[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]



                      CONSUMERS FIRST: SEMI-ANNUAL
                         REPORT OF THE CONSUMER
                      FINANCIAL PROTECTION BUREAU

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 27, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-80




                 [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]




                                 ______
                                 

                 U.S. GOVERNMENT PUBLISHING OFFICE

47-479 PDF                WASHINGTON : 2022












                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director






                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 27, 2022...............................................     1
Appendix:
    April 27, 2022...............................................    71

                               WITNESSES
                       Wednesday, April 27, 2022

Chopra, Hon. Rohit, Director, Consumer Financial Protection 
  Bureau (CFPB)..................................................     4

                                APPENDIX

Prepared statements:
    Chopra, Hon. Rohit...........................................    72

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of the American Financial Services 
      Association................................................    77
    Written statement of Americans for Financial Reform..........    80
    ``Principles for Responsible Consumer and Small Business 
      Loans to Prevent Predatory Lending Abuses''................    86
    Written statement of the Responsible Business Lending 
      Coalition..................................................    96
    Written statement of UnidosUS................................   103
Chopra, Hon. Rohit:
    Additional information provided for the record...............   112
    Written responses to questions for the record from 
      Representative Adams.......................................   127
    Written responses to questions for the record from 
      Representative Davidson....................................   129
    Written responses to questions for the record from 
      Representative Dean........................................   131
    Written responses to questions for the record from 
      Representative Anthony Gonzalez............................   134
    Written responses to questions for the record from 
      Representative Gooden......................................   137
    Written responses to questions for the record from 
      Representative Hill........................................   139
    Written responses to questions for the record from 
      Representative Kustoff.....................................   143
    Written responses to questions for the record from 
      Representative McHenry.....................................   125
    Written responses to questions for the record from 
      Representative Sessions....................................   145
    Written responses to questions for the record from 
      Representative Timmons.....................................   148
    Written responses to questions for the record from 
      Representative Tlaib.......................................   156
    Written responses to questions for the record from 
      Representative Torres......................................   157
    Written responses to questions for the record from 
      Representative Velazquez...................................   159




 
                      CONSUMERS FIRST: SEMI-ANNUAL
                         REPORT OF THE CONSUMER
                      FINANCIAL PROTECTION BUREAU

                              ----------                              


                       Wednesday, April 27, 2022

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:03 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, Sherman, 
Green, Cleaver, Foster, Vargas, Gottheimer, Lawson, Axne, 
Casten, Pressley, Torres, Lynch, Adams, Tlaib, Garcia of 
Illinois, Williams of Georgia, Auchincloss; McHenry, Lucas, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, Budd, 
Kustoff, Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, 
Timmons, and Sessions.
    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.
    Today's hearing is entitled, ``Consumers First: Semi-Annual 
Report of the Consumer Financial Protection Bureau.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Good morning. Today, we welcome Mr. Rohit Chopra, Director 
of the Consumer Financial Protection Bureau (CFPB), before our 
committee. Under your leadership, I am pleased that the CFPB is 
finally back on track. I commend your recent efforts to crack 
down on large financial firms that repeatedly break the law and 
harm individual consumers and working families. The practice of 
slapping a fine on a recidivist corporation while they continue 
to rake in large profits should not be tolerated anymore. There 
must be serious consequences and structural reforms to prevent 
these kinds of repeat offenses.
    Under my leadership, this committee has done extensive work 
to investigate and address compliance failures by Wells Fargo 
that hurt millions of consumers, work that resulted in new 
board leadership and management being installed, as well as 
former Fed Chair, Janet Yellen, imposing an unprecedented asset 
cap on the bank in February 2018, which remains in place to 
this day. I am heartened that you are building on our efforts 
by seeking to hold more corporations accountable, with lawsuits 
filed against TransUnion and MoneyGram for repeatedly breaking 
the law, and I hope these efforts will put other large firms on 
alert, and encourage your banking regulator counterparts to 
similarly use the full suite of enforcement tools.
    Furthermore, I applaud the CFPB's work to put an end to 
discrimination and ensure fairness in small business and 
consumer lending. Specifically, I look forward to learning 
about the CFPB's progress in finalizing the Section 1071 
rulemaking which requires lenders to collect demographic data 
on credit applications from small businesses. This data will be 
critical to our efforts to rule out discrimination against 
minority-owned, women-owned, and LGBTQ-plus-owned firms.
    In addition, it is important that the CFPB combat predatory 
payday lenders and closely monitor student loan servicers as 
well as mortgage servicers that strip America's consumers of 
their hard-earned dollars. On this last point, we should do all 
we can to prevent unnecessary foreclosures, especially for 
Black and Latinx homeowners, who are more likely to still be 
managing the end of a forbearance plan.
    I hope you will comment today on your efforts to coordinate 
with the Administration to ensure that struggling homeowners 
can access the $10 billion that myself and members of this 
committee secured in the American Rescue Plan. They have to 
stay current during the pandemic. Moreover, I commend your work 
to examine the junk fees that financial institutions charge 
consumers. And let us not forget the role of the CFPB in 
promoting responsible innovation. With the rise of financial 
technology, I am so happy, Director Chopra, that the Agency is 
taking action to prevent low-income consumers and consumers of 
color from being discriminated against by the redlining 
practices or algorithmic bias that may be present at some tech 
firms.
    Lastly, I applaud your work on the FDIC Board, ensuring 
that the Agency also fulfills its statutory mission, even when 
a Chair unlawfully attempts to thwart the will of the Board's 
majority to solicit public comment on strengthening bank merger 
reviews. So Director, I look forward to your testimony and to 
hearing about the CFPB's priorities under your leadership.
    I now recognize the gentlewoman from Missouri, Mrs. Wagner, 
for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. Director Chopra, 
under your leadership, the CFPB is out of control. Democrats in 
Congress can't pass their progressive agenda, so they have 
turned to regulators to get the job done. This approach ignores 
statutory limitations, and it actually endangers consumers' 
financial well-being.
    Director Chopra, in the short time since you were sworn in, 
here are just a few examples of this ideologically-driven 
regulatory regime.
    Number one, you led a power grab at an entirely different 
independent agency, the FDIC, which we look forward to 
investigating. You gave the CFPB the upper hand in 
administrative adjudication proceedings. You reignited the 
flawed disparate impact theory. You have scrutinized sectors of 
the financial services industry that left us long disfavored, 
and you have attempted to frame widely-used credit and deposits 
products as harmful or unfair to consumers. What's more, the 
Bureau's regulation by enforcement, which Republicans have long 
criticized, has only worsened under your watch.
    In fact, in your previous testimony before this committee, 
the ranking member asked if you would be willing to clearly 
define either through rulemaking or by supporting legislation, 
the ``abusive'' standard under your Unfair, Deceptive, or 
Abusive Acts or Practices (UDAAP) authority. You declined. You 
said you believed in establishing clear bright lines and rules 
for industry participants, but you have done quite the 
opposite, instead implementing changes in exam manuals and 
procedural rules without public input. Your actions are 
inconsistent with your statements, sir.
    Now, you are regulating by press release, issuing research 
reports with old data, and using press releases to drive your 
narrative, regardless of whether the data back up the claims. 
Your conclusions were clearly predetermined, so asking for 
comment was a waste of time and resources. These approaches are 
beneath the mission granted to you.
    Whether or not Republicans agree with that mission, it 
makes one wonder whether resources are really being devoted to 
pursuing illegal activity and bad actors, or is it all going 
toward the progressive crusade, but how would we know the 
answer to that question? The CFPB was structured by Democrats 
to be opaque. It is not subject to the annual appropriations 
process. Other than these semi-annual hearings on its reports, 
Congress has no role in how the CFPB operates. The Democrats 
wanted it this way. Unfortunately, at a time when consumers are 
seeking credit opportunities or services from new products, the 
CFPB is limiting choice with its actions. This will hurt all 
consumers.
    Last month, during the overdraft fees hearing, we heard 
from Professor Zywicki who reminded us that, ``Exasperation is 
not a substitute for sound economic analysis.'' In other words, 
not liking something is not a reason to forego basic economic 
analysis in favor of politically expedient decisions. This kind 
of behavior creates unintended consequences. It stifles 
innovation, limits consumer choices, and chokes off access to 
credit. And probably most egregiously, it drives up the costs 
of financial services for all Americans, something that I have 
spoken about for 10 years on this committee, particularly those 
whom Democrats claim they are trying to protect.
    The CFPB's actions under your leadership, Director Chopra, 
have not been based on sound regulatory or supervisory 
objectives, but a dictation of your own personal political 
views. That is bad news for Americans already struggling to 
make ends meet, thanks to a Democrat-controlled Washington.
    I thank you, Madam Chairwoman, and I yield back.
    Chairwoman Waters. Thank you. I want to welcome today's 
distinguished witness to the committee, the Honorable Rohit 
Chopra, Director of the Consumer Financial Protection Bureau.
    You will have 5 minutes to summarize your testimony. You 
should be able to see a timer that will indicate how much time 
you have left, and I would ask you to be mindful of the timer 
and quickly wrap up your testimony if you hear the chime.
    And without objection, your written statement will be made 
a part of the record.
    Director Chopra, you are now recognized for 5 minutes to 
present your oral testimony.

  STATEMENT OF THE HONORABLE ROHIT CHOPRA, DIRECTOR, CONSUMER 
               FINANCIAL PROTECTION BUREAU (CFPB)

    Mr. Chopra. Thank you Madam Chairwoman, and thank you, Mr. 
Ranking Member, and all of the members of the committee for 
inviting me to appear before you today.
    American households and businesses continue to recover from 
the economic devastation caused by the pandemic. And at the 
same time, ongoing supply chain disruptions, geopolitical 
strife, and inflation pose real challenges. The CFPB is working 
hard to fulfill the mandate Congress has specifically entrusted 
the Agency with to ensure that markets are fair, transparent, 
and competitive. The Agency is supervising financial entities 
for compliance, handling heavy volumes of complaints, issuing 
guidance to implement Federal law, and bringing enforcement 
actions where appropriate.
    In my written testimony, I detail some of the highlights of 
the direction of our work to protect consumers and the law-
abiding businesses we serve. Perhaps most importantly, the CFPB 
is deeply engaged with stakeholders and market participants 
about the future of the consumer finance ecosystem. And we will 
be very focused on what that future holds and how we can 
collectively shape it in ways that are in line with American 
values.
    Currently, the United States is lurching toward a market 
structure where finance and tech commingle, fueled by 
uncontrolled flows of consumer data and surveillance. This is 
the market structure that has emerged in China, where dominant 
internet conglomerates play an outsized role in financial 
services. These tech giants have access to an extraordinary set 
of data about consumers and about businesses, including 
financial businesses with which they compete.
    Over the last several years, Chinese tech and finance 
giants have developed so-called social scoring that goes beyond 
credit performance and relies on analyzing user habits totally 
unrelated to credit and banking. We really have a choice before 
us. Are we going to turn into a world of algorithmic banking, 
or will we be able to preserve relationship banking? All of 
these developments raise a host of questions about privacy, 
about fraud, and about so much more. The CFPB is currently 
studying these issues as part of our inquiry into Big Tech's 
entry into consumer payments in the United States. We expect to 
issue reports on our research to contribute to the discussions 
that we are all having about the future of consumer finance and 
relationship banking in our country.
    In addition, based on feedback from across the board, we 
are shifting our enforcement scrutiny away from small 
businesses and small firms, and instead focusing on repeat 
offenders and large market actors engaged in widespread harm. 
We are particularly focused on entities that violate formal law 
enforcement and court orders. Our recent lawsuits against 
TransUnion, one of the nation's largest credit reporting 
companies; FirstCash, one of the nation's largest pawn lenders; 
and MoneyGram, one of the nation's largest international 
remittance providers, illustrate this shift. In many of these 
cases, we allege that they violated specific orders that were 
law enforcement-related, to which they willingly agreed.
    And based on feedback from industry, the CFPB is also 
dramatically increasing its issuance of guidance. These efforts 
help entities comply with laws passed by Congress by drawing 
attention to an already-clear legal requirement or providing 
further clarity where needed. They also promote consistency 
among the many government actors responsible for enforcement, 
including other Federal regulators and Tribal and State 
Attorneys General across the country. The CFPB is especially 
interested in areas where guidance can support compliance by 
small institutions and new entrants looking to challenge 
existing dominant incumbents.
    The Agency is also rethinking its approach to regulations 
by prioritizing rulemaking that implements congressional 
directives. For example, we are heavily focused on making 
progress on implementing Section 1033, which is about consumer 
control of data. In addition, I have repeatedly expressed 
concerns about excessively-complicated rules, and I have asked 
staff to put a high premium on simplicity and bright lines.
    In closing, we must always remind ourselves that our 
consumer finance ecosystem serves as a critical infrastructure 
for the growth and prosperity of our country, and I am 
optimistic that we can live up to the directives that Congress 
established at the Agency's creation.
    Thank you again for the opportunity, and I look forward to 
answering your questions.
    [The prepared statement of Director Chopra can be found on 
page 72 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions.
    Director Chopra, I applaud you for your recent work to stop 
large financial firms from breaking the law time and time again 
without adequate accountability. These companies seem to 
believe that they are above the law because when they harm 
consumers, they only get a slap on the wrist from regulators. 
In a recent speech, you rightly pointed out that there is not a 
single senior executive who was truly held financially 
accountable for their role in the 2008 crisis. I am pleased to 
see that the CFPB is finally doing something about these repeat 
law breakers.
    Earlier this month, the CFPB charged TransUnion and senior 
executive, John Danaher, with violating a 2017 law enforcement 
order. The CFPB and the New York Attorney General also filed a 
lawsuit against MoneyGram. These actions to hold recidivist 
institutions accountable build on the committee's important 
work in the last few years to shine a spotlight on the reckless 
and egregious pattern of repeated consumer abuses at Wells 
Fargo, resulting in CEOs and board members stepping down, as 
well as the Fed imposing an unprecedented asset cap on the 
megabank until Wells Fargo cleans up its act, and they have 
more work to do.
    It was disappointing to see in recent reports that Wells 
Fargo allegedly denied more than half of Black homeowners a 
chance to refinance their mortgage, while 72 percent of White 
homeowners had their applications approved, the biggest 
disparity when compared to other lenders, according to 
Bloomberg. I hope regulators will investigate and not be shy on 
imposing escalating structural penalties if they continue to 
break the law.
    Director Chopra, what is your plan to ensure that large 
recidivist institutions face real consequences and change their 
behavior to the benefit of consumers? How do the penalties that 
are imposed when laws are broken change the perceptions of 
other financial institutions regarding the rule of law? What 
authorities do you intend to consider deploying that regulators 
in the past had been reluctant to use?
    Mr. Chopra. Thank you, Madam Chairwoman. I think it is 
actually pretty simple. When small players get caught breaking 
the law repeatedly, enforcers are pretty consistent. They often 
shut them down. They name individuals, and they often refer 
people for criminal prosecution. Yet, when large players do it 
over and over again, sometimes with the same exact facts, we 
see a totally different outcome. There is nothing in law that 
has a leniency factor for larger firms. So if we believe that 
there should be equal justice, we should apply the law equally, 
and that means yes, we may have to go beyond fines, which are 
sometimes just part of the profit that they made. We may need 
to look at stricter sanctions, especially when they are repeat 
offenders, just as we do for smaller firms. And this can 
include limitations and other remedies that are explicitly 
authorized in order to stop the endless repeat offenses again, 
and again, and again, and again.
    Chairwoman Waters. Thank you, sir, very much. I have a 
number of questions that I would like to ask, but we really 
don't have time. But while you are here and we are focused on 
consumers and the lack of protection under the past 
Administration, I want to tell you that now is the time when we 
must shine a bright light on the activities of businesses that 
are taking advantage of inflation. We have inflation and we 
know that, and our Administration is working very hard to deal 
with it, but others are taking advantage of these times, and 
they are raising prices. And we are going to do everything from 
taking more time on the House Floor, to more press conferences, 
in engaging on this issue. You are at the right place at the 
right time. I applaud your work, and I yield back.
    The gentlewoman from Missouri, Mrs. Wagner is now 
recognized for 5 minutes.
    Mrs. Wagner. Thank you, Madam Chairwoman. I would say that 
I believe the inflation crisis that we have ongoing in this 
country, which is devastating to working families all across 
the United States of America, is a result of Democrat policies 
and overspending, like trillions of dollars by this 
Administration.
    Director Chopra, how are you ensuring that the costs of 
regulations and other CFPB actions do not outweigh any 
potential benefit, especially since those costs will, in fact, 
be passed on to consumers?
    Mr. Chopra. I appreciate the question. In the Act, there 
are certain requirements about making sure that there is 
adequate analysis. I am very focused on making sure that we are 
not being excessively complicated in ways that just advantage 
the larger players at the disadvantage of the smaller players. 
So, we try our best to be able to understand what are the 
system changes that need to be made, what kind of vendor work? 
And one of the things that continually comes up when we talk 
with institutions is the role of software providers and how 
they might pass back costs, and the lack of competition with 
community--
    Mrs. Wagner. Respectively reclaiming my time, just very 
clearly, do you, sir, conduct cost-benefit analyses with each 
CFPB action?
    Mr. Chopra. We follow what the statute says--
    Mrs. Wagner. Do you conduct cost-benefit analyses on each 
CFPB action?
    Mr. Chopra. That is my understanding. I don't know if this 
is exactly what is required. I think in the statute, that we 
looked at cost and benefits.
    Mrs. Wagner. Director Chopra, do you intend to engage on 
issues related to interchange fees as part of your plan to 
address so-called junk fees?
    Mr. Chopra. Interchange fees is actually something that is 
regulated by the Federal Reserve Board of Governors. At the 
same time, it is certainly something we hear from the business 
community as a concern, but that is not the purview of the 
CFPB.
    Mrs. Wagner. In your opinion, do you consider fees that 
retail companies pay in exchange for the maintenance and 
operation of card networks to be junk fees?
    Mr. Chopra. A junk fee is something when there is often not 
competition, and so the fee may be something that you don't 
even want or you never even asked for.
    Mrs. Wagner. Develop that a little bit. How do you define a 
junk fee?
    Mr. Chopra. I think many people define it in different 
ways. The way I define it is that it is a fee that is often not 
subject to the full competitive process, and specifically for a 
service you may have never asked for or was forced, where its 
cost is way in excess of what a competitive market is.
    Mrs. Wagner. Apparently, it is very subjective then, is 
what you are saying here. I am not familiar with this 
terminology, and what you are describing is something very 
subjective.
    Mr. Chopra. Many Americans experience this in their day-to-
day life. There is a fee creep that is occurring throughout the 
economy where people are surprised, where people don't know why 
they are being charged for something that they never knew they 
agreed with to. It is a common experience, and we are trying to 
find ways that disclosures can be better.
    Mrs. Wagner. I thought you said this wasn't in your 
purview, so I am confused. Are you involved in this so-called 
junk fee subjective analysis or not?
    Mr. Chopra. No, we are asking people about their 
experiences. In our complaints, we receive a broad range of 
input about fees. We also hear about it from institutions. And 
one of the things we are seeing in the market today is that 
institutions are starting to compete more aggressively on 
fees--
    Mrs. Wagner. Reclaiming my time, I have a couple of 
questions, Director Chopra. Under former Director Richard 
Cordray, the CFPB studied overdraft protection but did not 
identify a need or a rulemaking effort. In the past year, the 
CFPB has hinted at restricting a financial institution's 
ability to offer overdraft products. Where do you expect 
consumers using this product to turn if the CFPB restricts this 
ability?
    Mr. Chopra. We are seeing institutions reduce their 
overdraft fees. So in some cases, they are providing that same 
service for a much lower cost, or they are even providing it 
for free. This is one of the beauties of a competitive market, 
is that when there is real competition, even on the back end, 
people can benefit--
    Mrs. Wagner. Thank you. I yield back the balance of my 
time.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Green, who is also the Chair of our Subcommittee on Oversight 
and Investigations, is now recognized for 5 minutes.
    Mr. Green. Who also, Madam Chairwoman, would like to 
associate himself with your comments about the inflation as 
well as the invidious discrimination.
    Mr. Director, it is an honor to have you before us today. I 
am concerned about invidious discrimination in lending. We have 
indications consistently of how these tests that are performed, 
such as the mystery shopper test that was performed by the 
National Community Reinvestment Coalition in several cities, 
consistently show that White persons are treated differently. 
They get better treatment than non-White persons.
    I have a piece of legislation to deal with this. I am 
convinced that in some of these cases, banks literally can 
build in the penalties as the cost of doing business when they 
are caught engaging in invidious discrimination. I think there 
has to be a stronger penalty. I think that just as when you try 
to defraud a bank, you pay a price and it can be a criminal 
penalty. When you defraud a consumer who is trying to get a 
loan for a business, or for a mortgage, I think there ought to 
be a criminal penalty when it can be proven.
    I am just very much concerned about the way it continues 
and the way we don't seem to be getting the relief that I 
thought we would be getting at this point in time. Can you 
comment on this, please, Mr. Director?
    Mr. Chopra. There is no question that it is important that 
we enforce the laws you have told us to enforce. One of them, 
of course, is the Home Mortgage Disclosure Act (HMDA), and 
another is the Equal Credit Opportunity Act (ECOA). We did 
finalize an action recently against Trustmark National Bank. It 
was a very significant action involving some of the conduct 
that I think you are referring to. I think one of the things we 
are also thinking--
    Mr. Green. Mr. Director, would you allow just a moment of 
interruption? I apologize, but my assumption is that the 
penalty was some sort of fine associated with a monetary 
punishment. Is that a correct statement that it was monetary in 
nature?
    Mr. Chopra. That is right. There are also sometimes other 
provisions about loan subsidy funds. I don't have it off the 
top of my head, but yes, there is usually a monetary penalty.
    Mr. Green. Have you had anybody punished with some sort of 
penalty that is associated with the penal laws, some sort of 
time associated with incarceration? And I am very serious about 
this. If you defraud a bank, you are going to jail, but we find 
that consumers, especially minority consumers, are being 
defrauded, and it is being done with impunity because the banks 
can simply build the penalty into the cost of doing business. 
So, would there be a greater deterrence if we had a penalty 
that carried with it some association with incarceration?
    Mr. Chopra. It is not something I have thought about, but I 
will share that, of course, lying to investors and securities 
fraud sometimes is punishable criminally. And as you mentioned, 
in the Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989 (FIRREA), there is wire fraud, and mail fraud. 
Those are criminal statutes. We don't enforce criminal law. But 
I think as a big picture point, I do agree that, particularly 
for repeat offenders, the monetary penalty on its own just 
doesn't seem to deter future problems. Maybe it does for 
smaller actors, but I am just not convinced that it does for 
larger ones. So it is something we are thinking hard about, 
but, of course, criminal law--we, of course, refer when we find 
potential violations, but it is not in our mandate.
    Mr. Green. Thank you for your commentary and for your 
leadership as well. These are tough times, and these are some 
tough issues that we are having to negotiate, but it is going 
to take people who are willing to deal with the issues. We 
cannot continue to assume that the passage of time in and of 
itself will cure the problem. We have to take bold action 
because, as you have indicated and others have, too, these big 
institutions just make it the cost of doing business. A few 
million here, a few million there, open up accounts in the 
names of persons without getting the person's consent. No big 
deal. Just go on with business as usual. Change out your 
leadership and continue to do what you do best, which seems to 
be to defraud the public.
    I thank you, Madam Chairwoman, and I yield back the balance 
of my time.
    Chairwoman Waters. Thank you. The gentleman from Oklahoma, 
Mr. Lucas, is now recognized for 5 minutes.
    Mr. Lucas. Thank you, Madam Chairwoman. Director Chopra, I 
would like to discuss with you for a moment the Bureau's tribal 
consultation policy. I represent all or parts of 16 different 
Tribes, and the State of Oklahoma alone is home to 39 tribal 
nations. Could you discuss how the CFPB typically seeks input 
from the tribes during the rulemaking process under your 
tenure, and is the Bureau committed to maintaining a meaningful 
dialogue with the tribal governments?
    Mr. Chopra. Yes. I really appreciate this. I myself have 
had a number of meetings directly with both those who represent 
tribal communities and those who represent tribal financial 
services providers, so I have been personally engaged with it.
    With respect to our policy, I do think that we are 
continuing to make sure that we can go beyond the letter of 
that policy and make sure that we are thinking beyond that. One 
of the areas that is quite an area of focus for me is what we 
have launched in terms of rural work. We know that rural 
financial services providers face very, very different 
constraints, but especially those who serve tribes. So, I am 
happy to take more input from you and others as well to make 
sure that we are fully making sure that all of their views and, 
frankly, the unique nature of their business models is also 
incorporated, because I do want to see us do what we can to 
reduce some of the banking deserts that we see across rural 
America, but especially in tribal lands.
    Mr. Lucas. We thank you for respecting that unique 
relationship. Financial innovation continues to drive the 
economy and empower businesses to meet the evolving needs of 
consumers. Director, could you discuss how financial technology 
allows institutions to support financial inclusion, 
particularly among the underbanked?
    Mr. Chopra. I am a huge believer that technology and 
finance provides a huge opportunity to accomplish exactly what 
you are saying. There are a few ways in which we are able to do 
it. Technology also helps people lower their customer 
acquisition costs, lower some of their back office costs, and, 
frankly, allows them to find and innovate on services. Here, 
though, I want to be open: I have a worry that I don't want 
technology and financial services to be dominated by Big Tech 
companies, like we see in China. I want to see that small 
institutions are able to partner with them responsibly in order 
to maintain their relationship banking model, but also 
accomplish the goals you are saying as well as those in the 
non-bank sector as well.
    Mr. Lucas. So, you are saying it is a priority for the 
Bureau to create an environment for financial innovation to 
thrive?
    Mr. Chopra. That is right. I think we want to make sure 
that competition and innovation are part of what we want to see 
as progress. We need to make sure that the market is 
competitive and that is what yields a lot of benefits. And 
there are some concerns in areas of the ecosystem that it could 
be quickly dominated by a handful of tech giants.
    Mr. Lucas. The U.S. economy, Director, is facing 
significant headwinds. We all see that. And we are coming off 
the heels of a pandemic that we are still studying the effects 
of, while experiencing supply chain backlogs and inflation of a 
40-year high, with the Russian invasion of Ukraine exacerbating 
economic uncertainty. As I am sure you can appreciate, 
supporting healthy and liquid markets to protect the U.S. 
economy and small businesses in the face of substantial 
challenges should be a priority. Could you elaborate on how the 
Bureau is working to ensure that its actions do not intensify 
the already-severe economic uncertainty for small businesses 
and, ultimately, the consumer?
    Mr. Chopra. Yes. You raised a good question that small 
businesses, capital markets, are looking at capital markets 
signals, but also frankly, inflation. We actually pore over 
these inflation numbers, and one of the places we see that is 
most likely to impact consumer finance is auto lending. Because 
the price of automobiles, both new and used, is going up, 
sometimes substantially above Kelly Blue Book value, that is 
having an impact on what our auto lenders are seeing. And when 
we meet with them, they tell us that the average loan balance 
is going up. They tell us that there are issues with people 
being able to afford cars. So, we are trying to work with 
everyone to make sure that people can adjust to the realities 
of you need a car, not sometimes just to get to work, but to do 
your work as well.
    Mr. Lucas. Mr. Director, just as long as we maintain 
liquidity in the market so that resources can be available. 
Thank you. I yield back, Madam Chairwoman.
    Mr. Chopra. Thank you, sir.
    Chairwoman Waters. Thank you. The gentleman from Illinois, 
Mr. Foster, who is also the Chair of our Task Force on 
Artificial Intelligence, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman. And actually, as 
part of our work on the Artificial Intelligence Task Force, we 
have been wrestling with what is sometimes referred to as the 
accuracy-fairness tradeoff in things like automated valuation 
models, which are right at the heart of making sure that people 
get a fair deal when they are buying or selling their homes. 
And in February, the CFPB proposed an outline for an 
interagency, or proposed or contemplated interagency rulemaking 
on automated evaluation models.
    There are four factors which are straightforward and easy 
to understand, and then a fifth factor, which is sort of a 
catchall for everything that we will have to deal with on the 
issues of the accuracy-fairness, a tradeoff. What is your 
thinking on the time scale and where that may end up landing, 
the range, if possible?
    Mr. Chopra. Yes. Thanks for the question. Many of you know 
that there are two vehicles in which the appraisal industry 
works. There are human appraisals, but also algorithmic 
appraisals, and this is sometimes referred to as an automated 
valuation model. So what the CFPB is doing is we are collecting 
input now from small businesses about potential changes to that 
rulemaking. The Dodd-Frank Act--or it may be another law--asked 
the regulators to make sure that there is essentially fidelity 
in these valuation models, these algorithms.
    I can't say anything about a specific timeline because 
actually it is the other regulators that are key parts of this. 
It is an interagency piece. But the way I think about this is 
we want an appraisal market that actually gets to accuracy. And 
in many cases, particularly rural areas or urban neighborhoods 
where you see heterogeneous housing types in a specific 
geographic area, sometimes there are severe issues with 
accuracy. So figuring out ways that we can make sure that it is 
accurate, that it is nondiscriminatory, that it is actually 
like what a good approximation of what that home is valued, I 
think that is the North Star. Getting at accuracy is so 
important. Overvaluation on an appraisal is dangerous, and 
undervaluation can really hurt a family's financial future.
    Mr. Foster. Yes. Now, one of the toughest things in the 
accuracy tradeoff is that an accurate estimate of a house's 
worth will contain the fingerprints of redlining generations 
ago. So, how do you view that problem where the dataset that 
you train your valuation models on has a discriminatory past 
history and the discrimination is embedded in the dataset that 
you have available?
    Mr. Chopra. It is not an easy question. I think many of us, 
when we saw Secretary Carson's complaint against Facebook that 
was related to housing, and how the algorithm worked, I think 
that actually was just one sign of where the algorithm lacked a 
sense of transparency about how it was actually making the 
decision. Why am I being denied? And I think this tension 
between algorithmic banking and relationship banking is one we 
are going to have to confront. I don't have a great answer for 
you. It is something, obviously, we are starting to collect 
feedback on, but it is an important question with which the 
agencies have to deal.
    Mr. Foster. Yes. And the other factor that you are going to 
have to end up waiting for is explainability because the most 
accurate models are neural network models where you could say, 
okay, here are all the weights in our neural network, and that 
gets the most accurate result. But when someone says, ``I am 
sorry, your house is not worth what you think it is because our 
neural network says so,'' that is not an acceptable 
explanation. So, how are you going to prioritize explainability 
inside all of these?
    Mr. Chopra. Yes. I want to say that about a decade ago, a 
lot of international bodies weren't focused on banking. They 
were focused on a cross-sectoral basis. Explainability was a 
key feature of something that was successful, because 
otherwise, there will be a lot of downstream effects if no one 
can answer how the algorithm works. We see that in social 
media. We see that even in health now. So I do think when it 
makes decisions, being able to understand how that decision was 
made and what inputs drove it, just feels like a common-sense 
goal that we have to have.
    Mr. Foster. Yes, the rubber hits the road when you have to 
choose between a model that is explainable and one that is more 
accurate than one that is easy to explain. And when you figure 
that out, let me know, because we have been wrestling with that 
on the AI Task Force since our very start.
    My time is up here, and I yield back.
    Mr. Chopra. Thank you so much.
    Chairwoman Waters. Thank you. The gentleman from Florida, 
Mr. Posey, is now recognized for 5 minutes.
    Mr. Posey. Thank you, Chairwoman Waters. Mr. Chopra, can 
you please tell us how you are continuing Director Kraninger's 
commitment to apply cost-benefit analysis to the Bureau 
regulations as required by Section 1022 of the Dodd-Frank Act?
    Mr. Chopra. Yes, sir. As you say, there is a framework that 
is required in the Dodd-Frank Act. One of the things that I am 
putting a big premium on is figuring out, how do you accomplish 
what the consumer protection goal is? And we are dealing with 
this now with some congressional directives. How do you 
actually minimize the cost while getting to the benefits? And 
one of the things I have been trying to impress upon is 
simplicity and bright lines. What we hear from smaller 
institutions especially is that the more we can get to a place 
of bright lines, the easier and less costly it is.
    The other place we are looking at, Congressman, is the role 
of software providers, especially core services providers. 
There are only a handful of them, but most financial service 
firms, especially small banks, use the same set and often 
struggle with the costs of how changes are passed back to them. 
So, we are thinking about this rather surgically. We are trying 
to get more data and talk to a broader set of businesses, 
including those who are technology providers, so that we can 
really understand what happens on the ground. What are the 
patches that need to be done? What are the changes that need to 
be done? What can be done in-house versus through vendors? What 
can be automated? How do you make it streamlined? All of these 
are things that I want to make sure we are doing a better and 
better job of because it is important to be able to get things, 
frankly, to be effective.
    Mr. Posey. Okay. Thank you. Can you give us an example of 
how cost-benefit analysis of a regulation changed or improved 
that regulation issued by the Bureau?
    Mr. Chopra. Sorry. There was a little bit of background 
noise. Just say the first part one more time. I apologize.
    Mr. Posey. Sure. Can you give us an example of how the 
cost-benefit analysis of a regulation changed or improved a 
regulation issued by the Bureau?
    Mr. Chopra. I will want to follow up with you on that, 
because the specifics may be quite before I came. But I think 
there is something that we are looking at currently, which is 
what are the ways and the drivers in which we can reduce costs 
in some ways by making changes to a regulation that really 
won't change the benefits? So again, what are the drivers of 
those costs and how do you dissect that in order to figure out 
how to lower that? But I will admit that sometimes it is very 
challenging to get the right set of data or the right type of 
way in which to fully understand the benefits. Sometimes, 
Congress has actually made a determination. That is the case 
with a lot of congressionally-directed rules, so it is not a 
perfect science.
    Mr. Posey. Yes. That brings up the status of compliance 
with Section 1022(d) of Dodd-Frank, and where Members of 
Congress and the public may access your congressionally-
mandated assessments of Bureau rules and public comments that 
have been conducted so far. Can you give us an example of that?
    Mr. Chopra. We are reviewing older rules, especially ones 
that have not been looked at in a while. Some of them were 
transferred from other agencies, including the Federal Reserve 
Board of Governors. I don't know if we have any specific 
timelines. We are still in the early stages, but we are 
certainly looking at older rules to see if they need to be 
updated or amended based on some of what you are saying.
    Mr. Posey. Great. Can you summarize the nature of public 
comments collected as part of your assessments?
    Mr. Chopra. Sorry, sir. One more time?
    Mr. Posey. Could you summarize the nature of public 
comments collected as part of your assessments?
    Mr. Chopra. Yes. In the rulemaking process, when we propose 
a rule, I think we actually always do. If it goes to a final 
rule, we will always describe this is compliance with the law 
about how the analysis of the comments might have driven 
changes as well as data that was collected through the process 
in order to explain the full regulation.
    Mr. Posey. Thank you. I see my time is up, and I yield 
back.
    Mr. Auchincloss. [presiding]. The gentleman yields back.
    The gentleman from California, Mr. Vargas, is now 
recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I appreciate 
the opportunity, and I thank you for the hearing. Good morning, 
Director Chopra.
    Mr. Chopra. Good morning, sir.
    Mr. Vargas. Thank you for your testimony and for your 
service. We really do appreciate you. As you know, April marks 
the Fair Housing month time to reflect on the 54 years since 
the passage of the Fair Housing Act in 1968, and 45 years since 
the passage of the anti-redlining law, the Community 
Reinvestment Act. However, many people of color still face 
significant barriers to affordable and sustainable housing 
today. According to the latest Home Mortgage Disclosure Act, 
Black and Hispanic applicants are denied conventional mortgages 
at higher rates than their White counterparts. This is 
important, because these families were still denied mortgages 
when they had the same debt-to-income ratios and made the same 
amount of money. I think we need to focus on decreasing 
barriers, especially for first-time home buyers. So, can you 
please speak to what the CFPB's role is in ensuring that 
Americans have equal access in our housing market?
    Mr. Chopra. Sure. While we don't enforce the Fair Housing 
Act, that is something the other bank regulators, and the 
Justice Department, and HUD look at. We, of course, administer 
the Home Mortgage Disclosure Act, so that is some of the data 
that you are referring to. We need to make sure that we are 
living up to that and also enforcing the anti-redlining laws 
that directly relate to the Equal Credit Opportunity Act. We 
did finalize an action in recent months against Trustmark for 
conduct that is related to this where there was evidence of 
liability under the Equal Credit Opportunity Act. So if the 
extent to which we have these types of tips, whistleblowers, or 
where the data leads us to look further, that is certainly 
something that is totally contiguous with the law that Congress 
has directed us to administer
    Mr. Vargas. How can the financial institutions utilize the 
Home Mortgage Disclosure Act to ensure that Americans have the 
needed resources to navigate the local housing markets?
    Mr. Chopra. Actually, you are seeing a lot of interest from 
financial institutions today to really address housing issues. 
We are living in a time where it is not just in coastal 
metropolitan areas that housing is expensive, you are seeing it 
across-the-board; urban, suburban, and rural housing is eating 
up a bigger and bigger amount of people's income.
    We are actually in line with the other analysts that 
project there will be a significant decline next year in 
refinancing activity because of changes in interest rates. I do 
worry when some people miss out on a refinancing cycle. So, I 
do think you are seeing a lot of the mortgage industry, not 
just banks, but non-banks as well, looking at ways to be able 
to serve people, especially to deal not just with high housing 
costs, but really even to get their first home altogether.
    Mr. Vargas. And lastly, maybe with the time I have left, 
you did mention auto lending. My understanding is that a third 
of the inflation that we have in the system right now is 
because of automobiles. Could you comment on that?
    Mr. Chopra. Sure. When we hear from the auto industry and 
auto lending industry, what we are seeing is that it is common 
with other goods that you are seeing driving inflation; it is 
often related to supply chain issues. Specifically, many cars 
today depend on semiconductors that are manufactured pretty 
much only in Asia--I know that is not a topic for today--I 
think many people are worried that their semiconductor 
production has essentially left the United States. That is 
making it tougher for global automakers, including U.S. 
automakers, to get those chips, and that is leading to a 
reduction in new cars coming on the market. And because of 
that, that is also creating a ripple effect on the used car 
market as well, so we see significant elevation in car prices. 
And we are looking at what is the impact on auto lending, what 
is the impact on repossessions?
    We want to make sure that the consumers have a lot of 
choice, can get a competitively-priced loan. Because an auto 
loan for many people is just not an option. You need to be able 
to have a car in much of the country, again, not just to get to 
work, but to do your work; light trucks, especially, are quite 
costly. And for many people in construction trades and others, 
it is a critical input to their business.
    Mr. Auchincloss. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Luetkemeyer, is now 
recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Director Chopra, 
an American Banker article dated December 10, 2021, entitled, 
``Dust-Up at FDIC Portends a Bigger Fight Over Bank 
Regulation,'' describes an 8-page internal CFPB memo containing 
detailed legal analysis of the legal authority of the FDIC. The 
problem is that legal analysis is exempt from disclosure under 
the Freedom of Information Act (FOIA), meaning that the CFPB's 
own confidentiality rules prohibit its release. In fact, the 
only way it can lawfully be released on CFPB's own rules is 
with your personal written authorization. So my question is, 
did you as Director personally authorize the release of this 
memo to the reporters?
    Mr. Chopra. Did I personally release it? I just--
    Mr. Luetkemeyer. Did you personally authorize the release 
of this memo?
    Mr. Chopra. Yes. I am happy to provide it to you as well.
    Mr. Luetkemeyer. We are requesting--
    Mr. Chopra. We do think that this is an important rule of 
law issue. What we saw at the FDIC was, frankly, pretty 
astounding. I have never witnessed--
    Mr. Luetkemeyer. Let me reclaim my time, Mr. Chopra. 
Reclaiming my time, we are going to request a copy of that 
authorization that you sent. If you are willing to release 
internal legal analysis for political and press purposes, it is 
not, as you have described in responses to this committee, 
protected by the liberty process and attorney-client 
privileges, furthermore, because we have asked you about this 
before. We haven't gotten that information, but suddenly you 
are able to release it to the press, but not to us. I'm very 
concerned about that. We are going to be sending you a letter 
requesting production of all internal legal analysis relating 
to your recent decision to assert that UDAAP can be used to 
address allegedly discriminatory conduct outside of ECOA. Will 
provide this material, hopefully without delay?
    Mr. Chopra. To be very clear, the legal analysis related to 
the FDIC was shared with the FDIC.
    Mr. Luetkemeyer. That is not what I am asking, Mr. Chopra.
    Mr. Chopra. No. I just want to make that clear because it 
was not just selectively shared. It was shared with other 
agencies as well.
    Mr. Luetkemeyer. You didn't share--
    Mr. Chopra. We were not able to get--
    Mr. Luetkemeyer. Mr. Chopra, reclaiming my time.
    Mr. Chopra. Yes, sir.
    Mr. Luetkemeyer. You didn't share it with the committee. 
That is the point I am trying to--
    Mr. Chopra. I will look into this. We will work--
    Mr. Luetkemeyer. So, we want to know if you are going to 
give us the information that led up to the decision and all of 
the legal analysis that went with it? Are you going to offer 
those papers to us?
    Mr. Chopra. We will work with your staff to make sure we 
are responsive to getting the analysis about the FDIC and we 
can discuss other topics as well.
    Mr. Luetkemeyer. Okay.
    Mr. Chopra. The FDIC legal situation was a severe crisis.
    Mr. Luetkemeyer. A crisis that was created by you, Mr. 
Chopra.
    Mr. Chopra. I disagree with that. We have never--
    Mr. Luetkemeyer. Reclaiming my time, I have another 
question for you. Yesterday, in front of the Senate Banking 
Committee, you stated that the CFPB General Counsel and the 
Office of the Comptroller of the Currency (OCC) General Counsel 
were the individuals who worked on this memo that I just 
referenced a minute ago. Did the OCC General Counsel agree with 
the conclusions laid out in the memo?
    Mr. Chopra. You would have to ask the OCC that. It is not 
my place to say what the OCC thinks. What I shared was that it 
was a major discussion across all the--
    Mr. Luetkemeyer. Director Chopra, yesterday in the Senate 
Banking Committee, you indicated that the OCC and the CFPB 
General Counsels worked on that memo together. You are not 
aware of that?
    Mr. Chopra. I don't believe I said that. What I said was 
that the legal issues were discussed across the agencies 
because never before--
    Mr. Luetkemeyer. That is not what I have here.
    Mr. Chopra. --has there been the level of stonewalling 
about what the legal authority was. Typically, you can look at 
the bylaws, look at this--
    Mr. Luetkemeyer. Reclaiming my time, Mr. Chopra, 
considering that the CFPB General Counsel led the effort to 
create this memo that was improperly leaked to the press and it 
resulted in the CFPB staff working on an issue related to FDIC 
bylaws, which is well beyond the statutory authority of the 
CFPB, will you make your General Counsel available to the 
committee staff for a transcribed interview regarding this 
internal memo?
    Mr. Chopra. I don't know what you are referring to in terms 
of the General Counsel, but we are happy to work with you and 
your staff to make sure you know all the details.
    Mr. Luetkemeyer. Okay. So, you are willing to allow your 
General Counsel, whether this--
    Mr. Chopra. No, I am not going to make those commitments. I 
do not know what you are referring to on this, but we will work 
with--
    Mr. Luetkemeyer. Referring to the memo that you discussed 
at the Senate yesterday and we just discussed a minute ago.
    Mr. Chopra. We will provide, and we have already provided 
substantial information to so many people about what the FDIC's 
legal authority is, where the dispute was, and--
    Mr. Luetkemeyer. Reclaiming my time, Mr. Chopra.
    Mr. Chopra. --continue to work with you to be responsible.
    Mr. Luetkemeyer. Thank you for helping us with that, 
hopefully. Okay. Recently, my colleagues and I sent you two 
letters, one regarding your statements on repossessions, and 
the other one on so-called junk fees, and I would argue that a 
bunch of your regulations are becoming junk regulations, the 
request for information. Both of those letters ask common-sense 
questions about statements and actions of the Bureau. In both 
responses you sent to all of us, you failed to answer any of 
those questions. So because you refused to answer that, I have 
sent, with Ranking Member McHenry and Representative Emmer, two 
other letters, just this morning demanding that you preserve 
all internal documents related those actions, that you obey 
those requests to retain those documents.
    Mr. Chopra. We will be compliant with all applicable laws, 
and we will make sure that we work with you to make sure you 
understand.
    Mr. Luetkemeyer. Okay. I am asking--
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Luetkemeyer. --you to comply with our request to retain 
those documents.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Chopra. I believe we have already responded to that.
    Mr. Luetkemeyer. No, you did not. You did not respond.
    Mr. Chopra. I will check into it, and we will respond if we 
have not responded.
    Mr. Luetkemeyer. Okay. Thank you.
    Mr. Auchincloss. The gentleman from Florida, Mr. Lawson, is 
now recognized for 5 minutes.
    Mr. Lawson. Okay. Thank you, Mr. Chairman, and welcome to--
    Mr. Chopra. Mr. Chairman, I am having a little bit of a 
tough time hearing from the video. Maybe you could ask the 
Members just to speak up a little? I am just having a tough 
time.
    Mr. Auchincloss. The gentleman from Florida, can you do an 
audio check please?
    Mr. Lawson. Testing one, two, three. Testing one, two, 
three.
    Mr. Chopra. Great. Sorry.
    Mr. Auchincloss. Thank you, Mr. Lawson. You can go ahead.
    Mr. Lawson. Okay, and thanks for being committed. As you 
know, the Consumer Financial Protection Bureau issued a report 
on the challenges faced by Americans in rural communities. I 
appreciate your comments to focus on rural communities, but 
while agriculture historically been the main economic driver 
for rural communities, the number of farmers has decreased over 
several decades. Today, less than 10 percent of the people in 
rural communities are completely working in agriculture. And 
the farmers who remain earn less than 16 percent of every 
dollar spent by consumers on agriculture products, according to 
U.S. Department of Agriculture (USDA) analysis. Can you explain 
how the CFPB plans to support our farmers and how to increase 
access to credit for those in the agriculture sector?
    Mr. Chopra. Yes. Thank you. We need to start recognizing 
that banking in rural counties and communities is really 
different than it is in other parts of the country. We see a 
lot of banking deserts, places where people live very, very far 
from an institution, and often the decline of branches in those 
areas has quite an effect on small business credit. It has an 
effect on other types of credit as well. We want to make sure 
that especially family farmers are able to navigate the ups and 
downs, are able to avoid bankruptcy. We also see issues in 
housing when it comes to appraisals, when it comes to how 
people get mortgages. So, we are going to detail some of the 
challenges that rural communities face, and we are looking 
forward to working with the USDA and others to see if there are 
ways that we can make sure those communities are being served. 
We do not want rural areas being a place where that cannot 
continue to exist. Our country just depends way too much on it.
    Mr. Lawson. Okay. Thank you very much. That is a great 
comment. While our focus is on establishing fair and 
competitive markets, how are you working to level the playing 
field for small, community-based financial institutions to 
compete with FinTech and Big Tech companies getting into the 
financial service space?
    Mr. Chopra. Yes. This is a huge challenge. Small 
institutions and community development financial institutions 
(CDFIs) are thinking about what are they going to do to stay 
competitive with the biggest players that are out there. The 
bigger players are always going to have more access to data and 
very, very detailed data. So part of what we have been thinking 
about is what are ways that small players can use technology to 
be able to promote that in a competitive way, that provides a 
meaningful challenge. I don't have an easy answer for you, 
Congressman, but it is something I am worried about. What we 
see in other jurisdictions, especially China, is that there 
could be a sense where it is only very, very large tech and 
finance companies that completely dominate from front to back, 
and that is not going to lead to a resilient competitive 
system.
    Mr. Lawson. Okay. And another economic driver for rural 
communities is small businesses. People living in rural 
communities are more likely to be employed by small businesses 
than people living in other parts of the country. I introduced 
the Small Business Fair Debt Collection Protection Act to 
encourage entrepreneurship and allow small business owners to 
have similar protection to consumers when having to deal with 
debt collecters. These protections are especially important to 
small businesses located in rural communities since they can be 
more vulnerable to predatory practices.
    Do you believe that expanding the protection that currently 
exists for consumers to small business owners--that these 
businesses would be more likely to succeed?
    Mr. Chopra. I don't know the specifics of your bill, but I 
do think that there have been a lot of troubling practices 
targeted at small business owners. I have met with a range of 
small business owners, including franchisees, about specific 
issues they are facing. So, we are happy to work with you on 
that. And I do think protecting small businesses is also about 
protecting our economy and our country.
    Mr. Lawson. Okay. Thank you, and I yield back.
    Mr. Auchincloss. The gentleman from Michigan, Mr. Huizenga, 
is now recognized for 5 minutes.
    Mr. Huizenga. Thank you, Mr. Chairman. Director Chopra, in 
your testimony you noted that, ``During my tenure, the CFPB 
will dramatically increase its issuance of guidance documents, 
such as advisory opinions, compliance bulletins, policy 
statements, and other publications.'' I think what you failed 
to mention was the CFPB's use of a press release as a way of 
influencing behavior. It was something that I spoke about with 
former Director Cordray at length, and back then, I used the 
phrase, ``trial by press release.''
    And just as I did back then, I read these press releases 
now that you are issuing that my staff sees and that the public 
sees, and more often than not, quite honestly, I am kind of 
shocked by reading them. And what Director Cordray never seemed 
to fully grasp is that--
    Mr. Chairman, can we suspend? We have to ask our colleague 
to turn his microphone off. And I would just say, as a courtesy 
to our witnesses, maybe people ought to show up. That would be 
helpful, okay? Then, he could actually clearly hear us, but we 
have other Members interrupting my time because they can't turn 
their stupid microphones off. So, I would request that you give 
me some time back so that we can properly go through this. Give 
me some time back.
    Mr. Auchincloss. The gentleman will proceed, and all 
Members will mute.
    Mr. Huizenga. And I would expect a very light gavel at the 
end of my 5 minutes.
    What Director Cordray never seemed to grasp was the 
Bureau's ability to influence decisions companies make, not by 
rules, not by policies, but simply by public statements. Just 
last week, I saw you sent out a release on the Bureau's lawsuit 
against MoneyGram, which, by the way, is one of the few 
companies that has been doing a public pushback on this, where 
seemingly very little information was given and no specific 
allegations were made, other than they broke, ``various 
consumer protection laws.'' And this week, the Bureau's 
announcement that they would now examine more closely, ``non-
bank companies posing risks to customers,'' but failed to 
mention what actually prompted this action.
    So, Director, let me ask you this. Since public statements 
are not rulemakings and not binding actions, what are you 
expecting from these pronouncements? And can financial 
institutions just simply ignore the public pressure campaigns 
and go about their business?
    Mr. Chopra. Let me be very clear. With respect to 
MoneyGram, there was not a lack of information about the 
allegations. We actually included a public version of the 
complaint that details it. And by the way, we regularly have 
firms quite clearly launch their own statements--
    Mr. Huizenga. Please don't fall into the--
    Mr. Chopra. We try and make sure that the actual document--
    Mr. Huizenga. Please don't fall into the same trap or the 
same mistake that Director Cordray--
    Mr. Chopra. But to be clear, it is not just the press 
release. There's a guidance document--
    Mr. Huizenga. Here is that--leave MoneyGram--
    Mr. Chopra. No, I know. I am speaking on the other one, 
too.
    Mr. Huizenga. You issue statements that you know affect and 
influence behavior without going through rulemaking, without 
having any kind of true review. And I want to know, what are we 
and what are those companies that you are targeting expected to 
do with that? Can they just ignore it? Is it just commentary?
    Mr. Chopra. We usually, I think, almost always include the 
policy document. And instead of just releasing that, we explain 
it in concordance with the plain language act and we do try and 
offer more details.
    Mr. Huizenga. I am going to reclaim my time, because I am 
not sure how light the gavel is going to be at the end of my 
time. Back in December--
    Mr. Auchincloss. The gentleman will have an extra minute.
    Mr. Huizenga. Thank you, sir. I appreciate that.
    Director Chopra, back in December of last year, you 
criticized the largest banks for becoming more powerful through 
mergers and acquisitions. You also noted that rural communities 
have become, ``banking deserts.'' It is a phrase that has been 
brought up a number of times. I actually happen to represent 
what used to be the poorest county in the State of Michigan, 
and is now the second-poorest county in the State of Michigan, 
very rural and quite poor, and there is one bank in that 
county. And the pressures that they and others who are in those 
situations are feeling are because of added regulations, much 
of that brought on as the result of Dodd-Frank and other 
harmful regulations. And they have often forced these small 
rural community banks to either close or consolidate.
    So quickly, can you cite the statutory authority given to 
the CFPB to review bank mergers and acquisitions, if any? Or 
will you just continue to use name-and-shame, trial-by-press-
release for the bank data?
    Mr. Chopra. No, I believe that statement is specifically 
related to the bank regulators, specifically the FDIC, its 
Board requirement to adjudicate under the Bank Merger Act. So, 
it is directly related to that.
    Mr. Huizenga. Okay.
    Mr. Chopra. I will share that you are right. There are a 
lot of small banks that almost feel that they need to 
consolidate in order to stay ahead. There are a number--
    Mr. Huizenga. Not almost feel. They have to, because they 
don't have the bevy of lawyers that are in there. Okay. I need 
to get back in this remaining little bit. You talk about 
enforcement, something that you and I have spoken about in the 
past. And what I see you proposed on 1071, on the Bureau 
revisiting payday lending or disparate impact, I have some 
concerns. And it is hard for me to know how these rules or 
policies can be anticompetitive to see how they impact small 
businesses. Yes, I think you have that view, but I see it every 
day. And what I want to hear from you today is, can you commit 
to me today that you will not pursue policies that are harmful 
to small businesses? And that goes back to some of these things 
that we were discussing earlier.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Chopra. I would love to take that question for the 
record, but I want to make sure that small players and 
challengers can go up against the big--
    Mr. Auchincloss. The gentleman's time has expired.
    The gentleman from Missouri, Mr. Cleaver, who is also the 
Chair of our Subcommittee on Housing, Community Development, 
and Insurance, is now recognized for 5 minutes.
    Mr. Cleaver. Thank you very much, Mr. Chairman. Director 
Chopra, thank you for being here today, and thank you for the 
work of the CFPB. My background would cause me to know what I 
am about to share, but I am not an anti-lender person. Since 
the beginning of time, human civilization has been involved in 
the lending business, and I have come to the conclusion that 
without lending, there would be no national commercial or 
industrial growth in our world. So, I am not anti-lender.
    We actually have evidence from archelogy and from theology 
that pawn brokers were around a thousand years ago, and they 
were lending by collecting collaterals from the borrowers to 
reduce risk. So having acknowledged that I am concerned about, 
but not opposed to, lending, I am still concerned, and I have 
been since I came to Congress, about the role the government 
can play. So, I want to know what the CFPB now is doing to 
reduce, if not eliminate the predatory practice of ripping off 
people under the pretense of just simply lending.
    Mr. Chopra. Congressman, if I understand the question 
right, we obviously are trying to make sure that everyone is 
following the law and no one is being ripped off. We have been 
doing some research and releasing data about some of those 
markets that you have referred to. We have filed a lawsuit 
recently in the pawn lending area for violations of the 
Military Lending Act and violations of a past law enforcement 
order. We are looking across-the-board, including through our 
supervision, where when we see complaints or fast-growing 
firms, we may be able to supervise those non-banks that which 
is separate from, they already are subject to enforcement 
authority.
    So, we are trying to address all of our tools to be able to 
make sure that people are not ripped off and not cheated. We 
really want everyone to play by the rules and to level the 
playing field for everyone.
    Mr. Cleaver. I appreciate that. I know that the CFPB did 
work in that arena, but I am just wondering whether or not 
there is something as it relates to reform that you believe 
Congress should be doing? I think the CFPB is doing its job. 
But what is it that Congress can do, or is there anything that 
Congress can do to address this whole issue of what we see with 
payday lending, that is almost, in some cases, thievery? What 
can we do? What would you recommend that we do as the Congress 
of the--
    Mr. Chopra. That is a big question. Obviously, we are happy 
to discuss this with your staff, and as much that there are 
bills or other proposals you want us to analyze, we are happy 
to be helpful. But at the end of the day, we want to make sure 
that the market is competitive, fair, and transparent, and that 
people have options and that small players can serve, not just 
large players. So, we are happy to work with you in more detail 
about that.
    I will share that we have seen a number of State laws that 
have been passed over recent years that do relate to consumer 
protection and consumer financial protection. In some cases, 
there is some data about the impacts of it that is available by 
their State banking supervisor or by third-party researchers. 
Often in our market monitoring, we keep that data on hand. and 
to the extent that we can share it or if it is publicly 
available, we are happy to do that with you.
    Mr. Cleaver. I would really appreciate that. Mr. Chairman, 
thank you very much, and if we could get any of that 
information, it would be very helpful. I yield back, Mr. 
Chairman. Thank you.
    Mr. Auchincloss. The gentleman yields back.
    The gentleman from Kentucky, Mr. Barr, is recognized for 5 
minutes.
    Mr. Barr. Director, welcome back. The Bureau recently 
announced it was invoking dormant authority to examine non-bank 
consumer finance companies. Your press release uses the term. 
``FinTechs.'' But the problem with running your Agency by press 
release as opposed to rulemaking is that nobody understands 
what you are referring to when you talk about dormant 
authority, and nobody understands what you are talking about 
when you say, ``FinTechs.'' So, I am going to ask you to be 
very specific here. What category of non-bank firms do you 
assert you have authority to supervise?
    Mr. Chopra. I am trying to be as responsive as possible. 
There are two different authorities established. One is 
enforcement authority. That is where we have to issue civil 
investigative demand, and you go to court to sue them. That is 
the full jurisdiction. Separate and apart from that, Congress 
has established three categories that are subject to bank-like 
supervisory examinations. This is the third category that 
hasn't been used. We have gotten feedback particularly--
    Mr. Barr. What non-banks?
    Mr. Chopra. Okay. I am going to explain. There are non-
banks that are automatically covered regardless of size in the 
statute, all in the mortgage industry, essentially, all in the 
payday industry, and all in the private student loan industry.
    Mr. Barr. Okay. Let me reclaim my time and draw down a 
little bit more specifically. You are the Director of the 
Consumer Financial Protection Bureau.
    Mr. Chopra. Yes.
    Mr. Barr. So you understand this means you lack authority 
to examine businesses to provide credit or funding to non-
consumers, merchants, businesses, correct?
    Mr. Chopra. Yes. If you are not covered under a covered 
person under the Consumer Financial Protection Act for 
enforcement, you certainly can't be supervised.
    Mr. Barr. Okay. Thank you. One of the few areas where the 
Bureau has access--
    Mr. Chopra. Or a service provider, I should say. It is a 
covered person service provider, what is in the statute.
    Mr. Barr. Okay. But you don't have jurisdiction over non-
consumers, one of the few areas where the Bureau actually has 
promulgated a rule in Section 1071. The rule would impose a 
new, massively complex, and burdensome data collection 
requirement that would put commercial loan officers in the 
unfair, uncomfortable, and highly inappropriate position of 
guessing a borrower's race or ethnic background based on visual 
observation or surname when the borrower refuses to disclose 
it. More than a few small rural community banks in my district 
have reviewed your proposed rulemaking, and they have told me 
that they will be forced to completely exit the small business 
lending market, leaving their small business borrowers with 
fewer options and higher costs of credit.
    You talk a lot about competition and helping rural banking 
deserts. And I appreciate and applaud you and the Bureau for 
putting up this focus on rural banking. But what I am telling 
you is that based on the feedback of my constituents, if your 
supervision and enforcement reduces or eliminates financial 
services and products, you are reducing and eliminating 
competition and you are exacerbating a banking desert in rural 
areas. I would like you to respond to that.
    Mr. Chopra. Great. And let me also clarify there, you are 
right. There are some authorities that relate to small business 
lending beyond normal consumer lending. Look, as it relates to 
small business loan data collection, that is an act of 
Congress. I am under a court order right now to be able to make 
progress on it. I did not make the proposal you have referred 
to that was proposed before. We are currently going through all 
of the comments.
    Mr. Barr. Thank you.
    Mr. Chopra. We are trying to make sure that we are looking 
at ways, so that we can reduce and--
    Mr. Barr. And reclaiming my time, the Bureau lacks 
authority over non-consumer businesses other than 1071. But 
what I am saying about 1071 is that I am getting feedback from 
small, rural community banks that you say you never focus on. I 
know you are well-intentioned on this, but they are telling me 
they are going to exit the small business lending market 
because of the complexity and the burdensome nature of this 
rulemaking. I urge you to review 1071. Don't force these 
community banks to exit small business lending in rural areas 
if you care about these banking deserts.
    Finally, in your request for information, you solicited 
public comment on what you refer as junk fees. Can you cite any 
legal or statutory authority that defines, ``junk fees?''
    Mr. Chopra. No, junk fees are something that everyone 
experiences in so many parts of their financial life. We try 
and make sure we are understanding what is happening in terms 
of businesses, in terms of consumer--
    Mr. Barr. I understand that. In my remaining 20 seconds, 
your stated goal in the request for information is to exercise 
your, ``enforcement supervision, regulatory, and authorities.'' 
This implies some illegal activity is happening in the space. 
Outline with specificity the illegal activity you alleged to be 
taking place with regard to consumer financial product fees.
    Mr. Chopra. We are happy to provide you with enforcement 
actions that have occurred under both of my predecessors that 
relate to fees--
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Barr. But there is no due process. Nobody knows what 
you are talking about.
    Mr. Auchincloss. You can put it into the record.
    Mr. Chopra. I will respond for the record on that.
    [The information requested can be found on page 112 of the 
appendix.]
    Mr. Auchincloss. The gentleman's time has expired. The 
gentlewoman from New York, Mrs. Maloney, who is also the Chair 
of the House Committee on Oversight and Reform, is now 
recognized for 5 minutes.
    Mrs. Maloney. Thank you, Mr. Chairman, and I apologize that 
I am literally chairing an Oversight Committee hearing at the 
same time. But I wanted to come in, welcome Director Chopra 
back, and ask him about the Credit CARD Act. This is a bill 
that I authored and passed in 2009, called the Credit Card Bill 
of Rights, to crack down on unfair and deceptive practices in 
the credit card industry, and I am proud to say the Bureau has 
been vigorously enforcing it. Thank you. Since its passage, 
according to the CFPB, it has saved consumers over $16 billion, 
with a ``B,'' a year, each year, and kept that money in their 
pockets instead of going to unfair and deceptive banking fees, 
and has been a much-needed stimulus, I would say, during the 
financial crisis.
    But I worry that if we take our eyes off the ball and don't 
continue to protect consumers, banks will start rolling back 
these protections. And we must continue to keep our eye on it 
and enforce it, and I hope you will, and to also prevent other 
bad practices that card companies use to take advantage of, 
low-income customers, such as exorbitant late fees, really 
large late fees. So, Director Chopra, is there anything more 
than this that the CFPB can be doing to protect and enforce the 
Credit Card Bill of Rights? And is there anything more that the 
CFPB plans to do that would help customers, consumers, 
particularly low-income consumers?
    Mr. Chopra. Thank you for raising that. With credit cards, 
Americans owe over a trillion dollars, I believe right now, 
maybe a little less. And that is one of the core ways in which 
people have small-dollar lending in which they are able to 
charge and get a product and have liquidity. We want to make 
sure that the CARD Act that Congress has passed, that credit 
cards are a competitive market where people can often find 
lower rates. But I am asking the staff to look at whether we 
should reopen the CARD Act rules that were promulgated by the 
Federal Reserve Board over 10 years ago, as I mentioned to one 
of your colleagues, to be able to look at some of these older 
rules we inherited to determine whether there needs to be any 
changes.
    Certainly, late fees is an area that I expect to be one of 
the questions that we solicit input on, and it will be 
important that that market is competitive. The credit card 
market is critical to the U.S., and we need to make sure we are 
living up to the ideals that Congress has set out in the CARD 
Act.
    Mrs. Maloney. Oh, wow. That is absolutely great news. Thank 
you for that. And I am proud to see that the CFPB is fighting 
for consumers and vigorously enforcing the CARD Act and looking 
at other ways to help consumers with predatory finance and 
fees.
    I would like to turn to the Overdraft Protection Act. That 
is another important bill that I have been fighting for, for a 
long time. Bank overdrafts can cause a $3 cup of coffee to cost 
over $40, and these fees take billions out of the pockets of 
hardworking consumers and Americans every year. My bill, the 
Overdraft Protection Act, would crack down on predatory 
overdraft fees and limit the number of instances in which banks 
can charge consumers for simply not having enough money. Since 
we spoke last October, the Bureau, under your leadership, has 
released data on the serious impact that overdraft has had on 
consumer financial health. Your research found that from 2015 
to 2019, the biggest banks have been increasing their overdraft 
fees every year. They charged their consumers $12 billion in 
2019 alone. I personally believe that is outrageous.
    Director Chopra, do you think Congress should pass my 
Overdraft Protection Act, and what does the Bureau plan to do 
on overdraft fees on its own?
    Mr. Chopra. I want to learn more, and we will work with you 
on the specifics of your bill. Generally speaking, we want to 
make sure that there are service and competitive markets, and 
that is exactly what we are starting to see when it comes to 
overdraft. You are seeing more and more institutions market 
that they are offering lower costs on overdraft, with some of 
them eliminating it altogether, and some of them offering some 
of the same services, a little bit modified, but for free. So, 
we want everyone to be able to benefit from that. We also do 
hear a number of complaints about overdraft. There have been a 
couple of enforcement actions related to overdraft, so it is 
certainly an area we know is very, very important to make sure 
is--
    Mrs. Maloney. Can we see a proposed rule? My time has 
almost expired, but--
    Mr. Chopra. We will circle back. But as of right now, we 
are currently looking across-the-board at all sorts of fees to 
determine where we are going to go.
    Mrs. Maloney. Thank you for continuing the legacy of the 
CFPB. Thank you. I yield back.
    Mr. Auchincloss. The gentleman from Texas, Mr. Williams, is 
recognized for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman. Before I 
start with my questions, I want to talk about a troubling trend 
I am seeing in our country: the erosion of personal 
accountability.
    In Texas, we often say, ``a deal is a deal.'' But now it 
seems to be if one side doesn't want to uphold their end of the 
bargain, they go to the government to intervene on their 
behalf. We see this as Democrats are demanding that people 
should not have to pay their student loans, effectively turning 
them into grants, and leaving taxpayers on the hook with 
billions in losses. We have people on this committee and within 
your agency who say there should be no penalty when someone 
mismanages their finances and overdrafts from their bank 
account. Rather than holding the individual accountable, they 
believe financial institutions should be forced to fund these 
unsecured, short-term loans at no cost.
    The CFPB has put out a press release targeting auto finance 
firms--you have mentioned that--warning them about repossessing 
cars simply because the price of used cars has skyrocketed, and 
that is ridiculous. This will undoubtedly make a person more 
hesitant to repossess a car, even though it is their money on 
the line when a person misses his payments. And we shouldn't 
forget that we allowed renters not to pay rent for 2 years 
during the pandemic, and many landlords are still yet to be 
made whole for providing house financing. They still have to 
pay their bank. So on top of all this, we have people wanting 
to diminish the amount of negative information reported to the 
credit bureaus that are used by financial institutions to 
accurately assess the credit risk of borrowers. And as a small 
business owner, which I am, I can tell you that certainty is 
key.
    And we must stop projecting to people that the government 
will intervene when they find their end of the bargain or their 
end of the agreement to suddenly be inconvenient for them to 
uphold. So to recap, you don't have to pay your student loans. 
There are no consequences if you spend money you don't have. 
You don't have to pay your car loan, and you can't be evicted 
when you don't pay your rent. These policies are killing, not 
will, but are killing Main Street America, I can tell you that.
    With that in mind, and with that said, I want to pivot to 
another issue that you can tell bothers a lot of us, and that 
greatly affects small business lending. Now, if we ask everyone 
on this committee room to guess your ethnicity based on your 
appearance and last name, it is very unlikely that everyone 
will land on the same answer. Yet, in your 1071 small business 
data recollection rulemaking, you are asking loan officers to 
do this exact thing when a customer comes in to get a small 
business loan. Not only does this put the loan officers in an 
extremely awkward position that no amount of training can 
rectify, but it would provide inconsistent data that will be 
the basis of enforcement actions coming out of the CFPB and 
legislation coming through Congress.
    Race should not play a part in credit decisions. I worked 
in the 1960s, and I can tell you that during the 1960s and 
1970s, we were required to check boxes based on race. It was 
pure racism. It was racist then and it is racist now. We should 
not go back to those days. So, Director Chopra, while we 
disagree on many aspects of the 1071 rulemaking, I wanted to 
see if I can get a commitment to improve the rule in two areas, 
which should be, frankly, nonpartisan. First, will, you commit 
to increasing the implementation time for affected entities so 
they can properly build their necessary systems to comply with 
the final rule?
    Mr. Chopra. Yes. To be clear, that was a rule proposed 
before I arrived, and we have not yet finalized it. But on the 
issue of implementation, it is obviously something I am asking 
a lot of questions about the comments we have received, looking 
at what is the role of software providers in implementing it, 
how it would work on the ground. I can't give a commitment on a 
specific rulemaking right now, but I am happy to talk more with 
you about it. But the key is we are looking hard at the huge 
body of comments that we got and we will work to get and 
address those comments and finalize it in an orderly fashion 
and in accordance with the court order back around here.
    Mr. Williams of Texas. Okay. I have a second question for 
you. Will you abandon the proposal that has loan officers 
guessing the ethnicity of borrowers if they don't provide the 
information voluntarily? And I think you have answered that 
the--
    Mr. Chopra. We have received a lot of comments. I hear very 
loud and clear the concerns about this.
    Mr. Williams of Texas. Okay. Let me--
    Mr. Chopra. It is similar to a provision in the Home 
Mortgage Disclosure Act that has been around, I think--
    Mr. Williams of Texas. Let me quickly go to one more 
question before my time is up.
    Mr. Chopra. Sure.
    Mr. Williams of Texas. Have you studied how restricting or 
ending overdraft charges would affect some smaller financial 
institutions? We worry about the customer writing a bad check, 
but what about the bank that has to deal with that?
    Mr. Chopra. Yes, there is a separate issue between 
overdraft fees, which sometimes is described as a penalty, and 
sometimes, it is described as a service. Obviously, when it is 
a service where a bank is taking on risk, that is something at 
which we look closely.
    Mr. Williams of Texas. But you had admitted it affects the 
bank, the lending institution, negatively, right, if somebody 
writes a bad check?
    Mr. Chopra. If they clear the charge.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Williams of Texas. Okay. I yield back.
    Mr. Chopra. Sorry.
    Mr. Auchincloss. The gentleman from Illinois, Mr. Garcia, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Mr. Chairman. Thank you 
for holding this important hearing. And of course, thanks to 
Director Chopra for joining us today.
    Predatory loans, including payday, auto title, and high-
cost installment loans, are a debt trap. These high-cost loans 
exacerbate financial difficulties and target low-income 
communities and communities of color. Not only are payday 
lenders more concentrated in Black and Latino communities, but 
consumers of color are far more likely to have a payday loan 
than White consumers, even when controlling for income. For 
example, in Chicago, a person is 13 times more likely to have a 
payday loan if they live in a predominantly Black neighborhood, 
such as Austin, as opposed to a predominantly White 
neighborhood such as Lincoln Park. A national rate cap is 
necessary, and especially urgent given the challenging times 
that we are facing. We must take action to protect our 
communities from high-interest loans and the dangers of 
predatory lending, which is why I have introduced the Veterans 
and Consumers Fair Credit Act, to extend the military's 36% 
interest rate cap to all Americans.
    Director Chopra, we applaud the CFPB resuming Military 
Lending Act examinations, as the examinations are critical in 
ensuring that active-duty military members and their families 
are protected from predatory lending. What do you think the 
impact of the Military Lending Act has been?
    Mr. Chopra. There have been some observations that it has 
done more to protect military families from credit report 
damage, and from certain debt collection practices. And 
ultimately, there is a view that financial readiness for 
service members is also about force readiness. There has been 
some work done by the Department of Defense which shows that 
loss of security clearance or severe financial distress does 
increase separations, and that has costs for taxpayers, and it 
also really limits, for those who want to build a career in the 
military, their ability to stay on and use their skills. So, I 
do support the Military Lending Act. I have worked at the JAG 
school before and have seen some of it on the ground. We are 
enforcing it and we are happy to be working with the DOD and 
others on it.
    Mr. Garcia of Illinois. Thank you. Director Chopra, there 
are virtually no meaningful restrictions on short-term payday 
lending in the majority of the States. Although the payment 
protections portion of the 2017 payday rule will help consumers 
when it goes into effect, large gaps remain, and the 
fundamental business model of these predatory lenders remains 
unchanged. To address this problem, I have introduced the 
Veterans and Consumers Fair Credit Act. Can you explain how the 
lack of meaningful restrictions on short-term payday lending 
has impacted low-income communities?
    Mr. Chopra. Certainly we are responsible for supervising 
payday lenders. We are certainly looking at that market 
actively. We recently released a research study about the 
impact of certain State laws, specifically laws that provide 
extended repayment plans, and offered some observations about 
their efficacy. There is no question that there are challenges 
when it comes to people taking out high-cost loans. The 
rulemaking that you refer to, there are elements of it that are 
still subject to litigation, and that process is ongoing.
    At the end of the day, we want to make sure that there is a 
fair and competitive market, that people have options, and that 
people can go to a place where they get a good competitive 
rate. Many people do have trouble in this market because they 
often get in a cycle where they can't ever get out, and that is 
obviously something that leads to real harm to their credit 
reports and to debt collection. So, we are very attuned to the 
problems. We share your concerns and we are happy to be 
responsive as you develop legislation and to provide technical 
advice on it.
    Mr. Garcia of Illinois. Thank you. And in my remaining 20 
seconds or so, several States, including my home State of 
Illinois, passed a 36-percent rate cap last year. Do you think 
that these trends in the States will have an impact on the 
broader financial marketplace?
    Mr. Chopra. Certainly, State laws are a huge part of the 
consumer protection framework. The system is based on 
federalism, and we certainly see differences in our complaints 
and market monitoring based on States and their protections.
    Mr. Garcia of Illinois. Thank you. Mr. Chairman, I yield 
back.
    Mr. Auchincloss. The gentleman from Minnesota, Mr. Emmer, 
is recognized for 5 minutes.
    Mr. Emmer. Thank you, Mr. Chairman, and thank you, Director 
Chopra, for taking the time to testify to this committee today. 
Sir, the last time you were here was October 27, 2021, last 
year, which actually was about 2 weeks before you were sworn in 
to your current position.
    Mr. Chopra. Yes, after.
    Mr. Emmer. And as I understand it, at that time you were 
preparing to force a request for information (RFI) regarding 
bank mergers under the FDIC's agenda. You presented a draft to 
FDIC Chair Jelena McWilliams just a few days after you appeared 
here before this committee. You did not, however, share those 
plans with us during your testimony on that day in October, and 
I am hoping you are going to provide some clarity for all of us 
now.
    Sir, do you remember presenting that document to Chair 
McWilliams back in October?
    Mr. Chopra. The document--
    Mr. Emmer. The answer is, ``yes'' or ``no?'' Do you 
remember presenting the document to her?
    Mr. Chopra. I am just giving you the full context.
    Mr. Emmer. No, I don't want that. My question is, sir, 
respectfully--
    Mr. Chopra. But it is a hard question. Let me give you the 
context.
    Mr. Emmer. It is simply yes or no.
    Mr. Chopra. The document was circulated--
    Mr. Emmer. Sir, do you remember giving her the document?
    Mr. Chopra. I remember discussing the document with every 
board--
    Mr. Emmer. So, you don't remember giving Chair McWilliams 
the document that we are talking about?
    Mr. Chopra. You mean physically?
    Mr. Emmer. Well, you did give it to her? Yes, you did 
provide it to her.
    Mr. Chopra. Okay. It was provided to all of the board 
members and the FDIC staff.
    Mr. Emmer. Sir?
    Mr. Chopra. And it was not drafted by me.
    Mr. Emmer. Allow me to do my job. I know you are here and 
very kindly sharing your time with us, but there are some 
things that I would like to get to the bottom of before we are 
done. And I would appreciate it if you would just do me the 
courtesy and answer the questions that I asked. Since you don't 
necessarily remember, I will take from your answer, physically 
providing Chair McWilliams at that time with the language--
    Mr. Chopra. Electronic--
    Mr. Emmer. --that you proposed for the RFI, I assume you 
don't remember that you did provide it on October 31st, and, by 
the way, that was 4 days after you testified before this 
committee. That draft RFI, I am interested, Director, how did 
that come about? Did you write it yourself? Did you have some 
help from the staff at the CFPB, or maybe even from staff at 
the Federal Trade Commission or people from outside the 
government?
    Mr. Chopra. No, it was provided by the FDIC, so staff under 
the direction of board members at the FDIC provided it. We all 
had discussions about it repeatedly.
    Mr. Emmer. Sir, you realize that you are here to provide 
accurate testimony. I have an email that recounts how this 
actually happened, and I guess I would have expected that it 
would be staff experts at the FDIC, but they were not involved 
in the process of preparing materials for the FDIC's docket. 
You did not give them that opportunity, and the documents and 
information that we have obtained so far show that Chair 
McWilliams was willing to work with you and have the experts at 
the FDIC prepare an RFI for the FDIC's docket.
    Again, we even have an email from November 17th to you from 
the FDIC Deputy General Counsel that says, ``The Chairman has 
repeatedly expressed her willingness to work with the staff and 
has discussions with FDIC staff on this issue.'' That is why, 
sir, I was surprised that you testified to the Senate yesterday 
that you were somehow prevented from communicating with the 
FDIC staff, because information that we have appears to show 
that the Chair made the staff available to you and you declined 
that offer.
    Mr. Chopra. That is not true.
    Mr. Emmer. Sir, reclaiming my time, here is what I mean. In 
November, after you presented your RFI to Chair McWilliams, the 
Acting Comptroller of the Currency, Michael Hsu, called her 
when she was at the airport about to board a flight to Europe. 
And on that call, they discussed a plan to have the FDIC staff 
prepare a version of your RFI for a vote. Chair McWilliams 
offered to instruct the staff to expedite your bank merger RFI 
by December 6th. Isn't that correct?
    Mr. Chopra. No.
    Mr. Emmer. Well, it is correct.
    Mr. Chopra. It is not correct.
    Mr. Emmer. And Mr. Hsu by the way, sir--
    Mr. Chopra. It is not correct at all.
    Mr. Emmer. And did Mr. Hsu, sir, share that offer with you?
    Mr. Chopra. Sorry?
    Mr. Emmer. Did Mr. Hsu share that offer to do your language 
and have something ready for a vote by--
    Mr. Chopra. When you say, ``your language,'' this is 
language by the board--
    Mr. Emmer. Look I am going to run out of time. So, I am 
just going to--
    Mr. Chopra. --associated in order to figure out how to get 
to compromise ultimately.
    Mr. Emmer. --at this point, you literally ignored 88 years 
of collegial operations together and tried to force the FDIC to 
do some agenda that you have rather than working through the 
process.
    Mr. Chopra. Well, no, I am going to defend the rule of law.
    Mr. Emmer. It looks like we have a lot here to learn about 
your effort to lead a hostile takeover of the FDIC, and I look 
forward to receiving all of the documents that we requested 
early in March.
    Mr. Chopra. We must defend the rule of law and make sure 
that these agencies are following the law.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Emmer. Thank you, Mr. Chairman.
    Mr. Auchincloss. The gentlewoman from North Carolina, Ms. 
Adams, is now recognized for 5 minutes.
    Ms. Adams. Thank you very much, and I want to thank the 
Chair for holding the hearing today. Director Chopra, thank you 
for being with us. Like I said when you testified before us in 
October, it is nice to have you behind the wheel of the CFPB. 
The work that you are doing is critical, from protecting our 
consumers to making sure that our financial regulators mirror 
the diversity of our nation. So, thank you for your efforts 
there.
    Director, I am extremely concerned with the levels of 
student debt in this country, which amounts to about $1.8 
trillion, and that is why I believe we need to cancel $50,000 
in student loan debt for Federal student loan borrowers. And I 
was proud to join my colleague here on the Financial Services 
Committee, Representative Nikema Williams along with 
Representatives Deborah Ross and Haley Stevens, in introducing 
our Clean Slate legislative series to make real steps toward 
helping our students. But, in particular, I agree with you that 
we need a concrete plan on student loan debt relief before 
payments restart in September.
    Can you discuss why it is so critical to have a plan in 
place for student loan debt forgiveness, one way or another, 
for our students, the services of that debt, and our economy?
    Mr. Chopra. Yes. When student borrowers have to make 
repayments, if they are wondering about whether there is going 
to be some change in policy, about what their total balance 
will be, it may be difficult. I think it is important that if 
there are going to be any decisions, that it is known before 
some of those borrowers have to begin their repayments again, 
which many of them otherwise might make a crapshoot. So, I 
think there are a lot of people wondering what is going to 
happen. And I think as soon as there are answers and clarity, 
one way or another as you say, it will make the process going 
forward for repayment clear.
    Ms. Adams. Okay. Great. When we spoke last time, we 
discussed the Public Service Loan Forgiveness (PSLF) Program, 
and I believe that service is the rent we pay for our time on 
Earth. Our young folks who are becoming teachers aren't doing 
it for the money. Of course, I taught for 40 years, and I would 
say you are not going to get rich doing that. They did it to 
serve the community, and that is why it is so important that we 
make sure that the PSLF Program is functioning as smoothly as 
possible. Director, can you discuss what the CFPB is doing now, 
to protect student loan borrowers who are pursuing the PSLF?
    Mr. Chopra. Yes. In our examinations, we have shared with 
institutions about where there might be problems if they may be 
deceiving borrowers about their benefits. Here is the most 
important thing. If you are a mortgage borrower, or if you are 
a student loan borrower, or whatever you are borrowing, and if 
you have contractual or legal entitlements about your rights 
embedded in the contract or in law, it is important that the 
servicer does not deceive you about what they are. We want to 
make sure that borrowers, when in a mortgage, are able to get a 
loan modification, which is often a win-win for both borrower 
and creditor to stay off a foreclosure track.
    The same thing is true with student loan default. When 
people have reached the eligibility or even just inquiring 
about their eligibility, they need to make sure that they are 
getting accurate information. We depend on loan servicers for 
that type of information, for clear answers about our accounts. 
And it is no good when you have firms that decide that it is 
cheaper for them to provide wrong information. Most of these 
firms are doing the right thing, but the ones who don't, 
disadvantage the entire industry.
    Ms. Adams. Right. With respect to the PSLF, can you 
describe any efforts that you have with the Department of 
Education to issue guidance to those borrowers and servicers to 
minimize efforts on the front end that would require 
enforcement action?
    Mr. Chopra. Yes. Some of that has already been done. We are 
happy to share that with you. But I think the most important 
part is a lot of borrowers made, in some ways, career decisions 
based on that program. They decided to stay in teaching. They 
decided to stay in the military because there was a sense that 
the law allowed them to get part of it canceled at the end. And 
the fact that so many have been stymied is a huge problem and 
we need to make sure we mitigate further damage from it.
    Ms. Adams. Thank you so much. And teaching has been a noble 
profession for me and for so many others. Thank you very much.
    I yield back.
    Mr. Auchincloss. The gentleman from Georgia, Mr. 
Loudermilk, is now recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. Director Chopra, 
thank you for being here. I have a few questions, some 
interesting comments and questions. Some have gone, in my 
opinion, unanswered, but just to get some background questions, 
are overdraft fees illegal?
    Mr. Chopra. Overdraft fees, when they comply with all of 
the regulations--
    Mr. Loudermilk. Are they legal?
    Mr. Chopra. Yes.
    Mr. Loudermilk. Okay. You mentioned overdraft services with 
which you have problems?
    Mr. Chopra. No, I think what I heard from your colleague 
was that sometimes overdraft was described as a penalty and 
sometimes it was described as a service.
    Mr. Loudermilk. Are either illegal?
    Mr. Chopra. No.
    Mr. Loudermilk. No. Okay. What about mortgage or 
origination fees? Are they illegal?
    Mr. Chopra. No, as long as they--
    Mr. Loudermilk. Okay.
    Mr. Chopra. --comply with what is required under the law--
    Mr. Loudermilk. Right. What about checking account 
management fees?
    Mr. Chopra. Checking account management?
    Mr. Loudermilk. Yes, the fee that you may pay on the 
checking account.
    Mr. Chopra. Like a monthly fee?
    Mr. Loudermilk. Yes.
    Mr. Chopra. Yes, if there are requirements under the Truth 
in Savings Act and others to do that.
    Mr. Loudermilk. Okay. As I understand it, you have kind of 
grouped these together as junk fees?
    Mr. Chopra. No.
    Mr. Loudermilk. These are things that you consider as junk 
fees?
    Mr. Chopra. No, I think anywhere you are getting a bona 
fide service is--we want banks to make money for services that 
they are providing. We see this all over the economy. We are 
sometimes getting charged for things we never even asked for or 
never even wanted.
    Mr. Loudermilk. Okay. But does that mean that these are 
currently illegal?
    Mr. Chopra. Actually, if there is any deception around it--
    Mr. Loudermilk. No, beside deception, just the fact that 
there may be fees associated with something?
    Mr. Chopra. Right. There are some State law issues, but the 
ones you have mentioned, there is not a per se ban on that.
    Mr. Loudermilk. Okay. So who is responsible for determining 
if something is legal or illegal? What entity is 
constitutionally given the power to make law?
    Mr. Chopra. Well, Congress and the President.
    Mr. Loudermilk. No, Congress is.
    Mr. Chopra. Sorry. The President signed the--
    Mr. Loudermilk. It is concerning that you don't know the 
basics of our Constitution. The President is not.
    Mr. Chopra. No, I know that the President signs law bills 
into--
    Mr. Loudermilk. Right. So, it is Congress. My question is 
in your job, and from what I am hearing through the testimony, 
is it your job, which it is, but I am just trying to get your 
opinion, is it your job to enforce a law, or what you 
personally believe is wrong?
    Mr. Chopra. It is enforcing the law and enforcing the law 
as written, and, in some cases, Congress has specifically 
required agencies to promulgate disclosures to enforce certain 
provisions. And often, we need to look at what is working and 
what is not in order to make those legal requirements that 
Congress has often required--
    Mr. Loudermilk. How do overdraft fees--
    Mr. Chopra. --to help them to ensure that they are 
effective.
    Mr. Loudermilk. How do overdraft fees fit into that?
    Mr. Chopra. Overdraft fees are subject to provisions of the 
Truth in Lending Act.
    Mr. Loudermilk. This is the issue we are having here. Now, 
let me ask you this question.
    Mr. Chopra. Yes.
    Mr. Loudermilk. It appears that you are a person who really 
likes to regulate. I understand there are folks out there who 
really like regulations. Do you believe that businesses, banks, 
even small banks, or whatever, incur costs for the regulations 
that you impose on them?
    Mr. Chopra. No. The key is that regulations should work to 
promote markets that are fair, transparent, and competitive is 
exactly--
    Mr. Loudermilk. My question is, do these businesses incur 
additional costs to implement these regulations?
    Mr. Chopra. Usually, if there are--
    Mr. Loudermilk. Yes?
    Mr. Chopra. If there is a bright-line ban on something, 
maybe not, but--
    Mr. Loudermilk. I am reclaiming my time here. With 
regulation, businesses incur costs. So you take something, a 
fee that is to recoup a cost, like with an overdraft, right? 
And if you are not allowing or you are going to punish a 
business that collects an overdraft fee, then who is going to 
incur that cost? It is not going to be the bank. It is going to 
be the consumers who do not overdraft.
    Mr. Chopra. I think--
    Mr. Loudermilk. So, how is that consumer protection?
    Mr. Chopra. No, you highlight a good point about cost 
recoupment. One of the important things is financial 
institutions, other businesses may incur costs, but then there 
is also a price, and the price ideally is set by the 
competitive market. And I think that is actually what we are 
starting to see in overdraft. You are starting to see banks 
look at what are their costs and how can they still make the 
numbers work and compete. And some of them are actually 
offering that service now for free because they are using it as 
a vehicle to offer a broader suite of services that is in their 
business interests. That is how the market works.
    Mr. Loudermilk. Obviously, my time has expired, so I will 
submit the rest of the questions for the record, Mr. Chairman. 
Thank you.
    Mr. Auchincloss. The gentlewoman from Iowa, who is also the 
Vice Chair of our Subcommittee on Housing, Community 
Development, and Insurance, is now recognized for 5 minutes.
    Mr. Chopra. Sorry. Do you mind if I offer a clarification 
to the previous question just for the record?
    Mr. Auchincloss. No.
    Mr. Chopra. Okay. Sorry.
    Mr. Auchincloss. You can do that when my time comes up.
    Mr. Chopra. Okay. Great.
    Mr. Auchincloss. If the Chair will allow for me to do that.
    The gentlewoman from Iowa, Mrs. Axne, is now recognized for 
5 minutes.
    Mrs. Axne. Thank you, Mr. Chairman, and thank you, Director 
Chopra, for being here. I appreciate that.
    Last month, the CFPB put out a report noting that medical 
debt is less productive for credit reports, and you pointed out 
as well some of the harm that it could do. After that report, 
we saw three of the main credit bureaus take steps to reduce 
the importance of medical debt on people's credit reports, 
which is good news. So, can you explain the changes that were 
made, and if you believe that they are really important to 
making a more positive change in people's lives? And what is 
the CFPB's role in this area?
    Mr. Chopra. Sure. I don't know them encyclopedically, but 
as I understand it, the three credit reporting companies, the 
nationwide credit reporting companies are making certain 
changes about when they will report allegedly owed medical debt 
on credit reports. I believe they are extending the amount of 
time for it to appear. They are also only going to include, 
they say, certain debts above a certain threshold. And there 
are some other changes they are making as well.
    You are right that there has been evidence to suggest that 
medical debt is not necessarily a very good predictor of credit 
performance on other loan obligations. We are actually looking 
hard about, given the challenges of accuracy, given the 
challenges that we see throughout the system, and also with 
respect to health privacy, because one of the things we have 
found is consumers are even reporting that collections issues 
are raising the cost of what their actual medical procedure 
might have been.
    We should determine whether it is appropriate to include 
this information at all. We are currently looking into that, 
and we will happily report back on that question with you.
    Mrs. Axne. Thank you so much for that, especially given 
some of the horror stories that I have heard lately about debts 
being sent immediately to collections after medical treatment. 
I appreciate you looking into this.
    Secondly, I want to turn to a topic that is been discussed 
here, and that is student loans. We know how important this is 
and we spoke about this in October, but I have a specific 
question that I am curious about. My office just had someone 
reach out because they are unable to get their loan forgiven 
after being defrauded by a for-profit college years ago. And I 
know that falls under the jurisdiction of the Education 
Department, but I wanted to know what you thought we could do 
to better protect borrowers from this ever happening to begin 
with, because if we can avoid it, that would be much better. 
The Student Borrower Protection Center released a report 
showing for-profit schools now offering Buy Now, Pay Later 
loans, my goodness, in place of normal student loans.
    Have you heard of these similar practices, and what can the 
CFPB do to keep these things from happening, address the issues 
with those folks and those for-profits who got defrauded? What 
are some of the root causes that we can get after so we can 
avoid these things?
    Mr. Chopra. Yes, we watched the education space as part of 
our ordinary required market monitoring, and you do see some 
new types of products that are entering outside of the banking 
system and outside of the Federal student loan system. It is 
obviously a place that we don't have too much information on. 
We just are kind of noticing those developments. We obviously 
want to make sure that there is clarity, transparency, and 
options about where people are going to borrow across every 
single market.
    So, I don't have too much for you on that, but I certainly 
would worry if there were ways in which students were being 
taken advantage of. People, when they borrow, are doing it for 
the purpose of bettering themselves and their families and to 
climb the economic ladder, reach the American Dream. And a lot 
of people have been made worse off by their experience with 
student loans, and it has a really deleterious effect. Many 
people say, ``I don't even want other people in my family to go 
to college because it actually ruined my life.''
    The more we can make sure that there is adherence to the 
existing law and to figure out how we can make sure that 
education is getting people ahead and not pushing them behind, 
that is really critical for, I think, what we want to achieve 
across-the-board as Americans.
    Mrs. Axne. Thank you, Director. I appreciate that. And 
anything that can be done to keep students from getting into 
this type of situation to begin with is what I am hoping we can 
address through the CFPB. Keeping money in folks' pockets and, 
to your point, giving them a future through an education is 
what we are looking for. I appreciate your words here today and 
the work that you are doing.
    And I yield back the rest of my time.
    Mr. Chopra. Thank you, Congresswoman.
    Mr. Auchincloss. The gentleman from West Virginia, Mr. 
Mooney, is now recognized for 5 minutes.
    Mr. Mooney. Thank you, Mr. Chairman. Director Chopra, 
thanks for being here again. I have a question relating to 
Section 1071, the Small Business Lending Data Collection rule. 
It may have been proposed before your time, I understand, but 
it is now up to you to shepherd that rulemaking to a 
conclusion. In the proposed rule, the CFPB's cost analysis 
indicated that small businesses would not be impacted much by 
its implementation. However, the Small Business 
Administration's Office of Advocacy, which is tasked with 
advancing the interests of small businesses and regulatory 
matters, disagreed. The Office of Advocacy says that the 1071 
rule will raise burdens on small businesses and increase their 
cost of credit. Director Chopra, how can you square the 
assertations in the 1071 cost-benefit analysis with the Office 
of Advocacy's concerns?
    Mr. Chopra. I don't have the exact text from the Office of 
Advocacy comment letter, but what I will say is that we are 
required, before finalizing the rule, to conduct a process to 
solicit input from small entities, and that has been done. To 
date, I think the small entities that were consulted were 
mostly small creditors. Separate and apart, we have received 
comments from small businesses, from banking associations, and 
others.
    You raise the point about, how do we make sure that we can 
minimize the challenges, and your colleagues have raised issues 
about the implementation timeline, and what they will be 
required to do. There is an open rulemaking. We are under a 
court order to make progress on it. It is required that we 
implement this by law. So, we are going to be looking carefully 
at all of this information and try to land at a result that 
faithfully implements what Congress has passed, but also make 
sure that we are thinking of all of the on-the-ground issues 
that you have raised.
    Mr. Mooney. Okay. Thank you. When you say for most 
agencies, rules and their cost-benefit analysis are reviewed by 
the Office of the Management and Budget (OMB), which uses peer-
reviewed, well-respected frameworks for their regulatory 
review, such as OMB Circular 84. As you know, the CFPB is not 
subject to OMB review because of its status as an independent 
agency. So, compared to the requirements of agencies under the 
OMB review, the Bureau's analysis is not as thorough. For 
example, OMB Circular 84 includes provisions relating to the 
distributional effects of a proposed rule, explicit guidelines 
on measuring indirect costs, probability models, and other 
important metrics not currently included in CFPB rules.
    Director, you have previously stated that cost-benefit 
analysis should be rigorous, robust, and grounded in data. If 
Congress were to expand the statutory requirements of the 
CFPB's cost-benefit analysis to bring it in line with the 
recommendations of OMB Circular 84, wouldn't doing so meet your 
goal of a rigorous, robust, and grounded cost-benefit analysis?
    Mr. Chopra. Currently, the analysis of our regulations does 
look at a broad range of factors, and, by the way, those 
circulars are certainly something that all agencies look at in 
making those determinations. So, I hear you loud and clear that 
you want to make sure we are looking carefully at what the 
impacts are, looking carefully at how to do it, making sure 
that we are finding data and looking at different categories of 
that. I hear you loud and clear on that.
    We will look through this carefully as we adhere to the 
court's requirements and adhere to Congress when it comes to 
getting that rule implemented because it has not been done in 
11 years.
    Mr. Mooney. Okay. Thank you. Let me say in closing, the 
Consumer Financial Protection Bureau's recent Section 1071 
rulemaking on small business lending data collection exposed a 
deeper problem that has plagued the CFPB since its inception, 
which is a weak statutory requirement to analyze costs and 
benefits. The Bureau may be independent of OMB's rulemaking 
oversight, but it should absolutely be subjected to a thorough 
cost-benefit analysis framework. My bill, the Transparency in 
CFPB Cost-Benefit Analysis Act, would fix some of the problems 
I have highlighted today. It would require the Bureau to 
consult with the Small Business Administration's Office of 
Advocacy to minimize the cost of regulations on small 
businesses, but also provide a striking cost-benefit analysis 
holding the CFPB to many of the same standards as other 
agencies.
    Thank you. I yield back.
    Mr. Chopra. Thank you, sir.
    Mr. Auchincloss. The gentleman from California, 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. Thank you. Director Chopra, when you last came 
before the committee, I asked you whether the CFPB was close to 
completing its statutorily-required obligation to impose 
ability-to-repay requirements on the Property Assessed Clean 
Energy (PACE) loans. Of course, we adopted that law in May of 
2018. In May of 2019, you had gotten to the point where you had 
proposed regulations and the comment period had ended. When you 
came before us then, you had only been on the job for 2 weeks, 
and now it has been another 6 months. When are we going to get 
the notice of proposed rulemaking, closed comment period ready 
to go to final regulations on the PACE loans?
    Mr. Chopra. As I noted in my written testimony, we are 
prioritizing the rulemakings that have been required by 
Congress. This one is a challenging one. I do anticipate that 
we will get to a final rule. I will have us brief your staff 
when we have a little bit more understanding on timing, but you 
should not have any worries that we are going to get it done. I 
am not going to do what we see in other agencies, where they 
just never implement something required by law.
    Mr. Sherman. My doctor says I have a limited life 
expectancy, so let us--
    Mr. Chopra. I hear you. We will get that done, and it is an 
important rule.
    Mr. Sherman. I look forward to getting it done. You are so 
close. You closed the comment period a couple of years ago.
    Mr. Chopra. Just so you know, the comment period, that was 
on a different phase of it, but we will get you the 
information, yes.
    Mr. Sherman. Okay. Good. When we look at consumer loans, we 
probably ought to have the same level of consumer protection, 
whether it is your traditional regulated bank or credit union 
making a loan, or these new Buy Now, Pay Later lenders.
    In a recent marketing inquiry, the CFPB has raised a number 
of concerns about that industry, including the risk that these 
firms are skirting some regulations with which other consumer 
lenders have to comply. I am particularly concerned that many 
of these products seem to lack an ability-to-repay requirement, 
but they also have clear policies on how they treat return 
purchases and disputes. And they seem to have an unknown credit 
reporting process. Do you share these concerns? And does the 
Bureau intend to regulate this market to protect consumers?
    Mr. Chopra. I don't have any conclusions on this, and I 
would really characterize where we are in this as questions. We 
have issued a series of questions through those orders that you 
referenced to be able to get to answers from the key players on 
the use of data. As far as credit reporting practices and some 
of the other issues you mentioned, we are expecting to issue 
one or more reports related to this. It is part of a trend we 
are seeing of finance and commerce apps converging. And then--
    Mr. Sherman. That brings me to the last question I am going 
to try to squeeze in, on another mixing of commerce and 
lending. In October, the CFPB ordered six technology platforms 
offering payment services to turn over information about their 
products, plans, and practices when it comes to payments. You 
had previously expressed concerns about these companies. They 
can gain tremendous scale and market power. And you have 
highlighted the risk of Big Tech exploiting these platforms by 
engaging in, in fact, financial surveillance by combining 
consumer payment data with consumer browsing data. I would be 
interested to hear if the CFPB's concerns have increased as a 
result of its inquiry and how this might influence your 
approach to its Section 1033 rulemaking?
    Mr. Chopra. Yes. The 1033 rulemaking is a key priority for 
me. It has a lot of ability to not move to an open banking or 
open finance system but to take some important steps. I think 
we want to really all think together about how do we get to a 
world that is more open banking, that people can switch more 
seamlessly, that people can compare more products across a 
broader range of participants? I see a lot of upside there. I 
will say I do worry about Big Tech firms really kind of 
modeling what we are seeing in China with Alipay and WeChat 
Pay. I think the fact that you have these dominant providers 
who have so much data about people's movements, about people's 
geolocation, about their habits, their church attendance, 
everything, it raises a lot of questions about, will there be a 
fair and transparent system?
    Mr. Sherman. Thank you.
    Mr. Auchincloss. The gentleman from North Carolina, Mr. 
Budd, is now recognized for 5 minutes.
    Mr. Budd. I thank the Chair for having this hearing, and 
Director Chopra, thank you for being here.
    Earlier this week, the CFPB invoked a dormant authority to 
begin examining non-bank companies posing risks to consumers. 
The CFPB's release stated that, ``This will allow the CFPB to 
be agile and supervise entities that may be fast growing or are 
in markets outside the existing non-bank supervision program.'' 
So, here is the question: Do you believe the CFPB has the 
authority to regulate activity specifically within crypto or 
decentralized finance (DeFi), using this dormant authority? And 
if so, how does the Bureau plan on doing that without actually 
killing innovation, pushing it offshore, and potentially 
harming consumers?
    Mr. Chopra. Great question. Blockchain-based technologies 
in finance, most of it right now is for the purposes of 
speculative trading. Our focus has been on payments and really 
the Big Tech rails, but as it relates to the supervision 
program, I do want to be clear about something: There is no 
expansion of jurisdiction through this. So if you are engaged 
in activities that Congress has specified in the law, you are 
already subject to this CFPB's enforcement jurisdiction with 
the exception of small banks.
    Enforcement involves subpoenas, CIDs, and litigation. 
Supervision is often a less adversarial way to do compliance 
examination. I just want to be clear that inasmuch as a firm 
that is engaged in an activity that is covered, is noted as a 
covered person in the Act, they are already subject to our 
enforcement jurisdiction, again except if they are a small 
bank, and the supervision process is actually just a way 
outside of litigation. And outside of that kind of law 
enforcement--
    Mr. Budd. Thank you.
    Mr. Chopra. Sorry.
    Mr. Budd. No, I see where you are headed with this, so fair 
enough, but let me ask you this: How does the Bureau regulate 
an entity that has no centralized structure, and it is simply 
made up of code and peer-to-peer transactions, because that is 
what DeFi is. How does it regulate or, in your term, supervise, 
I believe, something that has peer-to-peer transactions? There 
is really no structure.
    Mr. Chopra. Is the question, who is the entity?
    Mr. Budd. No. How do you regulate and supervise that, since 
it is peer-to-peer?
    Mr. Chopra. Honestly, I don't have good answers other than 
if it is a covered activity. We have an activities-based 
approach, not really an entities-based approach. Certainly, 
there are a number of activities that are covered under the 
Electronic Fund Transfer Act. Those activities would be covered 
under the CFPB, but there is not necessarily a delineation of 
what type of technology is being used.
    Mr. Budd. Thank you.
    Mr. Chopra. And I am sorry if I am not being responsive. I 
am trying my best, but--
    Mr. Budd. No, no, I understand, but just to be clear, I 
don't think that the CFPB has what appears to be an ever-
expanding authority, and I don't believe Congress has delegated 
that to you or the Bureau. But also, in a different topic 
here--
    Mr. Chopra. Yes.
    Mr. Budd. It is never, ``free-of-bias algorithms,'' and it 
may result in credit determinations that are unfair to 
consumers. You have also said that machine learning could lead 
to digital redlining and robo-discrimination. Interestingly 
enough, in your last appearance before this committee you 
stated that, ``Preserving relationship banking is critical to 
our nation's resilience and recovery, particularly in these 
times of stress.'' Fair enough. ``The Fair Housing Act 
prohibits discrimination based on race, color, religion, sex, 
national origin, family status, or disabilities.'' But how can 
an algorithm discriminate based on any of these characteristics 
if it doesn't have that information about the borrower?
    Mr. Chopra. I am happy to try my best at this. One of the 
ways in which we look at algorithms across the government, and 
a great example of this is Secretary Carson's complaint against 
Facebook about how the algorithm essentially excluded certain 
types of borrowers on Facebook for marketing, and I am happy to 
talk about this with you further. We also know about redlining. 
So, there may be places where you carve out certain geographies 
that can impact your liability under the fair lending laws or 
in certain cases, the fair housing law. So, I think it is 
important that we think about both human decisions and 
algorithmic decisions together across-the-board and understand 
that is part of the reason we brought on more technologists. We 
are trying to understand more of the data science because, 
especially when it comes to these Big Tech algorithms, it has 
huge implications.
    Mr. Budd. Thank you for your time. I yield back.
    Mr. Auchincloss. The gentleman from Illinois, Mr. Casten, 
who is also the Vice Chair of our Subcommittee on Investor 
Protection, Entrepreneurship, and Capital Markets, is now 
recognized for 5 minutes.
    Mr. Casten. Thank you, Mr. Chairman, and it's nice to see 
you again, Director Chopra.
    By happy coincidence, I would like to really pick up the 
thread that Mr. Budd raised, because when you were here last 
October, I had asked you specifically about this issue of 
digital redlining and what is going to happen if these 
algorithms are moving things around. And I am sure you saw the 
article this week that Facebook said that once you import all 
that data into their platform--your age, your race, your 
address, your income levels, your purchasing history--they 
can't even keep track of where all that data goes. They just 
know it is all out there somewhere and being used by their own 
algorithms.
    When I asked at the time whether you thought that those 
violated fair lending laws or potentially could, you said you 
were very worried about black box algorithms, and that we need 
to make sure firms cannot dodge fair lending laws and anti-
discrimination laws under the guise of their secret algorithms. 
Quick follow-up: Since October, have you initiated any 
investigations or enforcement proceedings based on that? What 
is the status--
    Mr. Chopra. Yes. I am not allowed to comment, especially on 
that specific entity, but here are a few things that have 
already started. One is that we have had a number of 
conversations across the industry, especially with smaller 
players. And what smaller players tell us is that they use 
Facebook, they use Google, and they use other services in order 
to reach customers, but they often don't really know how it is 
all working. I referenced the HUD complaint from a few years 
ago. Many of these firms are operating as service providers to 
many, many institutions. There are a lot of discussions across 
the regulators about many of these service providers, whether 
they be cloud providers or behavioral surveillance advertising 
platforms. So, it depends on the facts. In some circumstances, 
we need to look at what their role is. I think it is a place 
where a lot of financial institutions who want to comply with 
the law are worried. So, we are eager to hear from them too on 
that, how we can make sure that there is the right type of 
compliance and guidance on it.
    Mr. Casten. If I could, and I understand you can't comment 
on ongoing investigations, but when we talked last time, this 
was specifically raised because of a lender in my district who 
said that they don't know whether they are in compliance with 
fair lending rules, and they couldn't get information from the 
Facebooks of the world. Setting aside what you are doing that 
you can't disclose on the record--
    Mr. Chopra. Yes.
    Mr. Casten. --do you have the authority? Can you see inside 
to see how those algorithms work? Can you get the data to 
actually understand what they are hoovering up, and how they 
are using that, because the only evidence that we have seen 
from here are internal whistleblowers. Do you feel like you 
actually have the authority to see inside those algorithms and 
get the data that would be needed to answer the questions?
    Mr. Chopra. I am not really sure, to be honest, because I 
think what you see with a lot of algorithmic decision-making--
and I have said this before--is that the algorithmic banking is 
different than relationship banking. With relationship banking, 
you have a lot more insight into how things work. With 
algorithmic banking, you may not necessarily even know why a 
decision was made, or why an individual was denied, or why an 
individual was not marketed to. That is a real challenge when 
figuring out this space altogether. I will share with you that 
there are some requirements under current law that require 
essentially an explanation as to what were the factors that 
were relied on that led to an adverse decision. I think it is 
not clear to me whether all of those algorithms are really able 
to spit out those reasons to comply with that.
    Mr. Casten. Since that conversation in October, I have gone 
deep down this rabbit hole now, and I have introduced a bill 
with Congresswoman Trahan and Congressman Schiff, the Digital 
Services Oversight and Safety Act, because we, in talking with 
people, the concern was raised that you can't actually get in 
there unless a whistleblower comes forward. So, the idea of 
this bill is to establish a bureau within the FTC that would 
have the authority to conduct these investigations, issue 
content-neutral rules, and basicallyx, subject to reasonable 
claims, go and investigate, and find out how the algorithms 
work. You have worn some hats at the FTC and at the CFPB, and I 
realize you are not going to comment on ongoing legislation, 
but I would be curious for your thoughts on whether that tool 
would be useful, would the FTC be the right place to house it, 
and any comments you might have about whether it would make it 
easier for you to assess this problem?
    Mr. Chopra. Yes. The FTC, of course, is the blanket 
overseer of prohibitions on certain unfair commercial 
practices, deceptive commercial practices, but, of course, 
carved out of the FTC is banking, is airlines, is so many 
industries. So, it is something every department is 
confronting.
    Mr. Casten. Thank you. I yield back.
    Mr. Auchincloss. The gentleman from Tennessee, Mr. Kustoff, 
is now recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman, and thank you, 
Director, for appearing today. If I can go back to the 
questioning from Congressman Loudermilk several moments ago, 
you all were discussing overdraft protection. Just to clear 
things up, you were not suggesting that overdraft protection is 
subject to the Truth in Lending Act, were you?
    Mr. Chopra. The Truth in Lending Act, essentially--I don't 
want to characterize it as a carveout, but it basically says 
what type of credit. It does not trigger a disclosure.
    Mr. Kustoff. It is not subject to the Truth in Lending Act, 
is it, overdraft protection?
    Mr. Chopra. It is not subject to the Truth in Lending Act 
disclosures, and the requirements, but it is mentioned in the 
Truth in Lending Act's Fed's rules.
    Mr. Kustoff. Thank you, sir. And overdraft protection 
itself is not credit, is it? It is not credit that is subject 
to the Truth in Lending Act, correct?
    Mr. Chopra. That is right. Yes, sir.
    Mr. Kustoff. Okay. Thank you. I know you have had a number 
of questions about Section 1071, and I don't want to plow over 
old ground. If I can, from my perspective, like 434 other 
Members of Congress, I represent community banks that are in 
the district, good community banks, just like the other 434 
Members. The issues relating to Section 1071 requirements, 
because you have been asked about it before, have you thought 
about a threshold for these institutions, so that they would 
not have to comply with Section 1071 reporting? A billion 
dollars for an institution, is that a reasonable threshold?
    Mr. Chopra. And again, it was before I came, but there was 
a threshold put forth in the proposal. As I understand it, it 
was on a number-of-loans basis. I imagine there are many ways 
that Congress has designed thresholds. Actually, in our Act, 
there is a threshold on bank supervision that is cut off as an 
asset basis if we should be considered a loan-volume basis, 
number of loans. I believe we received a lot of comments on 
that. I will also say, inasmuch as there are Members who are 
introducing legislation about exemptions, there is actually not 
a statutory exemption in Section 1071, so we--
    Mr. Kustoff. It is subject to your interpretation though, 
isn't it, as Director?
    Mr. Chopra. Sorry?
    Mr. Kustoff. It is subject to your interpretation, isn't 
it, as Director of the CFPB?
    Mr. Chopra. I am not sure that is the case. I think that 
actually, the section spells out that it is a kind of 
congressional determination. We did propose it--
    Mr. Kustoff. Let me, if I can, reclaim my time and move on.
    Mr. Chopra. Sorry.
    Mr. Kustoff. Thank you. Mr. Budd asked you about a press 
release that you all issued on Monday, 2 days ago. This is the 
press release that you used to invoke previously unused legal 
authority to exercise greater supervision over non-bank 
financial companies. In the press release, under the 
transparency section on the second page, the CFPB announced 
that in a change with past precedent, it would no longer 
respect the confidentiality of exam proceedings, giving the 
Director authority to publicize the basis for opening an 
examination. I am going to take that concern, and I am going to 
ask you, wouldn't you agree that during a routine examination 
of a supervised financial company, that the CFPB, under its 
existing authority, and almost every regulator treats with 
confidentiality the proceedings between the regulator and the 
supervised entities to foster cooperation and collaboration? 
That is correct, isn't it?
    Mr. Chopra. Yes, yes. And to be clear, I want to make sure 
that where we have sought comment is not to release kind of the 
examination or the examination findings. I think the purpose of 
what we were trying to accomplish and solicit input on is 
Congress set a standard of posing risk, and we want to be able 
to provide guidance on what that is going to mean after we make 
a determination. So, it is not necessarily making exam findings 
public. It doesn't have to do with that. I just want to make 
sure I clarified that.
    Mr. Kustoff. Let me, if I can, ask you directly in my 
remaining time, wouldn't you agree that if that were suspended, 
the confidentiality of exams, that gives rise to the opening of 
exam and underlying information, in fact giving rise to that 
exam? Isn't that a correct statement?
    Mr. Chopra. We have to absolutely protect the confidential 
supervisory process. There are extremely rare circumstances. 
Often, when it goes to litigation, it comes up, but I totally 
agree with you.
    Mr. Kustoff. Thank you.
    Mr. Auchincloss. The gentlewoman from Massachusetts, Ms. 
Pressley, who is also the Vice Chair of our Subcommittee on 
Consumer Protection and Financial Institutions, is now 
recognized for 5 minutes.
    Ms. Pressley. Thank you, Mr. Chairman, and Director Chopra, 
thank you for being here today. Your command of Constitution 
and of the laws, and your command about that which is most 
important, the consumer, is clear. And after years of 
Republican sabotage, I want to commend you on your work to 
bring the CFPB back on the side of consumers. I also want to 
acknowledge your efforts to prevent unlawful medical debt 
collection and reporting.
    One of the issues that I will lead on here is that of COVID 
long haulers, and given the millions of people living with long 
COVID, we certainly should not be placing any additional 
stressors or anxieties on patients and families. I was also 
really pleased to see the Bureau take action to investigate 
overdraft and other junk fees. As myself and others have 
consistently advocated, these fees reflect an abusive and 
predatory practice that punishes people simply for being poor. 
Seven major banks made over $1.2 billion in overdraft and non-
sufficient fund penalties last year, including those that have 
a history of consumer abuse. As numerous studies have 
repeatedly shown, these fees disproportionately prey again on 
our poorest consumers.
    Director Chopra, in order to build on the Bureau's work 
thus far, what further steps is the Bureau considering to 
provide overdue relief to the millions of consumers facing 
financial hardship due to these junk fees?
    Mr. Chopra. You raised medical debt, you raised fees, and 
you raised other issues. We are taking a hard look at whether 
it is appropriate for especially privacy reasons as well, that 
medical debt information should be included on credit reports. 
There is significant information to suggest that it does not 
really help with accuracy on credit determinations. We also 
want to make sure that there is a competitive market when it 
comes to all sorts of not just deposit accounts, not just 
credit cards, but all financial products. And people should be 
paying for services rendered and that they want, and also be 
able to compete upfront on what those costs are. Ultimately, we 
think it is a benefit to all financial institutions and to all 
consumers to have more competition and more accuracy on credit 
reports.
    Ms. Pressley. Thank you. And I think the banks have 
certainly proven that they can't be expected to voluntarily 
reform themselves, and so legislative intervention really is 
sorely needed. Another area of concern that we have seen 
emerging is the rise of Buy Now, Pay Later. I know 
Representative Axne raised it earlier regarding the predatory 
practices of many of our for-profit colleges and universities, 
but we have seen this when it comes to payment credit plans. 
The number of consumers who have been using a Buy Now, Pay 
Later product, especially through e-commerce, has really grown, 
in fact by 300 percent since 2018. Recent reports show 
significant risk to consumers who may not know how this can 
potentially hurt their credit score or lead to hidden fees and 
exorbitant interest payments.
    Director Chopra, what steps is the Bureau taking to ensure 
that these companies are operating with transparency and 
accurately disclosing fees and charges to consumers of these 
products?
    Mr. Chopra. Yes. There are certain types of products that 
have not been subject to the normal disclosures that other 
financial products are, so we have actually issued a set of 
orders to the Buy Now, Pay Later companies, the larger ones. I 
would characterize it as we are in question mode. I think that 
Buy Now, Pay Later has actually provided a great service for 
many people, but there are also some pitfalls. How is the 
credit reporting going to work? How is the handling of data 
going to work? There are a number of questions that we need to 
make sure that we understand so that we can make sure that the 
market is working fairly and transparently.
    Ms. Pressley. Absolutely. And just given the evolving 
nature of this space and the potential risk to consumers, it 
really does require the Bureau's ongoing and diligent work. I 
thank you for your attention in that regard, and I yield back.
    Mr. Chopra. Thank you so much.
    Mr. Auchincloss. The gentlewoman yields back.
    The gentleman from North Carolina, Mr. McHenry, who is also 
the ranking member of the committee, is recognized for 5 
minutes.
    Mr. McHenry. Thank you, Mr. Chairman. Director Chopra, 
thank you for being here. I wrote you back in December. I had 
requested the Bureau preserve documents related to the FDIC 
matter that you have discussed earlier today. That request also 
covered any communications on your personal email accounts, and 
the Bureau delivered an initial set of documents on Monday 
night to staff here on the Hill, to our committee. It is fair 
to say those documents raise new questions, but we will get 
into that. One of the things that is really coming into focus 
is the fact that during the relevant period, you had email 
accounts at the FTC, at the CFPB, and at the FDIC. Is that 
correct?
    Mr. Chopra. No. Actually, we were supposed to be provided 
an FDIC email account, but I think we were never provided it 
until recently.
    Mr. McHenry. Oh, okay. So, which account did you use?
    Mr. Chopra. The account I used is my CFPB account.
    Mr. McHenry. Okay. Any personal email account used for 
business?
    Mr. Chopra. No, no.
    Mr. McHenry. None?
    Mr. Chopra. No.
    Mr. McHenry. Okay. Any messaging apps?
    Mr. Chopra. No, I comply with all of the requirements under 
FOIA, the Records Act, everything, and they should all be 
there.
    Mr. McHenry. Okay. But there is no messaging app or texts 
related to this in the documents we got, so if you use text--
    Mr. Chopra. If I receive anything to a personal device, 
what we do is we move it to a government server so that it is 
preserved. I have been in multiple agencies. This is what we 
do.
    Mr. McHenry. And the same for texts?
    Mr. Chopra. Yes. It is hard sometimes to forward it, but 
you create a record for it.
    Mr. McHenry. It is complicated, yes, but you have the best 
technology of any government agency at this point. So, we just 
want to make sure since there were none provided, of texts or 
personal emails, that that was, in fact, the case?
    Mr. Chopra. Yes.
    Mr. McHenry. Okay. We have a number of things that we want 
to raise with you, but we have a limited amount of time. You 
have had 49 press releases since you became the Director. It is 
an impressive rate, even for a State Attorney General, and they 
cover everything from your priorities and major initiatives, 
and you telegraph your actions through speeches as well. Why 
didn't the CFPB issue a press release announcing the interim 
final rule issued on February 22nd, which changed the rules 
practice for adjudicating proceedings? It seems like a 
substantial thing.
    Mr. Chopra. You are right. There should have been a blog or 
a press release on that.
    Mr. McHenry. Why didn't you?
    Mr. Chopra. I actually thought that was going to be the 
case, but you are right, I would change that.
    Mr. McHenry. Okay. Typically, the interim final rules are 
issued when there is good cause to issue the rule immediately 
without putting the rule out for comment. Why did you go to 
that procedure here?
    Mr. Chopra. This is a procedural rule. It actually doesn't 
even require a comment. And one of the things that was 
important about this is: first, making sure that the procedures 
are constitutional; and second, that they are fair. And what we 
did immediately is, respondents being defendants in this case, 
take depositions, have access to information. It also makes the 
process for them to go quickly to judicial review. We have not 
issued any complaints under this process, so it is a little bit 
theoretical right now, but we have received comments from it. 
We will not issue any complaints until we look at those 
comments. And we still expect that Federal court will be the 
primary way, overwhelmingly, in which we will do enforcement 
actions, contested actions.
    Mr. McHenry. You describe this as basically giving 
defendants more rights, but, in reality, you have internal 
adjudication now. You are basically taking this in-house in a 
way that the courts have ruled unconstitutional for the 
Securities and Exchange Commission. So, this is a power grab, 
as viewed by many that are under your remit and regulation. Why 
not put it out for notice and comment? And I understand, you 
have the power as Director to do enormous things. I get that. I 
understand. But to do that according to notice and comment 
rules that have been longstanding and that bind other agencies, 
I think, is the proper thing to do.
    Mr. Chopra. Okay. That is a fair point. I do want to be 
clear, though, that actually the issues that were identified 
with the SEC, the staff actually looked across-the-board at all 
agencies, so this is not a new administrative forum. It is the 
same one. But you are right; you have to make sure it is 
constitutional.
    Mr. McHenry. But it is new powers, and that is my point.
    Mr. Chopra. Sorry?
    Mr. McHenry. It is more power, and it is new power.
    Mr. Chopra. If I could, I actually don't know if that is 
true. I actually think--
    Mr. McHenry. We don't know it is true because you didn't 
allow notice and comment. That is my point.
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Chopra. I will tell you--
    Mr. Auchincloss. The gentleman's time has expired.
    Mr. Chopra. --if it was favorable, we would not be bringing 
all of these actions in Federal court.
    Mr. Auchincloss. The committee will stand in recess for 5 
minutes.
    [brief recess]
    Mr. Auchincloss. The gentleman from New York, Mr. Torres, 
is now recognized for 5 minutes.
    Mr. Torres. Thank you, Mr. Chairman. Director, it is good 
to see you. There are Federal regulators such as the SEC and 
the CFPB that have a practice of allowing corporate bad actors 
to enter into settlements and pay a fine without ever admitting 
wrongdoing. And the truth is often a casualty of neither admit 
nor deny settlements, which essentially protect corporate bad 
actors from the reputational consequences of their own bad 
behavior. I raised the issue with you back in October for the 
first time, and I am wondering, in the 6 months since then, 
have you taken any action to remove or reduce or otherwise 
reform the practice of neither admit nor deny settlements?
    Mr. Chopra. There are two issues. One, there are no 
settlements that we are doing that have denials. Certainly, 
there have been some with no admit, no deny. I think what we 
are weighing is what is the tradeoff between getting help to 
consumers, getting the order done, versus all of the issues 
that are related to a litigation, in order to seek that. One of 
the things that I recently spoke about is the issue of 
institutions that repeatedly break the law. And that is an area 
where I do think admissions is potentially going to be more 
part of the process or specific findings of wrongdoing, because 
I think when you have repeat bad actors, it is clear that 
sometimes there needs to be, for the sake of justice, a formal 
court determination or a formal legal determination that the 
entity agrees to.
    Mr. Torres. So, you are moving in the direction of treating 
repeat offenders differently?
    Mr. Chopra. That is right, yes.
    Mr. Torres. Okay. It has been 11 years since the passage of 
Dodd-Frank, which provides the statutory basis for Section 
1033. It has been a year-and-a-half since the advance notice of 
proposed rulemaking in Section 1030, and it has been nearly a 
year since President Biden's Executive Order directing the CFPB 
to implement Section 1033. And yet, in spite of it all, a 
Section 1033 rule has not yet been implemented. And so I am 
wondering, is there a deadline for implementation? How much 
longer must we wait?
    Mr. Chopra. I know. I am as frustrated as you. When I 
arrived, I was surprised to see how little progress had been 
made. It is one of the most important rules that the CFPB can 
do. It is something that Congress wants us to do. I wish I 
could give you a discrete timeline, but I am prioritizing the 
rulemakings that have been required by Congress. This rule in 
particular has the ability to open up consumer opportunities, 
financial institution opportunities. At the same time, there 
are some tough issues in it related to data privacy, 
especially. An institution is going to be able to go and grab 
consumer's data and then sell it or share it or resell it, so 
it is not--
    Mr. Torres. Do you have any timeline at all or--
    Mr. Chopra. The hope is to get the next step done within a 
year. I don't know when the final implementation will be, but 
it is certainly a top rulemaking--
    Mr. Torres. Well, I will ask you bluntly, if you fail to 
get Section 1033 finalized by the end of President Biden's 
first term, would you consider that a failure?
    Mr. Chopra. I would not be happy, and, yes, I would almost 
agree that would not be a good sign at all.
    Mr. Torres. On March 6th, and I hope I can squeeze in this 
question, The New York Times published an article with the 
following headline, ``Fraud Is Flourishing on Zelle. The Banks 
Say It's Not Their Problem.'' Did you read this article?
    Mr. Chopra. I am familiar with the issue. I don't know 
about this specific article, but probably.
    Mr. Torres. The New York Times tells the story of several 
victims, including a man by the name of Justin, who lost $500 
to a sophisticated scammer pretending to be a banking official. 
The scammer sent a text that seemingly came from the fraud 
department of Wells Fargo, and the scammer actually called the 
victim from a phone that a caller ID flagged as coming from 
Wells Fargo. And as a result, he was successfully scammed 
because he reasonably thought he was transferring his money to 
a bona fide bank employee. My understanding is that if a 
transaction has an unauthorized user, a fraudulent user, a 
bank, as I understand it, is required to reimburse a customer 
for losses. Is that a correct understanding of the law?
    Mr. Chopra. That is right. I want to be careful not to 
comment on this specific situation, but, generally speaking, 
Regulation E provides the fraud protections.
    Mr. Torres. Now, what about the case cited in The New York 
Times article? What if a transaction has a fraudulent receiver 
rather than a fraudulent user? Is a bank then required to 
reimburse a customer for losses? Should a bank be required to 
do so?
    Mr. Chopra. We will answer that question for the record. I 
am being especially careful because there is a specific entity 
you are referring to. But I am on board generally that we need 
to make sure that these payment systems, especially peer-to-
peer, that fraud is piling up and it is a major problem, 
including for service members and seniors, and it is high on 
our radar.
    Mr. Torres. I see my time has expired.
    Mr. Auchincloss. The gentleman from Indiana, Mr. 
Hollingsworth, is now recognized for 5 minutes.
    Mr. Hollingsworth. Director Chopra, and Mr. Torres, I 
really appreciate that back and forth because Mr. Gottheimer 
and I have worked really hard on several pieces of legislation 
trying to combat fraud, especially against our seniors. It is 
becoming more and more rampant, and the stories that are told, 
especially to my district case workers, are horrific about 
individuals who have lost their life savings due to these very, 
very sophisticated fraud schemes to which Mr. Torres alluded.
    I wanted to ask about something more specific that you said 
yesterday, which surprised me, and that I hope is not a 
disquieting statement of belief, but perhaps a flippant quip. 
You said in response to some questions at the Senate Banking 
hearing, ``I am not sure there is really a balance between 
consumer protection and others.'' The others, I think in this, 
refers to expansion of consumer access to products, financial 
innovation in products. But I wondered if you might very 
specifically, but also very succinctly, talk a little bit about 
how you view consumer protection also being aided by financial 
innovation and the expansion of financial products to those who 
don't currently have access to them.
    Mr. Chopra. Yes, sure, and I have been testifying for many 
hours, so I hope I remember it right. But what I think I was 
trying to articulate is that I don't necessarily know that it 
is always a tradeoff between innovation and competition, and 
consumer protection. I think there are many ways that actually 
everyone benefits, especially when there are some newer 
technologies being used, you can use them in different ways 
that are good for the institution and good for the consumer.
    Mr. Hollingsworth. So, you would say that you recognize 
that financial innovation is an important part of long-term 
consumer protection, being able to lower costs of delivery of 
products to consumers, being able to lower the cost to 
consumers, being able to give them more access to those 
products? Those are important aspects of consumer protection in 
the long run.
    Mr. Chopra. Yes. I think consumer protection has a lot of 
features, and one that Congress has spelled out is being fair, 
transparent, and competitive. Across-the-board, it is certainly 
true that technologies can help to do that. And I think you 
want more. Yes.
    Mr. Hollingsworth. As you have these internal discussions 
about policymaking and the press releases that come out, you 
are really thinking about how this might have a deleterious 
impact on innovation or a deleterious impact on the expansion 
of access to financial products, not just on some of the near 
and present and seemingly perhaps more urgent, if not perhaps 
less important aspects of consumer protection?
    Mr. Chopra. I am happy to discuss this further with you. I 
think we try our best to make sure that entities, especially 
smaller ones and nascent ones--it can often be hard to directly 
engage them. They don't necessarily have people in Washington, 
but we try and make sure when lawyers might be scaring them, to 
be able to give them some facts about the scope of what is 
happening, and also to figure out what are the barriers that 
they are facing in order to challenge the status quo, in order 
to raise capital, in order to use new technologies and no 
agency is perfect. But I have really pushed us to really make 
sure we don't just have lawyers. We have technical talent, we 
have a diversity of skills, especially that understand this 
intersection between technology, the capital markets, and 
consumer finance.
    Mr. Hollingsworth. There is a great amount of recognition 
that over the last 70 to 100 years, this country has continued 
to see costs to financial consumers go down. Some of that is 
due to innovation. And as you continue to think about what 
comes out of your office, are you going to be focused on 
ensuring that we don't have too much of a deleterious impact on 
that innovation over the long run?
    Mr. Chopra. Yes.
    Mr. Hollingsworth. We want consumers to have access to a 
wider variety of products and for them to be able to choose the 
products they want, and for those products to be delivered at a 
lower cost and perhaps even at a faster pace than ever before.
    Mr. Chopra. Yes, my sense is that we are right at a moment 
when the future could take very different paths. And I think 
one path is that it could be dominated by a very small set of 
firms or Big Tech firms, big Wall Street firms, or we could do 
what has seemed to work best in a lot of sectors, which is a 
very, very diverse ecosystem of big, medium, small, and 
especially new firms that are entering. So, that is something 
that we think about a lot.
    Mr. Hollingsworth. Well, when I talk with a lot of those 
small firms, they live in fear of the CFPB, not live in hope 
that the CFPB will be their savior. And I want to make sure 
that you are thinking about those smaller firms, those nascent 
technologies, those things in their infancy today that could 
become very important to consumers in the future and not 
foreclose upon any of those technologies going forward.
    And with that, I will yield back my time.
    Mr. Auchincloss. The gentleman from Massachusetts, Mr. 
Lynch, who is also the Chair of our Task Force on Financial 
Technology, is recognized for 5 minutes.
    Mr. Lynch. Hi, Mr. Chopra. Thank you very much for all your 
great work. I do want to follow up on Mr. Torres' line of 
questioning. As you know, we are concerned about consumer 
financial data, not only the permissioning of that data and how 
it might be shared, but also letting consumers know what is 
happening with their data when they participate on these 
platforms. I know we have a rulemaking that is pending on 
Section 1033. I won't press you on a deadline. I know you are 
doing your best in that regard. But I would like to get some 
direction, some sense of where we are going with that sort of 
as a benchmark. I don't want to wait until the next time you 
are before this committee to ask you about this very important 
piece of rulemaking, because there are a number of Members on 
both sides of the aisle here who are putting forward 
legislation, and what you do with that rulemaking will have a 
lot to do with whether we are in harmony with the guidance 
issued by the CFPB.
    Mr. Chopra. Here are a few principles I can share. A couple 
of goals are we want to make it easier ultimately to switch, to 
be able to shop, to find a product and switch. We also want to 
make it easier for small firms, including community banks and 
startups, to be able to reach new customers with new products. 
I think at the same time, we don't necessarily want to create a 
market where there is an underworld of data exchange, where 
people can grab your data and then sell it. That is actually 
what you see in other jurisdictions. There are some worries 
about that. We also don't want to create a haven for scams, and 
especially what Congressmen Hollingsworth and Torres mentioned 
about some of the scams we are seeing, especially on payment 
transfers, that is something we want to avoid.
    I do think it is important that we figure out how to get 
the data sharing and data privacy aspects right. And I think 
inasmuch that we can create a framework where people can 
participate without feeling like they are handing over 
everything and then everyone will know about it, those are the 
goals that I have set.
    Mr. Lynch. Okay. Now, let me move to the issue that Mr. 
Torres raised around Zelle. According to The New York Times 
article, and the reporters did a great job on this, Stacy 
Cowley and Lananh Nguyen, in the March 6, 2022, article, which 
is entitled, ``Fraud Is Flourishing on Zelle. The Banks Say 
It's Not Their Problem.'' According to the article, there were 
19 million Americans who were defrauded through wallets and 
financial platforms. And we have a hearing tomorrow in this 
committee on digital wallets and the security surrounding them.
    What could the CFPB do? I know you did issue a guidance 
that I think got the attention of a lot of the banks, because 
they own the company that is actually handling that security, 
so there is responsibility in principle on the part of the 
banks, but also the fact that they own the company that is 
responsible for security. What can the CFPB do to protect our 
consumers?
    Mr. Chopra. Certainly, as faster payments become more 
widespread, whether it is through private technologies or 
through systems like FedNow, it is true that in jurisdictions 
across the world, fraud and errors become a much bigger issue. 
Complaints go up and often people are out a lot.
    There is currently the Electronic Fund Transfer Act. 
Congress passed this to get those balances right about fraud 
protection, about getting errors resolved, about consumer 
rights, where to place the liabilities to make sure that people 
are protected from theft and hacks. So, there is currently that 
law that exists. And inasmuch that you think there needs to be 
further rulemaking or clarifications, we have set up a process 
for people to be able to petition for rulemaking on topics like 
this. So, I take this very seriously. Especially, we want an 
instant payment system. We don't want people to fear it if they 
feel like they won't have the same rights--
    Mr. Lynch. Thank you. And I just want to end by saying we 
would like to be informed on this committee about that 
rulemaking process on 1033. There have been long periods of 
silence, not your fault, but we need to be kept up-to-date 
during that process. So, it would be great if we had some 
interim updates as you move forward with that rulemaking. Thank 
you.
    Mr. Chopra. Understood.
    Mr. Lynch. I yield back, Mr. Chairman.
    Mr. Auchincloss. The gentleman from Tennessee, Mr. Rose, is 
now recognized for 5 minutes.
    Mr. Rose. Thank you. Thanks to Chairwoman Waters and 
Ranking Member McHenry for holding this hearing, and thank you, 
Director Chopra, for being here today. A lot has happened since 
the last time you testified, and as my time is limited, I want 
to go ahead and dive right in.
    We have talked a lot today about your request for 
information on, ``junk fees,'' which you have now defined for 
us as fees that do not correlate with the underlying cost of 
products or services offered by financial institutions. 
Director Chopra, is that a fair assessment of your 
understanding of what junk fees are?
    Mr. Chopra. No, I think again, a junk fee is an experience 
by so many consumers. Each of them may have a different 
experience. The way I often hear about it is, it is a fee for a 
service that you didn't even ask for, you didn't necessarily 
want, or a fee, for example, that doesn't feel like it is 
subjected to the competitive process, and that it is way in 
excess of really what a normal market would provide. I will 
give an example. A big area we hear is so-called pay-to-pay 
fees, where you have to actually pay a fee in order to pay, and 
that fee is sometimes way out of line with what people would 
typically expect. We have also seen payoff statement fees, 
where you have to pay a significant fee to know exactly how 
much you are supposed to pay, to pay off an amortizing loan.
    Mr. Rose. Okay. It still seems to me that in a competitive 
marketplace, competition will ultimately weed those things out, 
and if we try to substitute regulation for competition, it 
seems problematic. And I am wondering, would you consider 
requesting public comment on junk regulations or, as I might 
define those, regulations in which the costs do not outweigh 
the underlying benefits?
    Mr. Chopra. Yes. We actually have solicited comments as 
part of an assessment of rules. We have actually changed our 
procedures to allow anyone to submit a petition for rulemaking, 
and that will be posted so that the public can put comments in. 
It is much more open and accessible. So, I will share with you 
that you are right, competition is one of the best ways to help 
them deliver good outcomes. Here is the challenge: There are 
many cases where consumers don't get to actually choose the 
provider they are working with. This is common, especially in 
loan servicing, but it is also true in credit reporting, 
collections, and other markets as well.
    Mr. Rose. Director Chopra, on December 22, 2021, FTC 
Commissioners Noah Phillips and Christine Wilson, both of whom 
you served with at that Agency, penned an op-ed in The Wall 
Street Journal following your attempted coup at the FDIC, the 
title of which was, ``Remember `Norms'? This Biden Appointee 
Doesn't.'' The Commissioners wrote that they were dismayed by 
your conduct, but not surprised. They stated that your routine 
public interrogation of terrified FTC staff, your disregard for 
bipartisan norms and traditions, and your willingness to 
distort both law and fact eroded the tradition of bipartisan 
engagement in a way that even Democrats lamented. Commissioners 
Phillips and Wilson wrote that your actions undermine the 
credibility and integrity of the Agency, its missions, and its 
initiatives.
    Director Chopra, could you explain what actions you took at 
the FTC that led to such a stark rebuke from your former 
colleagues?
    Mr. Chopra. There were significant disagreements we had on 
a number of major policy issues and law enforcement actions, 
whether it was the Facebook settlement, the YouTube settlement, 
and others. I am disappointed that some of my colleagues have 
not embraced the rule of law and following Agency procedures. I 
have disagreed with my FTC Commissioner colleagues about laws 
that Congress passed and asked the Agency to do, and some 
believed, across multiple Administrations, that we should just 
ignore them. So, yes, I have had disagreements with Democrats, 
I have had disagreements with Republicans, but I have also had 
a lot of agreement with Republicans and Democrats, too. There 
are different things that we agree on. We don't always fall on 
one side. And I will tell you, we have the utmost respect for 
all of the civil servants who work at our agencies.
    Mr. Rose. Thank you. I see that my time is about to expire, 
Mr. Chairman, so I will yield back.
    Mr. Casten. [presiding]. The gentlewoman from Michigan, Ms. 
Tlaib, is now recognized for 5 minutes.
    Ms. Tlaib. Thank you so much, Mr. Chairman. Director 
Chopra, thank you so much for CFPB's workaround. I know the 
study came out in regards to medical debt, and that we know now 
over 20 percent of our neighbors across the nation are facing 
the harms and impact of having medical debt on their credit 
report. Last month, as you know, Equifax, Experian, and 
TransUnion announced that they would be making some changes, 
slight changes to the reporting of medical debt, but it does 
remove nearly 70 percent of medical debt from credit reports. 
And again, I think they capped it of which dollar amount and 
things like that.
    Some of my folks who were diagnosed with cancer or have 
major surgeries, and again, these are medically necessary 
procedures--it is a small victory for many of my neighbors and 
advocates who have been pressuring the predatory debt 
collection and credit reporting industries to protect patients 
instead of their bottom lines. And so, I applaud that kind of 
action, but this change can easily be reversed and undone, 
right? And so, Director Chopra, what steps can or is the CFPB 
doing to ensure that these changes can be permanent and maybe 
to be able to continue expanding on them?
    Mr. Chopra. Yes. To be candid with you, we are looking at 
whether it is appropriate and lawful to include this 
information at all. We also think that the level of inaccuracy 
on credit reports, and by the way, our country, I do think, is 
shifting toward this sort of social scoring world, and the fact 
that you get sick is not supposed to predetermine the rest of 
your financial future. So, I think we have to take a hard look 
at what our authorities are, in terms of whether this should be 
restricted altogether.
    We are talking to people in the healthcare industry, and we 
are talking to the financial industry about it. But I am 
worried that when you get sick and you are dealing with a 
billing dispute or stuck in a doom loop with the insurance 
company and the provider, that you might lose out on an 
employment opportunity because of a credit check or a tenant 
screening check, or even a loan.
    Ms. Tlaib. I can't agree more. Between the confusing 
reimbursements, to OPAC billing, and the increasingly high cost 
of healthcare, a single, unexpected trip to the hospital can 
set one of my neighbors back for years, again, due to medical 
debt. Often, patients are caught in the middle in disputes 
between hospitals, insurers, and collectors. What steps, and it 
sounds like you might have touched on this, is the CFPB taking 
to ensure that furnishers do not contaminate the credit 
reporting system with inaccurate reports? And it sounds like 
you all are moving in that direction. Should these credit 
agencies cut off access to repeat offenders as well?
    Mr. Chopra. Yes. I think there is this major question about 
what happens when there is inaccurate data by a furnisher that 
is constantly being furnished.
    Ms. Tlaib. That is right.
    Mr. Chopra. At what point do they need to just be cut off? 
There is a law, the Fair Credit Reporting Act, that governs 
some of this. There are supposed to be reasonable procedures to 
ensure maximum possible accuracy. But I worry that the credit 
reporting system is sometimes used as a vehicle to coerce 
people into paying debt that they don't owe or that they 
already paid.
    Ms. Tlaib. I don't know if many of my colleagues know this, 
but I am also concerned because healthcare providers are often 
now providing our patients, our residents with applications for 
medical credit cards or other financial products to pay for 
their healthcare. So between, when the patient puts the medical 
debt on their credit card or finances the debt in some other 
way, and I have heard horror stories about this, they may lose 
out on legal protections from medical debt and may also lose 
the opportunity to negotiate with the provider about the amount 
and terms. Director, has the CFPB incorporated or thought about 
other financial products such as credit card debt, analysis on 
medical debt? If so, what are some of the findings that you 
would like to share?
    Mr. Chopra. Yes. We are early in thinking about some of 
this, but we do know that there is growth in the use of certain 
medical, I would say, credit instruments. We see that in some 
places. It is used in particular areas--cosmetic surgery, 
dentistry. I don't know exactly, but we are happy to follow up 
with you. But, yes, I do worry that illness is creating cycles 
of debt that people get pushed down and can't get back up from.
    Ms. Tlaib. I cannot agree more. Finally, many low-income 
patients are frequently not screened for eligibility or 
notified of the availability of financial assistance. As a 
result, medical debt should be forgiven or covered by hospital 
financial programs, so they are not aware of it. Oh, I am 
sorry. Okay. We can ask later.
    Mr. Chopra. We will take the question for the record.
    Ms. Tlaib. Yes. Thank you so much.
    Mr. Casten. The gentleman from Ohio, Mr. Gonzalez, is now 
recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Mr. Chairman, and thank 
you, Director. It's good to see you. I want to start with the 
distinction between algorithm lending and banking, and 
relationship banking. I think you have stated a number of 
times, or at least implied, that relationship banking is better 
per se. Am I putting words in your mouth or would you agree?
    Mr. Chopra. No, it is more that you need to use both, and I 
wouldn't want to see the relationship banking option get 
totally eliminated. There are strengths of relationship banking 
and I worry that it is fading away.
    Mr. Gonzalez of Ohio. Okay. I think that is fair. And for 
what it is worth, it felt like at various points that the 
distinction was being made to attack algorithmic banking in 
favor of relationship banking. I think there should be options. 
I think the goal should be to provide as many options as 
possible. And if algorithmic banking isn't providing services, 
isn't providing loans to folks who either can't get them around 
better terms, then why wouldn't we want algorithmic banking, I 
think is sort of the perspective that I have.
    One thing I hear a lot of is the bias issue and that is 
obviously something we should all be thinking about and should 
have on our minds. I am curious. In a world where 22 percent, 
according to the Fed in 2019, 22 percent of Americans are 
unbanked or underbanked, is there any evidence that suggests 
that algorithmic banking would make those numbers worse or is 
it just a supposition at this point?
    Mr. Chopra. Again, let us distinguish--I think maybe we 
should use the term, ``human-only'' or ``algorithm-only.'' The 
truth is it is probably good when it is both, when there is 
some human dimension to it because when you do get that, you 
can get the benefits of both. And obviously, data analysis 
technology has the ability to do a lot, including to expand.
    Mr. Gonzalez of Ohio. Right.
    Mr. Chopra. But we also all want to make sure that we don't 
have situations like we have seen where those algorithms don't 
really have any explainability about the decisions that are 
made, because that can cause problems.
    Mr. Gonzalez of Ohio. And I think relationship banking only 
has proven throughout our entire history to have enormous 
problems. It does a lot of good. I am not saying it doesn't. 
But with respect to redlining and over-discrimination that we 
have seen over many, many years, when it is just humans, I 
think, we have always seen and known that is why the laws 
exist, to prevent these sorts of things, that can go sideways, 
right? So, I am happy to hear that you see it as both, not 
either/or, but both/and. And I look forward to seeing work that 
suggests that is true.
    I want to talk about 1071 for a second. I know it has been 
touched on. Complying with 1071 will be harder for small 
lenders as they have less staff to record compliance, and 
submit the data the CFPB is asking for. Do you believe 1071 
will increase the cost of small business credit or put an undue 
burden on some of the smaller lenders in my State of Ohio?
    Mr. Chopra. Sorry. There is background noise. I think the 
question--
    Mr. Gonzalez of Ohio. Do you believe that it will increase 
the cost of credit to small businesses?
    Mr. Chopra. It is hard to speculate because the cost of 
credit is obviously going to be driven by capital markets 
conditions, interest rates, and other things. But, yes, I am 
sensitive to the idea that for smaller creditors, when they 
have costs, they have to meet return-on-equity thresholds. They 
have to make--
    Mr. Gonzalez of Ohio. And they have to push them somewhere, 
right?
    Mr. Chopra. And so, I think that the challenge is, 
obviously we want to make sure we are meeting the congressional 
objective, just like the Home Mortgage Disclosure Act. There is 
this requirement. We need to get it done. And, again, if there 
are concerns about if you are looking to draft exemptions, we 
are happy to provide technical feedback to you, but we are 
under a court order to make progress on this, and so we are 
trying to do it in a way that adheres to the law and the order.
    Mr. Gonzalez of Ohio. That's fair, and I hope progress 
means more options for small businesses and more of my smaller 
lenders being able to participate in the market, because I 
think it would be an absolute tragedy if, as a result of 1071, 
we all of a sudden are now freezing small businesses out of the 
market or increasing the cost of capital. And I agree there are 
other factors, but holding all of those constant, if you 
increase cost, the cost has to be priced in somewhere.
    Mr. Chopra. Yes, and I think part of what I have been 
asking is what are the ways in which we can move toward more 
simplicity. Of course, sometimes congressional requirements are 
challenging, but also looking at how to use technology to make 
the reporting easier. It doesn't have to be in paper form, all 
of that, so I take your point seriously.
    Mr. Gonzalez of Ohio. Thank you. My last comment is about 
junk fees outside of normal market forces. People feel like 
they don't make sense. You are paying for things you don't 
want. Can you please turn that on the Tax Code and some of the 
things that we are spending money on at the Federal Government 
level, because I think a lot of us think that is junk, and I 
would love to see those go away--
    Mr. Chopra. And to be clear, that is on you, but I hear you 
loud and clear.
    Mr. Gonzalez of Ohio. Yes, I hear you. Thank you.
    I yield back.
    Mr. Casten. The Chair will note that there is no waste on 
this committee and the illustrious Members who serve here.
    The gentlewoman from Georgia, Ms. Williams, who is also the 
Vice Chair of our Subcommittee on Oversight and Investigations, 
is now recognized for 5 minutes.
    Ms. Williams of Georgia. Thank you, Mr. Chairman. A lot of 
folks watching today don't have banks knocking down their doors 
to give them loans, and I know exactly what that is like, 
because I have been unbanked. I have lived paycheck to paycheck 
as a public school educator, trying to figure out how I was 
going to have the money in time to pay my rent and my bills, 
and to this day, I remain strapped by student loan debt. My 
hard work and determination to achieve the promise of America 
hasn't always been reflected in my credit score. I am lucky to 
have been able to buy a home and get ahead. And now, as a 
Member of Congress, I am determined to open the door to 
financial inclusion wider so that everyone seeking the promise 
of America can walk through it. One way that we can do this is 
by ensuring that mortgage lenders consider alternative data not 
found in traditional credit reports so that everyone has the 
opportunity to put their best foot forward when it comes to 
getting a home.
    Director Chopra, I understand the Consumer Financial 
Protection Bureau is planning to collect alternative credit 
data like this. Can you tell us a little bit more about this 
effort and what you hope to learn about the value that the 
inclusion of such information may provide to marginalized 
consumers working hard to get ahead?
    Mr. Chopra. I don't think we have any specific collection 
of data going on. But it is obviously an issue that we think 
very closely about, how can we get data and lenders use data 
that are reasonable approximations for whether they can repay a 
loan. Often, looking at those characteristics will allow people 
to change their underwriting models. In some cases, it is about 
different income streams that they might be having. In some 
cases, it might be about their rental history or other 
histories where they have made good on their obligations, and 
it will help them get access and affect underwriting. So, we 
think hard about this. At the same time, unchecked use of data 
without transparency may have other consequences, and I know a 
lot of lenders are thinking carefully about that as well.
    Ms. Williams of Georgia. I have legislation included in 
this hearing that will task mortgage lenders with considering 
additional credit information at the request of the mortgage 
applicant. And to me, this is a win-win. A truly reflective 
mortgage application is valuable for both consumers and 
lenders. So, how could giving consumers the chance to point 
lenders toward additional information, such as positive rental 
payments, help lenders to understand the true creditworthiness 
of an applicant?
    Mr. Chopra. Yes. Many lenders actually do invite that 
information because some people's credit histories may be 
fairly unique, or they may have various nuances in their life. 
We are happy to discuss that further with you, if you would 
like us to provide any technical feedback on it. I will tell 
you that the industry is definitely innovating and evolving 
about how it considers its underwriting process. Obviously, 
market conditions are changing for many people. Homeownership 
is feeling out of reach because of high prices. And so, 
obviously, how that intersects with the mortgage markets is 
extremely important.
    Ms. Williams of Georgia. Thank you. Another big part of 
ensuring mortgage applications reflect the applicant is making 
sure that their hard work, not just their hardship, is 
reflected. And right now, when a borrower goes through the hard 
work of rehabilitating a defaulted Federal student loan, the 
default technically goes away, but a lot of the associated 
adverse information stays, so that is really not a true second 
chance. Along with Congresswomen Alma Adams, Deborah Ross, and 
Haley Stevens, I have introduced the Clean Slate Legislative 
series. The three bills included will remove default-related 
information once the student borrower rehabilitates, 
consolidates, or repays their defaulted Federal student loan. 
The affected borrowers have done their incredible work to 
repair a defaulted student loan. How would giving them a true 
second chance facilitate fairer outcomes in their future loan 
applications, including mortgages?
    Mr. Chopra. Yes, you are right. There is this 
rehabilitation program, I believe, that Congress established in 
Federal student loans. I don't know the status of it in other 
products, but I think there are a few pieces of this. It is not 
just what is in your credit report. There is also what is 
reflected in your credit score. And when information is 
deleted, we don't necessarily know if it impacts the credit 
score, depending on which reports that scores are using. I 
think this issue is really challenging. And again, we are happy 
to provide feedback to you, as you think about what you would 
like to propose.
    Ms. Williams of Georgia. Thank you, and Mr. Chairman, I 
yield back the balance of my time.
    Mr. Casten. The gentleman from Ohio, Mr. Davidson, is now 
recognized for 5 minutes.
    Mr. Davidson. Thank you, Mr. Chairman. I also thank our 
colleagues. And, Director, thank you for coming to testify 
before us today, one of the limited connections to Congress 
that the CFPB still has. And hopefully, we will change that. 
The burden is on our body to do that, not you, but certainly 
you could cooperate a little more. And I appreciate your 
exchange with Mr. Luetkemeyer and your offer to actually 
respond to some things that have been loose ends, and many of 
us have been co-signers on some of these letters. So, thanks 
for the correspondence and the commitment to continue the 
dialogue.
    One of the areas that I have focused on significantly, 
because Congress hasn't provided legal clarity, is digital 
assets. I saw that as a big void. And go back to the ICO 
market. You would think that in the midst of that, Congress 
would weigh in and provide some legal clarity, and Congress 
still hasn't. We have had legislation since 2018 to make it 
clear that if you are, in fact, a security, then you have to 
submit to U.S. securities regulations. And really, if something 
is a security, we would want the SEC to be vigorous in their 
enforcement. There are many things that I think, broadly, 
people will look at and say that is a pump-and-dump scam and 
investors are being harmed. That is really the SEC's 
jurisdiction. They have been very selective about it.
    And I guess I am just curious how you perceive consumer 
protection, and the role that you see for the CFPB in digital 
assets?
    Mr. Chopra. It is interesting. I think people talk about 
digital assets solely as blockchain-based technologies, and 
maybe that is the right definition for it. I think our focus 
has been a lot on digital payments. Unfortunately, the U.S. is 
quite behind China and others when it comes to fast, instant, 
real-time payments, and so, there are laws that Congress has 
asked that we administer. And we have actually seen an uptick 
in complaints and issues related to fraud and scams in this 
area, so it is obviously something we worry about. We are 
studying how the Big Tech companies are entering the payments 
area with respect to, I think your question about digital 
assets, if I am understanding it right.
    The Treasury Department and others, I believe, submitted a 
report about a payments working group, but we were not a part 
of that. It does lay out, I think, some frameworks. And I know 
there are open discussions about bank-intermediated versus 
other places for it. Certainly, technology is changing 
payments. It is something I pay close attention to, but 
hopefully, that is responsive.
    Mr. Davidson. Yes, somewhat. It doesn't sound like you have 
a very well-defined area that you plan to focus on. And look, 
there is a need for it, and I guess the concern is really that 
Congress needs to provide the clarity here because people 
continue to have the debates. And I think the other thing is, 
you have seen selective enforcement, and of course, we have 
seen that it has certainly been characteristic of the CFPB in 
the past, but hopefully never again. And I think the concern is 
when you take a dormant authority and just come in and say, 
yes, we are going to use that, and then you combine it with 
something that recently happened: administrative law judges.
    We have had legislation in the past that really seeks to 
curb this practice, because a lot of people feel that it is 
abusive and coercive because, in the SEC's case, I think they 
win, like, 96 percent of the cases that they bring, so everyone 
just settles, because the judge actually works for the SEC. So, 
there is not really a feeling that there is real due process 
there. And the CFPB recently fought to try to get 
administrative law judges. So, what is your view on that and on 
selective enforcement?
    Mr. Chopra. Yes. I actually wouldn't characterize it that 
way at all. I think that the changes that we have made, first 
of all, it actually gives more due process, in my view, to be 
able to get orders reviewed, to be able to expedite through the 
process, and it gives the defendants more ability to take 
depositions. I still think, overwhelmingly, we are going to be 
filing cases in Federal court. I don't agree that the 
administrative forum is more friendly than Federal court to 
either party.
    Mr. Davidson. The thing is, the Federal agency has the 
authority to automatically just go to an Article III court, and 
so should the citizen or the corporation, they should have the 
same standing and say, you know what, we are opting out of this 
process, and we are going to go to an Article III court, not 
this administrative procedures path. So, we will have 
legislation that will deal with that, and we look forward to 
your interaction on digital assets in particular. Thanks for 
coming today.
    My time has expired, and I yield back.
    Mr. Casten. The gentleman from Massachusetts, Mr. 
Auchincloss, who is also the Vice Chair of the committee, is 
now recognized for 5 minutes.
    Mr. Auchincloss. Director Chopra, thank you for being with 
us. I know it has been a heavy 2 days of testimony for you. I 
want to talk more about the issues raised by my colleague from 
Massachusetts, Mr. Lynch, and my colleague from New York, Mr. 
Torres.
    Following consumer complaints directly to the CFPB, the 
Agency issued an Electronic Fund Transfer Act fact sheet to 
explain the Bureau's approach. It is on your website. Are you 
looking at other ways to provide protections to consumers and 
victims of fraud and scams?
    Mr. Chopra. Yes. I would make sure it is clear that it is 
fraud, scams, but also hacks. A lot of people are losing out 
based on various breaches or hacks, and it is something that we 
are getting a lot of complaints on. As you know, the Electronic 
Fund Transfer Act and Regulation E provide the architecture for 
what is the responsibility of the financial institution when it 
comes to these issues. We obviously are monitoring this, and I 
think the guidance you may be referring to may have predated 
me. But certainly, if we want people to have confidence in our 
payment system, especially peer-to-peer and real-time payments, 
we need to make sure that people have similar levels of 
protection regardless of if they swipe a debit card or if they 
are using these services.
    Mr. Auchincloss. And what steps should financial 
institutions and companies be taking if their consumers are 
repeatedly flagged as fraudsters in peer-to-peer payments? If 
they have evidence that there is repeated fraud, do they have 
specific steps outlined for them by the CFPB?
    Mr. Chopra. That is not really a CFPB requirement, if I am 
remembering it right, and I am sorry if I am forgetting 
something. There are certain requirements under it, and it is 
sometimes referred to as Know Your Customer (KYC).
    Mr. Auchincloss. Right.
    Mr. Chopra. There are also some anti-money laundering 
provisions that are related to that. I know that many entities 
that do see patterns of fraud, will take certain steps. 
Obviously, it is important that they look for these trends, and 
we also look for these trends as well.
    Mr. Auchincloss. Shifting gears to DeFi, you had mentioned 
earlier in this hearing that you take an activities-based 
rather than an entity-based approach to regulation, which I 
think, broadly, seems like the right approach. There is going 
to be a challenge here with DeFi in that there may not be any 
kind of incorporated body in which to actually target the 
regulations at or to address grievances with. And you don't 
have to comment now about your exact approach. I understand 
this is a nascent field. But I would encourage the CFPB and 
your peers to be thinking about how you do activities-based 
regulation when those entities, the corresponding entities 
don't exist.
    Mr. Chopra. You are certainly right about that. I would say 
this. It is not a philosophy of activities-based versus 
entities-based. It is actually what Congress has set out. Our 
supervisory authority is for banks and other insured 
institutions over $10 billion in assets, and there is a whole 
framework for how we supervise non-banks. There is a whole 
grouping of activities that are delineated of what is subject 
to our enforcement authority. But I hear you loud and clear 
that in the DeFi context, there may not necessarily be an 
entity.
    Mr. Auchincloss. And I think I say this collectively as 
sort of the U.S. Government, Congress, and the Administration 
alike. We should not be penalizing these DeFi brokers who are 
not doing anything nefarious because there is a lack of clarity 
about the entity versus the activity. I think we need to be 
working with them rather than against them, and I'm not saying 
that the CFPB is not, but just as a statement of principle in 
this approach.
    You had mentioned earlier in this hearing that you had a 
clarifying remark to an earlier comment. I want to give you 
time to--
    Mr. Chopra. Oh, sure. Yes. Congressman Luetkemeyer had 
claimed that we did not provide a specific legal memo. My staff 
has confirmed that that was already produced. I thought that 
was true, but I can confirm that it was produced.
    Mr. Auchincloss. Okay. And I also want to give you some 
time to discuss your distribution process of the FDIC documents 
about a memo with legal analysis.
    Mr. Chopra. The FDIC staff drafted the RFI. We asked many 
times what is the legal justification for one board member 
being able to essentially ignore a supermajority of the board 
who went through all of the processes and precedent following 
statute and bylaws, and essentially got an answer of, well, 
because we say so. It is so important that Agencies follow the 
statute and bylaws of their governance structure, and it is 
quite clear that the actions of the board were valid.
    Mr. Casten. The gentleman from Texas, Mr. Gooden, is now 
recognized for 5 minutes.
    Mr. Gooden. Thank you, Mr. Chairman. And thank you, 
Director, for being here.
    Earlier this year, President Biden called on the DOJ to 
resume a controversial Obama-era policy that permits 
prosecutors to offer settlement agreements that result in 
defendants paying an outside group rather than a victim or the 
government. Following the financial crisis, the Obama DOJ used 
this practice to enter into quid pro quo settlement agreements 
that allowed banks to turn fines into donations, and, in some 
cases, to activist groups with a checkered record of benefiting 
consumers. I recently introduced H.R. 5773, the Stop Settlement 
Slush Funds Act, to prohibit the Administration and future 
Administrations from extorting companies to fund their partisan 
agendas and to put a stop to this corrupt practice. I think it 
is bad no matter who is in charge, and I would like your 
thoughts on that. And I realize I am probably catching you off 
guard, so while you compose your thoughts, I will tell you 
specifically what I am interested in.
    I would like to know if you will commit today to ensure 
that any funds distributed out of this fund will go directly to 
victims and not unaccountable third-party organizations. What 
safeguards do you intend to implement to ensure the Civil 
Penalty Fund is equitably distributed among all States that 
want to increase compensation to victims and not just States 
controlled by various parties at the time? Do you know what I 
am saying here? Will you commit also to ensuring the Bureau 
continues to utilize the Federal procurement process for these 
programs, and to continue to post information about the process 
and the contract requirements as Civil Penalty Fund money 
becomes available for consumer education and financial literacy 
programs?
    Mr. Chopra. You are catching me off guard, but I am glad 
you raised it. I have actually put a moratorium on expenditures 
from the Civil Penalty Fund that are not going to victims. I 
think the most important part, when you reach these 
resolutions, is to make those victims whole. Many of them were 
victimized by a very severe fraud. So, it is true Congress has 
specified that there are two purposes. We are reviewing those 
processes. I think if I understand that procurement law, I 
believe that has been the process that has been used, but I am 
happy to follow up.
    In terms of your big-picture policy question, I have no 
interest in settlements that are not focused on redress, and 
forfeitures that are related to what the statute is saying. I 
don't know all of the circumstances of the DOJ and what you are 
referring to, but on a principles basis, I think you are onto 
something, that when there are fines and penalties, that should 
generally go to the taxpayers or to redress for victims.
    Mr. Gooden. Thank you. What a pleasant answer. I appreciate 
that. We would love to follow up with you and visit more about 
it.
    Mr. Chopra. Please.
    Mr. Gooden. Thank you. One more thing: Big Tech. I wanted 
to thank you for your work on that. Big Tech companies have an 
incentive, obviously, to collect as much personal data on their 
users as possible. Their business models are built around using 
consumer data for profits, and this advantage of superior 
information is key to their success, as you know. There are 
countless examples of Big Tech exploiting data and behavioral 
biases to manipulate consumers' preferences. And I support your 
recent efforts to increase accountability, and I appreciate you 
working with my office on our efforts, our bipartisan efforts 
to rein in Big Tech.
    Mr. Chopra. I actually really hope that as a committee, we 
can work with you on this. I see this as potentially one of the 
biggest challenges we face. I think before you came in, I 
talked about now I really believe we are lurching toward a 
financial system that is not good for America, and more like 
what we see in China. And if we want to choose that, you all 
should choose that and do it with deep thought because I think 
we are much better off with a system that is not based on 
surveillance by a few firms, especially Big Tech firms. I think 
we need a decentralized system where small institutions who 
don't necessarily have an arsenal of data about each of us 
should be able to compete too. And I think this raises real 
questions about privacy, national security and really a fair 
and competitive market. And it is not just the Big Tech firms. 
There are big issues when it comes to scooping up and 
surveilling us and what that data is being used for, and the 
accountability for the decisions around it.
    Mr. Gooden. Thank you. I look forward to visiting with you 
more about that and working with you on this issue that I think 
has broad bipartisan support across our great nation.
    I yield back.
    Mr. Casten. The gentleman from New Jersey, Mr. Gottheimer, 
who is also the Vice Chair of our Subcommittee on National 
Security, International Development and Monetary Policy, is now 
recognized for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman, and thank you, 
Director. An ongoing concern of mine has been how government 
bureaucracy comes up with new rules that contradict other rules 
and layer on new ones without actually getting rid of old, out-
of-date rules. Year after year, these outdated rules pile up 
even when they are out of date, which is very tough for 
businesses and startups who must comply with all of these 
outdated rules. I introduced legislation that would create an 
independent bipartisan commission that would cut outdated and 
unnecessarily burdensome red tape and help streamline 
government to move faster and support our small businesses and 
economic growth while continuing to protect families and 
consumers.
    Director Chopra, do you think it is a good idea to have an 
independent bipartisan commission that modernizes our 
guardrails to help protect consumers from outdated, overly-
burdensome regulation?
    Mr. Chopra. I am happy to look at the legislation with you, 
but in spirit, I am in total agreement. We want to make sure 
that small players and startups are able to challenge the 
dominant incumbents. The way our economy has prospered in so 
many sectors, whether it is the life sciences, communications, 
or financial services, is when small entities can break in, can 
challenge the system, and to be able to make sure that we can 
have competition. The rules should not be designed in order to 
only benefit the big players who have all of the legal 
resources to be able to use those rules and comply with those 
rules. So, competition and innovation is--sorry.
    Mr. Gottheimer. No, no, I was going to say thank you, 
Director. Additionally, I am concerned that some of the rules 
that build up just pile on to hurt all of these businesses, and 
we end up just not looking--a new Administration comes in and 
we end up not looking at the old rules that are on the books. 
We pile on new ones, and then all of these businesses have to 
comply with things that are outdated and unnecessary, and, as a 
result, it actually creates a huge burden on them.
    If I could just turn to discussing the Consumer Complaint 
Database, a platform that the CFPB created to allow the public 
to file complaints against small businesses. One area I am 
particularly concerned about is how this database is managed. 
If you don't mind, can you please tell me how you use this 
database to inform rulemaking and enforcement actions around 
small businesses, and how you ensure the validity of these 
complaints to protect small businesses from unwarranted 
attacks? What is the accountability measures that you have in 
place on the database?
    Mr. Chopra. Yes. Thanks for the question. As I shared in my 
written testimony, we have actually moved our enforcement 
scrutiny away from small firms. I think that the most need of 
attention is on large firms engaged in market-wide harm, and 
repeat offenders. I have seen too many times Federal agencies 
focus on the small players and strong-arm them into 
settlements, and I think it is inappropriate. Of course, if 
they are engaged in serious violations of law, we will work 
with others to figure out where to refer it, and if we need to 
do it ourselves, we will. But on the complaint database, as I 
understand it, individual firms have the opportunity to respond 
not only to the consumer, and there are certain fields, and I 
am happy to brief you more specifically on it, but--
    Mr. Gottheimer. I would like to understand, because the way 
it has been explained to me is that literally anybody can post 
anything. And listen, it is obviously something that is 
merited. There should be some accountability. It should be 
looked into and not just something that any random person or a 
competitor, which is what I worry about, someone's competitor 
just decides to throw up a complaint on a site and then 
suddenly it hurts the business. And, frankly, I don't care what 
size the business is, if it is not merited, we shouldn't allow 
people to just post things that hurt a business because they 
decide to do it for anti-competitive reasons, because they want 
to hurt another competitive business. So, I just want to make 
sure there is accountability behind these complaints. You can't 
just throw them up. And people see a name written a bunch of 
times and decide that that business of any size is not good 
because there were some complaints.
    Mr. Chopra. As I understand it, it is not like a bulletin 
board where you can just post whatever. There is a process of 
how it moves through from the law enforcement side into what 
data is shared publicly. There is a dimension of it where 
companies have to enroll, and there is a whole process around 
that. And again, we are happy to share more with your staff. 
But I take it seriously, what you are saying about making sure 
that small firms have the ability to compete and are not just 
kind of pushed out by larger players and others who want to do 
them harm.
    Mr. Gottheimer. I appreciate that. Thank you so much. I 
yield back.
    Mr. Casten. The gentleman from Wisconsin, Mr. Steil, is now 
recognized for 5 minutes.
    Mr. Steil. Thank you, Mr. Chairman. And Director, thank you 
for being here. It has been a long day. We have a small 
attendance left, but I think it is a big topic. And I think the 
questioning you are getting from many Members is warranted 
because the CFPB, unlike other independent agencies such as the 
SEC or the FTC, isn't dependent on the congressional 
appropriations process, so this is our one chance to ask you 
questions rather than an appropriations process. I think the 
way that the CFPB was set up was foolish, but that is not for 
our discussion today.
    I want to dive into the announced changes that you made 
under the supervisory guidance related to discrimination on 
March 16th. The Bureau announcement noted that customers can be 
harmed by discrimination regardless of whether or not it is 
intentional. And it sounds a lot like disparate impact theory, 
the idea that different outcomes prove discrimination. And I 
reflect back on the Bureau's analysis, in particular of 
individual's races based on the ZIP Codes that they lived in, 
whether or not ads have people of different races in an ad, 
whether or not The Wall Street Journal even opined that maybe 
whether or not people are clicking on different ads, under 
different basis would be fall under disparate impact. I think 
it is a very interesting area to explore.
    And to my knowledge, the Bureau's Unfair, Deceptive, or 
Abusive Acts and Practices (UDAAP) authority has not been 
successfully stretched to include disparate impact claims 
previously. Yesterday in the Senate, when Senator Toomey asked 
you about the apparent inclusion of disparate impact in the new 
supervisory guidance, you said, ``That is not what is in the 
manual.'' And so, I would like you to, if you would, clarify, 
does the CFPB intend to use UDAAP authority to pursue disparate 
impact claims? Yes or no?
    Mr. Chopra. Yes. Just to be clear, disparate impact is not 
part of UDAAP. Disparate impact is what the courts have 
determined is part of certain, very specific laws, including 
the Equal Credit Opportunity Act, that we do enforce, and it is 
in the regulations we inherited from the Fed. ``Unfair,'' 
``deceptive,'' and ``abusive'' are spelled out, and unfairness 
has three prongs. These prongs--
    Mr. Steil. Understood. But are you using a disparate impact 
analysis and measure?
    Mr. Chopra. No. What you do is you evaluate the practice 
based on the prong, for example, take fake accounts. There is 
not a specific prohibition that says you can't make fake 
accounts necessarily. But there are three elements of 
unfairness that Congress has enacted and you evaluate each of 
them. So, substantial injury, was it reasonably avoidable? What 
is the--
    Mr. Steil. Cognizant of the time, and understanding the 
analysis, your view under UDAAP is that you don't have the 
authority to use a disparate impact analysis? You said it is 
not in the statute, so--
    Mr. Chopra. I am struggling. I want to be responsive but 
disparate impact theory is not part of UDAAP. And to be clear, 
this is not--
    Mr. Steil. Then, you have answered my question. It is not 
under UDAAP, and is it fair to say you don't have authority 
then to stretch disparate impact into UDAAP?
    Mr. Chopra. Yes. That is a different legal doctrine. 
Unfairness is a different one. To be clear, this is not also 
very new. There are multiple banking agencies that have 
described how discriminatory practice, in their exam manuals, 
may also violate the prohibition on UDAAP. So, there was a 
sense--
    Mr. Steil. I am going to reclaim my time. I appreciate 
[inaudible]. I think that is helpful to give us a little bit of 
clarity as to where you are looking. I just want to touch 
quickly on, if I can, junk fees. That is your term, not a not a 
definition in law. You have noted that it includes hidden back-
end fees. I don't want hidden back-end fees. Can you provide 
clarity as to what are hidden back-end fees? These are highly-
regulated entities. Are these disclosed hidden back-end fees? 
Are they non-disclosed hidden back-end fees? Can you describe 
what you mean by, ``hidden back-end fees?''
    Mr. Chopra. In some cases, and we have seen this and we are 
getting and analyzing comments on it, there are fees that are 
not necessarily disclosed beforehand. And I think there are 
certainly issues with this when the concerns--
    Mr. Steil. So, it is fees. You are specifically looking at 
fees that are not disclosed with highly-regulated firms?
    Mr. Chopra. We are looking at all fees.
    Mr. Steil. But that is what you mean by, ``hidden back-end 
fees?''
    Mr. Chopra. Yes.
    Mr. Steil. That they are hidden. They are not disclosed.
    Mr. Chopra. Yes.
    Mr. Steil. Okay. I am going to reclaim my time, because I 
want to ask you one final question that I am concerned about, 
in particular as it relates to student loans. Have you or 
anyone in your senior staff been in discussion and 
consultations about the termination of loans with the 
Department of Education?
    Mr. Chopra. Yes. We share a certain--
    Mr. Steil. So, yes. Have you been in discussions with any 
other third-party outside groups as it relates to the 
termination of student loans?
    Mr. Chopra. To the determination?
    Mr. Steil. Termination.
    Mr. Chopra. What do you mean by, ``terminate?''
    Mr. Steil. The Biden Administration is proposing to 
terminate student loans.
    Mr. Chopra. Oh, I see, the cancellation. I think we have 
been advocated before on it. I have not had conversations with 
the White House about that, but we do administer certain laws 
that overlap with the Department of Education.
    Mr. Steil. Thank you. I yield back.
    Mr. Casten. The gentleman from South Carolina, Mr. Timmons, 
is now recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman. As you are aware, 
political appointees throughout the Executive Branch must sign 
ethics pledges and certain financial disclosures. Here in 
Congress, staff making a certain salary must file financial 
disclosures and comply with various ethics requirements. Do you 
agree that those requirements and disclosures are important to 
maintain the public's trust in the government?
    Mr. Chopra. I think I know all the ones you referred to. I 
fill them out, too, yes.
    Mr. Timmons. Ethics requirements are great.
    Mr. Chopra. Yes.
    Mr. Timmons. In January 2021, President Biden signed an 
Executive Order on ethics commitments, that every political 
appointee and every Executive Branch agency must sign and 
commit to. The ethics pledge also has a revolving door ban that 
does not allow appointees to participate 2 years in matters 
involving specific parties that are directly or substantially 
related to their former employer. So, he went above and beyond 
the legal requirements. Do you think that is good?
    Mr. Chopra. Yes. I think that was the Trump pledge, too, 
which I signed--
    Mr. Timmons. I love it. Okay. We are on the same page. Are 
you familiar with the White House Fellows Program?
    Mr. Chopra. I think so, yes.
    Mr. Timmons. Generally speaking, it is the most prestigious 
fellowship in the Federal Government. There are 17 every year. 
It is a 1-year term. Each of them work directly under one 
Cabinet Secretary, the Vice President, or the President. 
Importantly, they are subject to all of the ethics 
requirements. They make $134,000 a year, and just for 
reference, Cabinet Secretaries make $210,000. The President 
makes $400,000. That is the White House Fellows Program. Up 
until a couple of hours ago, I thought it was the best fellows 
program out there, but the CFPB actually also has a fellows 
program. It allows the CFPB to bring on advisors to develop 
policy. That is from the website. I have information which 
shows that you have 23 fellows, and almost all of them make 
more than $214,000. Over half of them make $240,000. That is 
even more than you make as the CFPB Director, at $180,000. So, 
not only do fellows make more than you, but they also make more 
than any Cabinet Secretary, and you have 23 of them. But the 
Cabinet Secretaries, the President, and the Vice President get 
one who makes almost half as much. So, these incredibly well-
compensated fellows, because they are not technically political 
appointees, don't have any of the ethics requirements, none of 
the disclosure requirements, none of the outside earned income 
requirements. Do I have that right?
    Mr. Chopra. No. The fellowship program that the White House 
has is not the same--
    Mr. Timmons. So, separate the White House. This is just the 
CFPB fellows program. Do your CFPB Fellows have to go through 
the same ethics requirements, outside income requirements that 
political appointees do, because the answer is no.
    Mr. Chopra. I don't think so, but, again, it is a hiring 
authority--
    Mr. Timmons. You have 23 people making over $200,000 who 
are not political appointees, and they are also not fellows. 
Fellows generally are in graduate school or just starting their 
career. Most of your fellows have decades of experience. I just 
have a problem with this, because it seems like you are 
circumventing the political appointee requirement, and the 
Chair of this Committee, Chairwoman Waters, last Congress 
passed a bill, and she brought in then-CFPB Director Kraninger 
and lambasted her for having 10, bou have 8 political 
appointees and 23 fellows who make more than you do. Is that a 
problem?
    Mr. Chopra. Okay. So, just to be clear, these are term 
hires as I understand--
    Mr. Timmons. So, a 2-year term up to 4 years. That is still 
4 years. The Administration term is 4 years. What is the 
difference?
    Mr. Chopra. No, I understand that, but they are not 
determined by the President or the White--
    Mr. Timmons. I am aware. Do you determine who the fellows 
are?
    Mr. Chopra. No. They go through a competitive process. It 
was a posting.
    Mr. Timmons. Do you know the 23 people now?
    Mr. Chopra. I think I have met almost all of them. I 
spoke--
    Mr. Timmons. Did you know any of them prior to becoming the 
CFPB Director?
    Mr. Chopra. I knew a few of them. I encouraged a lot of 
people to apply, but I was not--
    Mr. Timmons. How many of the 23 did you know prior to 
applying?
    Mr. Chopra. I don't know.
    Mr. Timmons. Okay. But you did know a number of these 
people who became--
    Mr. Chopra. Not a number. I think I know a handful.
    Mr. Timmons. Okay. There are 23. You would say half?
    Mr. Chopra. Oh no, less than half.
    Mr. Timmons. Okay. We have a list if you want to see it, 
but you would say at least 5 or 10?
    Mr. Chopra. I don't know the exact numbers. Some people 
come through different hiring--
    Mr. Timmons. Do you think this is a problem? Do you think 
it is a problem that the Chair of this Committee went nuts over 
Director Kraninger having 10 political appointees and you have 
23--
    Mr. Chopra. These are not political appointees. There are--
    Mr. Timmons. They are paid more than political appointees.
    Mr. Chopra. Let me just be clear. There are a number of 
authorities, and, in fact, the CFPB and other agencies have 
hired on a non-competitive--
    Mr. Timmons. Do they have outside--
    Mr. Chopra. --basis that make big salaries that are 
permanent.
    Mr. Timmons. Do they have outside earned income bands? Do 
they have financial disclosures?
    Mr. Chopra. I believe so. I think all employees, and there 
may even be requirements if they make above a certain amount, 
too--
    Mr. Timmons. Okay. I don't think they do, because they are 
fellows. I think this is a workaround and--
    Mr. Chopra. No, I think they are like every other employee.
    Mr. Timmons. I don't believe that is the case. I believe 
that they--
    Mr. Chopra. Okay. I will look into this, and I am happy to 
discuss it with you--
    Mr. Timmons. It seems that you have 23 people who are 
political appointees and have no financial disclosure 
requirements, have no outside income requirements, and have no 
bans on their spouses lobbying them, so these are big problems. 
By the way, they are all--
    Mr. Chopra. If their spouses are allowed to lobby or--
    Mr. Timmons. By the way, they are all from aggressively 
left-wing organizations. Their employment history--
    Mr. Chopra. That is not true. We have people from Wall 
Street. We have people from industry.
    Mr. Timmons. Sixteen of the 23 come from far-left 
associations. We can get you their work histories. I yield 
back.
    Mr. Casten. The gentleman's time has expired.
    The gentleman from Texas, Mr. Sessions, is now recognized 
for 5 minutes.
    Mr. Sessions. Thank you. Thank you very much, Mr. Chairman. 
Director, I want to thank you for taking the time to be here. I 
know that taking all day to answer our questions takes its toll 
on you. And I really don't want to put you in any diminished 
position right now, especially since I cannot be downstairs, 
and I apologize.
    Director, I want to follow up on some of the advice and 
information that you provide to the industry. The industry, as 
you know, views that your viewpoints are important to them 
because they want to know the direction that you not only 
think, but that the agency may be headed in. And, in 
particular, there are two points, your comments made about the 
CFPB's efforts to reinvent the remittance market that were made 
in the context of announcing a lawsuit that included no 
specific allegation of consumer harm. And so, there are 
questions with people who are really trying to give advice, get 
ahead, prepare themselves as an opportunity for understanding 
your context of overregulation versus or, I guess, the term, 
``reinvent.''
    Mr. Chopra. Sir, just to make sure we are clear, when we 
filed that action--you said there were no allegations, but we 
actually posted the public version of the complaint that went 
through each count. That is the lawsuit that was filed in 
Federal court, so we are happy to follow up with you on that. I 
think, as I recall, there is no question that payment systems 
are really being reinvented right now. There are a lot of new 
technologies that are coming online that are helping people 
transfer money in ways that we haven't seen before, including 
in a cross-border context, so you do see apps, and you do see 
other products that are allowing people to do things in ways 
that are quite different.
    There is no question that there is a lot of change. I hope 
I am answering your question, but I do think that there is a 
lot of innovation happening. And I do think we are better off 
in a world where there are faster payments, more real-time 
settlement, but also that consumers can be protected in the 
process.
    Mr. Sessions. If I were to go a little bit deeper, you are 
suggesting, Mr. Director, the term, ``reinvent,'' does that 
mean something new or different in the way you look at things, 
and would consideration of advice be given ahead of time before 
action is taken?
    Mr. Chopra. Yes. And I think, by the way, when I said, 
``reinvent,'' it is the market that is reinventing it. How 
people are moving money, even just 10 years ago, is totally 
different than how people are moving money today. There is even 
some data to suggest that there is more peer-to-peer that some 
financial institutions are experiencing than even what they are 
clearing in checks. So, I think that was meant to say what the 
market is doing, if I am recalling it correctly.
    Mr. Sessions. Okay. In fact, Mr. Director, that is very 
helpful. You are talking about the marketplace, not the way you 
view the marketplace and oversight activities, and that is very 
helpful. And I will go back and re-look at what I believe and 
send you a letter because I believe now that you put it in 
context.
    The second question that I would have is from a source, the 
Financial Health Network, on March 24th. And I will be glad, 
sir, to save you these discussions in writing because it is 
hard when someone comes at you with something from a month ago, 
but essentially, it is the Buy Now, Pay Later loans. And in the 
discussion about them, that data shows that the overwhelming 
majority of users understand the terms and are successfully 
using the product. And perhaps, if I can gain your insight 
about how you look at, once again, going back to the word, 
``reinvent,'' you take it that it is the marketplace as opposed 
to your oversight. Now with your oversight of Buy Now, Pay 
Later, would you mind discussing your context of that?
    Mr. Chopra. I am out of time, but I am happy to answer for 
the record and to discuss it with you further, but I also gave 
a response on this to some of your colleagues.
    Mr. Sessions. Thank you very much. And thank you, Mr. 
Chairman.
    Mr. Casten. I would like to thank Director Chopra for his 
testimony today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    This hearing is adjourned.
    [Whereupon, at 1:54 p.m., the hearing was adjourned.]



                            A P P E N D I X

                             April 27, 2022


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