[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                     CONSUMER FINANCIAL PROTECTION
                        BUREAU: RIPE FOR REFORM

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
                          AND MONETARY POLICY

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 9, 2023

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 118-7
                            
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-365 PDF                   WASHINGTON : 2023                    
          
-----------------------------------------------------------------------------------     

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

               PATRICK McHENRY, North Carolina, Chairman

FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking 
PETE SESSIONS, Texas                     Member
BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
ROGER WILLIAMS, Texas                AL GREEN, Texas
FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
WARREN DAVIDSON, Ohio                JUAN VARGAS, California
JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
ANDREW GARBARINO, New York           RITCHIE TORRES, New York
YOUNG KIM, California                SYLVIA GARCIA, Texas
BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director
       Subcommittee on Financial Institutions and Monetary Policy

                     ANDY BARR, Kentucky, Chairman

BILL POSEY, Florida                  BILL FOSTER, Illinois, Ranking 
BLAINE LUETKEMEYER, Missouri             Member
ROGER WILLIAMS, Texas                NYDIA M. VELAZQUEZ, New York
BARRY LOUDERMILK, Georgia            BRAD SHERMAN, California
JOHN ROSE, Tennessee                 GREGORY W. MEEKS, New York
WILLIAM TIMMONS, South Carolina      DAVID SCOTT, Georgia
RALPH NORMAN, South Carolina         AL GREEN, Texas
SCOTT FITZGERALD, Wisconsin          JOYCE BEATTY, Ohio
YOUNG KIM, California                JUAN VARGAS, California
BYRON DONALDS, Florida               SEAN CASTEN, Illinois
MONICA DE LA CRUZ, Texas             AYANNA PRESSLEY, Massachusetts
ANDY OGLES, Tennessee
                           
                           
                           C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 9, 2023................................................     1
Appendix:
    March 9, 2023................................................    47

                               WITNESSES
                        Thursday, March 9, 2023

Ellison, Hon. Keith, Attorney General, State of Minnesota........    11
Himpler, William M., President and CEO, American Financial 
  Services Association (AFSA)....................................     5
Johnson, Brian, Managing Director, Patomak Global Partners LLC...     7
Thompson, Jessica L., Attorney, Pacific Legal Foundation (PLF)...     8
Watkins, Devin, Attorney, Competitive Enterprise Institute (CEI).    10

                                APPENDIX

Prepared statements:
    Ellison, Hon. Keith..........................................    48
    Himpler, William M...........................................    54
    Johnson, Brian...............................................    65
    Thompson, Jessica L..........................................    75
    Watkins, Devin...............................................    86

              Additional Material Submitted for the Record

Barr, Hon. Andy:
    Written statement of ACA International.......................    95
    Competitive Enterprise Institute, ``Congress Should 
      Appropriate Money for the CFPB Through the Congressional 
      Appropriation Process''....................................   103
    Written statement of the Consumer Bankers Association (CBA)..   105
    Written statement of the Credit Union National Association 
      (CUNA).....................................................   109
    Written statement of the National Association for Latino and 
      Community Asset Builders (NALCAB)..........................   115
    Pacific Legal Foundation, ``Small lending firm fights the 
      CFPB's illegal power grab and racial equity agenda''.......   118
    Written statement of the U.S. Chamber of Commerce............   126
Beatty, Hon. Joyce:
    Written statement of U.S. PIRG...............................   144
    Written statement of various undersigned organizations.......   171
    Written statement of the Center for Responsible Lending (CRL)   175
    Written statement of Lake Research Partners..................   178
    Written statement of Public Citizen..........................   184
    Written statement of 20/20 Vision............................   187
    Written statement of the National Coalition for Asian Pacific 
      American Community Development(National CAPACD)............   188
    Written statement of the National Association of Consumer 
      Advocates (NACA)...........................................   190
    NCRC statement in opposition to the TABS Act.................   192
    Written statement of the Woodstock Institute.................   194
    Written statement of Prosperity Now..........................   195
Ellison, Hon. Keith:
    Written responses to questions for the record from 
      Representative Kim.........................................   197
Johnson, Brian:
    Written responses to questions for the record from 
      Representatives Waters and Rose............................   199
Thompson, Jessica L.:
    Written responses to questions for the record from 
      Representative Rose........................................   201
    Written responses to questions for the record from 
      Representative Waters......................................   203

 
                     CONSUMER FINANCIAL PROTECTION
                        BUREAU: RIPE FOR REFORM

                              ----------                              


                        Thursday, March 9, 2023

             U.S. House of Representatives,
             Subcommittee on Financial Institutions
                               and Monetary Policy,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 9:59 a.m., in 
room 2220, Rayburn House Office Building, Hon. Andy Barr 
[chairman of the subcommittee] presiding.
    Members present: Representatives Barr, Posey, Luetkemeyer, 
Williams of Texas, Loudermilk, Rose, Timmons, Norman, 
Fitzgerald, Kim, Donalds, Ogles; Foster, Velazquez, Sherman, 
Meeks, Green, Beatty, Vargas, Casten, and Pressley.
    Ex officio present: Representative Waters.
    Also present: Representative Emmer.
    Chairman Barr. The Subcommittee on Financial Institutions 
and Monetary Policy will come to order. Without objection, the 
Chair is authorized to declare a recess of the subcommittee at 
any time.
    Today's hearing is entitled, ``Consumer Financial 
Protection Bureau: Ripe for Reform.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Thank you to our witnesses for joining us today in the 
Financial Institutions and Monetary Policy Subcommittee to 
discuss the administrative process fouls and structural issues 
that make the Consumer Financial Protection Bureau (CFPB) ripe 
for reform.
    At today's hearing, we will examine the CFPB's leadership 
structure, current funding mechanism and how the agency manages 
its budget, operations that are in need of reform, and current 
tactics of regulation without rules.
    Leadership structure: The CFPB does not have an executive 
board, an independent Inspector General, or any true oversight 
of the Director. This is unlike virtually every other Federal 
agency.
    The agency is led by a single partisan Director, Mr. Rohit 
Chopra, who has routinely acted unilaterally and arbitrarily, 
often outside any statutory mandate, without engaging in 
rulemaking and compliance with the Administrative Procedure Act 
(APA), and even sometimes without adjudication. This has led to 
the CFPB becoming the most unchecked, unaccountable agency in 
the entire Federal Government.
    Funding mechanism and budget: Further, the CFPB operates 
outside of the congressional appropriations process, receiving 
its funding through the Federal Reserve, through an opaque and 
arbitrary formula, operating, obviously, outside of the 
traditional appropriations process. This denies Congress the 
use of its most powerful oversight tool, the power of the 
purse.
    My legislation, the Taking Account of Bureaucrats' Spending 
(TABS) Act, would give Congress the power of the purse and its 
oversight power, reining in the unaccountable CFPB and 
subjecting the agency to the traditional appropriations 
process.
    As many of you know, the U.S. Court of Appeals for the 
Fifth Circuit recently held that the CFPB's funding mechanism 
is unconstitutional, stating that it is, ``double insulated as 
the Fed and CFPB both operate outside of the congressional 
appropriations process.'' The Supreme Court will review the 
Fifth Circuit's decision this fall and has the opportunity to 
clarify the constitutionality of the CFPB's funding once and 
for all.
    The TABS Act provides a common-sense solution for questions 
surrounding the funding mechanism and will put an end to 
bureaucratic overreach, and we hope it will earn bipartisan 
support once it becomes clear that this legislation is the way 
to save the agency.
    Additionally, the Fed does not exercise authority over the 
CFPB in terms of its budget. Instead, the Director is required 
to merely submit a short letter requesting funds each quarter 
that the Director alone decides are reasonably necessary for 
operations.
    The Fed rubber-stamps the request each time. This unchecked 
budget process allows for no accountability over the agency, 
which, in turn, permits the agency to stray from its core 
mission. This process must be reformed.
    Regulation without rules: Under Director Chopra, the CFPB 
has begun regulating without rules by evading the traditional 
notice-and-comment process, instead doing rulemaking through 
enforcement, blog posts, press releases, and changes to 
examination manuals. Not only does this circumvent the 
requirements of the APA, which provides for public input and 
prevents whiplash for industry with each change in leadership, 
but it also does not promote lasting policy directives and is 
harmful to consumers' access to financial services.
    Recently, the CFPB failed to fulfill its statutory 
obligation to comply with the Small Business Regulatory 
Enforcement Fairness Act (SBREFA), which is required when a 
rule may have significant economic impact on small entities. 
Evading this statutory obligation is not only unacceptable from 
a process standpoint but also disadvantages the small 
institutions which serve the consumers that the CFPB is charged 
with protecting.
    In addition to the TABS Act, today we will examine other 
bills that reform the CFPB's leadership structure by 
establishing an independent IG and creating a multimember 
bipartisan commission, focusing on the requirements for funding 
the agency's budget, requiring more oversight and quantitative 
analysis of the rulemaking process, and protecting small 
businesses and whistleblowers. These bills are the first steps 
toward reforming the unaccountable CFPB.
    I look forward to discussing these issues and to hearing 
from our panel today on what reforms will be beneficial for the 
agency and for consumers.
    With that, I will yield back my time, and recognize the 
ranking member of the subcommittee, the gentleman from 
Illinois, Dr. Foster, for 4 minutes for an opening statement.
    Mr. Foster. Thank you, Chairman Barr, and thank you 
specifically for starting this hearing exactly on time. We are 
setting a great precedent.
    We are here today to discuss ways that we might, 
``reform,'' the Consumer Financial Protection Bureau. 
``Reform'' is an interesting word, which can be taken as to 
improve, to alter, or to abolish. And if past is prologue, I am 
afraid that I may hear from my Republican colleagues not ways 
in which we can improve the CFPB, but ways in which we can 
weaken or handicap it. Many in the Republican party have fought 
against the CFPB since its inception, repeatedly seeking ways 
to delegitimize, defund, or, most recently, to abolish the 
agency entirely.
    The most recent Fifth Circuit decision regarding the CFPB's 
funding mechanism is the latest spearhead of this attack on one 
of our nation's most important financial regulators. This has 
far-ranging implications, carrying with it the danger of 
invalidating crucial consumer protection rules that our 
constituents have relied on for the past decade.
    This threat does not end there, however, because the CFPB's 
funding structure is not unique. The FDIC, the OCC, and the 
Federal Reserve all share the same basic funding mechanism and 
will be equally threatened if the CFPB's funding is ultimately 
found to be invalid. Republicans have effectively launched an 
attack that could impair much of the financial regulatory 
infrastructure that has saved the U.S. economy in 2008 and 
again in 2020.
    The Fifth Circuit court has crafted a theory that would 
empower courts to strike down mandatory spending on Federal 
programs, compelling Congress to either reappropriate the money 
each year or let the program die, the very embodiment of 
Republicans' plans to, for example, sunset Social Security. 
This radical reading of the Constitution could also threaten 
Medicare, Medicaid, the Affordable Care Act, unemployment 
benefits, child nutrition assistance, and so much more.
    This decision specifically threatens to inflict immense 
legal and practical harm on not just the CFPB but to consumers 
and our nation's final sector who have invested billions of 
dollars into a compliance regime which ensures that the vast 
majority of good actors and financial servicers do not have to 
suffer from competition from bad actors.
    The CFPB has more than a decade-long track record of 
working around the clock to fight for our nation's consumers. 
Consumer protection should not be a partisan issue. Since its 
inception, the CFPB has returned more than $16 billion back to 
192 million harmed consumers, and has held bad actors 
accountable to the tune of nearly $4 billion.
    Moreover, roughly 80 percent of polled U.S. citizens 
support the CFPB and want the agency to continue doing its job. 
So my friends across the aisle would be wise to listen to their 
constituents and work in a bipartisan way to truly improve the 
CFPB and not to handicap or abolish it.
    As American families are emerging from struggles of the 
pandemic, now is not the time to weaken consumer protection. 
The CFPB is integral to that goal, and I look forward to 
discussing how we can support its mission to protect our 
constituents.
    Thank you. I yield back.
    Chairman Barr. The gentleman yields back.
    I think the ranking member of the full Financial Services 
Committee, Ms. Waters, expressed an interest in giving an 
opening statement, but I do not see her. So with that, we will 
move on to the testimony of our witnesses.
    First, we welcome the testimony of Mr. Bill Himpler. Mr. 
Himpler is President and CEO of the American Financial Services 
Association (AFSA), which was founded in 1916. The AFSA is a 
trade association for the consumer credit industry, protecting 
member companies' ability to offer affordable credit options to 
American consumers and enhancing consumer choice.
    Second, Mr. Brian Johnson, who is familiar to this 
committee. He is the Managing Director in the banking 
supervision and regulation group at Patomak Global Partners. He 
previously served as Deputy Director of the CFPB, where he 
oversaw the agency's rulemaking, supervision, and enforcement 
activities.
    He conceived and led the creation of high-profile agency 
initiatives, including the Office of Competition and 
Innovation, the Taskforce on Federal Consumer Financial Law 
policy symposia series, and the Start Small, Save Up 
Initiative.
    Third, Ms. Jessica Thompson. Ms. Thompson is an attorney in 
the Economic Liberty Practice Group at the Pacific Legal 
Foundation. She has litigation experience in a variety of State 
and Federal constitutional law issues presenting constitutional 
challenges to the CFPB and COVID-19-related executive actions.
    She also engaged in appellate advocacy for clients 
challenging removal protections for SEC Administrative Law 
Judges, and submitted amicus briefs of judicial deference to 
State supreme courts.
    Fourth, Mr. Devin Watkins. Mr. Watkins is an attorney at 
the Competitive Enterprise Institute, where his expertise 
focuses on government transparency and regulatory reform. Mr. 
Watkins previously worked at the Cato Institute as a legal 
associate, and interned at the Institute for Justice.
    Another witness who has familiarity with our committee is 
Attorney General Keith Ellison. It's good to see you, my 
friend. Welcome back to the committee.
    Mr. Ellison was sworn in as Minnesota's 30th Attorney 
General on January 7, 2019. From 2007 to 2019, Keith Ellison 
represented Minnesota's Fifth Congressional District in the 
U.S. House of Representatives, and he served for 12 years on 
this, the House Financial Services Committee.
    We thank each of you for taking the time to be here. Each 
of you will be recognized for 5 minutes to give--
    Mrs. Beatty. Mr. Chairman, may I have a point of personal 
privilege, please, before you start?
    Chairman Barr. The gentlelady is recognized.
    Mrs. Beatty. Thank you, for one minute.
    Mr. Chairman, I would like to ask unanimous consent to take 
a point of personal privilege to welcome back our former 
colleague, Attorney General Keith Ellison.
    Thank you, Attorney General Keith Ellison, and welcome 
back. As many of us know, you served on this committee when we 
created the CFPB through the Dodd-Frank Act, and you are now 
Minnesota's chief law enforcement officer.
    You are just the right person to help us discuss the issues 
that this hearing is focused on, so we are glad to have you 
back here in our committee room. And we are looking forward to 
your testimony.
    Mr. Chairman, I would like to request, on behalf of our 
ranking member, to enter this statement for the record from the 
following organizations who are in support of preserving the 
CFPB's current leadership structure funding the mission to 
protect consumers: Americans for Financial Reform; the Center 
for Responsible Lending; the National Association of Consumer 
Advocates; the National CAPACD and the National Community 
Reinvestment Coalition; Public Citizen; Prosperity Now; U.S. 
PIRG; the Woodstock Institute; and 20/20 Vision, D.C.
    Chairman Barr. Without objection, it is so ordered.
    Mrs. Beatty. Thank you, Mr. Chairman.
    Chairman Barr. And without objection, each of the 
witnesses' written statements will be made a part of the 
record.
    Mr. Himpler, you are now recognized for 5 minutes for your 
oral remarks.

 STATEMENT OF WILLIAM M. HIMPLER, PRESIDENT AND CEO, AMERICAN 
             FINANCIAL SERVICES ASSOCIATION (AFSA)

    Mr. Himpler. Thank you, Mr. Chairman, Ranking Member 
Foster, and members of the subcommittee.
    My name is Bill Himpler, and I am President and CEO of the 
American Financial Services Association, which represents the 
consumer credit industry, protecting access to credit and 
consumer choice. And I must say I am glad, Mr. Chairman, that 
you have the really smart attorneys on the panel with me here.
    I appreciate the opportunity to testify before the 
Subcommittee to demonstrate how the CFPB's refusal to operate 
within its congressional mandate and its unhelpful rhetoric 
harms both consumers and creditors. Instead of a path that 
exceeds its authority, I would suggest an alternative path for 
the Bureau.
    But allow me to share five examples of how the Bureau's 
overreach could have detrimental effects on how an American 
consumer safely accesses credit, and could throw the entire 
consumer credit market into disarray.
    First, the CFPB seeks to impose limits on arbitration, 
despite Congress overturning its arbitration rule, and the 
Bureau's own study and research which shows that arbitration 
benefits consumers. The CFPB continues to pursue efforts to 
eliminate arbitration agreements, this time by proposing a non-
bank registry that would require finance companies to register 
certain terms and conditions, such as arbitration agreements. 
This proposal is unnecessary because the information is already 
publicly-available.
    In addition, it will only serve to shame companies from 
using this lawful tool and give trial lawyers a roadmap for 
class action lawsuits to pay consumers $3 or $4 per case while 
the lawyers make millions. By comparison, consumers actually 
receive thousands of dollars in arbitration settlements.
    Second, the Bureau focuses on press releases over rules, 
meaning that struggling consumers remain just that: struggling. 
The CFPB has issued press releases on so-called junk fees 
without defining what they are, while some, such as resort fees 
and ticket fees, are clearly outside the CFPB's jurisdiction. 
This leads to greater compliance uncertainty, thereby limiting 
consumer choice and credit access.
    In short, the Bureau's rhetoric accomplishes absolutely 
nothing for the consumer. If the Bureau has identified a 
problem in the consumer finance marketplace, it should follow 
the APA rulemaking authority that is at its disposal and 
institute real change.
    Third, regulation by press release can have serious 
consequences for consumers. In December, the CFPB issued a 
press release on the Servicemembers Civil Relief Act (SCRA). 
That press release ignores the SCRA statutory requirements, 
fails to account for the impact that the proposal will have on 
the securitization market, and does not address the failings of 
the Defense Manpower Data Center SCRA website. If creditors 
followed the Bureau's recommendations, it could have dire 
financial and privacy consequences for servicemembers that the 
CFPB could have foreseen if it had engaged in APA rulemaking.
    Fourth, the CFPB is using regulation by enforcement to 
change the decades-old Truth in Lending Act (TILA) with little 
concern for the harm that it could cause consumers. Under Dodd-
Frank, the CFPB has the authority to amend Reg Z, which 
implements TILA.
    A joint CFPB and New York Attorney General enforcement 
action, however, attempts to create an ability-to-repay 
standard for vehicle finance, and to punish companies for an 
unacceptable default rate, despite the fact that there is 
neither an acceptable default rate, nor an ability-to-repay 
standard in any law or regulation governing vehicle finance, or 
the fact that the proposal is unworkable. Such changes in the 
credit practices could substantially limit availability and 
would likely eliminate approximately $20 billion in the 
subprime auto credit market.
    Fifth, the CFPB's misinterpretation of the Military Lending 
Act (MLA) would harm the servicemembers it seeks to help. The 
MLA excludes vehicle finance, but CFPB is attempting to end-run 
around Congress' clear intent by bringing vehicle finance under 
the Military Lending Act. If the Bureau's interpretation 
stands, it could have serious consequences for loans that are 
already in the marketplace and could limit servicemembers' 
ability to get credit going forward.
    Instead of going after well-regulated financial 
institutions and products, the CFPB should pursue bad actors, 
such as credit repair organizations, which provide no benefit 
to consumers, cost the consumers significant money upfront, may 
damage the consumer's creditworthiness, and actually divert 
resources from legitimate disputes.
    AFSA and its members are committed to serving consumers in 
a well-functioning marketplace, and we agree with Director 
Chopra that markets work best when rules are simple, easy to 
understand, and easy to enforce.
    Chairman Barr. The gentleman's time has expired.
    Mr. Himpler. Thank you, Mr. Chairman.
    [The prepared statement of Mr. Himpler can be found on page 
54 of the appendix.]
    Chairman Barr. Thank you.
    Mr. Johnson, you are now recognized for 5 minutes to give 
your oral remarks.

 STATEMENT OF BRIAN JOHNSON, MANAGING DIRECTOR, PATOMAK GLOBAL 
                          PARTNERS LLC

    Mr. Johnson. Chairman Barr, Ranking Member Foster, and 
members of the subcommittee, thank you for holding this 
important hearing on reforming the Consumer Financial 
Protection Bureau.
    I am Brian Johnson, Managing Director of Patomak Global 
Partners, a financial services regulatory consultancy. I 
previously served as the Deputy Director of the CFPB, and prior 
to that, served for more than 5 years as a staff member for the 
Financial Services Committee.
    The CFPB has an important statutory purpose, and when 
properly structured and managed, it can fulfill that purpose. 
It can support free markets and promote consumer choice and 
economic opportunity while protecting consumers. 
Notwithstanding the admirable work of many of its staff, the 
CFPB has not reached this potential, which is why today's 
discussion is so important.
    More than 12 years since its creation, we now have a track 
record by which to judge this agency, but what yardstick should 
we employ to measure the Bureau?
    While reasonable people can and do disagree about the 
policies and processes the CFPB employs in pursuit of its 
mission, we should all agree that its activities must follow 
the objective rule of law, and its actions must remain within 
the authority set by statute by Congress. Measuring the extent 
to which the CFPB has adhered to the rule of law can help 
determine the need for reform and the contours those changes 
should take.
    In taking measure of the Bureau, my written testimony lists 
many examples where the agency exceeded its statutory authority 
and operated beyond the limits of the law and our Constitution. 
Examples include an unconstitutional funding structure and 
removal protections of its Director, as well as the Bureau's 
disregard for due process, failing to properly notify those 
subject to investigations, and proposing to restrict First 
Amendment rights.
    The CFPB has also aggressively sought and, at times, used 
powers not authorized in statute, ignoring limits placed on it 
by Congress.
    My testimony goes into greater detail on how the Bureau has 
claimed authority to examine institutions for compliance with 
laws beyond those statutes assigned to it, has attempted to 
apply laws governing applications for credit to non-applicants, 
and sought to regulate auto dealers despite a statutory 
exemption from its authority.
    This litany, further detailed in my testimony, is by no 
means exhaustive, and I take no pleasure in repeating it here. 
While one or two of these examples could, perhaps, be 
dismissed, the frequency with which these issues arise 
demonstrates that the CFPB is ripe for reform.
    There are many worthy legislative proposals, but I will 
focus on those which re-establish the separation of powers or 
other checks and balances and, therefore, are most apt to 
preserve the rule of law and protect our liberties.
    First, Congress should consider reforms to the funding 
structure of the CFPB. In my experience, there is no oversight 
of CFPB spending. This arrangement tempts Directors into 
pursuing initiatives that bear little relation to the 
priorities of the American people, nor to the boundaries of its 
statutory authority. Placing the Bureau under appropriations 
would refocus its efforts and better align them with all 
Americans' needs and desires.
    Second, Congress should determine the CFPB's primary 
purpose and consider what structure best serves that purpose. 
Our framers wisely designed the Executive Branch to be unitary 
so it may act with decision and dispatch. They also recognized 
that the creation of rules and laws requires careful 
deliberation to balance and represent the diverse interests of 
our citizens, so it created Congress to have many Members.
    The same lesson can be applied to the CFPB. If you wish for 
the agency to simply enforce consumer laws, there may be good 
reason for it to be remain headed by a single Director. If you 
wish for it to, instead, exercise your delegated legislative 
powers through rulemaking, then its deliberations may benefit 
from multiple commission members who can deliberate and better 
reflect a diversity of views and interest.
    Together, these basic reforms can enhance the legitimacy of 
the Bureau and help it achieve its promise.
    Again, I applaud this subcommittee for having this 
discussion and acting on its responsibilities to build a 
stronger CFPB that better adheres to the rule of law and better 
reflects the consent of the governed.
    Thank you, and I welcome the opportunity to answer any 
questions you may have.
    [The prepared statement of Mr. Johnson can be found on page 
65 of the appendix.]
    Chairman Barr. Thank you, Mr. Johnson.
    And now, Ms. Thompson, you are recognized for 5 minutes to 
give your oral remarks.

   STATEMENT OF JESSICA L. THOMPSON, ATTORNEY, PACIFIC LEGAL 
                        FOUNDATION (PLF)

    Ms. Thompson. Chairman Barr, Ranking Member Foster, and 
honorable members of this subcommittee, thank you for the 
opportunity to testify at this hearing on why the CFPB is in 
desperate need of reform.
    My name is Jessica Thompson, and I am a constitutional 
litigator in the separation of powers practice at the Pacific 
Legal Foundation, where we defend Americans' liberties when 
threatened by government overreach and abuse.
    I would like to share three points: one, CFPB's current 
funding mechanism is unconstitutional; two, CFPB uses consent 
orders to evade the APA rulemaking process; and three, my 
client's recent victory illustrates CFPB's pattern of 
overreach.
    First, in contrast to CFPB's recent arguments and briefing 
before the U.S. Supreme Court, CFPB has always described itself 
as a non-appropriated independent agency. This dual-level 
exemption from the appropriations process plainly violates the 
appropriations clause of the U.S. Constitution.
    The second thing you need to know is that without 
meaningful oversight and the accountability that accompanies 
congressional appropriations, CFPB is free to evade the normal 
rulemaking process by using consent orders to announce new 
legal theories. Although these theories are often untested in 
court, CFPB claims consent orders are precedential guidance for 
regulated institutions. This presents constitutional concerns 
for due process, undermines the rule of law, and will limit 
consumers' access to financial services.
    My third point illustrates the risk of constitutional harm 
from an unaccountable agency. At Pacific Legal, we are helping 
Americans fight CFPB's unconstitutional overreach, and we 
recently secured an important win for our client, Townstone 
Financial, and its owner, Barry Sturner. Last month, a Federal 
court held that CFPB's interpretation of its own regulation 
went beyond the authority granted to it by Congress in the 
Equal Credit Opportunity Act (ECOA). CFPB was so far over its 
skis that the judge dismissed the case with prejudice.
    Faced with an enforcement action based on a novel 
interpretation of a nearly 50-year-old regulation and 
allegations of redlining, Townstone faced immense pressure to 
enter into a consent order. But Townstone never discriminated 
against any applicants for credit, and the CFPB didn't even 
allege that it had. Instead, CFPB claimed that Townstone 
violated an agency regulation with statements about crime it 
made on a weekly radio show it hosted on a conservative 
station.
    As even Mr. Sturner would admit, it is difficult to talk 
for an hour about mortgages alone. Conversation on the show 
would often turn to local and national news, and in Chicago, 
crime is a frequent topic of conversation. In the show's 
history, Townstone never received a complaint about its 
discussions, and CFPB could not identify anyone who claimed to 
be discouraged from seeking credit, but that didn't stop CFPB 
from plucking five innocuous statements about crime and life in 
Chicago out of hundreds of hours of radio broadcast to allege 
that Townstone intended to discourage African Americans from 
seeking credit.
    Luckily, Townstone had the courage to challenge the CFPB's 
untested legal theory in court and, with pro bono assistance 
from Pacific Legal, the wherewithal to sustain the legal fight 
for 6 years. The court's rebuke of CFPB's overreach in the 
Townstone case is a huge win for the separation of powers, but 
we need Congress to act to prevent others from going through 
the abuse that Townstone and Mr. Sturner suffered.
    In closing, Pacific Legal urges Congress to bring CFPB 
within the annual congressional appropriations process to 
protect consumers' access to financial services and the rule of 
law. Once this essential element of checks and balances is 
restored, Congress should conduct oversight over the broad 
powers delegated to CFPB to ensure its regulations and 
enforcement actions do not exceed its authority or trample 
constitutional rights.
    Thank you again for this opportunity. I look forward to 
answering your questions.
    [The prepared statement of Ms. Thompson can be found on 
page 75 of the appendix.]
    Chairman Barr. Thank you, Ms. Thompson.
    Mr. Watkins, you are now recognized for 5 minutes for your 
oral remarks.

 STATEMENT OF DEVIN WATKINS, ATTORNEY, COMPETITIVE ENTERPRISE 
                        INSTITUTE (CEI)

    Mr. Watkins. Thank you.
    Chairman Barr, Ranking Member Foster, and members of this 
subcommittee, I appreciate the opportunity to speak to you 
today.
    My name is Devin Watkins, and I am an attorney at the 
Competitive Enterprise Institute. One of our principles is that 
government agencies should face democratic accountability to 
elected officials so that people can live freer, healthier, and 
more prosperous lives. That vision is needed today more than 
ever, especially for the Consumer Financial Protection Bureau.
    Today, I will focus my testimony on three critical reforms 
of the CFPB. All three of them implicate fundamental 
constitutional rights. These three reforms are: ensuring 
congressional appropriations; prohibiting any regulation by 
enforcement; and prohibiting fines without juries.
    First, the most critical CFPB reform is ensuring 
congressional appropriations. The Dodd-Frank Act bypassed 
congressional appropriations to avoid Congress' oversight of 
the CFPB. This is a direct affront to democratic control and 
public accountability.
    Founders wanted to prevent the lack of accountability that 
occurred when the King of England bypassed the legislature to 
control government funds. That is why the Constitution requires 
that no money should be drawn from the Treasury but on 
consequence of appropriations made by law. Congress alone is 
responsible for determining the budget for government agencies.
    Indeed, the Supreme Court decision to consider the 
constitutionality of the CFPB's funding mechanism says you have 
some possibility that the court will decide that only Congress 
may fund Federal agencies. Congress should scrutinize all other 
funding mechanisms with an eye towards returning to the 
congressional appropriations system.
    The second critical CFPB reform is prohibiting the practice 
of regulation by enforcement because it contradicts the rule of 
law. Instead of providing clear rules for people to comply 
with, the CFPB requires individuals to anticipate what the CFPB 
Director considers unfair and abusive. This method is similar 
to saying the speed limit is a reasonable speed and then 
allowing officers to issue tickets based on their subjective 
judgment of what a reasonable speed is. It leads to arbitrary 
punishment and leaves no way for regulated parties to ensure 
that their conduct remains lawful.
    The determination of what violates the law shouldn't be 
done by blog post. The regulated community should receive 
notice of what is illegal by Congress or through the rulemaking 
process that was laid out by Congress. This means a requirement 
that a rule existed that clearly and convincingly demonstrates 
that some given action is illegal. This means guidance issued 
by the CFPB would be limited to explaining what conduct is 
lawful. Constraining the CFPB in this way would block the 
agency from sneaking in new regulatory requirements through 
guidance documents.
    Finally, the CFPB should end the practice of issuing fines 
without jury findings of wrongdoing. The Seventh Amendment 
mandates that in suits at common law where the value of 
controversy shall exceed $20, the right to trial by jury shall 
be preserved. Common law remedies, such as fines more than $20, 
must be determined by a jury. The Seventh Amendment exists 
because the government can abuse monetary penalties. So, the 
jury system acts as a backstop to prevent such abuse.
    The Declaration of Independence cited one of the causes of 
American independence is the English Government, ``depriving us 
in many cases of the benefits of trial by jury.'' And John 
Adams recognized that, ``representative government and trial by 
jury are the heart and lungs of liberty.''
    Nevertheless, the CFPB regularly fines individuals without 
allowing them a jury. Instead, the CFPB uses Administrative Law 
Judges (ALJs) to determine if people have violated the law, but 
it is the CFPB that appoints, oversees, and can fire these 
judges at any time. How can any ALJ be impartial if their 
livelihood depends on one of the parties before the judge not 
removing them from office?
    Whenever a citizen of this country is punished, only their 
fellow citizens in a jury should make that determination.
    These three issues are the most critical reforms to the 
CFPB. The time for reforming the CFPB is now. Delaying action 
at the CFPB will result in more harm both to consumers and to 
industry.
    Thank you for the opportunity to testify today regarding 
this timely and important issue.
    [The prepared statement of Mr. Watkins can be found on page 
86 of the appendix.]
    Chairman Barr. Thank you, Mr. Watkins.
    And Mr. Ellison, you are now recognized for 5 minutes to 
give your testimony.

  STATEMENT OF THE HONORABLE KEITH ELLISON, ATTORNEY GENERAL, 
                       STATE OF MINNESOTA

    Mr. Ellison. Mr. Chairman, thank you. And I would also like 
to thank Ranking Member Foster and Ranking Member Waters, who 
is not here, but I do thank her as well.
    And let me just say that it is good to be back with the 
Financial Services Committee again. After 12 years of being 
your colleague, it was certainly an honor and a joy, and it is 
good to be back with you.
    I remember well September 2008, and I know many of you do, 
too, when President Bush's Treasury Secretary said, ``We need 
$700 billion by Monday or the economy is going to collapse.'' 
We can argue whether that was accurate or not accurate, but 
that was what we were told.
    Let me tell you, the CFPB is part of our response to that 
financial crisis, and the CFPB has been a wonderful partner to 
State Attorneys General and to American families. Let me remind 
everybody, the CFPB exists because we had four million 
foreclosures. We had over a trillion dollars in home value 
losses and blighted neighborhoods, and houses with copper 
wiring ripped out.
    We don't have a CFPB because somebody just thought it would 
be a great idea. We are here because of a financial crisis.
    Let me begin by discussing a case in Minnesota that we 
worked on with the CFPB. Back in October 2019, my office, 
alongside the CFPB, North Carolina, and the City of Los 
Angeles' City Attorney's office sued a series of companies and 
individuals running a fraudulent student loan relief scam that 
falsely promised to help people pay off student loans and 
obtain student loan forgiveness in the process.
    In this time, when over 40 million Americans owe $1.75 
trillion in student loans, these companies preyed on nearly 
90,000 desperate consumers and illegally collected over $95 
million in fees from them. Together, we shut them down, and 
this past December, issued refund checks to the consumers. 
Without the CFPB, we wouldn't have been able to get that 
result. Not only did the Bureau provide resources to give us 
the bandwidth to bring the case, but it is only because of the 
CFPB's civil penalty fund that we were able to secure $95 
million in refunds to compensate victims when the companies and 
the people we sued couldn't afford to pay the full amount.
    If not for the CFPB, consumers would likely have received 
only a fraction, if anything. I fear this example shows exactly 
why we need the CFPB and why some people are hostile to the 
CFPB.
    This is just one example of dozens where States like 
Minnesota have joined with the Bureau to act against companies 
and hold them accountable for defrauding consumers. Companies 
being held accountable sometimes don't like being held 
accountable, and sometimes that will explain the scenario we 
have today.
    It is not a matter of politics. It is not a red or blue 
issue. The CFPB has joined together with States regardless of 
politics to stop fraudulent actors. Let me give you an example. 
All 50 States joined the CFPB in suing the country's largest 
mortgage companies for numerous unfair and deceptive practices 
related to servicing borrowers' mortgages.
    In 2021, Georgia joined with the CFPB in suing a company 
offering fraudulent credit repair and debt relief services. And 
in just the last 3\1/2\ years, Arkansas, South Carolina, and 
others have joined the CFPB on more than one occasion.
    These cases get meaningful results for consumers. As a 
result, as the end of 2022, the CFPB has recovered $16 billion 
for consumers, obtaining $192 million for consumers nationwide. 
But what consumers gained, somebody on the other side of the 
transaction lost, and they are not happy about it.
    States like Minnesota have historically served at the 
forefront of efforts to protect consumers against fraudulent 
and abusive practices, and for over a decade, the CFPB has 
served as a critical enforcement partner for us in our efforts. 
The CFPB has also been a partner to American families 
struggling to make ends meet when they stand up against a 
Goliath in the form of a financial services company.
    Congress intended to create a CFPB in response to the 2008 
financial crisis, as I noted, and it should remain, but the 
Bureau doesn't just sue alongside States. It is essential in 
acting as another cop on the beat for consumers, particularly 
in targeted areas where--
    Chairman Barr. The gentleman's time has expired, so could 
you please wrap up quickly?
    Mr. Ellison. Thank you, Mr. Chairman. I will do that.
    Let me be clear, the CFPB is a critical partner, and we 
certainly believe that their continued success is essential to 
protect consumers and families.
    [The prepared statement of Attorney General Ellison can be 
found on page 48 of the appendix.]
    Chairman Barr. Thank you, Mr. Attorney General.
    And we will now turn to Member questions.
    The Chair now recognizes himself for 5 minutes for 
questioning.
    As I mentioned in my opening remarks, I have introduced the 
TABS Act to place the CFPB under the congressional 
appropriations process, restoring the power of the purse and 
vindicating the separation of powers doctrine.
    Mr. Watkins, and Mr. Johnson, please amplify your testimony 
as to how the CFPB's double-insulated funding mechanism is 
unconstitutional and allows the CFPB to stray from its 
statutory mission and evade proper oversight.
    And as you answer that question, please also address these, 
``sky-is-falling concerns,'' that if the Supreme Court upholds 
the Fifth Circuit decision, this would call into doubt the 
constitutionality of all of these other self-funded Federal 
bank regulators, including the Federal Reserve, the FDIC, the 
FHFA, et cetera.
    Mr. Watkins. I will begin. In my view, when the 
Constitution says, no money shall be drawn from the Treasury 
but on consequence of appropriations by law, what it meant by, 
``Treasury,'' was public money. It was money that the 
government owns, and that includes all of the money that the 
CFPB uses to fund its operations. And when it says that 
Congress needs to appropriate that money, it means Congress 
needs to decide the budget of the CFPB, not the Director of the 
CFPB. That is a decision that Congress and Congress alone must 
make.
    That is really critical from an accountability standpoint, 
but I do think that it isn't just the CFPB. There are other 
agencies out there that do have non-appropriated funds, and 
Congress should review those as well and think about how to 
return those agencies to the congressionally-funded 
appropriations process as well.
    Chairman Barr. And Mr. Johnson, do you believe that the 
CFPB's unique novel funding mechanism is distinguishable from 
these other self-funded Federal financial regulators?
    Mr. Johnson. Thank you, Mr. Chairman, for the question.
    One of the interesting arguments that was made in the cert 
petitions before the Supreme Court was whether or not the 
Bureau's funding can be distinguished from similarly-situated 
Federal regulators, and I believe it can.
    The Fifth Circuit certainly cited the unique double-
insulation structure, but fundamentally, the CFPB is 
differently situated than the FDIC, the NCUA, the Fed, and the 
OCC, and as much as each of those agencies has been assigned by 
Congress, a safety and soundness mission. In other words, they 
are prudential regulators, and they provide a service to banks 
in the form of guaranteed liabilities through deposit 
insurance, and they supervise institutions for safety and 
soundness to guard against the risk to taxpayers. And it may be 
appropriate for Congress to establish funding structures for 
those agencies to recoup the cost of that supervision from the 
banking institutions that are supervised by those agencies.
    The CFPB, contrary to those missions, is fundamentally a 
market conduct regulator. It has no safety and soundness 
mission. Fundamentally, the Bureau has no obligation to ensure 
the continued operation of institutions as an ongoing concern. 
It is simply there to supervise institutions for compliance 
with a discrete set of Federal consumer financial laws. Market 
conduct is distinct from prudential regulation, and it is a 
fundamental difference that I think should be accounted for in 
consideration of the funding.
    Chairman Barr. Thank you, Mr. Johnson.
    And another question for you. Since Director Chopra has 
taken over the Bureau, we have seen a new tactic of regulation 
without rules. For example, last month, when putting out a 
notice for proposed rulemaking on credit card late fees, the 
Bureau failed to fulfill its statutory obligation to convene 
SBREFA.
    Also, in March 2022, the Bureau updated its Unfair, 
Deceptive, or Abusive Acts or Practices (UDAAP) exam manual as 
a way of evading notice and comment.
    Can you explain the importance of implementing lasting 
policy directives? And how is the Bureau's recent rogue 
behavior harmful to consumers' access to financial services?
    Mr. Johnson. Thank you, Mr. Chairman.
    Briefly, Congress has established specific procedures that 
must be followed by agencies when promulgating rules, and rules 
are those which bind regulated parties in specific ways. So any 
time an agency departs from those specific rules, whether 
reflected in the Regulatory Flexibility Act, or whether 
reflected in the Administrative Procedure Act, a lot of 
downstream consequences and bad results can occur.
    And you are seeing where the agency departs from formal 
legislative rulemaking or even departing from specifically-
established categories of guidance like interpretive rules or 
statements of policy and blending the distinctions, and it 
creates fundamental uncertainty for regulated parties in the 
marketplace--
    Chairman Barr. My time has--
    Mr. Johnson. --in their operations.
    Chairman Barr. Thank you.
    My time has expired, but I think it does go to show that 
guidance and interpretive rules should not create new 
obligations. You can't change the law without notice and 
comment or without statutory authorization.
    With that, I recognize the ranking member of the 
subcommittee, Dr. Foster, for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    Attorney General Ellison, when Congress created the CFPB in 
the Dodd-Frank Act, it was created as an independent agency 
which would not be funded through the annual appropriations 
process. Some of our witnesses and some of my colleagues on the 
other side of the aisle seem to want to go against the original 
intent of the authors of Dodd-Frank and subject the agency to 
the annual appropriations process.
    Now, you and I were in the room when the decision was made 
in the wake of the financial crisis to establish an independent 
funding mechanism for the CFPB, and you remember, for example, 
the bipartisan incredulity. For example, when we ask ourselves: 
How could the SEC possibly have missed Bernie Madoff? And the 
answer came back that Congress had abused the power of the 
purse to systematically eviscerate the SEC's capacity to find 
bad actors like Bernie Madoff. And people on the other end of 
those scamsters suffered.
    And the same thing applies to the toxic assets that were 
all based on mortgages that--I think officially, it was the 
Federal Reserve that was supposed to have been the cop on the 
beat to stop all of these garbage mortgages from being re-
bundled and all of that, in which I think Barney Frank, 
referred to as someone with a tremendous sense of humor, put 
the Federal Reserve in charge of oversight of the mortgage 
industry.
    There is a lot of history that I think is in danger of 
being lost, so thank you for being here.
    Do you have any concerns about an alternative approach to 
funding? And what are the dangers that you have seen?
    Mr. Ellison. Certainly, Ranking Member Foster.
    The CFPB every day gets up and does things where there are 
folks with very powerful financial interests who try to impact 
what they are doing, and, therefore, it makes a lot of sense to 
be able to have a funding mechanism that does not make them 
easily susceptible to administrative capture, that makes them 
somewhat immune from the vicissitude of one case or another.
    Now, it is interesting because I think that it is simply 
wrong that the appropriations process is the only way Congress 
has to do oversight. We are having an oversight hearing on the 
CFPB at this very moment. Congress can change the statutory 
scheme for the CFPB any time that it wants to. If you can get 
the House and the Senate and the President to sign it, then you 
have the change.
    It is set up for a reason because we know that if you 
subject this institution to the appropriations process, it is 
simply going to change from session to session, moment to 
moment, giving no one any clear guidance or anything to rely 
on.
    So, thank you for your question. I think you are absolutely 
right.
    Mr. Foster. Okay.
    Mr. Johnson, you had a rather tortured attempt to separate 
safety and soundness from consumer protection, that they were 
somehow fundamentally different. I think you are wrong in that, 
actually.
    The CFPB provides a service to all actors in the financial 
services arena to protect them from competition from bad 
actors, and that is a service that the financial system has 
come to depend on because prior to the CFPB, we would--I am 
sure Attorney General Ellison and I both had financial entities 
come into our office and complain about other sectors of the 
industry that were bad actors, and how come we are not doing 
anything about that. And the CFPB was the answer. So, I think 
it is false.
    Now, actually, Mr. Watkins, you had indicated that there 
were many other agencies that you thought should be looked at 
by the courts or Congress. Prior to the CFPB, it was the 
Federal Reserve that was responsible for consumer protection. 
In your view, was that unconstitutional?
    Mr. Watkins. It is my view that all Federal agencies, 
including the Federal Reserve, should go through the 
congressional appropriations process for their budget.
    Mr. Foster. Okay. So, you believe it is perfectly fine if 
the next time Jay Powell comes in front of us, we say, look, if 
you don't raise interest rates, we are going to cut your 
budget? You think that is a good future for the United States?
    Mr. Watkins. I don't think that is what Congress should do. 
I think it is perfectly appropriate, if you think the Federal 
Reserve is doing a good job, to give it the money for which it 
is asking.
    Mr. Foster. Okay. And you don't see any lessons from the 
history of having a non-independent Federal Reserve?
    Okay. I am nearly out of time, so I will just yield back.
    Mr. Loudermilk. [presiding]. The gentleman from Florida, 
Mr. Posey, is now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Most citizens believe that we make all of the Federal laws, 
that all of the Federal laws on the books are passed by 
Congress, but most people in this room realize that for every 
law we pass, there are probably 1,000 laws that are made by 
unelected, un-recallable, oftentimes unaccountable, 
bureaucrats. They are supposed to make rules that are 
enforceable as laws, specifically at the direction of Congress, 
but Congress has abrogated its responsibility to control the 
rulemaking process.
    So the odds are if you are called into court now on a 
Federal violation, it is probably a thousand and one odds it is 
against a rule enforceable as a law that some unelected 
bureaucrat made.
    When former Director Kraninger of the CFPB appeared before 
us on her first semiannual report in 2019, I asked her whether 
the CFPB should conduct cost-benefit analysis on its 
regulations. She expressed her strong support of the idea, and 
she held the Bureau symposium of cost-benefit analysis in 2020. 
Apparently, little progress was made on that front after 2020, 
under Director Chopra. So, I am pleased that we have two bills 
for this hearing that would institutionalize a culture of cost-
benefit analysis at the CFPB.
    Mr. Watkins, briefly, could you explain how cost-benefit 
analyses could be used to improve rulemaking at the CFPB?
    Mr. Watkins. Sure. In a cost-benefit analysis, we look to 
the benefits and the harms of every rule. We try to evaluate in 
detail all of the various benefits and all of the various 
harms, and if you look at that in detail, you can find areas 
where the harms outweigh the benefits.
    And by relieving the pressure on those areas by either not 
issuing rules or issuing less stringent rules, we can make the 
rules provide more benefits to the American consumer and, at 
the same time, cause less harm. It may be better to create a 
slightly less stringent rule that provides the same benefits 
and yet allows the industry to have more money to give to 
consumers or to not cost consumers as much.
    Mr. Posey. Thank you.
    And I can't understand why they wouldn't do that other than 
it has been my experience with the CFPB that they are the most 
arrogant, petulant, and defiant agency with which I have ever 
dealt.
    Mr. Himpler, the current Director of the CFPB believes that 
many or most of the fees that financial institutions charge are 
junk fees and are merely made up. I don't want to call that 
junk regulation, but it is tempting.
    Please explain how or why even most so-called junk fees 
represent a legitimate reflection of the economic opportunity 
cost of the funds tied up in the consumer credit when consumers 
pay late?
    Mr. Himpler. Thank you, Congressman, and it is great to see 
you this morning.
    Essentially, the press release that the Bureau issued on 
junk fees, one, it goes beyond its authority to address resort 
fees, ticket fees well beyond anything in the financial 
services arena to begin with. There is no definition of what 
they are talking about, and it has a chilling effect on our 
member companies, both depository institutions and finance 
companies, in terms of wanting to stay within the guardrails of 
what our regulator expects of us without knowing what those 
rules are. It is kind of like trying to figure out what the 
speed limit is without the sign being posted but still being 
held accountable.
    The Attorney General talked about accountability or 
institutions not wanting accountability. What we are trying to 
do here is figure out what the rules of the road are so that we 
can be good corporate citizens. We want to stand shoulder to 
shoulder with the CFPB in its mission to protect consumers. But 
I think the best way to protect consumers is to protect access 
to credit, and the best way to protect access to credit is to 
have clearly-defined terms and conditions that both industry 
and the regulatory community can understand and follow.
    Mr. Posey. Under Section 1022(d) of the Dodd-Frank Act, the 
Bureau is required to produce a report on an assessment of each 
significant rule or order adopted by the CFPB in the Federal 
consumer financial law. The review is to be completed 5 years 
after each significant rule and is to be subject to public 
comment.
    Finding such review is hard. Ironically, there is an 
assessment that was posted on March 3rd for the Mortgage 
Disclosure Rule Act, which CFPB says was not a significant rule 
under the Act.
    Mr. Himpler, can you please comment on how well the CFPB is 
complying with Section 1022(d)?
    Mr. Himpler. With respect to the rules, I think where I 
would start with is actually finding the rules that the Bureau 
comes forward with, the regulations. These pronouncements they 
put forward without giving industry any opportunity to provide 
notice or comment means that they are really not well-informed 
in terms of how they are implemented.
    Mr. Posey. Thank you very much.
    And thank you, Mr. Chairman.
    Mr. Loudermilk. The gentleman's time has expired.
    The Chair now recognizes the gentlewoman from Ohio, Mrs. 
Beatty, for 5 minutes.
    Mrs. Beatty. Thank you, Mr. Chairman. And thank you to all 
of our witnesses who are here today.
    We have certainly had a lot of discussion about this, 
especially from my colleagues on the other side. Mr. Himpler, 
can you tell me, if you know, how many dollars are returned 
each year to consumers thanks to the CFPB and their great work?
    Mr. Himpler. I believe the total has been put out there in 
terms of $16 billion, but I couldn't tell you on an annual 
basis.
    Mrs. Beatty. Do you think that sounds--I will say it is $16 
to $18 billion. So, I will give you that. I think you are in 
the right range.
    I think that is important for us to know, the work that 
they did. Are you familiar with the work that Mick Mulvaney or 
Kathleen Kraninger did?
    Mr. Himpler. Some of it.
    Mrs. Beatty. Okay. And they continued it, appointed by the 
last Administration, and continued to do it.
    Let me be clear and be on the record that I am very 
supportive of the CFPB and the work that they have done, 
Democrats and Republicans--two Republican Directors during the 
last watch continued it.
    We also know that in this country, there are things that 
are discriminatory. There are people who are treated with 
disparities. My good friend, the late John Lewis, civil rights 
icon said, ``If you see something that is not right, that is 
not fair, you have a moral obligation to do something about 
it.''
    And as a Member of this committee, along with many of my 
colleagues, I take that very seriously, and I think that what 
the CFPB has done, whether it is for our seniors, whether it is 
for people who have been in abusive financial situations, they 
have made it better.
    Mr. Ellison, thank you for your work, not only in what you 
are doing here, but for the years you invested in Congress. You 
could have been off practicing law or doing some of those great 
things, but you stayed here. And we served together on this 
very committee, a committee that I have been on ever since I 
entered Congress.
    The CFPB, established in the wake of a dangerously-
underregulated industry that ultimately led to a national and 
then a global recession, looks out for all of our constituents, 
in my district, and in my Republican colleagues' districts, as 
well as trying to create fairness, transparency, and 
competition in our financial system.
    And here is where I am going with this. I believe 
wholeheartedly that we have a lot of work to do, and this 
agency can help us, because we know that study after study will 
show us that there is discrimination in lending, that there is 
consumer abuse, that there is fraud.
    I even wrote an op-ed that was published in The Hill last 
month addressing these comments because I have had my 
colleagues tell me that they were tired of hearing about 
discrimination in lending, and we should move on. That has 
bothered me from the time my colleagues said that until today.
    Attorney General Ellison, part of the CFPB's mandate is to 
rule out unfair, deceptive, and abusive practices, and they 
authorized last year that this also extends to unfair 
discrimination as well. Can you address the allegation that 
discrimination does not exist in financial services? And tell 
us why you think it is critical that the agency should protect 
our consumers by combating these harmful practices?
    Mr. Ellison. Congresswoman, it certainly does exist, and 
Attorneys General around the country know it, and it is very 
pernicious in its effects. It involves student lending. It 
involves mortgage lending, auto lending, and the beat goes on. 
And what it does is undermine the opportunity for meaningful 
prosperity, the American Dream for women and people of color in 
our country, and our economy would work better if people were 
able to receive fair treatment.
    And let me just tell you, not only is it going on now, but 
it has been going on for quite a long time. I will just say 
that for literally hundreds of years, we have seen this 
disparity, and I am glad that you are committed to rooting it 
out.
    Mrs. Beatty. Thank you.
    My time is up, and I yield back.
    Mr. Loudermilk. The gentleman from Missouri, Mr. 
Luetkemeyer, is now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Just briefly, I know that the ranking member made a comment 
a minute ago with regards to Mr. Johnson's testimony and saying 
it was tortured. I have a question with regards to having 
called the CFPB a service organization. I think that is a 
tortured definition of the CFPB.
    Mr. Johnson, you worked there. Would you call the CFPB a 
service organization?
    Mr. Johnson. What I meant to express was that the CFPB's 
fundamental mission is to supervise institutions and enforce a 
discrete set of laws and rules that are assigned to it by 
Congress.
    Mr. Luetkemeyer. So, it is basically an enforcement 
organization?
    Mr. Johnson. Right. And there are many market conduct 
regulators, for example, the SEC, the FTC, the CFTC, and the 
Consumer Product Safety Commission, whose fundamental mission 
is to enforce a discrete set of laws. They regulate market 
conduct, and they are all appropriated.
    Mr. Luetkemeyer. Very good. Thank you.
    Along that line, I would also like to--Mr. Johnson, you 
worked there. You are an attorney. You saw the funding 
mechanism that is in place right now. And I read to you out of 
Dodd-Frank, Section 1017, ``Funding Penalties and Fines,'' 
where it says, ``The Board of Governors shall transfer to the 
Bureau from the combined earnings of the Federal Reserve System 
the amount determined by the Director to be reasonably 
necessary to carry out the authorities of the Bureau.''
    In our hearing yesterday with Fed Chairman Powell, he 
admitted that because of the structure of his assets right now, 
he is losing money at the Fed. There are no earnings. And, in 
fact, I asked him, ``How are you going to pay your bills?'' And 
he said, ``We just print the money.'' Then, I asked him, ``How 
are you going to pay the bill that is presented to you from the 
CFPB?'' And his answer was, ``We will print the money.''
    My question is, the law says it is supposed to be paid out 
of earnings. If there are no earnings, can the Fed pay the CFPB 
bills with money it prints?
    Mr. Johnson. I understand that there is a bill to clarify 
whether or not it can do that. As a fundamental matter--
    Mr. Luetkemeyer. I am not asking whether there is a bill to 
do that, Mr. Johnson. I am asking, can they legally, at this 
point in time, with no earnings, pay the bills of the CFPB?
    Mr. Johnson. I would say, an average American finds it 
difficult to pay bills with no earnings. I think the Fed's 
accounting treatment maintains negative balances.
    Mr. Luetkemeyer. Thank you very much for that.
    One of the concerns that I have is, the CFPB has no 
authority over overdrafts, do they, Mr. Himpler?
    Mr. Himpler. They have no authority over--
    Mr. Luetkemeyer. Over overdrafts.
    Mr. Himpler. Right.
    Mr. Luetkemeyer. They have no authority over the 
description of service fees on a hotel bill, do they?
    Mr. Himpler. No.
    Mr. Luetkemeyer. And yet, they have created this phrase, 
``junk fees.''
    Ms. Thompson, is there such a phrase--or prior to their 
creating this phrase, is there such a phrase as, ``junk fees,'' 
in the financial lexicon at this point or prior to this?
    Ms. Thompson. Perhaps in the popular Rubicon and language, 
but not in any enforcement authority, no, sir.
    Mr. Luetkemeyer. There isn't a definition of, ``junk 
fees,'' in the financial lexicon like there would be for annual 
percentage rate (APR), right?
    Ms. Thompson. That is correct.
    Mr. Luetkemeyer. Okay. What we have done here is have a 
Director who, because he has no authority over these things, 
creates a word. And then, he twists his UDAAP authority to be 
able to say, well, now we have this situation where we have 
junk fees out here and we need to have somebody regulate these 
things. And he has the authority because he has twisted UDAAP 
to fall under junk fees, which he has no authority to do 
because there is nothing there to provide oversight. Is that a 
pretty fair statement, Ms. Thompson?
    Ms. Thompson. I would agree.
    Mr. Luetkemeyer. The fact that we now call them junk fees 
doesn't mean it is real, because there is no such word out 
there, and there is no such authority. So, I think we as a 
group need to be pushing back. All of you here this morning 
need to be pushing back.
    Mr. Himpler?
    Mr. Himpler. Thank you, Mr. Luetkemeyer. Directly on your 
point, the fact that there is no definition leaves financial 
institutions, both depositories and finance companies, with no 
roadmap as to how to follow that. As I mentioned, he calls into 
question resort fees and ticket fees, but he also calls into 
question credit insurance, which is tied to the underlying 
contract with the consumer. That very insurance product helped 
out millions of Americans who were facing flooding situations 
down in Louisiana just a couple of years ago.
    Mr. Luetkemeyer. Thank you for that. I know that yesterday, 
in one of the political magazines here, they had a long expose 
on the CFPB as a result of this ruling. And they are talking 
here about the legal uncertainty that could undermine the CFPB 
as a result of this coming decision. It could put also their 
other rules in jeopardy.
    Mr. Watkins, do you see that happening?
    Mr. Watkins. I do think there is a possibility as they kind 
of expand their definition, things like junk fees where I think 
the definition they seem to be working with is any fee they 
don't like. And when the definition under how they are acting 
is so broad like that, it raises real non-delegation concerns 
that could undermine their authority to enact any of these--
    Mr. Luetkemeyer. Thank you very much.
    My time is up. I yield back.
    Mr. Loudermilk. The ranking member of the full Financial 
Services Committee, the gentlewoman from California, Ms. 
Waters, is recognized for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Loudermilk.
    I am going to break protocol here for a moment and just say 
I would like to welcome Mr. Ellison. I am so excited to see 
him. He served on this committee, and he is considered one of 
the most respected and capable Attorneys General in the 
country. Thank you very much.
    Mr. Ellison. Thank you.
    Ms. Waters. Attorney General Ellison, last year, the CFPB 
launched an initiative to combat junk fees, which has the 
potential to save consumers billions of dollars each year. The 
CFPB's work is really resonating with consumers as they 
received more than 50,000 complaint letters on this initiative. 
It builds on the work of this committee, during my time as 
Chair, to combat excessive overdraft and other fees that really 
make it difficult for consumers to save money.
    I understand that in 2021, you led a bipartisan coalition 
of 33 Attorneys General to oppose an agreement that would have 
allowed the mortgage servicer, PHH, to continue charging 
illegal payment processing fees. Members on the other side of 
the aisle apparently think the CFPB lacks the authority to 
combat junk fees like this.
    Do you think that the CFPB has the authority to combat junk 
fees? If so, do you think they should use their tools to combat 
excessive payment processing junk fees?
    Mr. Ellison. Madam Ranking Member, let me express my 
appreciation for being invited here today. It is really, really 
wonderful to be back.
    Regarding junk fees, maybe certain firms don't know what 
junk fees are, but consumers do. Consumers know what a junk fee 
is. It is a fee that when you signed up for the service or you 
engaged the company they didn't disclose it, they didn't tell 
you about it, you didn't know, you didn't have any reason to 
anticipate it. It is a fee that they tack on because they have 
the market power to impose that fee.
    We enforce this not only in the financial services area but 
in a lot of areas. For example, in the internet service fees, 
when a company, for example, Comcast or Frontier, tells 
consumers, ``Hey, this is an, `It is Thursday' fee, and you 
have to pay it, and if you don't, we are going to cut you 
off,'' these are the kinds of fees that are unfair. There is 
often not proper notice; and if there is, it is buried deep in 
the small print. And it is absolutely appropriate for the CFPB 
to regulate this.
    I can tell you that Attorneys General, both Democrat and 
Republican, do it every day, and it is part of the way that we 
create confidence, faith, and the ability for consumers to have 
a shot at prosperity. So, I think it is entirely appropriate 
for the CFPB to do this work.
    Ms. Waters. Thank you.
    Mr. Ellison, last year, the CFPB issued an interpretive 
rule which reaffirms States' authority to initiate enforcement 
actions based upon violations of Federal and State consumer 
financial protection statutes. In your testimony, you state 
that CFPB has been a critical partner in the enforcement 
efforts by States, including Minnesota, to stop this 
fraudulent--these actors in the area of student debt relief. 
How was CFPB helpful in terms of halting student debt relief?
    Mr. Ellison. Thank you for the question, Congresswoman 
Waters. I noted that one of the cases that we brought in 
October 2019 was with North Carolina and the City of Los 
Angeles, when we sued a series of companies and individuals 
running a fraudulent student loan relief scheme that falsely 
promised to help people pay off their student loans and obtain 
student loan forgiveness in the process.
    The CFPB has been an indispensable partner in helping 
working- and middle-class people pay their bills. And I would 
add that a lot of small businesses look a lot like consumers. 
So it is not only your typical consumer that the CFPB helps; 
they help the entire market, as I think Congressman Foster 
already noted, by creating market stability, and sending proper 
signals.
    And as you have noted, Bernie Madoff, in his kind of 
behavior, did more to damage consumer confidence than any 
regulatory agency. It is the bad actors that undermine market 
stability, not regulators that are trying to protect consumers. 
So, I thank you for your question.
    Ms. Waters. And thank you so very much. I yield back the 
balance of my time.
    Mr. Loudermilk. The gentlewoman yields back.
    The gentleman from Texas, Mr. Williams, is now recognized 
for 5 minutes.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    I am listening to all the testimony today, and I can't 
believe how many people in this room know about the car 
industry. It is just pretty amazing. Full disclosure, I am a 
car dealer. I know about this stuff. I am probably the only 
person in this room who has had a confrontation with Operation 
Choke Point. I can tell you, these people are not fair, and 
some are not good people.
    And I am listening to student loans, and I thought we 
didn't want people to pay their student loans back. I thought 
that was the issue. So with all that being said--talking about 
junk fees too, I thought junk fees were taken care of in the 
Obama Administration, so--
    The CFPB has a history of neglecting the interests of small 
businesses by creating burdensome regulations and evading the 
traditional rulemaking process. And as a small business owner, 
as I said, a car dealer, one who offers credit, I can tell you 
that certainty is key. Businesses need to know the rules of the 
road before they are hit with arbitrary enforcement acts and it 
is making their operations more difficult.
    Last December, for example, I asked Director Chopra how his 
agency had been working to accommodate the concerns of small 
businesses within the CFPB's rulemaking process. He responded 
with the intention of improving the process by March, and here 
we are, 2 weeks into March, and I have only seen the opposite 
as the CFPB continues to ignore the concerns from the private 
sector and small businesses.
     Mr. Himpler, with your industry experience, have financial 
institutions experienced increased compliance costs from 
regulations or enforcement actions, and can you elaborate on 
the effects these costs and regulations have on small 
businesses?
    Mr. Himpler. Thank you, Congressman. Your statement was 
right on the money. It has a chilling effect on industry 
overall. The compliance cost of trying to chase after phantom 
regulations, junk fees, there is no definition. If there is 
something that the Director wants to root out, we are happy to 
work with them in a notice-and-comment process that allows 
input from affected industries. But ultimately, the impact is 
ultimately on the consumer. And what it has is a chilling 
effect, and what it will do is essentially limit access to 
credit, and that is in nobody's best interest.
    Mr. Williams of Texas. Exactly. And banks have to hire more 
compliance officers. I am in the car business. I have to hire a 
compliance officer, and everybody in my business is on 
commission, for crying out loud. So, how do you pay a 
compliance officer on commission? Somebody needs to tell me 
that.
    Secondly, the CFPB was created with the primary goal of 
protecting consumers from abusive financial practices. However, 
unlike other Federal agencies, the CFPB was designed to operate 
outside of Congress' annual appropriations process, as we have 
talked about, shielding them from agency oversight and 
accountability.
    Now, the CFPB's ability to make rules, enforce those rules, 
and adjudicate disputes gives them the power to act as 
prosecutor, judge, and jury. This concentration of power in one 
agency raises concerns from a lot of people. It is an abuse of 
authority and a violation of due process rights for individuals 
and businesses. And I am glad to see that this has been a 
priority of the Financial Services Committee this Congress to 
take action against the CFPB.
    Ms. Thompson, how does the lack of accountability for the 
CFPB hurt the interests of the American public, and how would 
funding the CFPB through congressional appropriations benefit 
consumers and increase transparency?
    Ms. Thompson. The people's representatives are here in 
Congress. And without the appropriations process, CFPB is free 
to abuse its vast regulatory powers, which include adjudicatory 
rulemaking and enforcement actions. Bringing the CFPB into the 
appropriations process would ensure accountability not only to 
the Members of Congress, but to the American people and the 
Representatives that they have elected.
    Mr. Williams of Texas. Thank you.
    Now, in the brief time I have left, when I talk to 
community bankers back home in my great State of Texas, and my 
constituents, every person tells me how terrified they are 
about the CFPB's 1071 small business data collection 
rulemaking. They are concerned that the rule will push the 
industry towards standardized small business loan products and 
kill relationship banking, community banking, and that bank 
employees will be forced to consider factors outside of 
creditworthiness when reviewing small business loan 
applications.
    And last year, the SBA Office of Advocacy even stated that 
they are concerned that the CFPB's approach may be 
unnecessarily burdensome to small entities, may impact the cost 
for credit for small businesses, and may lead to a decrease in 
lending to small minority- and women-owned businesses.
    So quickly, Mr. Himpler, can you expand on the potential 
problems with the 1071 data collection rulemaking?
    Mr. Himpler. If I could give you just one example, 
Congressman. I know this is an area that is near and dear to 
the ranking member's heart, that she worked on this in Dodd-
Frank. But just in the auto finance space, our industry is 
governed by both the Federal Reserve and the CFPB and there is 
incongruity there, and they are promulgating a rule that 
doesn't mesh up.
    Mr. Williams of Texas. Thank you.
    Mr. Loudermilk. The gentleman's time has expired.
    The gentleman from New York, Mr. Meeks, is now recognized 
for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman.
    And I am just listening, and I hear you, Mr. Himpler, 
saying that--and I have worked with you and your organization, 
and I appreciate what you do in that regard.
    Mr. Himpler. Thank you.
    Mr. Meeks. And I think that we need to find out, so that we 
can continue to work together, but you keep saying access to 
credit, which is very important. But the CFPB was put in place 
to make sure that it was fair access to credit, because what 
happened in the financial crisis is they got access to credit, 
but that also made them lose all their wealth because they were 
taken advantage of. There was fraud, and that is why it was 
created.
    So it wasn't just about access to credit, it was access to 
fair credit, so that individuals would have an opportunity to 
buy a home so that they could do what others--create wealth. 
And as a result of not having failed credit and not having--
consumers--a voice to say this is a divisive piece that will 
take away your wealth, we said that there had to be a voice for 
consumers.
    I appreciate everybody on this panel, but there is only one 
person that I have listened to who has a voice for consumers 
and that is the Attorney General. And do you know why we have 
Attorneys General in this country? Because the people need a 
voice separate from others. That is what we need. And then we 
realized here in Congress, after the financial crisis, that 
nobody spoke for the people. Nobody. And that is why 80 percent 
of the people want the Consumer Financial Protection Bureau 
because they want a voice also.
    Mr. Watkins said something about subject to the king, that 
the reason the founders of this country left is because they 
didn't want to be subject to the king, because the people had 
no voice. To give the people a voice. Well, guess what? We want 
to give the people a voice. We don't want to be subject to the 
king. The people must have a voice, and that voice is the CFPB.
    And what I have heard from everybody thus far it that is 
not about reforming; it is about getting rid of, diluting, 
changing. Not for the benefit of the consumer for sure; it is 
for others. So, you have to right the ship, and that is why the 
CFPB is so important.
    And you can't say now because you are not part of that 
voice. Everybody has different responsibilities, but I want to 
write the rules for them. No, that is subject to the king. That 
is what the king used to do. The king would set the rules for 
the people, and the people had nobody to speak for them. So, we 
set up a government so that we have an Attorney General to 
speak for the people.
    And when we got here and we saw--because when we see all of 
these things that are going on, the ones who were getting 
ripped off were people, the average, everyday American, your 
constituents and mine getting ripped off, rural and urban, in 
every part of this country. Nobody escaped.
    And we said in the conference, because that is what 
Congress is supposed to do, in its infinite wisdom, let's get a 
voice for the people that can look and and make something and 
give an example. And that is why this is so important, not 
ending the people's voice. Let the people have a voice. Let 
there be some decisions.
    I am a big advocate of homeownership. That is the way to 
wealth, to create wealth for everybody. And we know that hasn't 
been fair. We know that especially in minority communities, in 
Black communities, redlining took place, and interest rates 
were always different. It was not fair.
    In fact, some would love to give you access to credit so 
they could make more money by charging higher fees to these 
individuals. They need a voice. So, we should be talking about 
what we could do to help strengthen the CFPB. That is reforming 
it so that the people have a stronger and louder voice.
    That is what you do, Mr. Attorney General. Isn't that 
right? Don't you protect the people in the State of Minnesota?
    Mr. Ellison. Every single day, and I work with the Attorney 
General to help folks in New York, and the Attorney General to 
help folks in California and Ohio and all over the country.
    Mr. Meeks. And Republican Attorneys General?
    Mr. Ellison. Absolutely. We work in a bipartisan way.
    Mr. Meeks. That is what this is all about. So if we are 
really talking about the CFPB, let's talk about how we can 
strengthen it and make sure that the consumers have a voice.
    I yield back the balance of my time.
    Mr. Loudermilk. The gentleman yields back.
    The Chair now recognizes himself for 5 minutes for 
questioning.
    This is an interesting dialogue we are having. Thank you 
all for being here. I partially agree with my colleague, Mr. 
Meeks, in his comments about the king. The issue here is 
defining who is the king. Kings have ultimate authority without 
any constraint, without any oversight, and I think what we are 
saying here is the CFPB is becoming the king.
    It was brought up earlier also that if Congress wants to 
change the CFPB, then it just needs to change the law. However, 
Mr. Johnson, as you point out in your testimony, the CFPB has a 
long track record of dodging or outright defying statutory 
limits on its authorities, thus why the Framers of Our 
Constitution gave Congress the power of the purse to ensure 
that the Executive Branch stays within the statutory limits 
that it is given.
    One of my many frustrations with the Bureau has been its 
historically-expansive view of its own authority, oftentimes in 
conflict with congressional intent, legal precedent, and 
administrative procedures. For example, last year, CFPB claimed 
that it can apply UDAAP credit discrimination laws to any 
decision-making by financial institutions, including deposit 
and payment functions.
    Mr. Johnson, does the Bureau have the authority to broadly 
interpret and apply the law in this way?
    Mr. Johnson. Thank you, Congressman.
    Justice Scalia once said that Congress doesn't hide 
elephants in mouse holes. And the Supreme Court has recently 
spoken to the major questions doctrine, which says that an 
expansion of authority requires an express grant of authority 
in statute from Congress.
    And it may be that what the Bureau is proposing to do is 
eminently wise, but there is a method and a process that it 
needs to follow to do so. And what it is proposing is an 
interpretation of UDAAP authority that contradicts 80 years of 
settled understanding, going back to the grant of original 
unfairness authority to the FTC. And I think there was probably 
no discussion whatsoever during deliberations, at least 
reflected in the legislative record, that unfairness or UDAAP 
authority could reach the type of conduct that the Bureau is 
trying to reach.
    I think this is fundamentally a decision for Congress to 
make, and if it wishes to expand the CFPB's authority based off 
of the arguments that it raises or the necessity in terms of 
the conduct it observes in the marketplace, that is 
fundamentally a decision for Congress.
    Mr. Loudermilk. Thank you for that.
    Aside from falling outside the strong congressional 
oversight through the appropriations process, one of the 
reasons that the CFPB is so troubled is because its single-
director governance structure makes it more susceptible to 
dramatic policy shifts, depending on the political alignment of 
the Director. For example, due to significant regulatory 
uncertainty, many banks have withdrawn from the small-dollar 
consumer lending. Can you discuss how a multi-member board 
would bring regulatory stability?
    Mr. Johnson. Sure. Fundamental in the consideration of 
significantly-complex questions in terms of the operation of a 
regulation and the downstream effects and perhaps consideration 
of the unintended consequences, I think it is entirely 
foreseeable that the inclusion of the views, the opinions, and 
the experiences of multiple members could help the agency 
ultimately arrive at a better conclusion.
    That said, I would say that it is not a guarantee that is 
the case, and there are folks who are observing government 
agencies today that are multi-member commissions who believe 
that the agenda is not hampered by the presence of minority 
members of the commission.
    Mr. Loudermilk. Thank you.
    Mr. Watkins, the CFPB strategy seems to be to use every 
means available except the formal rulemaking process to 
regulate the financial industry. For example, like many other 
agencies, the Bureau issues circulars that are meant to provide 
clarity to the industry. However, many of these CFPB circulars 
do not provide clarity at all. Instead, they set forth 
disturbing expansions of CFPB authority all without clear 
congressional authorization or the opportunity for public 
comment.
    What implication does this kind of regulation have for 
public policy and the rule of law?
    Mr. Watkins. It really undermines the rule of law. The rule 
of law is based on the foundation that the rules of society, 
the conduct that people are supposed to follow are well known 
so that they can maintain within that boundary and make sure 
that all of their actions that they do follow the rule of law 
so that they don't get punished, and only the bad actors that 
violate those rules get punished.
    But when the agency has access like it has, it undermines 
the rule of law by blurring that line. So, the people can't 
tell if their actions are unlawful or not until it comes before 
the agency, in when they say, I don't know if what I did was 
lawful or not, because you haven't clarified that. And the way 
that it does really undermines accountability and people's 
ability to follow the law.
    Mr. Loudermilk. Thank you. My time has expired.
    The Chair recognizes the gentleman from Illinois, Mr. 
Casten, for 5 minutes.
    Mr. Casten. Thank you so much. And I appreciate you all 
being here today.
    I want to just ask a dumb question first. There is a lot of 
talk about whether the--given what is going on in the court 
right now with the funding structure of the CFPB, just a show 
of hands, how many of you are funded through congressional 
appropriations?
    How many of you would like to be funded through 
congressional appropriations?
    How many think you could do your job better if you were 
funded through congressional--okay. I thought we might end up 
there.
    Mr. Ellison, it is nice to see you here. I know that not 
that long ago, you were sitting on the other side of the dais 
in this committee, and I appreciate your service.
    Mr. Ellison. Thank you.
    Mr. Casten. I wonder when you were here in the work that 
you did to look after our financial institutions, did you feel 
like you were struggling to understand the needs of our banks 
and our financial community, that their lack of congressional 
funding for appropriations limited their ability to communicate 
with you and make sure you understood their needs?
    Mr. Ellison. Oh, no. They beat a path to my office 
everyday. They were very well-represented.
    Mr. Casten. So, to be less cute, you were also here before 
and after the creation of the CFPB.
    Mr. Ellison. Absolutely.
    Mr. Casten. How did the creation of that institution affect 
your ability to understand the needs of consumers and customers 
and borrowers and the people who ultimately are the money that 
drives our financial sector?
    Mr. Ellison. One thing, Congressman, is that it gave me, as 
a person trying to provide constituent services, a clear place 
to help consumers to go. Because before the CFPB--and my 
chairwoman will recognize this--there were a whole bunch of 
different Federal agencies that had the responsibility. And, of 
course, if everybody is responsible for something, then nobody 
really is.
    So, you have consumers who could go to a clear place and 
get clear answers and really get some real relief within a 
reasonable amount of time. And now that I have been Attorney 
General, the CFPB is an excellent partner and is also an 
advocate on a range of things when it comes to sharing 
information, helping consumers to understand what they are 
facing.
    The work that you all do on this committee is complicated. 
It is not intuitive. You have to study it. And for a consumer 
who is just trying to get a loan for this or that, they don't 
read all the fine print like you all do, but the CFPB does. So, 
they are just this indispensable partner, whom I think really 
does help the American family meet their financial obligations 
and reach their dreams. And I think you have to have an 
advocate like the CFPB.
    Mr. Casten. I wonder if you are comfortable speaking for 
our States' Attorneys General. We have these numbers of $16 
billion returned. That doesn't happen if--what has that meant 
for the resources that you have and how you can do the job of 
the people?
    Mr. Ellison. I can speak with some authority, because I do 
talk to my colleagues all the time. Obviously, they are all 
very capable of speaking for themselves. But in the AG world, 
and there is one, we meet, and we talk about a whole range of 
things. It might be anything from opioids, on the one hand, to 
student loans or payday lenders on the other.
    And I can tell you that we have our own partisan wrangling 
that we do. But as a person who has been in this body in 
Congress, and now I am in the AG world, there is no comparison. 
We work together on a far better basis. So many of these 
national multidistrict cases have Republicans and Democrats 
together. So I hope that answers--
    Mr. Casten. I want to just read you all a quote here: 
``Civil government, so far as it is instituted for the security 
of property, is in reality instituted for the defense of the 
rich against the poor or against those who have some property 
against those who have none at all.'' Does anybody know who 
said that?
    It was Adam Smith in, ``The Wealth of Nations.'' So much of 
our job here is to make sure that if we believe in capitalism 
and innovation and all that happens is making sure that 
everybody has a voice. We voted a few weeks ago to condemn 
socialism in all its forms on the House Floor, and let's hear 
it for that, and let's read the foundational text.
    Thank you. I yield back.
    Chairman Barr. The gentleman yields back.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Timmons, for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman.
    The CFPB was created to, ``make consumer financial markets 
work for consumers responsible for providers and the economy as 
a whole.'' Since that time, the CFPB has clearly strayed far 
from that mandate. In court case after court case, many of 
which are worthy of review by the Supreme Court, regulation by 
enforcement action, consent order press releases, and even 
conference speeches by the Director were all carried out under 
the problematic umbrella of the CFPB's insulation from 
congressional oversight and basic checks and balances.
    What is not at a loss in this hearing today is the 
understanding that a rabid, out-of-control CFPB only harms 
consumers. After reading all of your testimonies, what I heard 
loud and clear is that the CFPB has strayed far from its 
mandate, and no one who works for the economy is responsible 
for providers and, most importantly, consumers.
    Mr. Chairman, I look forward to working with my colleagues 
on this subcommittee to reign in the CFPB, and maybe sooner 
rather than later work to reshape the CFPB into an accountable 
and effective agency that works to empower consumers, not hold 
them back.
    Mr. Himpler, I am going to start with you. The CFPB has 
rolled out several new enforcement mechanisms over the last 2 
years, proposed results, defined rules, UDAAP authority 
expansion, advisory opinions, supervisory opinions, we keep 
going, enforcement by press release. These are all just some of 
the tactics that allow the Bureau to weaponize dormant statutes 
and regulations outside of APA rulemaking.
    Industry has been forced to greatly increase their 
compliance costs while the consumer has seen no real benefit. 
In fact, over the last 2 years, we have seen costs for almost 
all services go up to record levels. Can you talk about how 
these actions have harmed consumers in the form of increased 
costs of housing, financial services, et cetera, and I think, 
more importantly, also hampered industry's ability to innovate 
as they focus on complying with what is clearly an out-of-
control CFPB?
    Mr. Himpler. Thank you, Congressman.
    My head was almost spinning with the laundry list of things 
that you have just--
    Mr. Timmons. It is a lot.
    Mr. Himpler. --mentioned.
    I will go back to my oral statement. We like what the 
Director has actually said, at least in one regard. He said 
that markets work best when rules are easy to understand and 
easy to enforce. We couldn't agree with him more. But what we 
have in terms of press releases and blogs, it is like being on 
I-95 and you are supposed to follow the speed limit, but the 
speed limit is being set by somebody who has just issued a 
press release or held a press conference or spoke at a 
conference or anything of the like.
    You don't know what the speed limit is, but at the same 
time you are accountable. That has a chilling effect. It causes 
increased costs in terms of just trying to chase after 
compliance to hundreds of times of where it has been in the 
past. And ultimately, those resources that could go to increase 
access to credit are relinquished to following after these 
ghosts.
    Mr. Timmons. Businesses just want predictability. They want 
stability. They don't want to be guessing what they are 
supposed to do. And I think part of this is going to be a 
leadership issue and examining how we appoint the Director or 
the leadership structure entirely. So, that is the next 
question I have.
    Mr. Himpler. Congressman, could I comment on that?
    Mr. Timmons. Yes.
    Mr. Himpler. I don't think anyone here on this panel has 
testified today for doing away with the CFPB. The CFPB's 
mission is an important mission, but at the same time, we need 
accountability. And that is what the witnesses who share the 
panel with me--
    Mr. Timmons. Sure. Absolutely. The broad authority and 
unchecked power of the CFPB, particularly its single-Director 
leadership structure, is alarming and has had a clear negative 
impact on the consumer financial service's ecosystem. I know my 
colleagues across the aisle appreciate the work being done by 
the current Director, but it wasn't too long ago we had 
Director Mulvaney, and I don't think they appreciated the way 
that he went about his job.
    Mr. Johnson, what are some key legislative solutions that 
Congress should consider to ensure the CFPB abides by the 
system of checks and balances?
    Mr. Johnson. Thank you, Congressman.
    I testified about the importance of congressional 
appropriations as being a measure which can ensure that the 
agency's priorities are aligned with those of your 
constituents, and the collective needs and interests of the 
American people as understood by Congress. So, that is one.
    In terms of internal checks and balances, as you may know, 
the CFPB doesn't have its own independent Inspector General. It 
shares one with the Federal Reserve. That is a consequence, I 
think, of the funding structure itself and housing the CFPB 
within the Federal Reserve System. If the CFPB had an 
independent Inspector General, I think the oversight that can 
be provided through audits by an Inspector General could help 
appropriately tailor and focus the agency's mission to align it 
with its statutory responsibilities.
    Mr. Timmons. I am running out of time. I appreciate your 
answer. I think we are going to have an opportunity here in the 
near future to reform the CFPB. I look forward to working with 
my colleagues on that.
    Mr. Chairman, I yield back.
    Chairman Barr. The gentleman's time has expired.
    The Chair now recognizes the gentlewoman from 
Massachusetts, Ms. Pressley, for 5 minutes.
    Ms. Pressley. Thank you so much, Mr. Chairman.
    In today's hearing on the Consumer Financial Protection 
Bureau, we should really be praising the work of the agency and 
discussing how to augment its successes for consumers all 
across our country.
    I want to thank you, Attorney General Ellison, for joining 
us today and for doing exactly that.
    Without question, under Director Chopra's leadership, the 
agency has taken action on junk fees, medical debt, and 
appraisal equity, and has held bad actors accountable for their 
greed, exploitation, and illegal behavior. Unfortunately, some 
colleagues across the aisle are busy trying to criticize the 
agency and to undermine its mission. There is a particular case 
that the CFPB brought that has been raised in this hearing and 
is the primary focus of legal arguments; it is the lawsuit 
against Townstone Financial in Chicago.
    Ms. Thompson, you are here on behalf of Pacific Legal 
Foundation, which represented Townstone Financial, correct?
    Ms. Thompson. Correct.
    Ms. Pressley. And according to your testimony, the origin 
of CFPB's suit was regarding redlining. For the record, since 
there has been a lot of banter today about definitions, what is 
the precise definition of redlining?
    Ms. Thompson. The CFPB does not have a precise definition 
of redlining.
    Ms. Pressley. I will elucidate you as to the definition. 
According to the Legal Information Institute, redlining is a 
discriminatory practice that consists of the systematic denial 
of services such as mortgages, insurance loans, and other 
financial services to residents of certain areas based on their 
race or ethnicity. The history of the term dates back decades 
to when lenders would literally draw a red line around 
neighborhoods to stop Black people from moving in, as a way to 
maintain segregation.
    Today, this practice is not as overt, but it still 
persists, and again, not as overt since the passage of the 
civil rights legislation. So instead of a map and a red marker, 
discriminatory lenders often discourage applicants by using 
racially-coded language.
    Ms. Thompson, before I go any further, can you confirm that 
Townstone used marketing services through radio ads and a 
weekly radio show. Yes or no?
    Ms. Thompson. Yes, Townstone marketed through--
    Ms. Pressley. Reclaiming my time. On the radio, Townstone 
repeatedly disparaged Black neighborhoods in Chicago. Now, 
while I don't have enough time to go through all of their 
statements, I will share a couple for the record. The mortgage 
company described the south side of Chicago between Friday and 
Monday as, ``hoodlum weekend.'' On another occasion, Townstone 
described a grocery store in a Black neighborhood as, ``a 
jungle.'' I can't even call these dog whistles because they are 
as blaring as a bullhorn.
    These racist messages were loud and clear for everyone to 
hear, and it bore out in the data. In a City as racially 
diverse as Chicago, where 30 percent of the population is 
Black, only 1.4 percent of Townstone loan applicants were 
Black, and less than 1 percent of applications were for 
properties in Black neighborhoods. This is modern-day 
redlining, plain and simple, and that is why the CFPB brought 
the lawsuit against Townstone.
    Today, I have the honor of representing Massachusetts in 
the House of Representatives, but I was raised in Chicago. I 
know the City well, and I, for one, am glad the agency took 
action against discriminatory lending practices. We need more, 
not less, of the CFPB.
    On a final note, I want to address the suggestion that the 
agency is rooted in political bias. Ms. Thompson, who was the 
President in 2019 when CFPB brought that lawsuit against 
Townstone?
    Ms. Thompson. That was President Trump.
    Ms. Pressley. And if you don't know who the Deputy Director 
of the CFPB was when the lawsuit was filed, I will give you a 
hint. It is the Republican witness sitting two seats down from 
you, Mr. Brian Johnson.
    Mr. Johnson. May I correct the record, Congresswoman? I 
departed the Bureau on March 6, 2020.
    Ms. Pressley. Reclaiming my time. Again, Donald J. Trump 
was the President, and there is no political bias happening 
here. The agency is doing what they are supposed to do, which 
is to center consumers from across this country.
    Attorney General Keith Ellison, in these final moments, I 
want to give you a chance to add or correct anything for the 
record that has been previously stated.
    Mr. Ellison. I will make a few notes. First of all, I want 
to thank you for laying out the record on Townstone. That was 
brilliant and important for the record.
    I think that there is more than ample oversight of the 
CFPB: two annual presentations by the leader of that 
institution; numerous report requirements; and a number of 
appearances. When I was on the committee you are on now, ma'am, 
we heard from them all the time. That is oversight. And this 
idea that they are unaccountable makes no sense. We are having 
accountability right this second.
    Chairman Barr. The time of the gentlelady has expired.
    The gentleman from South Carolina, Mr. Norman, is now 
recognized for 5 minutes.
    Mr. Norman. Thank you, Mr. Chairman.
    Ms. Thompson, do you want to respond to that? I yield a 
minute.
    Ms. Thompson. I appreciate the opportunity to respond to 
that.
    Representing Townstone and Mr. Sturner, I have had the 
opportunity to listen to the radio shows that were involved in 
the CFPB's complaint against Townstone, unlike many others who 
have reviewed the complaint. Listening to those shows, I can 
tell you all that Townstone never discriminated against any 
applicants for credit. Townstone never said racially-derogatory 
statements to any prospective applicants.
    What is really going on here is that the CFPB is trying to 
be the police of free speech, and any speech that it disagrees 
with on a viewpoint and content basis, and that is against the 
First Amendment. They cannot censor creditor speech. Thank you.
    Mr. Norman. Thank you.
    I want to thank all of the panelists. If there is ever an 
agency that ought to be zeroed out, it is the CFPB. I was on a 
bank board for a number of years, and I can tell you that the 
CFPB is a rogue organization. Now, the funding has been 
mentioned. The budget in this past year was $717 million. There 
are 1,500 people are employed by the CFPB, so if you ink that 
out, it is $478,000 per employee: $478,000.
    I know that some of that is overhead. But this agency, I 
can't tell you the banks, and there are over 18,000 lending 
institutions all over the country. And here on the other side, 
everybody is a victim and everybody is being defrauded like 
Bernie Madoff. I am sorry. Banks have to compete.
    And I didn't realize we had so many experts who could 
qualify fees as junk fees. I think banks compete. I think banks 
have shareholders. I think banks have to make a profit for the 
shareholders. And it is almost laughable some of the comments 
being made here.
    Mr. Watkins, your comment about a jury trial, that 
everybody deserves a jury trial, a good example of government 
gone rogue is the January 6th people who are being held without 
a trial, without being able to defend themselves, or hire an 
attorney.
    And I think, Mr. Himpler, you mentioned the CFPB was doing 
away with arbitration?
    Mr. Himpler. Yes, I did.
    Mr. Norman. I am a real estate developer. Do you know how 
many times we have used arbitration? You get two unbiased 
parties. You have a mediator. You pay for that. You decide. I 
don't know that there is anything more American than--or more 
the rights of the two parties. Why in the world would they have 
the audacity to do away with arbitration?
    Mr. Himpler. Congressman, that's a great point.
    I will reiterate for the record that the CFPB put forward a 
rule to essentially ban arbitration, despite the fact that its 
own agency put forward a study which showed the benefits to 
consumers of arbitration. Congress overturned that through the 
Congressional Review Act, and the CFPB is trying to get around 
that by having--our member companies have to register with a 
database when we use arbitration clauses. That is going to work 
against the consumer's best interest. And that type of end-run 
around congressional intent, both in the first instance as well 
as trying to end-run around congressional review ban on that 
rule, that to me is the definition of unaccountable.
    Mr. Norman. And it is unaccountable.
    And the fact that Fed Chair Powell, on the funding end of 
it, on paying folks out of profits of which there are none, 
didn't have a clue. They get 12 percent. There is no 
incentive--and I think in 2011, with Dodd-Frank, it started at 
10 percent. There is no incentive to come under 12 percent of 
some imaginary number. The businesses' or families' budgets 
could not operate like this.
    Ms. Thompson, what would be the cost, the legal fees 
associated with bringing an action against the CFPB? Not 
everybody can do this. Would you agree?
    Ms. Thompson. Absolutely. And Pacific Legal was able to 
help Townstone with pro bono legal services. But for other 
entities that are engaged in legal fights with the CFPB, it can 
cost hundreds of thousands of dollars, if not millions.
    Mr. Norman. So, they say they are helping the consumers, 
but they are actually just taking rights away. You have all 
given me a great idea to try to get this agency nixed out, and 
I appreciate your testimony. In every closing I have done, they 
have listed every fee that I had to pay for, and I have never 
seen one hidden.
    I yield back.
    Chairman Barr. The gentleman yields back.
    And the gentleman from California, Mr. Vargas, is now 
recognized.
    Mr. Vargas. Thank you very much, Mr. Chairman.
    First of all, I want to apologize that I wasn't here for a 
lot of the testimony. Unfortunately, we had a Capital Markets 
Subcommittee hearing at exactly the same time.
    There was some discussion about the king. I just want to 
make sure that I am on the record. I definitely believe in the 
king, that king. But anyway, I never want to be embarrassed of 
loving Jesus. I want to make sure of that, first and foremost.
    There was also a comment made about Mr. Mick Mulvaney. He 
was a colleague of ours. I don't think that there is anybody 
more imminently principled than he is. He is an incredibly 
principled person. You may disagree with him, but he's an 
incredibly principled person, who is a friend to many of us, 
including Mr. Ellison. And it is great to see you, Mr. Ellison.
    But anyway, it is interesting. I have been around here now 
for a while. It is my eleventh year. When I first got here, I 
would love to say that Dodd-Frank was the boogie man. And a 
good friend of ours, Sean Duffy, Congressman Sean Duffy, used 
to yell and scream and be so theatrical in how this is going to 
be the end of banking and finance. I loved it when it was his 
turn, because I knew he was going to put on a good show.
    But that kind of waned and petered out after a while 
because we found out from the banks that, in fact, Dodd-Frank 
was very helpful, especially when it had a real stress test, 
which was this pandemic. The bankers came before us and we 
asked them, ``Was it helpful?'' And they said, ``Yes, actually, 
Dodd-Frank was helpful.'' Now, to be fair to them, there were a 
few things that they didn't like.
    So now, my colleagues on the other side--and not just on 
the other side, some are on this side now--Mr. Ogles, how are 
you doing, sir?
    Mr. Ogles. It is a full room.
    Mr. Vargas. And now, they are after the CFPB. But it is 
kind of waning too, with the exception of maybe Mr. Norman, who 
is a terrific guy, but everybody else is kind of, eh, and the 
reason for that is quite simple: They have returned $16 billion 
to U.S. consumers, answered over 47 million questions from U.S. 
consumers, and they have basically been doing a pretty good 
job.
    Now it is, should we have a board as opposed to a single 
Director, something like that, or trim back the amount of money 
that they have? But it just doesn't seem that the heart is in 
it anymore. Now, it is ESG that I think is going to be the next 
big boogie man.
    Attorney General Ellison, first of all, it is great to see 
you, my friend.
    Mr. Ellison. Likewise. Thank you. It's good to see you, my 
friend.
    Mr. Vargas. You were asked earlier about the CFPB and what 
would happen if we didn't have it. What would happen if we 
didn't have it?
    Mr. Ellison. I think that most actors in the financial 
services world would try to do the right thing. But then, what 
would happen is you would have some that didn't. Without any 
regulation, without pulling them back in, other industry 
players would have to replicate them or would begin to lose 
market share, and then you would begin to see bad practices 
predominate.
    You would clearly see foreclosures, you would see defaults, 
you would see all kinds of problems like that among consumers, 
which would, I think, have a cascading effect and would land us 
right back where we were in 2007 and 2008. And you will recall, 
first, it was Bear Stearns, then, it was Lehman Brothers, then, 
it was Fannie Mae and Freddie Mac, and then, it was a mess. 
Look, nobody likes regulation, but it is one of those things 
that we need in order to keep a financial system that is 
stable, and that is what I think would happen.
    Mr. Vargas. No, I think you are right. And, in fact, I 
think it is working fairly well. I think that is one of the 
reasons that you hear complaints, but even Mr. Himpler--I think 
I heard you correctly that you are not saying to do away with 
the CFPB; you are saying that we have to reel it in a bit. I 
will give you the opportunity to speak.
    Mr. Himpler. Thank you very much. It is great to see you, 
Congressman.
    Mr. Vargas. Likewise. It's great to see you, sir.
    Mr. Himpler. I would like to agree with the Attorney 
General. We are for regulation. That is the problem. Right now, 
the CFPB is being governed by press release, and lack of 
definition. This Congress, and previous Congresses, enacted APA 
rulemaking authority. It is there for a reason. Engaging with 
all of the stakeholders and producing a meaningful and lasting 
resolve that provides great guide posts down the road in terms 
of financial services. That is what we are asking for.
    Mr. Vargas. I understand that. But even some of their 
guides, I think, is to give the companies an opportunity before 
they get in trouble to make sure that they are doing the right 
thing.
    But my time is almost over, so I yield back the last 10 
seconds.
    Chairman Barr. The gentleman yields back.
    The gentlewoman from California, Mrs. Kim, is now 
recognized.
    Mrs. Kim. Thank you, Mr. Chairman.
    I want to thank all of the witnesses for being with us 
today. I am concerned about the proposals under CFPB Director 
Chopra, because his proposed rules will increase costs and 
reduce access to capital, especially to women-owned and 
minority-owned businesses and many families.
    I want to talk about, as an example, the proposed rule 
under Section 1071, because that would direct the lenders to 
guess or estimate, guesstimate. A small businesses owner was 
based on visual observation if they opt not to report it 
voluntarily, which you know very well.
    I wanted to ask you, Mr. Himpler, what are the most urgent 
policy issues the CFPB should be taking into account as they 
work on the final Section 1071 rule? Because we want to avoid 
reducing credit for women- and minority-owned businesses.
    Mr. Himpler. Thank you, Congresswoman.
    This is critically important. The vehicle finance industry 
is a key part of the economy. The auto market is another key 
part. And what we have right now is a regulation that is put 
forward by the CFPB to collect this data. By and large, my 
member companies don't know whether or not these are minority- 
or women-owned businesses and the like. That is largely data 
that is available to the dealers and then our members get the 
contract.
    The Fed has not put forward a similar rule so that the two 
can be married up. So, at the end of the day, the CFPB is 
insisting on going forward with a rule that we can't implement 
until the Federal Reserve acts, and I think that is going to 
create chaos in the industry.
    Mrs. Kim. The Bureau's new credit card late fee proposal 
claims to help some credit card customers avoid higher fees, 
but in reality, I think the CFPB also acknowledged in the 
proposal that the customers who do not pay their late fees, 
primarily about, what, 78, 80 percent, those Americans with 
credit cards, will not benefit from the reduced fees, and they 
could, in fact, face higher costs, maintenance fees, lower 
rewards, or even high-interest-rate accounts.
    I am concerned that the CFPB is breaking with prior 
precedent by not allowing its obligations under SBREFA. The 
SBREFA panels allow regulatory agencies to understand the cost 
that proposed rules may have on small businesses. In that 
proposed credit card late fee rule, the CFPB certified that it 
would not have a, ``significant impact on a substantial number 
of small banks and credit unions.''
    I want to direct this question to you, Mr. Johnson. Based 
on your experience, does the CFPB have a process in place to 
officially certify the rules that do not have a disparate 
impact on small businesses and small banks, and how do you 
think that the CFPB reached the conclusion to waive that SBREFA 
requirement?
    Mr. Johnson. I don't know, Congresswoman, how they reached 
that conclusion. The analysis in the CFPB's proposed rule was 
perfunctory. It is a statutory requirement to consider whether 
or not there would be an effect here. I do think, putting on my 
old agency hat, that the Bureau has real risk with this rule.
    The failure to abide by a SBREFA panel and process is a 
significant risk to the agency's rulemaking, and the 
insufficiency of the 1022 analysis through qualitative rather 
than quantitative analysis is a real risk. And given the public 
statements made, including at the State of the Union, I think 
there is real prejudgment risk about where the Bureau is going 
to come out in this rule.
    Mrs. Kim. Thank you.
    I would like to yield back the balance of my time to the 
Chair.
    Chairman Barr. Thank you to the gentlelady.
    And following up with Mr. Himpler's testimony, Director 
Chopra has defended his regulation-without-rules approach by 
claiming that guidance and interpretive rules, blog posts, and 
press releases merely respond to what the private industry is 
asking for, just to give more clarity.
    The question is, have Director Chopra's guidance and blog 
posts enhanced clarity or made things more confusing about what 
the legal requirements actually are?
    Mr. Himpler. More confusing.
    Chairman Barr. Mr. Johnson, are these blog posts and 
informal proclamations designed to commit institutions and 
credit providers to new legal obligations?
    Mr. Johnson. They often do, although they are kind of sold 
on the guise of something that does not.
    Chairman Barr. Thank you.
    The gentlelady's time has expired. And the gentlelady from 
New York, Ms. Velazquez, is now recognized.
    Ms. Velazquez Thank you, Mr. Chairman.
    I am sorry that my colleague, Juan Vargas, left, but he 
brought up Mr. Mulvaney--and how fun that he spoke about him. I 
just wanted to remind him that an investigation by the 
Inspector General rebuild that Mr. Mulvaney was responsible for 
withheld funding that was allocated by this Congress to help 
the people of Puerto Rico after Hurricane Maria. And that 
investigation revealed how President Trump told him, Mr. 
Mulvaney, that he didn't want a single penny to go to Puerto 
Rico. And he did exactly what President Trump asked him to do 
with total disregard to the fact that 4,000 Puerto Ricans, 
American citizens, died because of Maria. And here was the 
President telling Mr. Mulvaney, who didn't have the courage to 
say to the President of the United States that that was morally 
wrong.
    Anyway, Attorney General Ellison, Congress established the 
CFPB to provide a single point of accountability and to work 
across all States and jurisdictions to enforce Federal consumer 
financial laws and protect individuals and families from 
predatory actors and wrongdoers. As the highest law enforcement 
officer in your State, can you explain the areas in which you 
collaborated with the CFPB?
    Mr. Ellison. Thank you, Congresswoman.
    I will tell you that we have had extensive cooperation 
around student loan debt. We have had a number of conversations 
that have helped guide us. We have collaborated across multiple 
States with the CFPB. I can tell you that they are an excellent 
partner.
    Ms. Velazquez. What has you and your staff's interaction 
with the CFPB been like?
    Mr. Ellison. It has been very positive. As a matter of 
fact, one of the things that I shared in my comments is an 
October 2019 matter that involved North Carolina, and the City 
of Los Angeles, when we sued a series of companies and 
individuals running a fraudulent student loan debt relief 
scheme that falsely promised to help people to pay off their 
student loans and obtain student loan forgiveness in the 
process.
    And I can tell you that we were able, with the assistance 
of the CFPB, to give restitution and relief to literally 
thousands of people to the tune of millions of dollars.
    So, we are very confident that the CFPB is meeting its 
mission and its goals.
    Ms. Velazquez. And in this era--
    Chairman Barr. Could someone close the door, please?
    Ms. Velazquez. Thank you.
    Chairman Barr. Thank you.
    And once we close the door, the gentlelady will be given 
more time.
    Ms. Velazquez. Thank you.
    Mr. Ellison, it is so great to see you.
    In this era of misinformation, can you remind members of 
this committee who perhaps weren't here during that time why it 
was important to create an agency like the CFPB?
    Mr. Ellison. Congresswoman, as you know very well, there 
were a number of agencies assigned the responsibility of 
consumer protection, so many that nobody really took it 
seriously. Others had dual responsibilities like prudential and 
soundness responsibilities and consumer protection. Consumer 
protection invariably took a back seat to those considerations.
    We believed that it would be good to consolidate that 
responsibility in one place, and we also concluded that we 
didn't want the agency to be subject to agency capture. We all 
know on both sides of the aisle that an agency can be subject 
to capture. None of us want that. We want the agency to do what 
it is there to do.
    I think that Representative Foster made a great point. 
Would it be a good idea to be able to go to the Fed and say, 
``Raise interest rates or we are going to cut your budget.''? 
That is a bad idea.
    Ms. Velazquez. Thank you.
    You and I have worked most of our careers to root out and 
combat discrimination in lending. I know the CFPB is close to 
finalizing its Section 1071 rulemaking, which will require 
lenders to collect and report demographic data of borrowers who 
apply for loans to start or grow their businesses, and shine a 
light on lending disparities. Some claim that this will create 
more discrimination and lead to less lending. Do you agree with 
this assessment?
    Mr. Ellison. I think it will really help us find out how 
well we are doing in the area of equal opportunity, and I 
welcome it. I think it is a good proposal.
    Ms. Velazquez. Thank you, Mr. Chairman. I yield back.
    Chairman Barr. The gentlelady yields back.
    The gentleman from Florida, Mr. Donalds, is now recognized.
    Mr. Donalds. Thank you, Mr. Chairman.
    And thank you, witnesses for being here today. Attorney 
General Ellison, welcome back. It is good to see you here as 
well.
    Let me be very clear with everybody here. I am the sponsor 
in the House for the bill that repeals the CFPB, so I want to 
just level set for a moment. I am not a fan of the agency, 
never was, and I am actually glad that Members have talked 
about the history of how we got to this point.
    I was a part of the commercial banking industry from 2003 
through 2007, and I was watching. The first congressional 
committee I ever watched as an American citizen was the House 
Financial Services Committee, because I was actually an 
industry participant. I worked in the industry. So, I saw the 
deliberations about the Troubled Assets Relief Program (TARP) 
and all of that stuff, and then the deliberations on Dodd-
Frank.
    One of the issues for the CFPB is that it is a highly-
partisan agency because it was created under partisan 
parameters. It was one-party vote, one-party rule that created 
the CFPB.
    If you were to ask me if the CFPB is unconstitutional as a 
whole, I would say yes, because the way I view it, there is no 
oversight, obviously. Its funding comes out of the Fed. We all 
know that.
    If you ask Chairman Powell, he doesn't know how much money 
goes into the CFPB. A letter shows up, they say, okay, the CFPB 
gets their money, and they go on about their business. So, 
there is no oversight of the CFPB at all at-large.
    It appears to be a freelancer more than a regulator. It 
goes and it roams the countryside looking for products that may 
or may not pop up, and then it decides, frankly, at the 
direction of the Director, if it likes the product or not. That 
is not a regulator. That is a freelancer.
    I have a couple of questions. Mr. Himpler, do vehicle loans 
pose a systemic risk to the American economy?
    Mr. Himpler. No.
    Mr. Donalds. Mr. Johnson, do credit card late fees pose a 
systemic risk to the American economy?
    Mr. Johnson. No.
    Mr. Donalds. Let me ask you this question, Mr. Johnson. Are 
there serious issues about not only separation of powers but 
due process at the CFPB? And can you detail them?
    Mr. Johnson. Congressman, in my extended written statement, 
I have provided a list of roughly 30 instances that in my view 
constitute due process or separation of powers concerns or the 
Bureau overreaching its statutory authority.
    Mr. Donalds. Can you go into detail about one of your 
comments where they pressured financial institutions to waive 
attorney-client privilege during supervisory examinations?
    Mr. Johnson. Sure. The Supreme Court has been very clear 
that when Congress enacts a statute, including the CFPB's 
enabling statute, if it wishes to abrogate a common law 
privilege, especially one as foundational as attorney-client 
privilege, it must do so expressly. There is no express 
abrogation in Title X of attorney-client privilege. In other 
words, the CFPB lacks authority to compel institutions in any 
capacity to waive attorney-client privilege. It is especially 
troubling in the context of supervisory examinations because 
all of that communication with the Bureau is secret and can't 
be made public. So, there is a ripe opportunity for the Bureau 
to pressure institutions in a non-public setting to waive that 
privilege.
    Mr. Donalds. Mr. Johnson, I have to cut you off.
    And I thank you for the more layman example because I am 
not an attorney. I am a finance guy, so I appreciate that. 
Thank you.
    Mr. Attorney General, do you think it is okay for the CFPB 
to force financial institutions to waive attorney-client 
privilege?
    Mr. Ellison. I think it would depend, but I would like you 
to prove that is, in fact, what is going on. I think you need 
to demonstrate that. That is an allegation, but I would like to 
know what facts you are using to make that claim.
    And I certainly think there are occasions in which the 
attorney-client privilege is--I have been an attorney for 30 
years, and I can tell you that there are occasions in which 
that veil is pierced. It depends.
    Mr. Donalds. Okay.
    I am going to ask you one final question because, actually, 
in your testimony, you have been citing the work that you do 
with CFPB, your State and I forget the other State, that was 
involved with respect to the student loan fraudsters. And I do 
want to thank you for prosecuting that because we should not 
have fraudsters roaming through the financial landscape. I 
believe everybody agrees with that wholeheartedly. So when we 
find that stuff, we have to root it out of the system. I 
totally agree with you there.
    You also state that the CFPB civil penalty fund secured $95 
million in refunds for the affected parties in that case.
    Mr. Ellison. That is right.
    Mr. Donalds. Because the perpetrators, obviously, didn't 
have the funds to pay people back.
    Mr. Ellison. Right.
    Mr. Donalds. Where does the CFPB get its money in the civil 
penalty fund?
    Mr. Ellison. It gets the money through the resolution of 
other matters and so that is--
    Mr. Donalds. So, fines levied on other institutions were 
then used to give out rewards in other areas?
    Mr. Ellison. Right.
    Mr. Donalds. Okay.
    Mr. Ellison. Which is an appropriate thing to do and 
happens all the time.
    Mr. Donalds. Okay.
    I yield back. Thank you.
    Chairman Barr. The gentleman's time has expired.
    The gentleman from Texas, Mr. Green, is now recognized.
    Mr. Green. Thank you, Mr. Chairman.
    And I thank the witnesses for appearing today.
    I especially thank Attorney General Ellison for appearing. 
It is just good to have him back. He sat right next to me for 
years. He always had things that were important to deal with, 
and I am not surprised that he has become Attorney General. He 
is capable, competent, and qualified. Welcome home.
    Mr. Himpler, dear sir, would you kindly explain to us how a 
servicemember can receive a reduction to 6 percent on a pre-
service loan? And if you can be terse and laconic, I would 
greatly appreciate it.
    Mr. Himpler. I will try, Congressman. A servicemember who 
receives active duty orders can submit those orders to his 
lender and immediately receive reduction to the statutory limit 
under the Servicemembers Civil Relief Act of 6 percent.
    Mr. Green. And if that servicemember has multiple loans, if 
the servicemember complies, as you have indicated, the loans 
would be reduced to 6 percent, all of these various loans, is 
that a fair statement?
    Mr. Himpler. That is correct.
    Mr. Green. And the CFPB has indicated that if the 
servicemember does as you have indicated with a single loan, 
that would then apply to other loans. Is that a fair statement?
    Mr. Himpler. What the CFPB has put forward is a request of 
industry to essentially paying the Defense Department--
    Mr. Green. Excuse me. If I may, I don't mean to be rude, 
crude, and unrefined, but is it true that if the servicemember 
applies and complies as you have indicated, with one loan, the 
CFPB has concluded that that can apply to others?
    Mr. Himpler. No.
    Mr. Green. Okay. What have they concluded?
    Mr. Himpler. They have put forward that what the industry 
needs to do is regularly go into the Defense Department 
database and look for active duty orders of servicemembers. So, 
they don't have to comply with the statutory requirements at 
all to notify lenders.
    Mr. Green. Well, do they--
    Mr. Himpler. The problem with--
    Mr. Green. Excuse me, if I may. Do they indicate that one 
loan must have been--there must have been a request for a loan?
    Mr. Himpler. No.
    Mr. Green. No loan at all? Just look for the loans and 
reduce them?
    Mr. Himpler. The industry is supposed to look into this 
database that, quite frankly, is down on a regular basis, and 
currently gets about 40,000 pings annually. What they have 
asked the industry to do is now take that up to 120 million 
pings annually. The Defense Department database cannot handle 
that, and, quite honestly, it doesn't have the security 
precautions that are necessary for this type of work.
    Mr. Green. How would it harm the servicemembers if the 
Defense Department--or if there is compliance with what the 
CFPB has recommended?
    Mr. Himpler. If industry pings it and does not find a 
servicemember's active duty assignment and, thereby, the 
extension is not granted but somehow that is not accurate, the 
servicemember doesn't receive the relief they should get if 
they were to pursue this as the statute requires.
    Mr. Green. The servicemember would get loans reduced if the 
industry complies with the request of the CFPB.
    Mr. Himpler. I am not sure I understand.
    Mr. Green. You have said that the servicemembers--the CFPB 
has asked the industry to look into these loans and make the 
reductions when they find that there is such a loan.
    Mr. Himpler. Essentially, the database, as I said, is down 
on a frequent basis. It is actually down this week.
    Mr. Green. Let's assume that it is functioning for our 
purposes. For our purposes, let's assume that it functions. If 
it functions, would the servicemembers benefit?
    Mr. Himpler. Congressman, my point is that we can't assume 
that it is functioning, because if my members assume that it is 
functioning and it is not, we are the ones who are accountable.
    Mr. Green. I understand. But when it does function, do the 
servicemembers get their loans reduced when they apply?
    Mr. Himpler. If everything is accurate, yes.
    Mr. Green. Thank you, Mr. Chairman.
    Chairman Barr. Thank you.
    The gentleman's time has expired.
    The gentleman from Tennessee, Mr. Ogles, is now recognized.
    Mr. Ogles. Thank you, Mr. Chairman, and thank you to our 
panelists.
    To be or not to be, that is the question that I borrow from 
Shakespeare, as Hamlet contemplates death. And I can't think of 
an agency that should meet a quicker end than the CFPB. I can't 
think of an agency whose regulatory authorities could be 
delegated to other agencies as quickly and efficiently as those 
of the CFPB.
    Let's say we disagree on that point. I think we can agree 
that any agency, regardless of funding mechanism, that is out 
of control, that has usurped its authority, should be brought 
to bear and feel the full weight of Congress in the 
appropriations process. Last year, the CFPB chose to completely 
transform fair lending policy without any kind of public input. 
They also didn't give any prior notice to stakeholders who 
would be impacted by this change. Is it appropriate for a 
Federal agency like the CFPB to upend transparency as it did by 
undermining the Administrative Procedure Act (APA)?
    Mr. Himpler?
    Mr. Himpler. No, it is not fair, and that is our whole 
testimony today, Congressman, is that we are looking for clear, 
understandable rules from the CFPB.
    Mr. Ogles. Mr. Johnson?
    Mr. Johnson. If the agency wishes to impose new burdens on 
anyone, it should do it forthrightly and in compliance with the 
APA.
    Mr. Ogles. Ms. Thompson?
    Ms. Thompson. These raise constitutional concerns, 
including the major questions doctrine, and is ripe for 
consideration by the Supreme Court.
    Mr. Ogles. Mr. Watkins?
    Mr. Watkins. The regulated industry should only receive 
what is unlawful from Congress or through the process that 
Congress has mandated.
    Mr. Ogles. Before I get to my next question, I did want to 
revisit the idea of the process by which servicemembers have 
reductions in loans. Would you like to clarify, Mr. Himpler?
    Mr. Himpler. I don't believe what Congressman Green put 
forward would require, under the CFPB's proposal, for the 
servicemember to put forward their active duty assignment to a 
single creditor or lender. But even if that were the case, the 
conclusion of what he and I were discussing is that every other 
creditor would be subject to knowing that the servicemember had 
put that forward to that particular creditor, totally 
uninformed but, at the same time, accountable.
    Mr. Ogles. What you are saying is that you don't think the 
Federal Government should be poking around in your personal 
business?
    Mr. Himpler. The statute is a great statute to protect 
servicemembers. The statutory requirements are that once the 
servicemember gets his or her assignment, they can then present 
that to the creditor and get a reduction. Nobody takes any 
exception with that. Trying to figure out willy-nilly by 
somebody posting it in the Cloud doesn't make any sense in 
terms of regular order.
    Mr. Ogles. Last year, the CFPB unilaterally decided that 
Dodd-Frank's grant of authority to prevent unfair, deceptive, 
or abusive acts or practices known as the UDAAP now includes 
controversial disparate impact liability. The Bureau announced 
this change by press release.
    So on this point, or really any other, is it fair that by 
way of press release, an agency can transform industry 
practices without due process and notice? Never mind the fact 
that Congress didn't get a say.
    Mr. Himpler?
    Mr. Himpler. Congressman, that is a wonderful question.
    What we are asking for is fairness from this regulator. 
Having to follow supposed rules by press release, how do you 
challenge a press release? How do you challenge a news 
conference? You can't. It is only through APA rulemaking 
authority that you can have the meaningful back and forth 
between the regulator and the regulated entity.
    Mr. Ogles. Mr. Johnson?
    Mr. Johnson. The short answer is that it is not fair.
    Mr. Ogles. Ms. Thompson?
    Ms. Thompson. Not only is it not fair, but CFPB should only 
exercise the power delegated by Congress.
    Mr. Ogles. Mr. Watkins?
    Mr. Watkins. The Constitution requires notice before due 
process can be found for someone to have violated, and blog 
post is not proper notice.
    Mr. Ogles. I thank all of you for being here.
    Mr. Chairman, I yield back the balance of my time.
    Chairman Barr. The gentleman yields back.
    The gentleman from California, Mr. Sherman, is now 
recognized.
    Mr. Sherman. Thank you.
    It is interesting to find out there is a database of 
servicemembers. That is interesting in the financial services 
area. I sure hope our friends over at Armed Services are 
looking at that from whether it is a national security concern 
or a privacy concern.
    But I am a nationalist. I like it when we have the same 
standards nationwide. I realize, however, that if the CFPB 
doesn't do its job, there is going to be even more pressure for 
the States to do their job.
    Mr. Ellison, you know something about State Government and 
consumer protection. And welcome back.
    Mr. Ellison. Thank you.
    Mr. Sherman. If the CFPB is not as effective, do you see 
your State and other States being more involved? And would 
those regulations tend to be disparate so a business would have 
to deal with, perhaps, 50 different sets of regulations?
    Mr. Ellison. Congressman, I think that is an accurate 
description. You would create a very hard-to-predict patchwork 
from State to State, and I am sure that would not please 
industry to have to deal that way. But I also would say that 
some of our staffs are fairly limited, so it would mean that 
people are just getting away with things they shouldn't be 
doing and that are against the law.
    Mr. Sherman. And some States would not step forward even 
when they should.
    One of the advantages of having national standards is that 
sometimes those standards may not be quite as high as somebody 
in Sacramento would like, but there are an awful lot of 
Americans who live in States that don't provide much protection 
at all, and at least we raise the floor for the whole country.
    Mr. Himpler, can you explain why lenders in some industries 
would have higher default rates than those in other industries?
    Mr. Himpler. Mr. Sherman, if I may expound on--
    Mr. Sherman. And you may have done that earlier. I realize 
that I have come late to this hearing.
    Mr. Himpler. Mr. Ellison is talking about what industry 
wouldn't like. The American Financial Services Association 
represents both banks and finance companies, and I can tell you 
that our national finance companies deal with 50 sets of State 
regulations, the, ``work,'' that he mentioned. The certainty 
that we have in those States, all 50 of them together, is still 
better than the uncertainty that we have by virtue of press 
release from the CFPB.
    With respect to your question about default rates, I didn't 
quite understand what you were--
    Mr. Sherman. Can you explain why some lenders have higher 
default rates than other lenders?
    Mr. Himpler. Some lenders go deeper into the credit 
spectrum than others.
    Mr. Sherman. So, they are willing to make loans to a group 
of people knowing that, well, if we design our standards this 
way, we will be able to make 100 more loans, but out of those 
100, we may have 3 percent or 5 percent defaults that we 
wouldn't otherwise have?
    Mr. Himpler. Correct.
    Mr. Sherman. We are talking about higher interest rates. 
How is that going to affect the companies you represent and, 
more importantly, the consumers that they serve?
    Mr. Himpler. Congressman, each creditor serves a different 
niche in the market, and our industry is committed to access to 
credit. And to do that, folks need to take on varying levels of 
risk, and in order to offset that, you have to charge different 
rates in order to get to the same sort of outcome of performing 
loans.
    Even if folks are having a 20-percent default rate, which 
is huge by any estimation--I respect your reaction--that still 
means that 8 out of 10 people who otherwise wouldn't get access 
to credit are getting access and performing on those loans.
    Mr. Sherman. And the natural thing is we want all of our 
constituents to get loans, even those where the statistics 
would indicate there is a somewhat higher rate of default, and 
we want all of our constituents to get the best possible, 
lowest possible rates, and, obviously, you can't always do 
that.
    I just want to point out that I know the courts are going 
to decide this issue about the powers of the CFPB. I am glad 
that isn't being decided here in this room, and we, as a 
committee, have to be able to react. But I think having a 
single national organization setting the standards and, of 
course, doing so in a way that the courts find is appropriate 
is a good thing.
    And I yield back.
    Chairman Barr. The gentleman yields back.
    Now, the gentleman from Wisconsin, Mr. Fitzgerald, is 
recognized.
    Mr. Fitzgerald. Thank you, Mr. Chairman.
    In 2018, economic growth, regulatory relief, and the 
Consumer Protection Act provided relief from the harms of Dodd-
Frank to community banks and credit unions who had nothing to 
do with the financial crisis. However, many of these small 
financial institutions still face, as has been discussed today, 
the daunting regulatory compliance challenges.
    In particular, the CFPB has abused its authority to advance 
a political agenda and harmed small businesses in doing that. 
Congress repeatedly has urged the CFPB to narrowly tailor its 
rules to specific consumer abuses.
    When the Small Business Regulatory Enforcement Fairness 
Act, or SBREFA, the worst acronym in banking, was enacted in 
1996, Congress intended to ensure Federal agencies throughout 
would understand and thoroughly work their rules to see how it 
would affect small firms and the use of that information to 
eliminate unnecessary burdens. We had discussions about this in 
the House Small Business Committee in the last Congress.
    Over time, the SBREFA process has been treated as merely a 
check-the-box initiative where outreach is made to the small 
entity representatives, otherwise called the, ``real people,'' 
on the street, but their feedback is not adopted in the final 
rulemaking.
    That is why last Congress I, along with some other Members, 
introduced the Making the CFPB Accountable to Small Businesses 
Act. This bill would require the CFPB to presume that size and 
sophistication-based tailoring of regulations are needed in 
SBREFA panel reviews. If tailoring is not undertaken by the 
panel, then they must issue a justification, which would be 
painful for the CFPB.
    Just a quick question to anyone on the panel, but I will 
start with Mr. Johnson, can you just talk a little bit about 
that process that otherwise is just a check-the-box kind of 
exercise?
    Mr. Johnson. It is critical that the agency undertake it, 
and if there is ever a question about whether it should or not, 
all it is, is an additional process that the agency 
fundamentally benefits from, because they are hearing the type 
of information that they wouldn't otherwise hear as part of the 
rulemaking process.
    And, by definition, larger institutions have the capital 
base over which to spread the cost of compliance, so the agency 
needs to pay critical attention to the smaller market 
participants that lack that capacity so that the impact of the 
regulation itself is not creating an uneven playing field.
    Mr. Fitzgerald. Ms. Thompson, do you have a comment on 
that?
    Ms. Thompson. I would just like to emphasize the fact that 
compliance falls especially heavy on some of the smaller 
financial institutions which provide credit to people who may 
not otherwise have access.
    Mr. Fitzgerald. Mr. Watkins, do you want to talk about 
that?
    Mr. Watkins. I am in agreement. The small institutions just 
can't afford the voluminous number of regulations and trying to 
go through all of them. It adds costs with each one of them. 
For large financial institutions, that cost may be a very small 
percentage, but for smaller institutions, it can be a much 
larger percentage.
    Mr. Fitzgerald. Very good.
    Thank you, Mr. Chairman. I yield back.
    Chairman Barr. I thank the gentleman, and the gentleman 
yields back.
    I appreciate the witnesses' testimony today. I want to 
thank all of them for their expertise in offering their 
testimony.
    I think a takeaway is that if there was ever a Federal 
regulatory agency that needed greater scrutiny, and more 
accountability to the American people through their elected 
Representatives in Congress, subject to the appropriations 
process, this agency is it.
    And I will just say, as a final parting point, if any 
agency pronouncement, whether it is an interpretive rule, 
guidance, a blog post, a speech, or a press release creates new 
legal duties, then it must do so within clearly-delegated 
authority from Congress, subject to the West Virginia decision. 
And it must comply with the Administrative Procedure Act, and 
notice-and-comment rulemaking. Otherwise, it is not 
constitutional, and it is a violation of basic administrative 
due process fairness.
    So with that, we want to make sure that the CFPB changes 
its behavior in compliance with the law.
    The Chair notes that some Members may have additional 
questions for this panel, 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 these witnesses and to place their 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 now adjourned.
    [Whereupon, at 12:25 p.m., the hearing was adjourned.]

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