggishness that we suffered.
Getting government off the backs of our hard-working people
gave us the strongest economy in our history. There are important
lessons to learn, moving forward. My first question for you, Ms.
Kraninger, is, what your early experience [inaudible] advisory [in-
audible].
Ms. KRANINGER. I’m sorry, Congressman, you broke up a little on
the question. The experience with, what, specifically?
Mr. POSEY. The advisory opinion [inaudible].
Ms. KRANINGER. With the advisory opinion program we have
launched, what has come in, I am guessing, you would like to
know?
Mr. POSEY. Yes, ma’am.
Ms. KRANINGER. Okay. Thank you, sir. As you know, we are en-
gaged right now in the pilot, and we are in a Paperwork Reduction
Act process to get comments on the full program. We have not got-
ten anything in yet, specifically, but it has only been a few weeks
since we launched that. And we do anticipate it.
And as I told you, the biggest part about this is, it is making for-
mal and transparent interpretive rules that we have essentially
been giving to individuals as they have asked along the way. So,
it’s incredibly useful.
Mr. POSEY. Thank you.
Many of us believe that the rules and regulations must be ap-
plied with [inaudible] Overregulate credit in such a way that [in-
audible] Approach [inaudible] And puts a burden on families [in-
audible]. Please tell us about your strategy to carry out the stand-
ard [inaudible] Without unduly constraining our economic recovery
from this pandemic as we go forward.
Ms. KRANINGER. I’m sorry, Congressman, your sound is cutting
in and out, so it is hard to actually gather the question.
Mr. POSEY. I don’t know why. Maybe the lowest bid here is not
the best bid for communications. [inaudible]
Ms. KRANINGER. That I heard, of course.
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Mr. POSEY. What metrics and policies would give you [inaudible]
To ensure that we protect consumers but [inaudible].
Ms. KRANINGER. I have no idea. I’m sorry, sir.
Chairwoman WATERS. We are having technical difficulties, and I
can’t hear Mr. Posey either. So, we are going to come back to him.
And we are going to move on, so that he can finish the remainder
of his time.
With that, we will start the clock over. The gentleman from Mis-
souri, Mr. Clay, who is also the Chair of our Subcommittee on
Housing, Community Development, and Insurance, is recognized
for 5 minutes.
Mr. CLAY. Thank you, Madam Chairwoman, and let me thank
Director Kraninger for her testimony today.
Director Kraninger, the CARES Act includes important fore-
closure forbearance protections for homeowners struggling to pay
their mortgages.
Given these protections, it is very concerning that 55 percent of
COVID-19-related mortgage complaints identified struggling to pay
the mortgage as a primary issue, according to the most recent Bu-
reau report. Consumers reported that some mortgage servicers are
providing information that conflicts with guidance regarding lump
sum payments.
What are you doing to ensure that mortgage servicers are com-
plying with the CARES Act?
Ms. KRANINGER. Thank you, Congressman. That is obviously a
significant issue right now. The complaint that you are referencing
came in very significantly, particularly, in March and early April.
We actually looked carefully at those. And we took a bunch of ac-
tions with FHFA and with HUD, including producing scripts for
servicers to make sure they are clearly conveying their CARES Act
rights to consumers who contact them.
In addition, with respect to the complaints, we noted that a lot
of them came around what happened after the forbearance period.
So we worked together, and actually the CFPB issued an interim
final rule enabling servicers who offer consumers a beneficial out-
come, which is a lump sum payment at the end of the mortgage
term, rather than having a question over what loss mitigation op-
tions would be there.
And under the mortgage servicing rules, the fact of the matter
is that servicers would have to literally start a full application
process that was probably going to confuse consumers.
So we gave them this option, and acted very quickly with that,
in partnership with the other Federal regulators.
I can say we are working very closely on an ongoing basis to
monitor those complaints, to monitor what the servicers are con-
cerned about or hearing, and what consumer advocates are saying
in terms of concerns they are hearing, as well as housing coun-
selors.
And I will say, it seems as though those primary early issues
have been addressed, and we will keep monitoring as things dy-
namically change.
Mr. CLAY. Last month, the Bureau released a proposed rule that
would dramatically change the definition of ‘‘qualified mortgage’’
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(QM) and weaken consumer protection by replacing the debt-to-in-
come (DTI) threshold with a standard based on a loan’s pricing.
Many consumer and industry groups have expressed concerns
with such a QM definition that only relies on the price of the loan
and the broad, Dodd-Frank statutory product restriction, a defini-
tion that relies on pricing reflects investors’ assessment of risk, but
does not assess an individual borrower’s ability to repay. Can you
address that?
Ms. KRANINGER. Gladly, Congressman. I think that is a critically
important misunderstanding. The Dodd-Frank statutory require-
ments remain in effect. That includes consideration and verification
of debt and income and the ability to repay. That is still very much
a critical part of the process.
The question is, in addition to that, how would you determine
what is a qualified mortgage? As we looked at the hard, 43 percent
debt-to-income ratio requirement out there, many consumer organi-
zations and financial institutions have supported our approach, as
a pricing approach. It takes into account wider aspects about the
applicant and their creditworthiness, but it is not a replacement of
consideration and verification of debt and income. That is in the
statute, and that continues.
Mr. CLAY. I guess, as a final question, have you been able to pre-
vent foreclosures of any great number, or have you been able to err
on the side of the homeowner to keep people in their homes? Is
there any anecdotal or documentary evidence of that?
Ms. KRANINGER. Congressman, I certainly believe that Congress
took the right action, and I supported HUD and FHFA actually
prior to the CARES Act when they put in place a foreclosure and
eviction moratorium on the properties that they back. It is criti-
cally important during this uncertain time, and I know it is some-
thing that you are all looking at again now.
Mr. CLAY. Thank you so much.
And Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you. The gentleman from Missouri,
Mr. Luetkemeyer, is recognized for 5 minutes.
Mr. LUETKEMEYER. Thank you, Madam Chairwoman.
Thank you for being here today, Ms. Kraninger. I appreciate your
testimony.
As you heard in my opening statement, I am supportive of chang-
ing the CFPB structure and putting a commission in charge of the
CFPB. I was just curious as to your thoughts on whether the com-
mission, if structured correctly, would be able to complete the mis-
sion of the CFPB, and whether you thought it would stop it from
being a political football, which we had another example of yet
today in our opening statement?
Ms. KRANINGER. Congressman, I certainly would support things
that would take down the political temperature. I think you will re-
call that that is something I have talked about since my nomina-
tion, and that has certainly been my intent with the actions I have
taken.
But I do think there are some inherent issues that are stacked
against a single director in this dynamic.
In terms of the solutions to put into place, I respectfully defer to
Congress and what actions you all decide to take there, and I
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would look forward to helping the Agency transition to the extent
that such changes are enacted.
Mr. LUETKEMEYER. I think in response to Mrs. Wagner’s con-
cerns with regards to data and screen scraping and things like
that, you articulated some concerns and indicated you are watching
and looking at it and looking to try and do some things.
Could you articulate a few ideas that you have with regards to
how we can do certain things?
I was a part of a group today that discussed this very issue of
privacy, how do you protect, where do you draw the line, who owns
the data, and how much access should you allow? Can you give us
just some of your thoughts of directions you might be going on
some of this stuff?
Ms. KRANINGER. Yes. Certainly, we have been talking extensively
to all of the stakeholders who care about this, including the indus-
tries that are running the technical back-and-forth of the data.
Progress has been made at least to reduce screen scraping as the
primary method. There are now APIs that are agreed-upon be-
tween entities that allow you to actually have a transmission of
that data in a more secure way.
That doesn’t mean the consumer needs to hand over their bank-
ing credentials to accomplish that data-sharing, but I think in our
symposium discussion, we found a lot of questions around, what
truly is the consumer’s financial data? There are concerns by insti-
tutions, likely for competitive reasons, over what data might be
proprietary around pricing and otherwise.
At the same time, the consumer may very well think that data
is their own, because it is what they are paying, it is what they
are getting, it is the servicers that they have.
So, I think there are some legitimate questions around that, that
really do get to why we decided to do the advance notice of pro-
posed rulemaking step as our next step on this topic.
As I noted to the Congresswoman, this is going to be a com-
plicated area for rulemaking, and to the ranking member as well,
there is a broader conversation happening around data privacy and
data security that also complicates it. But we will endeavor to
again get feedback and think about the smartest way to proceed in
this issue.
Mr. LUETKEMEYER. Okay, very good. I want to talk a little bit
about the breadth of the ideas today about some of the pandemic
problems that we are having with regards to consumers being able
to pay back their debts and the concern with regards to reporting
on it.
One of the concerns I have is with regards to forbearance. To me,
I am concerned that if the regulators don’t give the banks and cred-
it unions and those lenders the ability to give forbearances, I am
concerned that we are going to wind up with an elongated recovery
here that is going to be very difficult to get out of.
And it will destroy local economies, destroy businesses, and take
away jobs, much as it did in 2008 and 2009, whenever the regu-
lators came in and basically got rid of lots and lots of the lines of
business.
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Although your area of oversight is a little bit more narrow, it still
is in the area where forbearance would be a big help to some of
the consumers. Would you like to comment on that just a little bit?
Ms. KRANINGER. Congressman, you are very correct, and that is
certainly something that many consumers would benefit from, and
have frankly benefitted from. The first action that we took with
prudential regulators was an FFIEC-issued statement about ac-
commodating consumers.
I do think that my fellow regulators have sent that clear mes-
sage. So if you are hearing otherwise, we would love to get some
specifics on that, so that we can make sure that is done.
I recognize it gets to safety and soundness issues potentially that
are outside of my—
Mr. LUETKEMEYER. I appreciate your comments, but my concern
is, I have been a former regulator, and I know that the regulators
themselves are hamstrung by the rules and regulations that they
have to operate under.
So when you go in, much as they did in 2008 and 2009, they
said, okay, well, my rules say I have to do this, so therefore, I have
to classify this loan, which means I classify the loan. Then, you
have to reserve more against it, you have to have more capital,
whatever the case my be. And at some point, you turn around and
force the banks to liquidate those loans.
We are in a position where if we allow the time that it takes to
get these loans back up, because of the uniqueness of the recession
that we are in, I think we can get back out of this with minimal
damage to a lot of our businesses and, therefore, our jobs and our
local economies. So, to me, I have a bill to fix this problem, and
I appreciate your comments. Thank you very much.
With that, I yield back, Madam Chairwoman.
Chairwoman WATERS. The gentleman from Illinois, Mr. Foster, is
recognized for 5 minutes.
Mr. FOSTER. Thank you, Madam Chairwoman, and Director
Kraninger. The Bureau’s proposed definition of a qualified mort-
gage would remove the 43 percent debt-to-income limit from the
QM loan definition and instead use a price-based approach that
creates a new limit on the spread between a loan’s annual percent-
age rate (APR) and the average prime offer rate (APOR).
Now, as someone who has lived through the financial crisis and
saw firsthand how much havoc was wreaked on the economy from
shoddy underwriting practices, this, to me, shows an amazing con-
fidence in the ability of a mortgage crisis to appropriately price
risk.
The proposed rule itself identifies several shortcomings with rely-
ing on pricing. It says, ‘‘The Bureau anticipates that a price-based
approach would incentivize some creditors to price some loans just
below the threshold in order to receive QM status. More broadly,
a lender’s pricing of a mortgage reflects many factors outside of a
borrower’s individual risk profile, including prepayment speeds,
balance sheet capacity, business goals, as well as broader economic
conditions.’’
I am very concerned with having a definition that could be so
easily manipulated. So, Director Kraninger, how will you ensure
that this rule does not just incentivize an irresponsible race to the
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bottom, reminiscent of what we saw in the lead-up to the 2008 fi-
nancial crisis?
And if the CFPB acknowledges that the APR can be manipulated
by lenders, ‘‘to meet the mark,’’ then how can this serve as an effec-
tive measure of a borrower’s ability to repay?
Ms. KRANINGER. Congressman, the nature of a rulemaking proc-
ess, of course, is that you put a proposal forward, and you acknowl-
edge all sides of the argument, so you are definitely doing that with
the quote in there. But I will say, just taking one step back, that
the requirements of the Dodd-Frank Act remain in effect. So, the
features that were so concerning during the financial crisis that are
precluded from being qualified mortgage and precluded from being
offered this way, are still statutorily-prohibited features.
In addition, the statute still requires debt and income to be con-
sidered and verified. So, that is part of the proposal as well as a
premise of the pricing approach. The pricing approach is then what
we get to. The 43 percent DTI cap, well, we frankly found in 2018,
a third of the loans that the GSEs backed had DTIs that were
higher than 43 percent, and many of these loans are performing,
and many of these loans are also to those in minority communities.
And so, again, thinking holistically about what a pricing ap-
proach benefit has, and that is that it really does take away—it
provides that opportunity above that DTI threshold that is so hard
and it will go into effect in January without additional action by
me, which is why we put the rule out, but we are trying to alter
that effect.
Mr. FOSTER. I am very worried about the word, ‘‘consider.’’ While
the CFPB’s proposal does eliminate the 43 percent DTI, it does, as
you say, require lenders to consider a borrower’s DTI as part of the
underwriting process. But it also emphasizes that lenders would be
given great latitude in how they considered a borrower’s DTI. And
I am concerned that, ‘‘consider,’’ is just so loose that people are
going to drive a truck through it, and we are going to see this all
over again.
Do you have any—
Ms. KRANINGER. Congressman, if I could, there are standards—
I know you probably have other questions, but there are standards
proposed in the rule for the debt and income consideration, and we
are open to industry and consumer groups coming together and
coming up with other standards.
So, there does have to be a standard, to be clear.
Mr. FOSTER. I think that having some clarity on exactly what,
‘‘consider,’’ means, would help a lot in this, and so that is—I am
close enough to being out of time, that I think I am just going to
yield back the balance of my time. I don’t really have time to get
the next question out.
Thank you, and I yield back.
Chairwoman WATERS. The gentleman from Michigan, Mr.
Huizenga, is recognized for 5 minutes.
Mr. HUIZENGA. Madam Chairwoman, at this point, I would prefer
if you could go to the next person and then come back to me, if that
is okay?
Chairwoman WATERS. The gentleman from Ohio, Mr. Stivers, is
recognized for 5 minutes.
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Mr. STIVERS. Thank you, Madam Chairwoman. And thank you,
Director, for being here today. I want to thank you for everything
you do on behalf of consumers. I am really sorry to see that the
nature of your agency has gotten so partisan. I am convinced that
is driven by the structure of your agency.
Recently, the Supreme Court, in a Supreme Court opinion, said
that your structure violates the constitutional separation of powers.
I am curious what action the agency is either taking or planning
to take, to ensure some certainty and stability, given the recent Su-
preme Court decision, certainty and stability in your actions, deci-
sions, and the things you do?
Ms. KRANINGER. Congressman, as I said, I welcomed the decision
and the action in this because bringing that stability and certainty
is certainly what I was hoping to do.
And we have looked at prior actions, litigation that is ongoing,
and prior rulemaking actions, and I did ratify those prior actions
again, just in an abundance of caution, to make sure that those can
continue to be relied on, because they have been relied on appro-
priately, and certainly going forward, I don’t know that it changes
a lot, but we are certainly looking at the opinions still and talking
to the Justice Department about anything else that that may im-
pact.
Mr. STIVERS. Thank you, Director.
Second, there has been a lot of talk today about your QM rule,
and you also temporarily extended the sunset on the GSE Patch
that is out there. The Bureau is proposing to extend that patch for
6 months after the publication in the Federal Register of the final
rule.
Do you believe 6 months is an adequate time for the mortgage
market participants to develop, test, and implement new stand-
ards, models, and business operations?
Is it possible that maybe 12 to 18 months might be a better tran-
sition, especially given everything that is going on with COVID-19
and the pandemic?
Ms. KRANINGER. It is a proposal in terms of the time length, and
we asked for comments on it. I think, again, based on experience,
the 6 months seems appropriate.
I will say the pricing threshold is not new. It is actually part of
the current safe harbor and rebuttable presumption of the qualified
mortgage. So it is not a new concept, and institutions are already
doing those calculations.
DTI—they are still considering debt and income as required
under statute, so it is not precisely a DTI ratio necessarily—
Mr. STIVERS. It is because of the change. It is a change.
Ms. KRANINGER. It is a change.
Mr. STIVERS. You take the DTI, safe harbor, add a percentage,
take it away. It is still considered. You look at costs more than you
are in today’s—and it is a little more—it is a change.
I want to ask you to think about how long that transition will
take for folks, that’s all.
Ms. KRANINGER. Absolutely.
Mr. STIVERS. The next issue I wanted to bring up is online secu-
rity. With the pandemic, more people are doing everything online.
And according to the FBI, in 2019, victims lost over $221 million
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to real estate scams and fraud, and that is based only on crimes
that were reported.
I have had individual constituents who had mortgage closings
where the entire proceeds of the closing have been wired to dif-
ferent accounts through fake emails and scams.
And I am curious what the agency is doing to build awareness
on this massive consumer problem, and what you are doing to help
potentially address real estate fraud and scams, and prevent them
in the future?
Ms. KRANINGER. The particular scheme that you mentioned is
one that we were aware of. I don’t recall precisely when. It has
been at least a year-and-a-half, I feel like, so that is something that
we, right away, worked with industry on. We actually, I believe,
produced a video on that frankly, that REALTORS were sending
out to their customers close to closing to make sure they are aware
of that, make sure they know precisely how they should be con-
tacted and where they should be sending closing money. So, that
is a significant issue.
It highlights the need in general to make folks aware of the
frauds that are out there and certainly to use our enforcement ac-
tions to go after fraudsters. I will say a lot of those things, like
those online frauds, are particularly hard because they are—
Mr. STIVERS. They use offshore accounts, they do lots of other
things. This happened to my constituent about 18 months ago, and
it is something I have become aware of, and I am trying to build
an awareness of, and I would ask you to continue to build aware-
ness.
We are talking about a quarter billion dollars of reported real es-
tate scams and fraud in 2019, and probably it is higher today, and
given that more things are moving online, I hope you will continue
to look after those consumers because they need protection, and we
are talking about in many cases, somebody’s biggest asset and the
entire proceeds scammed from them.
Ms. KRANINGER. You are absolutely right. I will say, the Depart-
ment of Justice, the Federal Trade Commission, all of us are pretty
engaged in this.
Mr. STIVERS. Thank you, I yield back.
Chairwoman WATERS. Thank you.
The gentleman from Connecticut, Mr. Himes, is now recognized
for 5 minutes.
Mr. HIMES. Thank you, Madam Chairwoman, And Director
Kraninger, thanks very much for being with us today.
I would like to follow up on the question that Ms. Velazquez was
talking to you about, which is the revised payday lending rule.
You commented to her that it was your opinion that the rule pro-
mulgated under Director Cordray resulted in a lower availability of
credit, and I think you implied that the new rule would, therefore,
make credit more available.
I understand that, and if I can just frame my question—and I
think you agree with this framing—financial regulation is hard be-
cause it is always a balance. And always, availability of credit is
on one side of the balance, and the safety of consumers, somehow
defined, is on the other side of that balance.
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So, I want you just to elaborate, please, for us—presumably you
did a lot of quantitative work, and we don’t have the time to get
into all of the quantitative work, but I am really interested, if you
could give us a minute or two on how the revision to the rule will
provide how much more credit out there at the cost of how many
more people who may find themselves in difficult financial
straights?
Whether that is defined as personal bankruptcy or finding them-
selves in a situation where debts spiral. I am interested in what
the quantification was of finding that revised balance point.
Ms. KRANINGER. And I appreciate you framing it as a balance
point, because I have often found in my public policy life that that
seems to be the spectrum we talk on. I certainly believe it is my
job to protect consumers while increasing availability of credit. And
I don’t think it is an either/or.
I think with respect to this, I would offer a few other things. The
rulemaking itself did have a substantial and dramatic impact on
small-dollar credit availability, as its own terms said. So, roughly
70 percent of branches would be closed or those locations would be
closed by the rules assessments. But there were other factors to the
effect of credit—
Mr. HIMES. I’m sorry, 70 percent of locations of what?
Ms. KRANINGER. Of the payday and title loan outlets, and so the
distance that people had in terms of availability.
But what I want to get to is also banks and credit unions and
others who were also due to other actions, but also influenced by
the rule, other guidance issued by regulators that reduced their in-
terest in engagement in this area. And so I think it is not an ei-
ther/or.
There are a couple of things that we are trying to do, and one
is, disclosure testing, to look at—for those individuals who may be
more vulnerable, is that something that will help? There are clear-
ly consumers who understand the product well. There are con-
sumers who pay within the term. The data that we produced in the
rule demonstrated that. There is a substantial portion.
And there is a substantial portion who also defaulted on the loan
very early in the term, very early in the process. That also dem-
onstrates understanding of the product. So, how do we support and
help that last group?
Mr. HIMES. Director, I’m sorry, I do want to get an answer to my
question. You partly answered it.
You said that your work indicated that 70 percent of payday loan
locations would be closed under the old rule. Thank you. That is
a very specific, checkable fact.
But before you go on to the other stuff you are doing, tell me
what the CFPB’s analysis showed in terms of the increase associ-
ated with bad outcomes, however defined, under the new rule? Or
is it your belief that there actually won’t be an increase in irre-
sponsible borrowing or negative effects as a result of the newly pro-
mulgated rule?
Ms. KRANINGER. I would say the way that was—it was the total
lending under payday loans that was in that original rulemaking,
and I think that is where you start to get to a challenge, because
parsing out what was lost, you don’t understand what choice that
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individual consumer was making—what outcome did they get that
might have made it worse to them, in terms of that loan, and what
was the alternative they had at the time?
And so that is something that, again, additional research could
probably bear out, but there is data in the rule that gets to the
point that you are making. I just don’t have it at my finger tips
here.
Mr. HIMES. I have one last question—I really would like to un-
derstand. I really do believe there is a balance here, and I really
would like to hear from you as to kind of what the implications are
if this form of credit is more available, how many more people get
themselves in trouble with it?
But in my very short remaining time, I am having a hard time—
this gets pretty technical, but basically, the revised rule eliminates
the necessity for a payday lender or other lender to come to a con-
clusion that there is a reasonable ability to pay on the part of the
borrower. And just for the people watching at home, why does that
make any sense at all? Why shouldn’t a lender undertake a very
basic process to determine that there is a reasonable ability to
repay?
Ms. KRANINGER. Madam Chairwoman, I know time is out, so I
can—
Chairwoman WATERS. The gentleman’s time has expired. Could
you please respond to the gentleman in writing?
Ms. KRANINGER. Yes, certainly.
Chairwoman WATERS. Thank you, Mr. Himes. She will respond
to you in writing.
The gentleman from Kentucky, Mr. Barr, is recognized for 5 min-
utes.
Mr. BARR. Thank you, Madam Chairwoman, and welcome back
to the committee, Director Kraninger.
Thanks also for your work to give consumers access to fair,
transparent, and competitive markets by focusing your work on
clarifying the rules of the road.
I do think giving consumers access to competitive markets and
clear rules of the road is, by definition, consumer protection, and
because of that good work, I certainly hope this is not your last
time in front of this committee.
Last July, in my capacity as the ranking member of the Over-
sight and Investigations Subcommittee, I wrote to the Inspector
General of the Federal Reserve asking for details about how the
Fed reviews the Bureau’s budget request prior to approval. This
week the Fed IG published its report. This is it. This is the re-
port—I think you have probably seen it—in response to my letter.
The report and the ensuing briefing with my staff confirmed
what I initially suspected, which is that it is more or less a rubber
stamp. The Fed only reviews whether the request is within the
statutorily-mandated cap. If the request is under the cap, the Fed
approves the request. There is no back-and-forth between the Bu-
reau and the Fed. There is no discussion of any line item. It is just
a version of a blank check.
And given the fact that Dodd-Frank gave the Bureau extraor-
dinary powers—rulemaking, enforcement, adjudicatory powers, in-
cluding the authority to conduct investigations, issue subpoenas,
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civil investigative demands, initiate administrative adjudications,
prosecute civil actions in Federal court, and issue binding decisions
in administrative proceedings—
And given the fact that the Bureau can seek restitution,
disgorgement, injunctive relief, and significant civil penalties for
violations of 19 Federal statutes under its purview, it is troubling
that the Bureau’s budget and funding process lacks any meaningful
external oversight.
Of course, the Supreme Court, as many of my colleagues have
noted here today, recently held that the Dodd-Frank law violated
the separation of powers, concluding that the Bureau’s structure,
limiting the President’s power to remove the Bureau’s single Direc-
tor, is unconstitutional.
In my view, this decision properly vindicates the President’s
power under Article II to supervise and, if necessary, remove those
who exercise the President’s authority on his behalf.
The Court’s decision holds that the Bureau must be accountable
to the President, but I would argue that the Bureau should also be
accountable to Congress. And the Supreme Court recognized this in
its opinion, noting that the lack of accountability is alarming.
And the majority opinion said this, ‘‘The CFPB’s receipt of funds
outside the appropriations process further aggravates the agency’s
threat to Presidential control.’’
So, there is clearly a lack of accountability at the Fed, and as you
know, I have been a frequent and vocal critic of this lack of trans-
parency and accountability in the Bureau’s spending. I have a bill,
the Taking Account of Bureaucrats’ Spending Act (TABS Act),
which would place the Bureau under the congressional appropria-
tions process.
Unfortunately, my colleagues in the Majority refuse to consider
this common-sense measure. But I want to ask you, Director
Kraninger, do you believe that subjecting the Bureau to the con-
gressional appropriations process would enhance accountability and
fix this lack of external check, and would it in any way diminish
your ability, or the Bureau’s ability, to protect consumers?
Ms. KRANINGER. Congressman, I certainly appreciate where you
are coming from in asking this. I respectfully defer to Congress on
determining how best to operate this. I do take seriously, of course,
the internal controls that I put in place in our budget process and
I believe I am accountable for the fund, but—
Mr. BARR. And the IG recognized that good work, by the way.
The IG recognizes that good work, and that is encouraging. I just
think that we shouldn’t leave it just to the agency and your leader-
ship. We, as representatives of the American people, owe it to the
taxpayers, I think, to also hold the Bureau accountable as well.
Let me ask one final question also about the QM rule and the
change to the loan definition, the QM loan definition. Can you de-
tail what impacts the rule might have on the portfolio lending mar-
ket and how might the changes proposed help struggling borrowers
especially during this time?
Ms. KRANINGER. Certainly, providing that certainty with respect
to the Patch replacement is part of what we think will be helpful
coming out of—hopefully, coming out of the pandemic.
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In addition, in terms of helping struggling borrowers, we did take
into account and ask about how this time period should be treated
in terms of that consideration and verification of debt and income
for borrowers who may have experienced a hardship. So, that is
also something that will be part of the ultimate rule, to address
that issue that you raised.
Mr. BARR. Thanks for your testimony and your work, and I yield
back.
Chairwoman WATERS. Thank you. The gentleman from Cali-
fornia, Mr. Vargas, is recognized for 5 minutes.
Mr. VARGAS. Thank you very much, Madam Chairwoman, and
thank you for holding this hearing. I appreciate it very much. I also
want to thank the Director for being here. Thank you very much,
Director.
You did say earlier that it would be nice to take the political
temperature down a bit. I don’t know if you witnessed when Direc-
tor Cordray was here, the yelling and screaming that would nor-
mally come from this side, including some of my good friends, who
now find it to be political. It sounds like the old Captain Renault
in, Casablanca, ‘‘Gambling, I am shocked.’’
The truth of the matter is that in cases like this, we do have dif-
ferent views, and I think that plays out. I thank God that we have
some people who have real tenacity, like our Chair, who made sure
that Dodd-Frank was in place.
One of the things that would be disastrous right now is if the
banks were failing. If we had all of what we have right now be-
cause of the pandemic, and if our banks were crumbling and failing
at the same time, we would be falling into a deep depression. So,
I thank God that we put these regulations in. I wasn’t here at the
time, but I am very thankful, and, of course, oftentimes that comes
because of the rub of politics.
I wasn’t going to state that, but I think I had to because of some
of the comments that were made earlier about politics. But I did
foreshadow what I was going to ask you about, and that is the
issue of these networks and how to prevent fraud and capture
fraud.
As you know, the agencies have shown an alarming increase in
financial crime and exploitation during this pandemic. The Finan-
cial Crimes Enforcement Network (FinCEN) has issued two
advisories since late May on the medical scams, imposter scams,
and money-mule schemes targeted at consumers.
The FBI has also recently stated in a hearing before the Senate
Judiciary Committee that the pandemic has also only served to in-
crease the number of stimulus, healthcare, bank, elder and govern-
ment fraud schemes.
The CFPB has ordered a solution to reduce the victimization of
elderly individuals. I am sure you would agree this solution could
also be used to prevent victimization of low-income minority groups
that tend to be vulnerable to these schemes as well.
Could you comment on that? Because I do think that these net-
works could be something that could become very helpful.
Ms. KRANINGER. With respect to the elder fraud prevention and
response networks, a really fantastic groundswell at the ground
level between financial institutions, social service providers, and
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law enforcement, sharing information about what they are seeing,
and absolutely I take your point.
I would say one of the things that we find, though, with respect
to older Americans, is the isolation that is further compounded by
the pandemic, which is why putting out additional resources at this
time on how to build and sustain those networks has been a par-
ticularly valuable undertaking.
There are a lot of different fraud schemes, certainly, that we are
keeping an eye on, but that is one population in particular that is
further isolated by the pandemic.
Mr. VARGAS. I agree, it is a very vulnerable population. You also
spoke, though, earlier, about having information in Spanish, too.
Obviously, language can be a real issue as well in these fraud
schemes.
In your opinion, have these networks been worthwhile? I know
the coordination and everything costs money to do, but have they
been effective?
Ms. KRANINGER. Yes. We actually have done a couple of reports
around that, and we are certainly encouraging financial institu-
tions to continue to do the Suspicious Activity Reports (SARs) to
FinCEN, and to their partners, making sure partners have access
to that information that is happening too, and so we are really rap-
idly increasing the—or I guess shortening the time, I should say,
for people to be made aware of the different schemes and then be
able to intervene.
Mr. VARGAS. And lastly, I guess I would ask about forbearance.
I know a couple of my colleagues and friends have asked about this
already. Under the CARES Act, forbearance is not supposed to be
held against you. In fact, I know that now over at the FHFA, the
Director there has stated—and I have language here from his note
of 5/19/20—that they are going to attempt to not have this be a
negative if you are going to refinance or buy another house, if you
are in forbearance because of the great interest rates at the mo-
ment.
But again, I would ask you to take a look at this, because this
is an extraordinary moment in our history, and a lot of people who
could normally pay their mortgage are in trouble because of the
pandemic, and hopefully we can get over this, and get back to nor-
mal.
But anyway, I would ask you, as my colleagues did, to follow up
on that. And again, I thank you for being here.
Thank you, Madam Chairwoman. I yield back.
Chairwoman WATERS. The gentleman from Michigan, Mr.
Huizenga is recognized for 5 minutes.
Mr. HUIZENGA. Thank you, Madam Chairwoman. I appreciate
that. And it is good to have you here today, Director, and I appre-
ciate your time.
I would remind my colleague and friend—and he is a friend—
from California, that there are a number of us who have been
amazingly consistent in our belief that the structure of the CFPB
needs to be a commission. And whether it was the Duffy legislation
in previous Congresses or the TABS Act, as my colleague, Mr.
Barr, was talking about, I do believe that this is the right way to
organize the CFPB.
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And Director, I guess I will ask a question along the lines of
what my colleague, Mr. Barr, was asking about—refinement. I un-
derstand you don’t want to get into the, ‘‘what should Congress do’’
question, but let me ask this: Do you believe that somehow the
ability to protect consumers would be diminished under a commis-
sion structure, and would consumer protections be lessened under
such a commission approach?
Ms. KRANINGER. Congressman, I will certainly say there are
other organizations that have commissions, and that is something
that I am sure could be looked at or compared. I will say at this
point, it is a similar answer to you—I know it’s not fully satis-
fying—that I will allow you all to make that call yourselves, and
I will certainly take any action that Congress directs us to take by
law.
Mr. HUIZENGA. I fully understand that. I guess that is one of our
jobs, is to ask those types of questions, to find out whether those
involved and engaged believe that there would be a diminished
ability for them to do their jobs. And the nature of my question is
really more along those lines, trying to make sure that based on
your professional experience and your opinion, whether you could
effectively do your job with a different structure.
Let’s say Congress decided to move away from the dictatorial
structure that they currently have and decided to make it that
every single decision you made would be subject to a vote of Con-
gress. I don’t think that would be a wise move. I would assume pro-
fessionally, you would maybe discourage that.
I am reminded that, in the previous Administration, Director
Cordray had no problem sharing his opinion on the idea of whether
or not there should be a commission structure.
So, I will give you one last shot at that, if you care to expand.
Do you think that you could make that type of structure work or—
Ms. KRANINGER. Congressman, how about I tackle it this way?
Certainly, if I see legislation that I think would be detrimental to
the agency in terms of a miss, and it is progressing, I will certainly
let you know my views. And I welcome the action on structure by
Congress, generally speaking, and I do believe that Congress would
come to a good conclusion on that.
Mr. HUIZENGA. Great, okay. That is helpful. And unlike the
Chair, I guess, I hope this isn’t your last appearance before this
committee.
Let’s move on to credit reporting and debt collection here—and
sorry, I don’t see the clock right in front of me, so I will try to move
quickly. We know, and I think there was [inaudible] In the CARES
Act about [inaudible]. But we know that that may be a temporary
fix, but what might [inaudible] Long-term [inaudible]. Could that
adversely affect consumers?
Ms. KRANINGER. Congressman, I think you were asking about
credit reporting, but you did cut in and out. So if there is a specific
question, I know we don’t have a lot of time left.
Mr. HUIZENGA. Okay. So, what type of negative effect might
there be on credit for consumers if there is not accurate credit re-
porting that is allowed at all?
I believe that there is a proper time and is a proper time under
the CARES Act to suspend that, but if this becomes a long-term
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solution, which I know some of my friends on the other side believe
ought to happen, that there should never be any sort of actual, ac-
curate credit report, and I am curious about the negative effects?
Ms. KRANINGER. Yes. Accuracy in the system is hugely impor-
tant. I would at least agree with that, and I know—
Chairwoman WATERS. The gentleman’s time has expired.
The gentleman from Florida, Mr. Lawson, is recognized for 5
minutes.
Mr. LAWSON. Thank you very much, Madam Chairwoman, and to
you, Madam Chairwoman and Ranking Member McHenry, I appre-
ciate you having this hearing. My question centers around student
lons, because I have so many students in my area. As you know,
the CARES Act provides student loan relief that includes sus-
pending payments, interest, and collection of the government-held,
Federal student loans from, I think March of 2019, through Sep-
tember 3, 2020.
I am especially concerned about how credit reporting bureaus are
not complying with the Federal coronavirus relief requirements
under the CARES Act. Some student loans servicers appear to be
reporting the student loans and the language in nonpayment status
to national credit bureaus.
On May 20th, students loan borrowers filed a class action lawsuit
against Great Lakes and the major credit bureaus for their erro-
neous credit reporting.
Director, what are you doing to ensure that credit reporting bu-
reaus and the lenders that furnish data are complying with the
CARES Act, and holding accountable the companies that do not?
Ms. KRANINGER. Congressman, thank you. It is an important
issue with respect to credit reporting agencies and the furnishers
that, of course, provide the data to the credit reporting agencies.
And so, we are actively engaged in ongoing oversight over FCRA
compliance, with respect to accuracy and dispute resolution, and
the CARES Act requirement is certainly an overlay of that.
One thing we are doing under the pandemic is a prioritized as-
sessment, which is a kind of special exam, going in and looking at
what is happening right now. So, we are going into furnishers, and
looking at their compliance overall, in all product areas. We did an
assessment of risk. We recognized that the student lending space,
given CARES Act requirements, was an area that should be looked
at, and so we are going in and looking at the furnishing side.
We are also talking to the credit reporting agencies about how
they are engaging on their side as well to make sure that there is
compliance happening.
With respect to, I think, Great Lakes, there were some mistakes
made that were caught very quickly, both through complaints to
the Bureau and things that consumer advocates and financial insti-
tutions noticed. And there was a very quick resolution, both in how
scoring happened and the data that was provided by the fur-
nishers. So, that was something that was addressed very quickly.
And I think it is a good example of how quickly we can act when
we see mistakes are made.
Mr. LAWSON. That is great. What is the status of that lawsuit at
this point? Or is it too early to make any comments on it?
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Ms. KRANINGER. I’m sorry, Congressman. Was there a question
there?
Mr. LAWSON. Yes. I was trying to see if you could elaborate on
the status of the lawsuit at this time, or is it too early to comment
on it?
Ms. KRANINGER. Oh, understood. The Bureau is not a party to
that lawsuit, so I am aware of it, but I do not know the status of
it.
Mr. LAWSON. Okay.
With that, Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you very much.
The gentleman from Colorado, Mr. Tipton, is recognized for 5
minutes.
Mr. TIPTON. Thank you, Madam Chairwoman. And Director
Kraninger, thanks for being here, and I hope you have an oppor-
tunity to do it 8 more times, if you so choose.
We recently had—and this is a little follow-up to Mr. Huizenga’s
questions—Secretary Mnuchin was here before the committee a few
weeks ago, and he had noted that the credit reporting agencies, in
order to be able to function properly, need to be able to maintain
a complete profile of the consumers’ credit history, especially dur-
ing this pandemic.
Some proposed legislation that we have would suspend negative
consumer credit reports during the COVID-19 pandemic and any
other future disaster for a period of 120 days, or until the emer-
gency ends. My view is, this would weaken, not increase, access to
credit, as lenders would lose confidence in the accuracy of the infor-
mation before them.
And I guess my question is, do you agree with Secretary
Mnuchin, that it is important to be able to maintain complete cred-
it profiles and not alter credit-related data during this pandemic?
Ms. KRANINGER. Let me answer it this way, Congressman, the
Fair Credit Reporting Act actually holds accuracy in the system as
a high priority, and the Bureau is tasked with compliance with
those FCRA requirements around accuracy in the system. It is
hugely important.
I appreciate why you are raising the question, because there is
a concern with respect to the system itself. If those lenders who are
seeking to do a creditworthiness assessment, can’t actually access
information, or trust the system to give them good information,
then there is a problem.
But we also have a situation where we are looking for alternate
data and other sources of information that is going to give a more
robust credit picture of a creditworthy borrower. And so, there are
a lot of discussions around what happens in the credit reporting
system. I clearly recognize that as well.
And certainly with respect to making sure that those minority
communities as well, that individuals actually have information in
the credit reporting system that will enable them to get credit if
they are creditworthy.
Mr. TIPTON. Great. Thank you.
As we previously discussed, responsible debt collection is an im-
portant part of maintaining access to credit for consumers, and en-
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suring good access to credit is more important now than ever, espe-
cially in rural places like the ones I represent.
But the technology has changed dramatically since the last time
the debt collection rules were updated, and the CFPB has proposed
common-sense reforms, allowing mandatory disclosures in the body
of an email, to ensure that consumers have access to important in-
formation in a timely manner.
But communication is a two-way street, and both collectors and
consumers should be able to communicate with one another elec-
tronically, especially during this pandemic.
My question is, would the Bureau consider allowing an exemp-
tion from the Electronic Signatures in Global and National Com-
merce Act (E-Sign Act) requirements for validation notices for com-
panies who are otherwise complying with the Fair Debt Collection
Practices Act (FDCPA) requirements and rules?
Ms. KRANINGER. Congressman, we have recognized some of the
challenges with the E-Sign Act requirements, pursuant to the pan-
demic and did provide some flexibility. I am not aware of a concern
or a conflict with FDCPA or other challenges with respect to that.
But I can tell you that our debt collection Notice of Proposed
Rulemaking does address electronic communications, in addition to,
obviously, continuing to preclude harassing communication, trying
to facilitate that two-way communication that you talked about is
important, setting some bright-line rules for it, and enabling indi-
viduals to communicate the way they want to communicate, wheth-
er that is receiving texts or receiving emails, rather than getting
phone calls, for example.
So those things are all addressed in the rule, and we are poring
through comments right now to think through the right approach
going forward.
Mr. TIPTON. Okay. Thank you. And Mr. Stivers brought up some
issues in regards to technology and fraud. Could you maybe expand
a little bit on the financial technology and how it has changed dur-
ing the pandemic, and how you are monitoring the regulatory envi-
ronment around the technology to make sure that consumers can
safely access the important tools?
Ms. KRANINGER. That is critically important. Clearly, we have a
number of processes that contemplated in-person interactions or
expect that, and we have done a lot to address it in terms of ap-
praisal processes and other processes in terms of, particularly,
mortgage loans and mortgage origination. So, it is something that
we are looking at.
The Bureau also is engaged in technology sprints, to think about,
again, how do we promote electronic disclosure? But the point that
you raise is a real one, and that Congressman Stivers did, that you
have to take into account fraud and other cybersecurity issues, pri-
vacy issues, with that data.
Mr. TIPTON. Thank you. I yield back.
Chairwoman WATERS. Thank you.
The gentleman from Texas, Mr. Gonzalez, is recognized for 5
minutes.
Mr. GONZALEZ OF TEXAS. Thank you.
And thank you, Director Kraninger, for being here before us.
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Our nation has a patchwork of mortgage protections in place,
and this fact is reflected on the Consumer Financial Protection Bu-
reau website, which highlights that we have one system in place
for at least the federally-backed mortgages. And up until now, we
have relied on the tendency of non-federally-backed loans to simply
follow along the path.
While many lenders have voluntarily given similar relief as the
federally-backed programs, consumers are not protected in this
lending space for COVID-induced foreclosures and financial prob-
lems.
First, how is the Consumer Financial Protection Bureau helping
consumers with non-federally-backed mortgages, and do you have
the tools and authority that you need to help these folks?
Ms. KRANINGER. Thank you, Congressman. There are obviously
distinctions there with respect to CARES Act treatment. One thing
that we did very early on in the pandemic was to provide clear di-
rection to all of the entities subject to our responsibility, our regu-
lated entities, that their first responsibility is accommodation of
customers during this time, consistent with safety and soundness
and compliance with consumer protection law.
So, that does send the strong signal to all those that are regu-
lated, including those entities that are servicing non-federally-
backed loans, about those requirements.
And I would say, generally speaking, the information that we
have is that the right steps are being taken there, but we also have
the backstop of our supervision and enforcement activities to en-
sure that that is the case and that they are complying with the
law.
Mr. GONZALEZ OF TEXAS. Okay. Changing the subject just for a
second to landlords, what can a landlord do who is not getting their
rent but has eviction problems, and foreclosure is looming? How
are they getting help, especially smaller landlords?
Ms. KRANINGER. I will say, Congressman, that the landlord-ten-
ant issues are a little bit outside of our purview.
We took on the responsibility, recognizing the need for one Fed-
eral Government website to provide that avenue for landlords, ten-
ants, borrowers, and everyone, to get information from one site.
So, we do have CFPB.gov/housing, but it is really HUD and a few
other dynamics there in the States that have the avenues for and
resources for folks to follow. But we were trying to be at least a
conduit, as one place to go for that information, so we are housing
that information.
Mr. GONZALEZ OF TEXAS. Yes. That is the concern, particularly
for smaller landlords.
Do you feel like the Home Mortgage Disclosure Act, which re-
quires many financial institutions to maintain, report, and publicly
disclose loan-level information about mortgages, is useful in detect-
ing discrimination in the marketplace?
Ms. KRANINGER. That is one of the purposes of the Home Mort-
gage Disclosure Act. Certainly, the collection of that information
does provide transparency to the marketplace and to the public and
is useful to agencies. We do use that information on a regular basis
to engage in fair lending analysis and to understand what is hap-
pening in the marketplace.
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Mr. GONZALEZ OF TEXAS. Are there improvements that you be-
lieve could be made?
Ms. KRANINGER. We are continuing to improve the way that we
make that data available. I have also looked to work with our part-
ner agencies around how we do the fair lending analysis.
Each agency does it slightly differently, and frankly, I would like
to better understand that. So, we have been trying to get the econo-
mists together from each of the agencies to see how they are doing
that analysis, frankly to help also institutions, because many of
them do the analysis themselves, to also ensure compliance with
the law.
I think there is a real opportunity to look at how we analyze that
data, thinking about it, sharing it, understanding what it means,
and understanding what we are looking for. So, that is a dialogue
that I have sought to further.
Mr. GONZALEZ OF TEXAS. Thank you, and we look forward to
working with you on that.
And I yield back.
Chairwoman WATERS. Thank you. The gentleman from Texas,
Mr. Williams, is recognized for 5 minutes.
Mr. WILLIAMS. Thank you, Madam Chairwoman, and thank you,
Director, for being here today. And before I begin my questions, I
just want to echo what we have heard quite a bit today about the
Supreme Court and their decision that said the current structure
of the CFPB is unconstitutional.
I think you have been a 100 percent improvement over the first
Director, but I still think it would benefit everyone if there was
greater oversight and less power concentrated in one individual.
Now, Director, the economic recovery from the coronavirus is
going to be driven by small businesses, Main Street America, open-
ing the doors and hiring back workers. These businesses are going
to need to adjust their storefronts and business models to make the
necessary changes to make this happen, and to satisfy State and
Federal safety guidelines.
The ability of a business to access capital will be critical during
this time. The CFPB is under a settlement agreement to adhere to
a predetermined timeline to issue a rule regarding small business
data collection in the course of Dodd-Frank Section 1071. As I have
mentioned to you before—you and I have talked about this—I have
serious concerns with the effect that this rule will have on the cost
of capital for small businesses.
So, could you please give us an update, a timeline, on the imple-
mentation of this rule, and tell us how you will ensure that these
actions will not inhibit small businesses and Main Street from get-
ting loans?
Ms. KRANINGER. Yes, Congressman, I absolutely understand your
concerns and frankly share some of them as well. I will say that
Section 1071, of course, is a mandatory rulemaking in the Dodd-
Frank Act. Even in my confirmation process, I pledged to make
that a priority because it is a required rulemaking.
So, we are engaged in that effort. We are issuing a Small Busi-
ness Regulatory Enforcement Fairness Act (SBREFA) outline by
September 15th. That is the small business regulatory relief proc-
ess where we sit down with a panel of affected small businesses,
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with the Small Business Administration (SBA), and with the Office
of Management and Budget (OMB), and go through that outline
and get comments.
It is a kind of early stage in the rulemaking process. So, we will
have a draft proposal out by September 15th, and this fall, we will
really engage in that process of discussion of that draft.
And then, the next step after that would be a Notice of Proposed
Rulemaking, but we have not come up with any firm timeline for
that.
Mr. WILLIAMS. Thank you. On June 18th, the Bureau announced
a Pilot Advisory Opinion Program that would allow businesses to
try new products and services without fearing that the CFPB
would come down with some enforcement actions for trying some-
thing new.
This is a welcome step towards providing more certainty to the
private sector, as they are often fearful that they will be targeted
by your agency.
So, Director, how have you been publicizing this pilot program to
industry participants, and can you give us an update on how many
people have submitted requests to be a part of this program?
Ms. KRANINGER. Congressman, I am sorry. Which pilot program?
Mr. WILLIAMS. It is called the Pilot Advisory Opinion Program.
Ms. KRANINGER. Oh, the advisory opinion—absolutely. I wanted
to make sure I had the right pilot program.
Mr. WILLIAMS. Sorry.
Ms. KRANINGER. That’s okay.
The Advisory Opinion Program is out for comment right now. So
it will go final. We are just—when we collect data from an entity,
we need to actually do the Paperwork Reduction Act.
So needless to say, we launched the pilot, but we expect it to be
fully going soon. It is an interpreted rule that we would be issuing.
We have not gotten any applications yet, but any entity that is
seeking an interpretation or additional information about how to
comply, because they have a particularly challenging issue.
What happened prior to this program is, they would send us an
email through our site, and we would send them back an answer.
Right now, though, I think that process should be transparent.
I think all of the entities that are equally situated should actu-
ally benefit from getting that information, and it should happen
formally from the agency and not just informally through trade
groups or otherwise when someone actually gets that useful piece
of paper.
So, that is what we are hoping for with the Advisory Opinion
Program.
Mr. WILLIAMS. Thank you.
I am in the credit business. And when this whole pandemic
began, I said I did not want to see a person’s credit score, like we
saw in 2008, ruined as a result of the pandemic and the mandated
government shutdown.
As you know, the CARES Act—and we have talked about this—
included provisions for lenders to work with their customers who
make changes to their credit accommodations, such as adjusting or
delaying certain payment agreements, while at the same time en-
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suring the integrity of the credit reporting system is kept intact,
which is very important.
Last week, TransUnion released a report that showed delin-
quencies decreased in June on a month-to-month basis, which
makes it seem that people are still managing their finances and
debt with responsibility throughout this pandemic and that the
CARES Act provisions have been working.
So quickly, Director, does this data point released by TransUnion
align with what your Bureau has seen?
Ms. KRANINGER. Yes, it does.
Mr. WILLIAMS. Thank you.
I yield back.
Chairwoman WATERS. Thank you.
The gentlewoman from Michigan, Ms. Tlaib, is recognized for 5
minutes.
Ms. TLAIB. Thank you, Madam Chairwoman. And thank you, Di-
rector Kraninger, for being here. I appreciate your time. I am actu-
ally in the people’s business. That is what I do, is help people. And
I know during this pandemic, your Bureau received quite a number
of complaints, I think 42,000, a little bit over 42,000 in April, and
a little over 44,000 complaints in May.
I want to talk to you a little bit about this. I know it is about
a 60-percent increase, Director. So I just want to know if my resi-
dent is calling and, of course, they qualify for a forbearance, they
are calling over to the mortgage company, and they call you all,
what is the process that they go through to get your help and your
advocacy to make sure that this mortgage servicer is complying?
Ms. KRANINGER. That complaint is processed immediately, and
sent to the relevant company, and we do a little bit of quality con-
trol on that in terms of making sure it is something that can be
responded to, but that is sent to the company. And I did get a little
bit of an update from a prior question about the average response
time. Our average response time of the consumer getting an an-
swer from the company is 9 days. So, that is what is generally hap-
pening in terms of the issue they are raising.
Ms. TLAIB. That is great in some cases. Do you know what the
resolutions are? Are they just contacting via email, or are they re-
solving the issue? Because what I am hearing from residents is
they qualify for forbearance, but the mortgage servicers are kind
of giving them the runaround.
Ms. KRANINGER. It is a response. We do quality control and the
responses back. We also, particularly with respect to mortgage
servicers and the CARES Act forbearance and the issues that are
happening right now, we are looking at all of those to see if there
is an issue with a particular servicer.
Ms. TLAIB. —Give me an example of one that you all resolved,
and it doesn’t have to be a mortgage. I know the next number-one
issue folks call about is credit cards, and then issues with their
consumer report or credit report.
Ms. KRANINGER. The one that has gotten a lot of attention, and
it certainly got my attention, was in late March and early April,
we did get a significant number of complaints submitted about pay-
ment of mortgage payments, and around the forbearance option
that was given to servicers, and when they would have to pay. Be-
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cause the initial information from servicers was, we put you in 90-
day forbearance, and you are going to have to pay that full 90-day
deferral after the 90 days, because that is the way the process
tends to work in normal times. So, that concern came through loud
and clear. And people said, ‘‘If I can’t pay now, I am sure not going
to be able to pay in 90 days.’’
That is something that we took very seriously. I talked to FHFA,
in particular, but HUD, all of us came together as Federal partners
and said, that really doesn’t make sense. That resulted in some
guidance from them, but also an interim final rule adjusting our
mortgage servicing rules to make clear that the option that can be
offered is deferred to the end of the mortgage period.
So, that is to the end of the loan, a lump sum payment at the
end. And that was, I think, a demonstration of how this can work
and how it should work.
Ms. TLAIB. And, Director, in that case, that service, it was just
that mortgage servicer, it wasn’t any other companies, they just
tried to find—so we have to actually school them and get the actual
accurate guidance that that is not how they have to do it? What
happens to them when they do that? What do you do? Smack them
on the hand? What exactly happens? My worry is, what else are
they doing that, if they can get away with it, or maybe we don’t
find out about it, some people don’t even know to call you, your Bu-
reau. I am just curious what happens in that case, do they get
fined or something?
Ms. KRANINGER. Absolutely. If they are not complying with the
law, they can have to pay restitution. And there are other out-
comes.
Also, the example I gave you is a good example of where they
were doing what they should do, but it was not the outcome that
any of us would want.
Ms. TLAIB. Yes.
Ms. KRANINGER. I think there are a lot of examples across-the-
board. But making sure we address servicers who are not taking
compliant action with the law is important, too.
Ms. TLAIB. And my last question is, do you work with other de-
partments? One of the things I have noticed is if there is a huge—
do you all ask or see a pattern of complaints maybe from commu-
nities of color? And do you work with the civil rights division with-
in the Department of Justice if you see a pattern of discrimination
based on someone’s ethnic background, faith, or things like that?
But, primarily, I would say, there is a huge impact on the African-
American community and people of color, and I am wondering what
your Bureau is doing to work with other agencies to push back on
that?
Ms. KRANINGER. Definitely, if we see a pattern or practice there,
we have our own authority, obviously, to act under ECOA, but we
also do make referrals to DOJ and work with them closely.
Ms. TLAIB. Thank you, Madam Chairwoman.
Chairwoman WATERS. Thank you. The gentleman from Arkan-
sas, Mr. Hill, is recognized for 5 minutes.
Mr. HILL. Thank you, Madam Chairwoman. I appreciate the op-
portunity to have this hearing.
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Director Kraninger, I want to commend you for leading the Agen-
cy during this very difficult time of COVID-19. Given the current
economy, many of us in Arkansas, many of our families have been
really navigating a tough financial space. I want to thank you and
the Agency for doing a number of good updates and adding helpful
information to your website. We have been using these newsletters
you send out several times a week on the COVID-19 crisis, and the
materials have been very beneficial to consumers. So, please thank
your team for the extra efforts to communicate.
I want to touch, Director, on the topic that Dr. Foster spent quite
a bit of time on, which is your revisions for the qualified mortgage
rule. You walked through, I think, the background quite clearly,
and a lot of us are concerned about, will this rule approach that
you are taking, that you put out for comment, lead us down a road
towards weaker credit underwriting by the banks or by the Federal
entities that insure or purchase those loans?
You did a good job answering these questions, so I won’t belabor
that point, but the DTI is just one of many considerations to be
taken in underwriting. But since that is true, what is your philos-
ophy—all bankers take into account a variety of compensating fac-
tors when underwriting a loan. Why is what you viewed that it is
necessary to replace the DTI definition with something that ap-
pears pretty open-ended?
Ms. KRANINGER. I think, Congressman, and I appreciate your in-
terest in this important marketplace, clearly, for mortgages for
many Americans, the point that you just made is precisely why we
are moving from DTI solely to a pricing approach, because it really
does bring in the more holistic considerations of the borrower’s
creditworthiness. And, certainly, you would expect and want re-
sponsible lenders to be pricing in the risk that they see, and that
is a different approach than a hard debt-to-income ratio that,
frankly, at 43 percent, but, frankly, as we looked at, what would
be an acceptable DTI threshold if you were going to stay at that?
And we, in fact, asked that question in the rulemaking.
But clearly, at 43 percent, we know we are keeping a lot of cred-
itworthy borrowers and, particularly, borrowers of color out of the
qualified mortgage market.
Mr. HILL. Thank you for that. Do you have any concern that
granting a safe harbor to underwriting standards of third-party
guidelines could be too open-ended? Are you concerned about that?
Ms. KRANINGER. No, it isn’t just third party—arbitrarily, it is
third-party guidelines that we would have to actually recognize. So,
there is that check in the process.
Mr. HILL. And you would approve those guidelines?
Ms. KRANINGER. Yes.
Mr. HILL. Okay.
Ms. KRANINGER. That is what is proposed.
Mr. HILL. Let me switch subjects and talk about the difference
between the 150-basis points pricing range that you considered,
and, yet, for the safe harbor, you think it should be 200 points for
the QM. Don’t you think that spread could do two things: One, cre-
ate a potential for misunderstanding in lawsuits, and that it would
actually deter private sector players from making the loan, and
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could they even be shifted more to a government-type loan, such
as an FHA loan? Are you concerned about that spread?
Ms. KRANINGER. Ccertainly, it is a proposal, Congressman, so we
absolutely won’t comment on that to the extent that anyone in the
public has data that would demonstrate a greater risk. We outlined
why we chose that threshold, and that it is not too different from
the thresholds that are already recognized in the current QM. Be-
cause there is a pricing threshold differential between the safe har-
bor and the rebuttal presumption now. So, the APR APOR spread
is something that is in the current system. But, again, we looked
closely at performance over the last many years. That data is in
the rule, and we welcome comments on alternate concepts or risks
that might be introduced here.
Mr. HILL. Thank you, Madam Chairwoman. I yield back.
Chairwoman WATERS. Thank you. The gentlewoman from Iowa,
Mrs. Axne, is recognized for 5 minutes.
Mrs. AXNE. Thank you, Madam Chairwoman. And thank you, Di-
rector Kraninger, for being here. I would love to start with some
positive news by thanking you and your staff for taking some time
to give us some feedback on a bill I introduced a couple of months
ago to create a working group with the CFPB and the SEC to help
protect consumers and investors from fraud. So, thank you for that.
I do hope we can move forward to get your two agencies working
together to prevent Americans from being taken advantage of.
And I also appreciate the website you set up with information on
the prepaid debit cards that a lot Americans received. I wish that
had been communicated earlier, and then my colleagues and I may
not have had to push the Treasury to make those improvements.
But thank you for those two pieces.
I want to go back to the last time you were here. You had just
signed an information-sharing agreement with the Department of
Education on student loan servicers, marking the first time in more
than 2 years that that information was properly being shared. But
2 years is far too long to go without full compliance information
that we need to understand how the $1.6 trillion of student loan
debt is being handled. I am glad that part is resolved, but it should
have been done much sooner. However, not only did the agreement
not restore the supervisory memorandum of understanding (MOU),
the last time you were here, you couldn’t even tell me when that
would be done.
In September, just a month from now, we will be at 3 years with-
out the Consumer Financial Protection Bureau properly super-
vising student loan servicers for the 40 million Americans with
these loans.
So, I am going to ask you again: When are regular exams of stu-
dent loan servicers going to resume?
Ms. KRANINGER. Congresswoman, I am happy to be able to tell
you that they have already resumed. We started in that—that was
the lag time, frankly, between the February House hearing and the
March Senate hearing. I managed to get that done in February, so
that the supervisory exams commenced, and there are no barriers
to us doing the supervision work that we need to do in the student
loan space. We are working very closely with the Department of
Education so they can continue to do their contractual oversight,
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but we are pursuing our own information requests, we are getting
that information, and we are engaging in those exams.
Mrs. AXNE. Perfect. From what I have heard, though, I believe
that there has been one exam done, and that was in March. Is that
correct?
Ms. KRANINGER. Congresswoman, we do not stipulate what
exams are happening and in what product areas. I made the excep-
tion by at least trying to show Congress, recognizing the great in-
terest in this—
Mrs. AXNE. I appreciate that, but have you done any exams since
that March exam?
Ms. KRANINGER. There are no barriers in our way. We are doing
all of the exams that we would like to do. That is what I can say
at this point in time. And I know that is not satisfactory to you,
but we don’t talk about the number of exams that we do in any
given industry.
Mrs. AXNE. I am going to take that as a no, because if you can’t
tell me that you have more than one exam, and you won’t answer
the question, I am assuming that is a no. I would like the question
answered, when will regular exams resume?
Ms. KRANINGER. Congresswoman, I don’t want to parse words
with you, but it is definitely not a no. We are engaged in every
exam that we need to be in the student loan space.
Mrs. AXNE. How many exams have you had?
Ms. KRANINGER. Again, that is not a publicly disclosed number.
It is not in any area except our total number of exams conducted.
We don’t issue exam numbers publicly in each industry.
Mrs. AXNE. So, you don’t issue it for each industry? How then are
we supposed to get the information that we need?
Ms. KRANINGER. And we never have. So again, I am—
Mrs. AXNE. That is certainly a problem that we are going to have
to figure out, because how are we going to make sure that there
is oversight of these 40 million loans that people in this country
need to have oversight of, if we can’t get that information, and you
are not willing to tell me how many you have done within this in-
dustry? That was the specific question.
Ms. KRANINGER. I understand. It is not a publicly available num-
ber. It is something that I—I think is appropriate given the con-
fidential nature of supervision. It’s the same with the number of
investigations that we have ongoing in any industry; we don’t actu-
ally disclose that publicly, given the confidential nature. Certainly,
when it is public, we do have a number of ways to do that, and
I am absolutely looking at this. But I am trying to tell you that it
is not any obfuscation, this is important, and we are engaged in
every exam that we need to be.
Mrs. AXNE. Listen, from what I have been told, there has been
one examination. And I believe there should be around—there are
about 12 servicers, 10 to 12 that would need an examination. So,
I think we are failing the people in this country right now. I yield
back.
Ms. KRANINGER. You were told there was one exam, because I
am the one who actually publicly released that there has been at
least one exam.
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Mrs. AXNE. We just went all through that, and now you just said
that there has been one exam. I yield back.
Chairwoman WATERS. We will explore that a little bit further,
Mrs. Axne.
The gentleman from Minnesota, Mr. Emmer, is now recognized
for 5 minutes.
Mr. EMMER. Thank you, Madam Chairwoman. I appreciate the
opportunity. Thank you, Director Kraninger, for being here today
and for the great work you are doing. Unfortunately, under the
Obama Administration, Democrats created an agency which is com-
pletely unaccountable to the American people. Outcomes and over-
sight of the agency were, by no means, transparent. We have also,
unfortunately, faced unnecessarily partisan attempts to reform the
structure of the Bureau by putting it on a budget and creating a
bipartisan forum.
On a brief personal note, Director Kraninger, I want to sincerely
applaud you for being open and accessible to every Member. My
staff and others constantly praise your efforts to be responsive to
our requests for input and feedback. I know this willingness to
meet and discuss policy occurs across the aisle as well, so I just
wanted to take a moment to thank you for your service.
I also appreciate Paul Watkins, and the work you are doing to
advance inclusion through Fintech innovations. This is one of our
top priorities at the committee, and the FinTech Task Force. He
didn’t receive the most welcoming comments from the Majority
when he came before us. But advancing Fintech innovation to help
those in need should be a nonpartisan issue.
Now more than ever, families need to have access to options to
cover unexpected costs. For many, short-term lending can be a life-
line in difficult times. Abuse cannot occur, but this must remain an
option. Your work to ensure that borrowers have access to loans
will increase competition and choice in the marketplace at a time
when it is so desperately needed.
Turning for a moment to ongoing litigation started by the past
Administration, Director Kraninger, I noticed that in your budget
request, there is no mention of the funds the Bureau expends to
continually pursue Cordray-era litigation. Can you please speak to
the cost of that ongoing litigation?
Ms. KRANINGER. Certainly, the Bureau continues to engage in
litigation, both before and under my term, and also litigation that
Director Mulvaney approved at the time that he was Director.
There is a cost, obviously, as you noted, and we do include in the
budget lines for expert witnesses and document production, and
things like that. But I don’t think, Congressman, I can give you a
specific delineation for which Director signed off on which enforce-
ment action, and what the litigation costs have been. But, cer-
tainly, there are some complex litigation cases that we are still in-
volved in that are costly, but I deem them necessary to continue,
Mr. EMMER. I would move to follow up with you outside of the
hearing on that.
Listen, I share the concerns of my colleague, French Hill, and I
also share the praise that Mr. Hill was giving you for your work
to update the qualified mortgage rules. But I do share his concerns
that he raised with you, and I am not going to go over those again.
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I appreciate you being aware of them, and appreciating the con-
cerns.
And now that we have a definitive answer that CFPB’s leader-
ship structure does violate the separation of powers, I am curious
about your plans regarding transparency and accountability. Given
these developments, and under your leadership, where do you plan
to take the CFPB?
Ms. KRANINGER. Congressman, certainly since I was named and
testified before you all for the first time, that has been something
that is significantly important to me, given my public service ca-
reer. We are endeavoring to engage in that transparent dialogue in
every aspect of what we do. I would say the Advisory Opinion Pro-
gram that was recently launched is a great example of that. Again,
we are providing guidance or essentially, interpretations to one en-
tity that asks. But through that advisory opinion process, we are
making that public, and we are providing that interpretive rule to
everyone, so that they can see what the rules of the road actually
are, and it is not just benefiting one entity, or who that entity de-
cides to share that with.
So that is one example. And certainly, our rulemaking efforts as
well, and I am trying to ensure that we are fully transparent there.
Mr. EMMER. My colleague, Andy Barr, was asking about congres-
sional oversight of the budget. And I know you didn’t want to step
into Congress’ role. But could you answer the question: Would con-
gressional oversight of your budget inhibit your ability to do the job
as Director?
Ms. KRANINGER. Congressman, I have endeavored not to get into
that. But I will certainly acknowledge that I was a long-time appro-
priations staffer on both sides of the Hill.
Mr. EMMER. I am sure we will talk more. Thank you for your
time, Director. Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you. We have now reached the end
of Group 1. The committee will stand in recess for 5 minutes while
the room is cleaned.
[recess]
Chairwoman WATERS. The committee will come to order. The
gentlewoman from California, Ms. Porter, is recognized for 5 min-
utes.
Ms. PORTER. Director Kraninger, would your proposal to imple-
ment the Fair Debt Collection Practices Act prohibit repeated calls
from debt collectors?
Ms. KRANINGER. Congresswoman, it is a proposal, and it did, in
fact, propose a limit on the number of calls that can be received
in a week.
Ms. PORTER. Great. Good work. Would it prohibit some debt col-
lectors from making calls harassing families and friends?
Ms. KRANINGER. Yes, harassment is already precluded by the
law.
Ms. PORTER. So we can agree that harassing practices by debt
collectors are something that you can probably pretty comfortably
say falls within the jurisdiction of the Consumer Financial Protec-
tion Bureau?
Ms. KRANINGER. Yes.
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Ms. PORTER. Great. In the last 4 years, has the Bureau taken
any enforcement actions to punish medical debt collectors that
break the law and harass consumers?
Ms. KRANINGER. We have taken public enforcement actions
against debt collectors. I am not sure about what kind of debt, off
the top of my head.
Ms. PORTER. I am specifically asking about medical debt collec-
tors. Have you taken any enforcement actions against medical debt
collectors that would—
Ms. KRANINGER. I understand the question, Congresswoman. I do
not have an answer for you off the top of my head. Many of the
debt collectors actually collect on behalf of multiple clients, so it is
very possible.
Ms. PORTER. Okay. Let me answer that for you, the CFPB has
taken zero actions against medical debt collectors. So, if you are
just tuning into this hearing, here is what you have missed. Noth-
ing. You have missed nothing, because that is what the CFPB has
been doing to protect you against predatory medical debt collection,
even in the midst of a terrible pandemic.
The CFPB, Ms. Kraninger, was created to protect consumers,
that is its mission, that and nothing else. Would you consider it
pro-consumer to not enforce the law to prevent consumers from
being illegally abused by debt collectors?
Ms. KRANINGER. There were a lot of caveats to that statement,
Congresswoman. Let me just tell you that we are committed to en-
forcing the law. I am committed to enforcing the law. And we have
taken action against a number of practices in the debt collection
space, including through our supervisory effort. So, it is not just
the public enforcement action that you are citing, certainly,
through supervision, we have issued supervisory highlights that ar-
ticulate what we have done in the debt collection space, we provide
information to consumers about their expectations from debt collec-
tors.
Ms. PORTER. But, Ms. Kraninger, just to be clear, if I am a med-
ical debt collector, I can break the law under your CFPB, and know
that there is a zero percent—if the past predicts the future, and we
are looking back at the past 4 years, there is a zero percent chance
that I will get sued. How is that robustly enforcing the consumer
mission of the agency? You are not—
Ms. KRANINGER. Congresswoman, I respectfully disagree with
you. There is certainly no guarantee that that is the case. And I
would endeavor to have you give us information on any debt collec-
tors that you are concerned about their practices. We absolutely
will follow up on them. It is a career decision to open an investiga-
tion for CFPB, and I welcome any information that you have on
bad practices.
Ms. PORTER. Ms. Kraninger, in your own database, in the CFPB’s
own database, there are thousands of complaints about medical
debt collectors. Each time you come before this committee, I appre-
ciate that you welcome me to do your job for you, but my job is to
make sure you are doing it. I wanted to ask you about something
else. Are you familiar with Mike Hodges, H-o-d-g-e-s?
Ms. KRANINGER. No, I do not believe I am.
Ms. PORTER. You aren’t?
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Ms. KRANINGER. I don’t believe so, no.
Ms. PORTER. He is the CEO of Advanced Financial, one of the
country’s largest retail lenders. Do you know how much he has do-
nated to the Trump campaign?
Ms. KRANINGER. I have no idea, nor do I care.
Ms. PORTER. So, you don’t know anything about him. Let me
read you this quote. ‘‘I have gone to the RNC and said, ‘Ronna, I
need your help on something.’ She has been able to call over to the
White House and say, ‘Hey, we have one of our large givers. They
need an audience.’ The White House has been helpful on this par-
ticular rule we are working on right now.’’ That was Mike Hodges
in October 2019. Do you know what rule he was talking about?
Chairwoman WATERS. The gentlelady’s time has expired.
The gentleman from Ohio, Mr. Davidson, is recognized for 5 min-
utes.
Mr. DAVIDSON. Thank you, Madam Chairwoman. Director
Kraninger, I thank you and your team for all of the work you are
doing to protect America’s consumers. I appreciate having you on
the job. And I want to say a special thanks to Paul Watkins and
the attention he has given not just to Fintech, but to privacy.
In your proposed rulemaking on privacy—I guess I am looking at
the scope of privacy. You think about the key things for consumer
protections, their data and the use of it has really defined at lot
of this age, whether it is data breaches or the way that any num-
ber of companies have monetized the access to data that consumers
have.
So, what is the scope that you are looking at and how do you use
that to protect consumers?
Ms. KRANINGER. Absolutely, Congressman. I believe you are ref-
erencing the Section 1033 policy discussion that we are having now
about consumer-authorized access to their own financial data. It is
a complex issue. Certainly, the Bureau issued principles, and pri-
vacy and data security are part of that consideration for how best
to enable that data access to consumers.
We had a symposium a few months ago. We just issued the re-
port out from that symposium and announced we would engage in
an advance notice of proposed rulemaking.
It is a complex area. There are a lot of issues to consider that
we are looking forward to getting more data on. But I would say
that there has been progress made in moving away from screen
scraping as the means by which many aggregators would get con-
sumers’ financial data using their bank credentials and having that
be provided by the consumer.
That is something that is not a best practice certainly. And so
moving in the direction of APIs so that there is an automated data
transfer that can happen, and that there is more control on both
sides. But that is something that we are really looking to having
more extensive dialogue around, and that is what we announced
last week.
Mr. DAVIDSON. When you think about the consumer protections
with respect to data, the work you are doing there is critically im-
portant, in large measure because Congress has failed to act. We
don’t have a comprehensive data protection law for all consumer
activities in the United States. We have a somewhat outdated
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Gramm-Leach-Bliley Act that I think you proposed to update. But
there are lots of data houses that make use of this, that aren’t cov-
ered by Gramm-Leach-Bliley. So do you feel like you have the au-
thority or scope to do everything that you would need to do to pro-
tect consumer data?
Ms. KRANINGER. Congressman, you are raising an interesting
issue here with respect to not just 1033, but more globally. We do
have, I think, a number of issues around privacy and data security
with standards in California and Europe and what happens in the
United States. And there are many parts of this that are outside
the CFPB’s purview. Specifically, the safeguards in the Gramm-
Leach-Bliley Act are outside the authority of the CFPB, generally.
That is just to make you aware, but I am actually looking at pri-
vacy and data security broadly, and may have some requests of
Congress or some suggestions around that. So, I am looking at that
internally, particularly when it comes to credit reporting, because
that is where we have at least a little more of an engagement and
a responsibility there, particularly when it comes to our super-
visory work.
But I will certainly get back to you on that and others; I know
it is of great interest. But with Section 1033, we do have the ability
to take this into account, as we think about how best to move for-
ward in that.
Mr. DAVIDSON. Thank you very much for your attention to it.
There is really no excuse for Congress’ failure to provide the safe-
guard for all of America’s consumers. And I hope that I can collabo-
rate broadly for a good bipartisan solution on privacy, not just with
respect to government, warrantless surveillance and things like
that, but consumer financial data. Our seniors are especially vul-
nerable, and I appreciate the work you are doing to safeguard our
seniors.
And I think the last thing I would say is, as you have conversa-
tions with the members of FSOC, with the Treasury and every-
thing else, most of America has their assets in U.S. dollars. It is
the store of value, it is the means of exchange. And this idea that
we can, in an unlimited way, just continue to print money and not
damage the value of all of the other dollars is foolish. We have
printed an awful lot of money. We haven’t truly borrowed it, be-
cause there is not a real lender.
And I just urge you to weigh in where you can on the importance
of protecting the U.S. dollar, store value, and means of exchange.
And for that purpose, my colleagues and I recently formed the
Sound Money Caucus. Thanks again for what you do to protect
America’s consumers, and I yield back.
Chairwoman WATERS. The gentleman from Illinois, Mr. Casten,
is recognized for 5 minutes.
Mr. CASTEN. Thank you, Madam Chairwoman. I think I probably
speak for all of us on this committee, saying that when I woke up
this morning, I was going through the news headlines, and I was
completely gobsmacked, for lack of a better word, to see that the
GDP has collapsed by almost 33 percent in the last quarter. That
is well outside the range of challenges that I anticipated that I was
going to be grappling with when I was asked to serve on this com-
mittee. I suspect, Director Kraninger, it is probably outside the
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48
scope of yours, as well. The old Monty Python sketch says nobody
plans for the Spanish Inquisition, right?
I think all of us knew it was going to be difficult. We did have
leading indicators. Your own Bureau, in the case of leading indica-
tors, is unfortunately the case. When the economy gets tight, un-
scrupulous actors emerge.
And as Congresswoman Tlaib was calling out, I think you saw
an all-time record for consumer complaints at the Department in
March, which was then topped in April. And a new record was set
in May, and a new record was set in June.
During the Q2, you are basically running about 50 percent above
historic complaints at the CFPB. In spite of that, you have had 13
public enforcement actions this calendar year, which basically puts
you on track to finish about at the level of 24 that you did last
year, which, as The Wall Street Journal had reported, is down 80
percent from the 2015 peak.
My question for you is, why has the CFPB decided against taking
enforcement actions, despite the rising complaints that Americans
are feeling during this economic downturn?
Ms. KRANINGER. Congressman, we are taking robust actions
using all of our tools, and, certainly, that includes enforcement. So,
I would ask you to reserve judgment until we actually get to the
end of the year and see where we end up. I will not manufacture
enforcement cases, but I will take the right action against bad ac-
tors. And we do have a number of actions in the pipeline that I
have authorized that I expect to see move forward. So, I will at
least note that.
Mr. CASTEN. I want to just—hang on. Because you said to Con-
gresswoman Tlaib that you are averaging 9 days between when the
complaint comes in and you respond. I just gave you data going
back to March that is 50 percent up. You are saying you have gone
through, and you have gotten back to people in 9 days, but you
haven’t decided what to do with that yet?
Ms. KRANINGER. Congressman, complaints are different from en-
forcement actions. The complaints do get resolved in 9 days—
Mr. CASTEN. I understand.
Ms. KRANINGER. —on their initial response.
Mr. CASTEN. Okay. On April 1st, your Bureau issued a statement
which said, in part, ‘‘The Bureau specifically states that it does not
intend to cite an examination or bring an enforcement action
against firms who exceed the deadlines to investigate such dis-
putes, as long as they make good-faith efforts to do so as quickly
as possible.’’
It sounds like you are saying you are not taking enforcement ac-
tions, and the data would be consistent with that. What motivated
you to issue that guidance?
Ms. KRANINGER. You are, specifically, talking about credit report-
ing dispute resolution. And the dispute cannot be resolved if the
small business merchant, for example, is actually shuttered and
cannot respond to the credit reporting agency. So, that is what the
good faith effort is about.
Absolutely, the mandates to respond remain in place, and they
need to be met. But there are extenuating circumstances, like the
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49
closure of a small business, for example, that is a merchant that
is the subject of the dispute.
Mr. CASTEN. I am pretty sure your job is to protect consumers.
What are you telling consumers who are sitting there saying, I
need a response, you got a 50 percent surge in consumers, and
what are you doing, you are calling them back and saying, I’m
sorry, I just can’t address this? Figure out how to pay your own
rent? Figure out how to pay your medical bills? Figure out how to
pay your car payments? The title of your agency is, ‘‘Consumer.’’
Ms. KRANINGER. Congressman, there are remedies that come
after that particular example that I gave you, so it is not accept-
able not to respond. And I noted to Congresswoman Tlaib, as you
noted, that we do actually get initial responses, and for the vast
majority of complaints, on average, it is a 9-day response. But
there are responses that take a little longer.
Mr. CASTEN. Let me just close the way I started. All of us in this
hearing, yourself included, are entrusted with looking after the
public interest. When these circumstances arise that are way, way
outside of the range of situations that we would encounter, we have
an obligation to make sure that we are adjusting our tools. There
is a reason why the captain goes down with the ship. Because the
captain has to look over the safety of everyone on the ship.
I would hope that you are seriously looking at what your agency
can do better. Because what you are doing right now is the status
quo, which is 80 percent down from what it was when it was cre-
ated. I think that you know you can do a better job. I yield back.
Chairwoman WATERS. The gentleman’s time has expired. The
gentleman from North Carolina, Mr. Budd, is recognized for 5 min-
utes.
Mr. BUDD. Thank you, Madam Chairwoman.
Director, thanks for being here today. I wanted to highlight a
QFR response that I received from your team regarding a concern
I had with the Bureau’s marketing service agreement under Rezpo.
Now, there is still some need for clarification between me and my
team as far as what we received. But you did indicate that you are
willing to receive some feedback on this. Is it okay if we follow up
with you after this on that issue?
Ms. KRANINGER. Absolutely. Please do.
Mr. BUDD. Okay. I would also like to ask unanimous consent to
submit for the record a recent article on this issue, and it was actu-
ally authored by your former Deputy Director, Brian Johnson. And
I will be sure to share this with your team.
Chairwoman WATERS. Without objection, it is so ordered.
Mr. BUDD. Thank you, Madam Chairwoman. I have a few ques-
tions, Director. In the notice of proposed rulemaking for the ability-
to-repay rule, the CFPB encourages stakeholders to develop addi-
tional verification standards that the Bureau could incorporate into
the QM safe harbor. Given the Bureau’s important desire to move
away from the static and data verification standards in the appen-
dix Q to promote and foster innovation, how can industry and
stakeholders help inform and define the Bureau’s definition of
qualified mortgages?
Ms. KRANINGER. I think I am very much looking forward to the
conversation around the standards, because it is a critical part of
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the ability to repay. And considering verified debt and income is
what the statute requires. We know that alternative data consider-
ations, residual income as opposed to other means of assessing in-
come. And we have a challenge of the current Appendix Q as well
with respect to self-employed or gig economy workers. So under-
standing how industry has been looking at that, frankly, with input
from all stakeholders, it is not just industry, but also consumer ad-
vocates and others who pay very close attention to what is hap-
pening in this space, how we can, again, bring forward credit-
worthy borrowers who are going to have successful loans, that is
part of this.
So we are very much looking to promote that and are welcoming
engagement with all stakeholders, frankly, on what standards they
would propose.
Mr. BUDD. Thank you. I want to point to the CFPB’s July 10th
report on debt settlements and credit counseling. And in that, you
looked at the critical issue of options for consumers. You just found
out they have more debt than they can actually handle.
In this report, your agency found a rise in debt settlement since
2016, and an even more significant increase in settlements that are
facilitated by companies that actually charge the consumers to set-
tle those debts for less money than they owe.
In my home State, North Carolina, we have seen a rise in com-
plaints about the practices of that industry, including misleading
advertising and high fees, that particularly targets the military,
which is very concerning to all of us.
So, I want to encourage you to continue to look into this industry
and take all appropriate actions to protect our troops and all Amer-
icans who could be misled by false promises and high-pressure
sales tactics from this industry. Any thoughts or follow-up on that?
Ms. KRANINGER. Congressman, I will tell you it is an important
area. We have taken a number of enforcement actions, including
with State attorneys general against bad actors in this space.
There are clear rules about their ability to collect any fees prior to
actually getting the outcome they promised to the consumer. So,
that is generally where our actions have been taken, and we will
continue to pursue that.
Mr. BUDD. Thank you. A priority of mine, and also of my com-
mittee Republican colleagues here, is to eliminate costly and con-
fusing regulations that make it more difficult for businesses to
thrive and innovate for the benefit of consumers and markets. Par-
ticularly during this pandemic, when we are striving to get our
economy back on its feet, it is critical to only promulgate clear,
well-founded regulations. That is why I believe that the failure to
change the payment provisions in the small-dollar rule will create
a patchwork of inconsistent standards for payment provisions
based purely on the consumer of the product.
For example, some products will be judged by the standards of
the National Automated Clearing House Association (NACHA), and
others by the CFPB rules. And when the Federal Reserve an-
nounces the payment standard, that rule will judge yet other prod-
ucts. This is, particularly, the type of regulatory mess that the Ad-
ministration has sought to eliminate.
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Would it not be better to undertake an appropriate study of the
payment provisions rather than to ratify and implement the flawed
findings of the 2017 Cordray Rule?
Ms. KRANINGER. Congressman, we will undertake a review, of
course, 5 years after the rule is in place, and take a look at how
it is actually implemented. We did try to provide great clarity
around which entities and which products are actually pulled into
that rule. I know there were some questions about products that
clearly were not actually even contemplated in the rule, so we did
a lot with guidance on that,
Mr. BUDD. Thank you. I yield back.
Chairwoman WATERS. Thank you. The gentleman from Utah, Mr.
McAdams, is recognized for 5 minutes.
Mr. MCADAMS. Thank you, Madam Chairwoman. Director
Kraninger, when you first appeared before this committee last
March, we had a discussion then about balancing access to credit,
while at the same time, ensuring that consumers are protected
from harmful products. Specifically, I asked about CFPB’s planned
actions on its payday rule, and I expressed my concern that payday
products can quickly become debt traps, especially if a lender
doesn’t ensure that the borrower has the ability to pay. And you
noted that it was a proposal at the time, and you would continue
to review your consumer protection mission as you undertook the
rulemaking.
Earlier this month, you issued a final rule that repeals the re-
quirement that lenders determine a borrower’s ability to repay
those loans before making them. So I would like to ask you again,
what role does consumer protection play as you undertook and fi-
nalized this rulemaking?
Ms. KRANINGER. Congressman, the mandatory underwriting pro-
visions were very specific. I recognize that it is frequently referred
to as an ability to repay, but there were specific stipulations there
that would be particularly challenging. Again, by the Bureau’s own
estimation, it would have a significant reduction in the availability
of credit there. So, that would be something that we looked at—
Mr. MCADAMS. I would just say from my perspective, it seems
like you just made it much easier to have consumers get trapped
in that cycle of debt, that they would be cycling through over and
over again. And I worry there are rulemaking sacrifices of reason-
able consumer protections, and I know it is a balance, but it seems
like the balance is against the consumers.
And as I understand it, that part of your assertion for repealing
the mandatory underwriting provisions is due to what you claim as
insufficient research that went into the 2017 rule, is that correct?
Ms. KRANINGER. Yes, Congressman, as well as the legal rea-
soning that was in that rule.
Mr. MCADAMS. I would like to read you a footnote in your rule-
making from this month, footnote 343 buried on page 177 of the
PDF, and it says, ‘‘Consumer protection issues have arisen, and
will continue to arise in the payday market, as in other markets
as a result of a given lender’s specific practices. And the Bureau
is prepared to address those issues, for example, through super-
vision and enforcement against deceptive claims in advertising or
marketing for payday loans.’’
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So, you acknowledged in your own rule that there are consumer
protection problems in the payday industry. And I would ask, is
your contention that supervision and enforcement are sufficient
tools to keep consumers safe?
Ms. KRANINGER. Congressman, that is certainly part of the pro-
tections that are in this basis and others. I have vented that there
are bad actors in every market space, including this one. So they
are a key part of it. I would also say that we are doing work on
disclosures, because I think there is great evidence in those
rulemakings that there are consumers who understand the prod-
uct, and there might be some who don’t quite understand the prod-
uct when they actually get them. And that is something we want
to look into, and are doing disclosure testing on.
So, that is another example of another protection, in addition to
the payments provisions and supervision and enforcement.
Mr. MCADAMS. Thank you. I think if we are putting a lot of stock
in supervision and enforcement as our means in protecting con-
sumers in this regard, I would like to see what your plans are for
beefed-up supervision and enforcement plans. And if not, do you in-
tend to study the issue to put together sufficient research and pur-
sue regulations that actually do keep consumers safe, which is the
mission of the CFPB?
Ms. KRANINGER. I am committed to constant review of the rules.
We have 5-year lookback requirements by Congress that I think
were incredibly—there is a lot of foresight in those, but we will
definitely do that on this rule, as we do on others, for example. But
any feedback based on what is happening in the marketplace needs
to inform the way we operate.
Mr. MCADAMS. But as it stands right now, even though you ac-
knowledge that there are consumer protection issues, you are not
looking for any additional tools that would help to protect con-
sumers in regards to this debt trapping in payday loans?
Ms. KRANINGER. Our disclosure testing would represent that. I
would also note increased competition is part of what we are seek-
ing, and we have been working through our innovation policies to
get banks and credit unions to offer responsible products in this
space, too.
Mr. MCADAMS. Okay. I would like to see what research was used
to base that conclusion, that that would be adequate and sufficient
for consumer protections.
Lastly—and we are about out of time, so maybe I will submit
this in written form. But on Friday, the CFPB announced that it
plans to release an advance notice of proposed rulemaking on con-
sumer-authorized access to financial records. This is a topic that
this committee has explored before, and it is of great interest to
consumers, to financial institutions, and to Fintech companies.
So I would love for you to elaborate on the CFPB initiative and
what the Bureau’s goals are with the NPR and rulemaking process.
And I do see that we are out of time, so we can take that outside
of this forum. But thank you, and I yield back.
Chairwoman WATERS. Thank you. The gentleman from Ten-
nessee, Mr. Kustoff, is recognized for 5 minutes.
Mr. KUSTOFF. Thank you, Madam Chairwoman. Thank you for
convening today’s hearing. Director, thank you for appearing today.
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I would like to follow up on Congressman Budd’s question to-
wards the end of his questioning. I know about 3 weeks ago, you
did finalize the final rule as it relates to these payments to the
small-dollar lenders. The rule that you promulgated 3 weeks ago
or so kept in place the 2017 rule provision. It imposed, frankly, a
restrictive requirement by allowing just one re-presentment of a re-
turned ACH payment. And it also extended the re-presentment
limit to transactions not covered by the NACHA rule.
So by my first question is, is there a disparity in that, that the
NACHA rules shouldn’t be applied to all lenders?
Ms. KRANINGER. Congressman, we were starting with the rule-
making we had in place. And so, the mandatory underwriting pro-
visions were the ones that had the significant impact on the avail-
ability of credit, as well as the issues that we have been discussing
here today. The insufficiency of the evidence and legal reasoning
that underpin that part of the rule. So, that is where the reconsid-
eration came into play. It was my judgment that the payments pro-
visions, again, should, continue so that we can see how that is im-
plemented. And as I said to Congressman McAdams, we can cer-
tainly look at what happens, and see if there are unintended effects
to it.
We did also put out some very clear guidance to try to stipulate
what products are affected and what products are not. And I appre-
ciate the point you are raising, the rulemaking that was promul-
gated, and that is the process that we engaged in.
Mr. KUSTOFF. Let me ask it another way: Doesn’t the final rule
create more burdensome regulations for just some covered lenders?
Ms. KRANINGER. It does only affect certain lenders, that is very
true. And that was certainly by design of the rule, and we will cer-
tainly take into account what impacts that has when that is able
to be implemented.
Mr. KUSTOFF. Okay. Are there plans to revise the payment provi-
sions in the future, or is it your position you have to wait for 5
years?
Ms. KRANINGER. Congressman, I certainly respond to things that
we see in the market. If we get evidence sooner that there is an
issue that needs to be dealt with, I would certainly be happy to
consider that.
Mr. KUSTOFF. Thank you, Director. I was reading a report from
Yahoo Money last week that talked about how 1 in 4 Americans
with credit cards said that they had an account involuntarily shut
down during the span of May to July. And, specifically, the article
talked about those consumers with FICO scores between 550 and
700. I think that article said that that roughly covers about 60 mil-
lion Americans.
I think we all know that the credit card, for so many Americans,
is not just a lifeline; it is a necessity. Are there any steps that the
CFPB is taking—and, again, I am talking about, specifically, for
those consumers in the 550 to 700 credit score range, so that they
don’t lose their credit cards due to the pandemic?
Ms. KRANINGER. Congressman, you raised an important issue. I
am certainly aware of credit limit changes, and certain cards that
don’t have activity on them. But I was not aware of the article you
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54
just cited, so I am happy to take a look at it and see precisely what
happened there and what action we should take.
Mr. KUSTOFF. Thank you, Director. And with that, I yield back
the remainder of my time.
Chairwoman WATERS. The gentlewoman from Virginia, Ms.
Wexton, is recognized for 5 minutes.
Ms. WEXTON. Thank you. Thank you, Madam Chairwoman, and
thank you, Director Kraninger, for joining us today. Director
Kraninger, I did read your extended testimony, and in 14 pages, I
saw just one reference to the Paycheck Protection Program, which
I am sure is something that you all are very much involved in at
this time. This is such a timely program and doing so much work
here in our country. And you do have the role of supervising imple-
mentation of that program, do you not?
Ms. KRANINGER. Only a narrow slice of that, with respect to the
Equal Credit Opportunity Act compliance by covered lenders.
Ms. WEXTON. Right. So you do have to manage and make sure
that—you have to assess the compliance of lenders with fair lend-
ing laws, right?
Ms. KRANINGER. Yes. With ECOA, yes.
Ms. WEXTON. Are those assessments taking place, and what have
you found out about Paycheck Protection Program loans?
Ms. KRANINGER. We are engaged in what we are calling
prioritized assessments, so very targeted exams of entities with re-
spect to what is happening right now, and we did include small
business lending, ECOA compliance, as part of that effort, so we
are engaged in that now.
Ms. WEXTON. Let me ask you, and if you need to, you can just
ballpark it, what percentage of Paycheck Protection Program loans
are to minority-owned small businesses?
Ms. KRANINGER. Congresswoman, off the top of my head, I don’t
know the answer to that question. I do know it is an area that,
again, I am interested in generally, that the Administration has
been interested in promoting, and we have done a lot of outreach
to try to expand that availability.
Ms. WEXTON. So, I don’t suppose you can ballpark what percent-
age of paycheck protection loans went to women-owned small busi-
nesses either?
Ms. KRANINGER. No, I cannot.
Ms. WEXTON. Okay. Well, an Inspector General report from May
criticized the FDA for not requiring applicants to submit demo-
graphic data. I am sure you are aware of that. And my colleagues
and I have repeatedly called on the SBA and Treasury to collect
this information on loans or the loan forgiveness application and
make it mandatory. But so far, it is only being collected on a vol-
untary basis.
And that is concerning, because in my district, we performed an
assessment of our own of those applications put out there in Vir-
ginia 10. And in my district, 95 percent did not provide the race
or ethnicity data, and 83 percent did not provide gender ownership.
So, Director Kraninger, it is probably a lot harder for you to do
your job if you don’t have the information, the demographic data
to do your assessment with, is that correct?
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Ms. KRANINGER. There were certainly other issues at play with
trying to move quickly and get this program running, so I will
say—
Ms. WEXTON. I understand. I get that. Reclaiming my time. I un-
derstand that time was of the essence and everything, but it is
hard for to you do your job if you don’t have the data to do your
assessment. I know you don’t work for the SBA or Treasury—well,
I guess a little bit for Treasury. But have you communicated with
them about their decision not to require demographic data for col-
lection of the Paycheck Protection Program on either the applica-
tion or the forgiveness application?
Ms. KRANINGER. We have talked about the data that is available
in terms of what the reach of the program has been and the extent,
the number of small businesses that it has helped. We are con-
tinuing to look at how we can promote, again, access, which is the
core of your question, and, certainly, the core of my interest in un-
derstanding them better. And that is part of why we engaged in
prioritized assessment.
Ms. WEXTON. How are you going to know what kind of access has
been provided when 95 percent of the people, at least in my dis-
trict, aren’t even answering the questions, so that makes it very
difficult. Now, you are responsible for implementing Section 1071
of Dodd-Frank, right?
Ms. KRANINGER. Yes.
Ms. WEXTON. And that does require that lenders collectively
maintain information about a loan application by women-owned,
and minority-owned small businesses, and that requires the CFPB
to collect and publish that information. Is that correct?
Ms. KRANINGER. Yes, that is correct.
Ms. WEXTON. But the Bureau, under your leadership, has slow-
walked the implementation of this section, and in February of this
year, you settled a lawsuit seeking to compel you to implement the
law. Is that correct?
Ms. KRANINGER. No, that is actually false. I committed during
my confirmation process that that was a statutorily required regu-
lation, and I was committed to implementing it. And I actually an-
nounced that in the regulatory agenda prior to the filing of the law-
suit.
Ms. WEXTON. But you entered into a settlement that had court-
ordered implementation deadlocks. Is that correct?
Ms. KRANINGER. That is correct.
Ms. WEXTON. And have you started the rulemaking process?
Ms. KRANINGER. Yes. We will issue a brief outline, which is a
small business regulatory relief process outline by September 15th,
and engage in that part of the regulatory process this fall.
Ms. WEXTON. And you commit to meet your deadlines under this
section? Thank you.
Ms. KRANINGER. Yes, that is the only deadline at this time.
Thank you.
Chairwoman WATERS. The gentleman from Indiana, Mr. Hol-
lingsworth, is recognized for 5 minutes.
Mr. HOLLINGSWORTH. Good afternoon, Director Kraninger, thank
you for being here, and thank you for your continued work at the
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CFPB. I am sure at times today, a quarter of an inch of Plexiglass
doesn’t seem like enough protection.
I wanted to step back and talk more generally for a second about
some of the larger dynamics at play in our economy and certainly,
at the CFPB as well. You recently published a blog post—or I
should say, the CFPB generally published a blog post about the use
of artificial intelligence (AI) and machine learning (ML) on increas-
ing the financial protection laws.
I wondered if you might venture into, do you intend to do more
in this space? And if so, what might that look like? What are you
trying to balance in terms of your next actions in that space?
Ms. KRANINGER. That is a great question. I think what we were
seeking to do with the look that we have done at AI and ML and
also, alternative data in underwriting is the recognition that there
is a great opportunity there in terms of expansion of access, par-
ticularly for underbanked and unbanked individuals who have not
been reached before, so taking that information into account.
There is also some risk introduced in that process, again, under-
standing it. So, we are continuing to look at how lenders are ap-
proaching that, looking at what innovations they are bringing. Our
innovation policies are an opportunity for them to engage with us,
and look at either a sandbox policy or a no-action letter policy, to
have a more robust conversation about that, and then have data
from actual operations, by an actual lender or a creditor, to base
any additional action on.
We are certainly looking at it with respect to our supervisory ac-
tivity, enforcement activity too, but I think, largely, it is making
sure we have experts inside who understand how it works, under-
stand how industry is seeking to apply it, and looking at how that
is hopefully being beneficial to consumers and taking action where
it is not.
Mr. HOLLINGSWORTH. Yes. Director Kraninger, I think that is ex-
tremely well-said. There are tremendous opportunities. There are
also limitations in the technology certainly, but tremendous oppor-
tunities to increase inclusion in the financial sector and empower
Americans in our district, and in many other districts across the
country, to be able to live better lives and achieve the American
Dream.
And I think you would agree with this, but to hear you say it,
it sounded like you also said there are real costs to retarding inno-
vation in this country, retarding financial inclusion in this country,
to families, their lives, and their futures. Is that true?
Ms. KRANINGER. Yes. I do see that.
Mr. HOLLINGSWORTH. And that is something that you will weigh
as you continue to think about what that sandbox might look like,
and how we increase, perhaps, the pace of innovation while also
recognizing the safety that needs to go into place as well?
Ms. KRANINGER. Yes.
Mr. HOLLINGSWORTH. Great. Second question, again generally, I
know my friend across the aisle, Ms. Wexton, touched on
prioritized assessments. I wondered if you might talk a little bit
about what you have learned in some of that, about how our finan-
cial institutions have been able to serve their customers, help their
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customers, empower their customers, during the course of the last
4 months.
Ms. KRANINGER. Yes. That is certainly what I expect to find in
the vast majority of the prioritized assessments, is precisely that,
and understanding—getting, again, some more information about
how that is going, what practices are successful for consumers, and
what activities, or what challenges are those institutions facing in
trying to help their customers.
Mr. HOLLINGSWORTH. But I am sure—
Ms. KRANINGER. We don’t have much at the moment, but we are
literally in the midst of it right now.
Mr. HOLLINGSWORTH. Right. I am sure not all of their challenges
are policy-related, but some of them may be policy-related, regu-
latory-related, to ensure that they have the flexibility to be able to
serve those customers, not just during more ordinary times per-
haps, more ordinary circumstances, but also the flexibility to ad-
dress their customers’ needs during extraordinary circumstances as
well. So providing some of that latitude and flexibility, I imagine,
will be an important learning point going forward, right?
Ms. KRANINGER. Yes. Definitely.
Mr. HOLLINGSWORTH. Great. And then in addition to that, I
wanted to ask about further coordination and some of these exams
done by multiple agencies in making sure that a company or an in-
stitution is providing that information as few times as possible, and
is disseminated as widely as possible, as needed—not overly dis-
seminated by the way—within the reaches of the Federal Govern-
ment.
Ms. KRANINGER. Yes. That is something that has been a focal
point for me as the Chair of the Federal Financial Institutions Ex-
amination Council (FFIEC), where we are coming together and co-
ordinating on exams. Despite the challenges of the pandemic and
other priorities that do supersede this, we have a continued activity
going on around common technology and common data collection
and sharing. So that is still happening, and we are still looking to
make some progress on that.
Mr. HOLLINGSWORTH. Right. Obviously, institutions are rightfully
concerned about the proliferation of hours that are being used in
submitting to exams, which they are ready and willing to do, but
they also want to make sure it is coordinated and done as effi-
ciently as expected so that they can spend their time serving, help-
ing, and empowering those customers.
And with that, I will yield back.
Chairwoman WATERS. Thank you. The gentleman from Massa-
chusetts, Mr. Lynch, is recognized for 5 minutes.
Mr. LYNCH. Thank you, Madam Chairwoman, for having this
hearing, and thank you, Director Kraninger, for appearing and
helping us with our work.
Director, last week, the CFPB announced an Advance Notice of
Proposed Rulemaking around Section 1033 of Dodd-Frank, which
obviously deals with the consumer authorization of access to finan-
cial data and records. We recently had a hearing on this issue, and
I am following up on Mr. Davidson’s concerns.
We recently had a hearing on this issue on the Financial Services
FinTech Task Force, and the concerns were largely in two areas,
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58
and they were bipartisan. First of all, Members were concerned
about the full spectrum gathering of data from consumers, and
whether that happens from screen scraping, which you mentioned,
or web scraping, content scraping, or whether it is telematics.
Right now, through our cell phones and other technology, financial
firms and others know everything about our lives, who we are with,
where we travel, how fast we drive, and those tools can be used to
discriminate.
We have seen, in some instances, where individuals who live in
a certain census tract were discriminated against because they
lived in a low-income area, or in public housing. So, that was one
concern about the use of that data and the practice of screen scrap-
ing in particular.
The other issue was the consent form, the so-called consumer
consent. And you have a 19-page consent form that basically, the
application administrator requires you to sign off on this 19-page
item that, even as an attorney, I had a difficult time under-
standing, and that is for regular consumers.
So, two questions: First, where are we on screen scraping? You
mentioned we are moving away from screen scraping in your ear-
lier comments, but we have been moving away for over a year. We
are just not moving that fast.
And second, the issue of those consent forms, are you thinking
in this rulemaking that you will address both of those aspects? And
I would just love to get your insights and your thoughts on both
of those issues. Thank you.
Ms. KRANINGER. Thank you, Congressman. I am glad you all had
the opportunity to talk about that and take advantage of that our-
selves. We had our symposium where these issues came up, and
the purpose of the Advance Notice of Proposed Rulemaking is to
really formalize that data-gathering and think about what might
be needed in a rulemaking and what would make sense.
But the two issues you raise are important ones certainly, one
with respect to what kinds of data is actually available and how
it gets used, and then, certainly, what consumers know about the
data that they have permissioned and how it is going to be used.
And the disclosure aspect of this, the consent process that you
noted, is one that has been a concern to me since I have been in
this position, and we are going to make some progress on trying
to do better disclosures and give people the key information they
need, rather than giving them legalese that they just end up check-
ing the box on. So that is a huge, I think, concern on many fronts.
Mr. LYNCH. On screen scraping, you started to address that ear-
lier, but you were cut off.
Ms. KRANINGER. Oh, yes. With respect to screen scraping, the
‘‘we,’’ of course, is the marketplace at this point in time. The Bu-
reau certainly would intervene in a UDAP circumstance, or other
compliance issue, but the market really is moving away from that.
There have been a number of agreements on API means of shar-
ing that are making progress, and some real deadlines from finan-
cial institutions in shifting on APIs, or shutting off access. I won’t
comment, frankly, on—there are issues with that, for sure, on both
sides, but I do think there has been progress, actual progress,
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made to reduce the screen scraping, so that is in the marketplace
generally.
Mr. LYNCH. And what about the length and complexity of these
consent forms?
Ms. KRANINGER. That is a concern area. It is something that we
will take feedback on and see what we can do about that, or what
would require rulemaking, or what might be able to be addressed
in other ways. But that is what the ANPR will do.
Mr. LYNCH. All right. Thank you, Madam Chairwoman. And
thank you, Director Kraninger.
Chairwoman WATERS. Thank you. The gentleman from Ohio, Mr.
Gonzalez, is recognized for 5 minutes.
Mr. GONZALEZ OF OHIO. Thank you, Madam Chairwoman, and
thank you, Director Kraninger, for being here today and for your
continued service to the country. I applaud you and your staff for
continuing to work on behalf of our country during the pandemic.
It is not easy for anybody, and you all have performed well, so
thank you for that.
As you know, there is growing evidence that one of the best
things regulators could do to expand credit access is to make it
clear that lenders are allowed to use new underwriting techniques
that leverage alternative kinds of data. Mr. Hollingsworth ref-
erenced this as well.
Traditional credit scores are generally good predictors of risk for
people who have high scores, but they don’t work for people with
little or no credit history, and don’t work for many people who are
creditworthy but have lower scores due to complex factors that the
scoring process does not capture.
Fintechs and some banks have been innovating in the use of non-
score factors now that it is easy to capture new kinds of data that
can be analyzed with techniques like machine learning. Research
by the nonprofit FinRegLab and others supports the argument that
these methods are predictive of risk.
However, the industry, especially banks, has hesitated to adopt
the methods because of concerns about regulatory criticism, and,
especially, the potential to run afoul of the prohibition against un-
intentional discriminatory disparate impact.
You and other regulators have issued joint encouragement that
lenders consider these new methods, but have not yet offered clar-
ity on how to do so in ways that regulators consider inside a green
zone on disparate impact.
First question, do you see this innovation as a high-impact way
to expand credit access? I think the answer is yes. You sort of
elaborated already, but just to say it again.
Ms. KRANINGER. Yes. Yes, I do.
Mr. GONZALEZ OF OHIO. Great. And then, what plans are you
currently working on to clarify the rules of the road to encourage
faster adoption here?
Ms. KRANINGER. Congressman, I would point particularly to our
innovation policies, having that opportunity to have engagement
with an entity, understand the product, they have to provide the
benefits that they see of the product to consumers, the risks that
they see, the way they are mitigating those risks, and what regu-
latory issue is a barrier or is a challenge.
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And we can have that dialogue about that product and be very
specific about the ability to move forward with that product with
guardrails. So, that is certainly the top avenue.
We are looking at what additional guidance would be useful. We
have issued guidance on alternative data, we did on AI and ML use
in underwriting, and I think we are very open to that in terms of
the conversation.
I did issue a request for information just 2 days ago on the Equal
Credit Opportunity Act, and it did specifically ask about alter-
native data and other issues that might be posing challenges to en-
tities, or where we think there might be opportunities. So, re-
sponses to that could lead to different action.
Mr. GONZALEZ OF OHIO. Thank you. And is there anything that
we can provide at the congressional level that would empower you
even more to sort of help set up the guardrails here? And other reg-
ulators generally, yes.
Ms. KRANINGER. Congressman, I don’t have anything at the mo-
ment that I would seek or suggest, but I appreciate the question,
and I will certainly let you know if we do find something that
would be useful.
Mr. GONZALEZ OF OHIO. Okay, thank you. Because, I think, like
a lot of my colleagues, one of my biggest fears coming out of this
pandemic is—and you can just see this looking at what is hap-
pening in the markets—for very wealthy people or people in the
upper-income scale, it is inconvenient but not financially dev-
astating, certainly not. For people who are lower-income, especially
minority communities, it’s absolutely devastating, setting them
back even further.
And so, I see alternative data sources and different ways of ex-
panding access to credit as one of the most important things we
can do, because people are going to have to rebuild their lives, and
we have to provide them with all of the opportunities necessary to
do that.
So I would encourage you to keep that work alive and to keep
interacting with us if we can provide help, because people are going
to need it.
With that, I yield back.
Chairwoman WATERS. Thank you. The gentlewoman from North
Carolina, Ms. Adams, is recognized for 5 minutes.
Ms. ADAMS. Thank you, Chairwoman Waters, for convening to-
day’s hearing. Thank you, Director Kraninger, for being here. I
wanted to ask a few questions regarding predatory debt settlement
companies and the harmful settlement activities that are hap-
pening in my State, that are likely also happening across the coun-
try.
In North Carolina, we have seen a rise in complaints about the
practices of this industry, including misleading advertising, and
high fees, particularly from the military and their families. I have
gotten letters from high-ranking officials at Camp Lejeune and
Fort Bragg in North Carolina, and from one of our largest credit
unions, the State Employees Credit Union. So, yes or no, have you
heard of a company called Freedom Debt Relief, or Freedom Finan-
cial Network?
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Ms. KRANINGER. I have not heard of those companies specifically,
Congresswoman.
Ms. ADAMS. Okay. So you are not aware, then, of their business
model or predatory practices, if you are not familiar [inaudible]. It
is one of the largest—
Ms. KRANINGER. I will say that the concerning practices by some
debt settlement companies is definitely something that I am aware
of, and we have engaged in enforcement actions, I believe, with the
State of North Carolina, with the attorney general of North Caro-
lina. I believe he was a party to that, to one of those cases. So there
are concerning practices happening there, and we are taking en-
forcement action.
Ms. ADAMS. Thank you, but the CFPB, under Mr. Mulvaney,
brought an action against Freedom Debt Relief, and secured about
$20 million in restitution and $5 million in damages, for violating
the law by charging customers or consumers without settling their
debts as promised. But are you aware that the CFPB entered a
consent order with Freedom Financial Service after the agency
filed this complaint?
Ms. KRANINGER. Congresswoman, I do apologize that I don’t re-
member that particular case, but I stipulate that you are probably
right.
Ms. ADAMS. Okay. Let me ask you, do you believe that it helps
consumers when debt settlement companies encourage customer
borrowers to deliberately default on credit card debt? Do you think
that helps consumers when they do that? Yes or no?
Ms. KRANINGER. No. There are many concerning practices in the
debt settlement space, there is no doubt. We are certainly paying
very close attention to that and taking action. They cannot accept
fees when they have not actually provided the results, and there
is a requirement to actually do that several months after the out-
come they promised has been delivered.
Ms. ADAMS. Okay. In this time of COVID, with an economy that
is hurting, it is very likely that our constituents will find them-
selves saddled with more debt. So I want to know what you and
the CFPB will do to protect American consumers and our military
from being misled by false promises and high-pressure sales tactics
from the for-profit debt settlement industry, because they are real-
ly leaning hard on these folks?
Ms. KRANINGER. I agree with you, it is a concerning area. I can
say we are also working with the Department of Defense. In addi-
tion to all of our enforcement actions, we are working to make sure
we get information to those military personnel, and to consumers
generally, about being cautious in the debt settlement space, and
frankly pointing them also to nonprofit entities where they would
get the support that they may need.
Ms. ADAMS. Let me ask you, in terms of smaller lenders, they are
probably finding it more difficult to compete in this kind of environ-
ment. Several industry groups and consumer advocate organiza-
tions have also expressed concern that a pricing-based definition
could result in a race to the bottom.
Based on the Bureau’s own recognition that pricing can be ma-
nipulated, the proposed qualified mortgage standard does not ap-
pear to be an effective measure of a borrower’s ability to repay. So
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how would you ensure that a pricing-based qualified mortgage does
not incentivize irresponsible mortgage lending similar to what we
witnessed in the lead-up to the 2008 financial crisis?
Ms. KRANINGER. Congresswoman, I appreciate the question. It is
an important one. The statutory features that are precluded from
being part of a qualified mortgage, that continues. In addition, a
requirement to actually consider and verify debt and income is part
of the law.
Ms. ADAMS. Okay. Thank you very much.
I yield back, Madam Chairwoman.
Chairwoman WATERS. Thank you. The gentleman from Ten-
nessee, Mr. Rose, is recognized for 5 minutes.
Mr. ROSE. Thank you, Chairwoman Waters and Ranking Mem-
ber McHenry, for holding this hearing, and thank you, Director
Kraninger, for appearing before us today.
I would like to jump right into the CFPB’s recently finalized
small-dollar lending rule. The Bureau has previously acknowledged
the key role that small-dollar loans can play in helping consumers
meet credit needs, usually resulting from unexpected expenses. At
the beginning of this month, the Bureau took a step in the right
direction by rescinding the mandatory underwriting provisions of
the Obama-era small-dollar lending rule.
However, like several of my colleagues, I am very disappointed
that the CFPB chose to leave the payment provisions of the origi-
nal rule intact. Much like the ability-to-repay provisions, the Bu-
reau’s own evidence didn’t support its payment practices provi-
sions. They were flawed, and based on unsupported data.
It also imposes onerous requirements that could make it all but
impossible for consumers to use recurring payments.
I want to get a real answer to this question, Director Kraninger.
Please explain to me why you kept this particular provision in
place, choosing to enforce an Obama-era rule requiring overly bur-
densome compliance?
Ms. KRANINGER. Congressman, I recognize that that is an impor-
tant issue for you. It has been raised by many Members. First and
foremost, it was the reconsideration of the mandatory underwriting
provisions that really were the focal point, given the dramatic im-
pact that that would have on the availability of credit in this space.
So, that was the priority.
With respect to the payments provisions, it was also a recogni-
tion that there is some consumer protection in there with respect
to certain products. I recognize there were also concerns about how
broad this may be applying, and we did issue additional guidance
when we issued the final rule that laid out the types of products
that are covered, and are not covered under this rule, to try to ad-
dress some of those issues.
And the last thing I would say, that I have not mentioned ear-
lier, is that we are still in litigation over these provisions, so that
is still ongoing.
Mr. ROSE. Since we last spoke about this, I know you were look-
ing again at this provision. However, it remained in the final rule
published on July 7th. How long will the lenders be given to com-
ply with this payment provision?
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Ms. KRANINGER. Because of the litigation, the rule is still stayed.
The Bureau is seeking to propose to the court that it lift it after
a reasonable period of time. Since we have not done that filing, I
can’t tell you here what the reasonable period of time is, but that
would be my intention, and that filing should happen relatively
soon. So, we can answer that question for you relatively soon.
Mr. ROSE. So once that filing occurs, would you expect it to be
60 days from that time?
Ms. KRANINGER. I am looking at a reasonable period of time, and
I can’t tell you right now precisely what that will be, but we will
get back to you.
Mr. ROSE. Keeping this provision in place will cause, in my view,
an undue compliance burden on financial institutions and payment
processors. Ultimately, the end result will be that responsible lend-
ers, unable to manage and mitigate the risk, will choose to de-risk
and quit, or not form relationships with companies offering covered
loans, increasing the cost of these products to the consumers who
need them.
This will also drive the small-dollar lending market back to the
storefront payday lenders, putting us in the position of picking win-
ners and losers.
Moving forward, I believe it is crucial that we maintain con-
sistent payment system rules, which are grounded in associated
laws and regulations, and I urge you and the CFPB to revisit this
finalized rule, and roll back the payment provisions created by the
2017 small-dollar lending rule.
In my remaining time, I want to just turn to another issue. Back
in January 2017, under Director Cordray, the CFPB filed a suit in
Federal court, alleging that hundreds of thousands of student loan
borrowers have been harmed by steering borrowers away from in-
come-driven repayment, and toward costlier options. In nearly 4
years, how many borrowers have been proven to have been steered?
Ms. KRANINGER. Congressman, that is ongoing litigation, and ob-
viously in the midst of discovery and other parts of that process
there, so I can’t answer that question for you, but I understand
why it is important.
Mr. ROSE. I am very concerned that this ongoing litigation that
you describe, without discovering any evidence, is a bad use of tax-
payers’ dollars. And I am concerned that the CFPB is dragging out
cases like this, in search of a problem, in order to justify the costs
that have already been incurred. I hope this practice does not con-
tinue.
With that, Madam Chairwoman, I yield back.
Chairwoman WATERS. Thank you. The gentleman from Illinois,
Mr. Garcia, is recognized for 5 minutes.
Mr. GARCIA OF ILLINOIS. Thank you, Madam Chairwoman, and
Ranking Member McHenry, for convening this hearing, and thank
you, Director Kraninger, for joining us today.
Congress passed Dodd-Frank and authorized the Consumer Fi-
nancial Protection Bureau 10 years ago this month. In 2010, our
country faced high unemployment, and millions of people lost their
homes to eviction and foreclosures. My community was hit hard by
the last financial crisis, and many people never recovered.
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And now, the COVID-19 crisis has left my constituents piled
with housing debt, medical debt, and credit card debt, and who
knows when they will get back on their feet to pay it off.
That is why the CFPB was established during the last crisis, to
give ordinary people, like my neighbors in Chicago, their own voice
against big banks, against mortgage lenders, and against debt col-
lectors. But that is not what we see from watching the Bureau
today.
During a nationwide pandemic, when we have no idea when jobs
can come back, and consumers have no idea how they are going to
pay off their debt, the CFPB has been working for industry instead
of the public. Gutting the payday lending rule earlier this month
is a scary example.
I represent a working-class immigrant district. There are a lot of
payday lenders in my district, as lobbyists always like to point out.
The CFPB’s new rule eliminated the requirement that lenders en-
sure that the borrowers can pay the loan back. This means that a
lender can now make a loan when they know that a borrower can-
not pay it back. Director Kraninger, do you think that a lender
should make a loan to a customer if they know that they cannot
pay it back?
Ms. KRANINGER. Congressman, the mandatory underwriting pro-
visions of the small-dollar rule have not—
Mr. GARCIA OF ILLINOIS. Can you give me a yes or no answer,
Director?
Ms. KRANINGER. I will just say, the small-dollar space is a little
bit different, and that ability to—
Mr. GARCIA OF ILLINOIS. Should they make such a loan if they
know that it can’t be paid back?
Ms. KRANINGER. Congressman, I appreciate the principle—
Mr. GARCIA OF ILLINOIS. Okay, you won’t answer that. Are you
worried about trapping customers in a cycle of debt that they aren’t
able to repay?
Ms. KRANINGER. Congressman, again, I appreciate the principle
you are trying to establish. This is a complex area—
Mr. GARCIA OF ILLINOIS. Are you concerned about that?
Ms. KRANINGER. I absolutely want to make sure that consumers
understand the products that they are engaged—
Mr. GARCIA OF ILLINOIS. Are you concerned about it?
Ms. KRANINGER. I want consumers to understand the products
that they are—
Mr. GARCIA OF ILLINOIS. Maybe? Or not. Let’s move on, if you
don’t want to answer those two questions.
The Military Lending Act protects our servicemembers from get-
ting trapped in a cycle of debt by setting a 36 percent interest rate
cap on their consumer finance products. I introduced the bipartisan
Veterans and Consumers Fair Credit Act to extend the cap to all
consumers, so that all of my constituents can enjoy that protection.
Do you support the 36 percent interest rate cap currently in effect
under the Military Lending Act?
Ms. KRANINGER. It is current law, Congressman, so that is—
Mr. GARCIA OF ILLINOIS. Do you support it?
Ms. KRANINGER. I don’t have a role in examining that, but cer-
tainly, we enforce it.
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Mr. GARCIA OF ILLINOIS. Do you think that the rate cap helps
servicemembers avoid being trapped in a cycle of debt?
Ms. KRANINGER. Congressman, I believe that Congress put that
in place for a reason that is outlined in the—
Mr. GARCIA OF ILLINOIS. Do you think it helps them? Your opin-
ion, not Congress’?
Undecided.
Okay, my last one. Director, some of my colleagues across the
aisle seem to be mistaken about the recent Supreme Court decision
in Seila Law v. CFPB. I want to clarify that the Supreme Court
did not rule that the CFPB itself was unconstitutional, but that
only the requirements needed to remove the Director were uncon-
stitutional.
So my question is, does this case, in any way, limit your author-
ity or ability to protect consumers moving forward?
Ms. KRANINGER. I continue to carry out what the Dodd-Frank
Act empowered me to carry out, which is protecting consumers. So
I think at this point, I would say no.
Mr. GARCIA OF ILLINOIS. Okay, thank you.
I yield back the rest of my time, Madam Chairwoman.
Chairwoman WATERS. The gentleman from West Virginia, Mr.
Mooney, is recognized for 5 minutes.
Mr. MOONEY. Thank you, Madam Chairwoman. So for preface, I
am not a lawyer myself, but a lot of businesses and individuals
have needed good lawyers when they need to exercise their legal
rights. And in many cases, that is when money is owed to them.
They loaned money in a fair contract, it is owed back to them, and
it is not getting paid back, which prevents the lender from paying
their bills, employing more people, and putting food on their table.
So for hundreds of years, attorneys have been regulated and dis-
ciplined, primarily by State supreme courts that license them, and
by the State court judges, not by the Federal agencies. I fear that
the proposed rule change from the CFPB on debt collection could
jeopardize this norm. The CFPB’s safe harbor proposal to codify the
meaningful attorney involvement doctrine is intended to clarify
regulation for creditor attorneys, but I fear it would do exactly the
opposite.
The meaningful attorney involvement doctrine appears nowhere
in the Fair Debt Collection Practices Act or the Dodd-Frank Act.
The concept has gone far beyond the statute, and creates uncer-
tainty and confusion over the rules regulating attorneys. So Direc-
tor Kraninger, I fear that the CFPB’s proposed safe harbor rule, for
meaningful attorney involvement in debt collection, could lead to a
codification of meaningful attorney involvement doctrine, bringing
further uncertainty.
The American Bar Association and the National Creditors Bar
Association have both stated their opposition to the safe harbor
provision in this rule. Would you be open to reconsidering the pro-
posed safe harbor rule for meaningful attorney involvement?
Ms. KRANINGER. It is a proposed rule, Congressman. I actually
had not heard of those organizations’ opposition, but I imagine that
I will hear it soon because we are going through all of the com-
ments now. We did get thousands of comments on this rulemaking,
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and as it comes forward to me, in terms of recommendations and
decisions, I absolutely will take those comments into account.
Mr. MOONEY. Thank you for that. Since the founding of our coun-
try, up until the CFPB was created, the legal process has worked
well. People may not always get the results they want, but they
have legal representation, and they have a fair hearing. And it is
regulated by the courts, and if you do something wrong, you get
disbarred. We have all heard of lawyers who have been unethical
and gotten disbarred. They have a working process. If it ain’t
broke, don’t fix it.
So, I am glad to hear that you want to do that. I had a bipartisan
bill I introduced myself last Congress called the Practice of Law
Technical Clarification Act, which would have amended the fair
debt collection practice to exclude law firms and licensed attorneys
engaged in litigation, from the definition of debt collectors.
Had it passed, it would have made absolutely clear that licensed
attorneys are regulated by the courts, not Federal regulatory bod-
ies. But thank you for your answers. And Madam Chairwoman, I
yield back the balance of my time.
Chairwoman WATERS. Thank you. The gentlewoman from Texas,
Ms. Garcia, is recognized for 5 minutes.
Ms. GARCIA OF TEXAS. Thank you, Madam Chairwoman, and
thank you for being with us today, Director. I know it has been a
long day, but we are down to the final stretch. First, I want to
thank you. I want to thank you because back in March of last year
when you first came by, I mentioned to you my concerns about pro-
tecting those with limited English proficiency. That is a real con-
cern in my district, which is predominantly Latino, about 77 per-
cent, and I have seen your Spanish-language, COVID-related out-
reach, and I really do appreciate that, so thank you.
However, there is so much more work to be done, not just in out-
reach, but in enforcement. You mentioned this issue in your oral
testimony, but it is not mentioned in your written testimony, and
only once in the agency’s Spring report. I would like the agency to
devote additional resources in this area. How is your agency work-
ing to target unfair practices that target the limited English pro-
ficiency community?
Ms. KRANINGER. Thank you, Congresswoman, for that question,
and we have a lot of sources for the enforcement actions that we
take. Certainly, whistleblowers come forward. We use the com-
plaints, so encouraging communities—and we have many commu-
nities we still need to continue to reach so they know about us, but
when they do submit complaints, we take those seriously. We look
for any patterns or practices. We go in and do examinations based
on that or go straight to an enforcement action. So, there are a lot
of ways—
Ms. GARCIA OF TEXAS. How many times have you gone to an en-
forcement action?
Ms. KRANINGER. We have hundreds of ongoing investigations and
many other—
Ms. GARCIA OF TEXAS. No, but how many times have you taken
an enforcement action?
Ms. KRANINGER. There are 40 public enforcement actions that I
have taken in my term to date.
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Ms. GARCIA OF TEXAS. And how many of those were based on any
targeting of unfair practices against limited English proficiency
(LEP) consumers?
Ms. KRANINGER. I will admit to you that I do not recall there
being an LEP nexus to these cases, but that doesn’t mean we don’t
have other work that we are doing in that area.
Ms. GARCIA OF TEXAS. Okay. Can I hear from you a commitment
to be more vigilant about that?
Ms. KRANINGER. Yes, Congresswoman. I would pledge, too, if
there are particular entities that your constituents are interacting
with, where you have heard about issues, raise them to us, and we
would be happy to take that into account, too.
Ms. GARCIA OF TEXAS. I am going to switch topics now. I am tre-
mendously upset—tremendously upset—by your agency’s recent ac-
tion to allow payday lenders to continue to prey on those most in
need. You have testified that the previous rule would have reduced
access to credit by 70 percent, and that is why you changed this
rule, correct?
Ms. KRANINGER. Yes. That is certainly one reason.
Ms. GARCIA OF TEXAS. Okay. But what I don’t think you under-
stand is that payday loans aren’t credit. They are chains of debt.
A cycle of debt entraps—as some of my colleagues have described,
they are tools that extract wealth from the most vulnerable. This
isn’t just my opinion; this is something we all know to be true.
That is why Congress enacted the Military Lending Act nearly
15 years ago, to protect our servicemembers from being trapped in
a cycle of debt. It was such a concern that the Department of De-
fense was beginning to see the impact to military readiness.
Mr. McHenry calls these products a lifeline, and that is what
people are looking for when they seek out a payday loan. They are
seeking a lifeline, but instead, they are being thrown an anchor by
these predatory companies. If the military felt that these institu-
tions were degrading the readiness of our military personnel, imag-
ine what these predators are doing to the very fabric of our society.
Predatory payday lenders extract wealth from poor and minority
communities. They perpetrate the racial wealth gap. They are part
of a system that has let inequity grow and wealth accumulate to
the very few, while leaving those in my community struggling just
to maintain.
I have always said that payday lenders just make poor people
poorer. I am afraid that your actions have made you an enabler,
and I am just really distressed and concerned that you have taken
that recent action.
Finally, one last topic, I want to talk about the stimulus checks.
This spring, Treasury sent out about 159 million checks. That is a
lot of people. There was a lot of concern about some of the calls our
constituents were getting, people saying, ‘‘Hey, we can get you the
check, but there is going to be a fee. We are going to take 10 per-
cent.’’
Knowing that there has been some fraud and some issues with
stimulus checks, and knowing that we are looking at another round
through this relief package, what are you doing to help prevent
some of these scams from recurring?
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Ms. KRANINGER. Congresswoman, that is an important question.
I know we are limited here. We are already talking to Treasury
about that, and we were with them from day one, trying to figure
out, as soon as they made a policy decision about how to distribute
the funds, how do we communicate that and reach people?
Ms. GARCIA OF TEXAS. Thank you, and I yield back.
Chairwoman WATERS. The gentleman from Wisconsin, Mr. Steil,
is recognized for 5 minutes.
Mr. STEIL. Thank you very much, Chairwoman, and thank you,
Director, for being with us today. As several Members have men-
tioned, the Supreme Court finally confirmed what many of us have
been arguing for years, that the leadership structure at the CFPB
was unconstitutional, and to me, that is just one of the structural
problems with the agency that was seemingly built to be unac-
countable.
That is not a comment to you. That is a comment to us in the
House of Representatives, and in the United States Senate, who
structured it to be that way, to be unaccountable.
And one of my big frustrations is that the Bureau is set up to
be regulated and to put forward regulation by enforcement, rather
than allow the regulations to be developed here in this committee,
in the House of Representatives, and the Senate, where I think it
would be far better suited rather than an unaccountable agency,
where I think there can often be disastrous consequences.
Neither Republicans nor Democrats can do anything about it if
we feel that the Bureau is overstepping its bounds. I have made
this offer before, and I am going to make it again, I am willing to
work with anybody on this committee, regardless of party, to do
meaningful reform to the structure of the CFPB.
I think the Bureau needs to have a leadership structure that re-
spects the principles of our Constitution. I think it needs to be tied
to the appropriations process and truly be accountable to the peo-
ple and to Congress. Consumer protection is a vitally important
issue, and we should be working together to make sure that the
Bureau is lawful, built to protect consumers, and to respond to the
concerns of the American people. And so, I call on our colleagues
to get to work.
Now, I would like to chat with you. Director Kraninger. I spent
some time reading through your budget. In trying to parse this
out—and you were asked earlier by my colleague from Minnesota
on your litigation cost, but I think—and I understand you are not—
and I am not asking you to speak to any specific piece of litigation,
but trying to just get some clarity into the structure of your budget.
In going through it, you had about $112 million—in Fiscal Year
2020, about $112 million in what I viewed as salary: $47 million
in benefits; and $107 million in what was labeled as other contrac-
tual services. I’m unclear if that might be additional litigation ex-
penses.
I am wondering if you can provide some level of clarity to me and
to my colleagues here on this committee as to what, broadly speak-
ing, your litigation expenses may be across-the-board?
Ms. KRANINGER. We certainly can, and we can get back to you
on that. There are contractual costs associated with litigation, as
I was saying, with document production and sometimes data anal-
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69
ysis efforts, in getting depositions and all of those kinds of things
involved, generally speaking, some contract support. So off the top
of my head, I don’t have it, but we can get back to you on it.
Mr. STEIL. I think it is an important number, and as you go for-
ward and put forward these documents, I think it is helpful to the
committee to get a broader understanding of what the vast major-
ity of the spending is inside the CFPB and what portion of that is
in litigation.
The reason I am concerned is, I think it is a really poor way to
go about policymaking, when it is done through litigation and en-
forcement. I think we are far better off at policymaking here at this
committee through a deliberative process where the people are rep-
resented through their elected representatives, rather than an
unelected agency through litigation. That’s not a comment to you,
but a comment really to how this agency was structured, I think,
to set up potentially disastrous consequences in the future.
I appreciate you coming back with some additional details on the
litigation costs.
Let me shift gears. I am also very concerned during the
coronavirus, in particular, about bad actors. In the ongoing pan-
demic, there are criminals taking this as an opportunity to take ad-
vantage of American consumers, and so, I have introduced bills to
increase penalties on these types of criminals.
Can you comment on what the CFPB has done to ensure that
consumers of financial products are protected during some of the
most challenging of times?
Ms. KRANINGER. Absolutely. We are in partnership with the De-
partment of Justice, the FTC, and all of the prudential regulators,
and State attorneys general, talking regularly about fraud schemes
that we see, and who is handling them. There are certainly a lot
of things happening in the healthcare space.
We have seen admittedly slightly less in the financial products
space. And I will say that the financial institutions are a huge help
in that as well because they are keeping their eyes open, con-
sumers advocates are keeping their eyes open, but the minute we
hear about anything, we are investigating and moving on it. So,
that is an ongoing vigilance, as well as making sure that we get
good information to consumers so they are aware of it, so that it
is front and center for them.
Mr. STEIL. Thank you very much. I appreciate your leadership in
this regard, and I yield back.
Chairwoman WATERS. Thank you. The gentleman from Virginia,
Mr. Riggleman, is recognized for 5 minutes.
Mr. RIGGLEMAN. Thank you, Madam Chairwoman, and thank
you, Director, for being here today. I would like to start by thank-
ing you for your continued efforts to make the Consumer Financial
Protection Bureau more accountable and transparent, and for
many actions the Bureau has taken since your appearance in Feb-
ruary.
I also, going near the end, get some advantages to being near the
end of these, and I would like to know, the challenges that you
had, one of my colleagues talked about the number of complaints
that you have had and the increase in those complaints from
March until now. And I know you have also had to work under the
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same structure of CDC guidelines and COVID issues also. Is that
correct, ma’am?
Ms. KRANINGER. Yes. We take that seriously.
Mr. RIGGLEMAN. And obviously, the challenges have been pretty
huge with your workforce, right, for either teleworking and things
like that. You all have had to actually sort of navigate all the same
challenges that other workforce people have done. Is that correct?
Ms. KRANINGER. Yes, it is.
Mr. RIGGLEMAN. So I think you understand your civic responsi-
bility, and I want to thank you for all those challenges and the
amazing number—I know data and I know volume, and the fact
that you are getting back to people in 9 days, I think is commend-
able. And there is a difference between receiving the information
and responding to it and doing an investigatory action, which I had
to do when I had to process requests for information in intelligence
analysis, so I appreciate that.
I also want to talk about Section 1033, and I know you an-
nounced an intent to issue an ANPR on consumer authorized ac-
cess to financial records later in the year, and I know we have
heard that. So again, the benefit of going later—I don’t know if
anybody knows how long Section 1033 is, and I know all of us have
probably read it, but Section 1033 is only 335 words. I don’t know
if people have looked at Section 1033, and about 10 years ago, it
would be the same with me.
And I don’t know if people have seen 1033 and what it is dic-
tating, and what you have to do in that rulemaking. There are
some challenges I don’t think people really realize, even like some-
body handing me a piece of paper that is 335 words, and it pretty
much says, ‘‘Hey, Denver, don’t worry, you have a couple of years
to make a missile to go between mach 5 and mach 25, it has to
reentry from space, and it has to hit a target with 10 meters, go
ahead, you can do this.’’ And that is pretty much how many words
you have in Section 1033.
Here are some of the challenges that I think the CFPB is going
to have, and I have been writing these down. You are really talking
about aggregated or interconnected banking. You are talking about
a critical path checklist that is huge for 1033 on rulemaking.
You are talking about the legal issues people have to deal with—
data transfer issues, universal API middle ware challenges, data
translation, cloud utilization or not, policy on authorizations, inter-
connected banking like we talked about, and how people actually
stress test interconnected banking with that volume of data.
You are talking about data-volume issues because of that, and
then you are talking about access to consumers, or aggregators, or
consumer agents. That is just part of the critical path checklist
that you have to worry about during your critical path checklist bill
and when you are making rulemaking. Is that correct?
Ms. KRANINGER. Yes, that is the case. And I would always say,
the distinction, of course, is that you have an end user who actually
is building that missile. This is a distributed system. I am not the
builder of this system.
Mr. RIGGLEMAN. And that is why I found it so interesting, the
challenges that you have not being the builder of the system, but
somehow, being identified as the one responsible for that entire
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71
system, based on Dodd-Frank and the rulemaking that you worry
about on 1033. And I have seen some of the talent that you sort
of array around you, and I am really impressed with that.
But this is the question I want to get at. Do you see the CFPB,
even with you not building something—and I would never ask that
or never even infer that—do you see yourself almost as the lead
system integrator for this, or do you see when you do this rule-
making that you are just going to have a threshold that these pri-
vate entities have to actually answer to, or bill to, or do you see
it actually putting out specific rule sets or specific ways of actually
approaching this technology, and you are going to be the final arbi-
ter on that?
Ms. KRANINGER. You have definitely laid out a lot of challenges
of this. I would say that we are really just taking a tiptoe in this
direction with that Advance Notice of Proposed Rulemaking. We
are not necessarily committing to do a rulemaking, because there
are some who would argue that Section 1033 and its 335 words is
self-effectuating.
But trying to put some parameters around this, and at least have
a conversation around these complicated issues is what we are
looking to facilitate.
Mr. RIGGLEMAN. Even when you look at Dodd-Frank, when it
came back over a decade ago, we have gone from things like rela-
tional databases to graph analytic databases, and the ability to
parse data on a level we have never seen before, right, FinCEN,
looking at different types of aggregators all across the financial sec-
tor?
I think that is why it is such a challenge, and why I wanted to
just express to you that I appreciate what you have done during
the COVID pandemic, but I also hope people understand the chal-
lenge of rulemaking at this level, with the amount of technology
that sort of presented before the CFPB, but also for those certain
banks to actually do this.
I think I would love to have seen, if I was here when that was
made—I don’t see where there is a technical solution for all of this
embedded within Dodd-Frank. So, I appreciate the efforts that you
have made.
The next question would take 17 minutes to answer, so I am not
going to ask it. I appreciate your time, and Madam Chairwoman,
I yield back.
Chairwoman WATERS. Thank you. The gentleman from Texas,
Mr. Taylor, is recognized for 5 minutes.
Mr. TAYLOR. Thank you, Madam Chairwoman. I appreciate this
hearing and this opportunity. And Director Kraninger, I appreciate
you being here.
I grew up legislatively in the Texas Senate with my colleague
from Texas, Ms. Garcia, and I am used to a, perhaps, more profes-
sional environment, where when you are asked a question, you
allow the person to answer it, rather than cutting them off and
then accusing them of refusing to answer.
Is there anything you wanted to add? I noticed you were cut off
a couple of times since I have been here, and maybe there is some
question you wanted to answer that—I will just yield you some
time to answer a question.
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Ms. KRANINGER. Thank you, Congressman, I do appreciate that.
I would say we fulsomely have been able to cover some of these
things along the way. I know there is a lot of interest certainly in
the qualified mortgage effort that deserves some more conversa-
tion. Given that it is a proposed rule, though, we have time for
that. We expect to get comments on it. But just noting that the Act
requires debt and income to be considered and verified.
We believe that under a rulemaking, there has to be a standard
for that, that the CFPB would allow to be used, and so that is what
we are trying to promote that. That is where the core ability to
repay comes into play. Linking that, then, to the pricing threshold
that we are proposing, it really is about a more holistic view than
just DTI itself as that ratio that is a hard cap right now under the
current rule.
So at any rate, there is time on that particular topic to continue
the conversation.
Mr. TAYLOR. Thank you for answering that, and it is, again, frus-
trating to watch people not have the respect and give you the time
to answer the question they are asking.
Something that has come up repeatedly in this hearing is the re-
cent Supreme Court ruling. I know you have had a chance to think
about it, and I have had a chance to listen to some of my colleagues
and some of your responses. But if you were to give us what we
are supposed to do from here, it seems like we need to change some
things in statute. Could you speak to that? What changes would
you recommend, or what kind of direction should we start to go in
hunting around to get the agency in constitutional compliance?
Ms. KRANINGER. I will tell you, Congressman, the decision with
respect to, of course, the removal of the Director and the Presi-
dent’s ability to do that, that is certainly the starting point for the
conversation. I know that is, for some, the way the organization
was created, and then there becomes some questions about other
changes that Congress might want to contemplate.
And so, I have respectfully declined to opine about precisely what
those structural changes or proposals should look like, but I cer-
tainly stand ready to provide anything, as a process goes forward
on that, that we can provide, and should something be enacted, I
also obviously stand ready to help implement that.
Mr. TAYLOR. Yes. I certainly hope, at a bare minimum, that Con-
gress would take action to fix this. And I guess, one of my frustra-
tions with this institution is its inability to act, and to see simple,
straightforward legislative solutions go through, that I hope we
could all agree that your agency should be constitutional, and that
we would take some actions, and I hope that we could do that on
a bipartisan basis. I don’t think it is terribly difficult to say, Okay,
let’s let the President appoint and relieve the Director of the CFPB,
which I think is—my understanding is that would basically bring
you in constitutional compliance. Is that directionally correct?
Ms. KRANINGER. The decision essentially did that. The question
then becomes if there are other changes that the Congress would
want to see made.
Mr. TAYLOR. Okay. And so, I look forward to working to try to
make this institution functional, to actually be able to issue legisla-
tion so that it doesn’t have to feel like we are so impotent that we
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73
must create eight new agencies that are then non-accountable to
the institution.
I know, again, in my time in the Texas legislature, we were pow-
erful in that we could actually pass common-sense legislation. We
could bring agencies to heel because we could actually wield legis-
lation. That legislature would pass between 1,000 and 1,500 bills
in a 20-week session. Here, we are passing about 50 or 100 bills
a year. So, the volume of production is just so much lower, and,
therefore, the power that it wields is consequently reduced. And
enough of my pontificating on that. I yield back.
Chairwoman WATERS. Thank you. And I would like to thank Di-
rector Kraninger for her time today. This may be her last presen-
tation before this committee.
Before we adjourn, I have statements for the record, and without
objection, the statements will be made a part of the record.
The Chair notes that some Members may have additional ques-
tions for this witness, which they may wish to submit in writing.
Without objection, the hearing record will remain open for 5 legis-
lative days for Members to submit written questions to this witness
and to place her responses in the record. Also, without objection,
Members will have 5 legislative days to submit extraneous mate-
rials to the Chair for inclusion in the record.
This hearing is now adjourned.
[Whereupon, at 4:45 p.m., the hearing was adjourned.]
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APPENDIX
July 30, 2020
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File and source
- File
- CHRG-116hhrg43343.pdf
- Size
- 12,300,666 bytes
- SHA-256
- 4d6dd58478fa023f9650683bb073a59f3e9e983d7836f9ae19b6426b22c4f3bf
- Our copy
- CHRG-116hhrg43343.pdf
- Original
- www.govinfo.gov