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


                       THE SEMI-ANNUAL REPORT OF
                         THE BUREAU OF CONSUMER
                          FINANCIAL PROTECTION

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION
                               __________

                           NOVEMBER 29, 2023
                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 118-59
                           
                           
                  [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
                  
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
55-098 PDF                 WASHINGTON : 2024                   
                  

                 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, Vice          EMANUEL CLEAVER, Missouri
    Chairman                         JIM A. HIMES, Connecticut
TOM EMMER, Minnesota                 BILL FOSTER, Illinois
BARRY LOUDERMILK, Georgia            JOYCE BEATTY, Ohio
ALEXANDER X. MOONEY, West Virginia   JUAN VARGAS, California
WARREN DAVIDSON, Ohio                JOSH GOTTHEIMER, New Jersey
JOHN ROSE, Tennessee                 VICENTE GONZALEZ, Texas
BRYAN STEIL, Wisconsin               SEAN CASTEN, Illinois
WILLIAM TIMMONS, South Carolina      AYANNA PRESSLEY, Massachusetts
RALPH NORMAN, South Carolina         STEVEN HORSFORD, Nevada
DAN MEUSER, Pennsylvania             RASHIDA TLAIB, Michigan
SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
ANDREW GARBARINO, New York           SYLVIA GARCIA, Texas
YOUNG KIM, California                NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida               WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska                 BRITTANY PETTERSEN, Colorado
MIKE LAWLER, New York
ZACH NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDY OGLES, Tennessee

                     Matt Hoffmann, Staff Director

                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    November 29, 2023............................................     1
Appendix:
    November 29, 2023............................................    79

                               WITNESSES
                      Wednesday, November 29, 2023

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

                                APPENDIX

Prepared statements:
    Chopra, Hon. Rohit...........................................    80

              Additional Material Submitted for the Record

Barr, Hon. Andy:
    ``Federal Business Loan Data Collection Election Form''......    83
Fitzgerald, Hon. Scott:
    Written statement of the Consumer Bankers Association (CBA)..    84
Sessions, Hon. Pete:
    ``Remarks of CFPB Director Rohit Chopra at White House 
      Roundtable on Protecting Americans from Harmful Data Broker 
      Practices,'' dated August 15, 2023.........................    91
    Wall Street Journal editorial, ``The CFPB Targets an 
      Antiterror Tool,'' dated November 28, 2023.................    95
Chopra, Hon. Rohit:
    Written responses to questions for the record from 
      Representative Barr........................................   108
    Written responses to questions for the record from 
      Representative Casten......................................   163
    Written responses to questions for the record from 
      Representative Flood.......................................   160
    Written responses to questions for the record from 
      Representative Garbarino...................................   107
    Written responses to questions for the record from 
      Representative Gottheimer..................................   104
    Written responses to questions for the record from 
      Representative Hill........................................    98
    Written responses to questions for the record from 
      Representative Kim.........................................   133
    Written responses to questions for the record from 
      Representative Lawler......................................   101
    Written responses to questions for the record from 
      Representative Loudermilk..................................   167
    Written responses to questions for the record from 
      Representative Luetkemeyer.................................   166
    Written responses to questions for the record from 
      Representative Norman......................................   157
    Written responses to questions for the record from 
      Representative Nunn........................................   146
    Written responses to questions for the record from 
      Representative Ogles.......................................   171
    Written responses to questions for the record from 
      Representative Sherman.....................................   165
    Written responses to questions for the record from 
      Representative Steil.......................................   144
    Written responses to questions for the record from 
      Representative Timmons.....................................   142
    Written responses to questions for the record from 
      Representative Velazquez...................................   170
    Written responses to questions for the record from 
      Representative Wagner......................................   104
    Written responses to questions for the record from 
      Representative Nikema Williams.............................   155

 
                       THE SEMI-ANNUAL REPORT OF
                         THE BUREAU OF CONSUMER
                          FINANCIAL PROTECTION

                              ----------                              


                      Wednesday, November 29, 2023

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:06 a.m., in 
room 2128, Rayburn House Office Building, Hon. Patrick McHenry 
[chairman of the committee] presiding.
    Members present: Representatives McHenry, Lucas, Sessions, 
Posey, Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, 
Hill, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons, 
Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood, 
Lawler, Nunn, De La Cruz, Houchin; Waters, Velazquez, Sherman, 
Scott, Lynch, Green, Cleaver, Foster, Beatty, Vargas, 
Gottheimer, Gonzalez, Casten, Pressley, Horsford, Tlaib, 
Torres, Garcia, Nickel, and Pettersen.
    Chairman McHenry. The Financial Services Committee will 
come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    Today's hearing is entitled, ``The Semi-Annual Report of 
the Bureau of Consumer Financial Protection.''
    I now recognize myself for 4 minutes for the purposes of an 
opening statement.
    Good morning. The public's trust in our financial 
regulators is shaken. Earlier this year, a Consumer Financial 
Protection Bureau (CFPB) employee made an unauthorized transfer 
of records containing personally identifiable information (PII) 
and confidential supervisory information. Director Chopra, your 
agency subsequently tried to downplay this major data breach.
    We recently found out that the Office of the Comptroller of 
the Currency (OCC) hired a fraud, who repeatedly lied about his 
workplace experience, to lead its Office of Financial 
Technology. The OCC also tried to sweep this incident under the 
rug.
    Finally, we are all aware of the allegations of widespread 
and entrenched workplace misconduct at the Federal Deposit 
Insurance Corporation (FDIC). These allegations directly 
implicate Chair Gruenberg and span his almost 20-year tenure as 
leader of the agency. Director Chopra, as CFPB Director, you 
have a seat on the FDIC Board, where you have made your 
presence known, from the ouster of former FDIC Chair 
McWilliams, to the March bank failures and the subsequent weeks 
of inaction thereafter. In other words, what the heck is going 
on at the FDIC?
    Director Chopra, this committee is interested in hearing 
what you knew about the allegations, when you knew it, and any 
actions you have taken to remedy this unacceptable situation. 
This string of scandals has left many, including myself, 
questioning whether these agencies are up to the task of 
protecting consumers and ensuring the safety and soundness of 
our financial system.
    When you are not dealing with internal mismanagement, the 
Biden Administration supposedly has independent financial 
regulators that are busy serving as political actors for the 
Administration. Director Chopra, your leadership is a glaring 
example of this alarming trend of becoming a hyper-partisan 
agency doing the bidding of the White House rather than 
protecting American consumers. That is much more about 
election-year politics than about what is right for consumers.
    The ongoing barrage of press releases from the CFPB is 
misleading at best. They too often paint with a broad brush to 
vilify entire sectors of the financial services industry and 
even the U.S. financial system as a whole rather than targeting 
independent bad actors. To make matters worse, when the Biden 
Administration doesn't have the authority or the votes in 
Congress to make a change, the CFPB, under your leadership, 
simply forges ahead and works unchecked. One need only look at 
your Small Business Data Collection rulemaking, Section 1071 of 
the Dodd-Frank Act, which goes well beyond the CFPB's statutory 
authority to require the collection and reporting of onerous 
amounts of information in an attempt to facilitate the naming 
and shaming of lenders whose business activities are 
unfavorable to progressive activists. That is why House 
Republicans will pass a resolution this week to protect small 
businesses' access to affordable credit by rescinding this 
burdensome and overly-complex rule.
    But I would like to close on an area where I believe we 
have found some agreement, which is a good thing, and that is 
on your work on the Section 1033 data privacy proposal. We have 
talked about this in private. To be clear, I think what you 
have proposed is far from perfect, but I believe there is 
common ground between your proposal and the Data Privacy Act 
that this committee passed earlier this year. We agree on the 
core of the issue, that Americans should have greater control 
over their sensitive financial data. Consumers should know 
where their data is going and how it is used, and should be 
able to terminate the collection of their data by certain 
firms. To ensure our data privacy policy is not subject to the 
whims of any Administration, I believe it is critical that we 
make law here, not just regulation, although your regulation is 
a good step.
    I hope we can work constructively on this issue moving 
forward so that Americans' financial data privacy is protected 
for the long term.
    With that, I yield back, and I recognize the ranking member 
of the committee, Ms. Waters, for 4 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. Good 
morning. I would like to welcome Director Rohit Chopra back to 
our committee and applaud the excellent work the CFPB has done 
under your leadership to protect our nation's consumers. I am 
also pleased that this coming Saturday, Director Chopra will 
join me in my district in Los Angeles for a town hall meeting 
with my constituents to discuss consumer protections and access 
to banking products and services. We will also hear from senior 
executives from Wells Fargo, PNC Bank, City National Bank, and 
local stakeholders.
    While the Senate is moving forward with a hearing featuring 
Big Bank CEOs next week, I am very disappointed that this 
committee is breaking with the tradition I established as 
chairwoman to hold the same hearing. Our Members deserve the 
same opportunity to conduct oversight of our nation's big 
banks. I hope the chairman will reconsider his decision and 
convene the CEOs for a hearing as soon as possible.
    Now, as the Solicitor General argued before the Supreme 
Court in October, the CFPB's funding structure is 
constitutional, and gutting the only agency dedicated to 
protecting our nation's consumers in the financial marketplace 
will harm our economy and communities. The lawsuit before the 
Supreme Court is a part of a broader extremist effort by House 
Republicans to undermine and defund critical government 
agencies and programs, even Social Security and Medicare. To be 
clear, every single court that has reviewed CFPB's funding has 
reaffirmed its validity, other than the extremist Fifth 
Circuit. Committee Democrats urge our nation's justices to 
stand with the 82 percent of Americans, including 77 percent of 
Republicans, who want the agency to continue doing its job.
    It is no mystery why the CFPB has such broad bipartisan 
support. It has cracked down on financial institutions that 
repeatedly engage in abusive practices, held lenders 
accountable for discriminating against borrowers, taken action 
to remove medical debt from credit reports, eliminated junk 
fees, increased access to capital for small businesses, 
particularly businesses of color, and more.
    Unfortunately, this week, House Republicans have launched 
an effort to harm small businesses and help the Big Banks 
continue to price gouge them by overturning the CFPB's Small 
Business Lending Rule, which implements Section 1071 of the 
Dodd-Frank Act, that I worked on with House Small Business 
Committee Ranking Member, Nydia Velazquez. This section 
requires lenders to collect and report data on small business 
lending similar to what they already do for mortgage lending. 
This would help reduce borrowing costs for small businesses by 
creating a more transparent, competitive marketplace, and 
combat discriminatory lending practices. I am disappointed that 
Republicans are moving forward with this anti-small business 
effort, and I would remind my colleagues that market 
transparency is a fundamental pillar of free market capitalism, 
and that is exactly what this rule is focused on.
    I look forward to hearing from Director Chopra about the 
importance of this rule and the other good work of the CFPB. I 
yield back.
    Chairman McHenry. The Chair now recognizes the gentleman 
from Kentucky, Mr. Barr, who is also the Chair of our 
Subcommittee on Financial Institutions and Monetary Policy.
    Mr. Barr. The CFPB is the most-unaccountable agency in the 
entire Federal bureaucracy, and it is not just about Director 
Chopra; it is the structure itself. But, Director Chopra, under 
your leadership, the agency has acted unilaterally and 
arbitrarily outside its statutory mandate, and we have seen 
time and time again, the Bureau, under you and your 
predecessors, pursue a lawless regulations-without-rules 
approach, and attempt to change the law without congressional 
authorization and without complying with the Administrative 
Procedure Act. This has not only led to a lack of 
accountability by the agency and a lack of accountability to 
the American people, but it has also harmed the very consumers 
that, sir, your agency is supposed to protect. Due to the 
CFPB's novel funding mechanism, Congress has no visibility into 
the agency, and Congress needs to regain its power of the 
purse, subject the Bureau to the congressional appropriations 
process, and rein in this regulator.
    And you may have noticed that Congress rejected an 
amendment to defund the agency. We just need to fund the agency 
the right way, the constitutional way, and that is through the 
power of the purse so that the agency becomes a professional 
nonpartisan regulator, not a partisan regulator that acts 
outside of the law. And we will bring light to this today. I 
yield back.
    Chairman McHenry. The gentleman yields back. The Chair now 
recognizes the ranking member of our Subcommittee on Financial 
Institutions and Monetary Policy, Mr. Foster, for 1 minute.
    Mr. Foster. Thank you, Mr. Chairman, and Director Chopra. 
Since we passed the Dodd-Frank Act that created the CFPB back 
in 2010, the CFPB has effectively fulfilled its mission to 
protect consumers from unfair, deceptive, and abusive practices 
in financial markets, despite coming under continual attack. 
And despite those attacks, the CFPB has continued its work, 
securing over $20 billion in relief for harmed consumers, over 
$4 billion in penalties for violations of the law, and millions 
of responses to consumer complaints, all while adapting its 
supervisory activities to a rapidly-changing financial sector, 
and the public understands that.
    As the ranking member pointed out, over 82 percent of 
Americans and 77 percent of Republicans support the mission of 
the CFPB. And as our financial system becomes more digitalized 
and complex, so do the scams and abuses and junk fees that 
threaten the life savings of the American people. So, I 
encourage you to stay vigilant to our new challenges, and thank 
you for joining us today. I yield back.
    Chairman McHenry. The gentleman yields back.
    Today, we welcome the testimony of the Honorable Rohit 
Chopra, Director of the Consumer Financial Protection Board--
Bureau, sorry. We wish it was a board. Director Chopra, thank 
you for being here. You will have 5 minutes for an oral 
presentation of your testimony, and without objection, your 
written statement will be made a part of the record. You are 
now recognized for 5 minutes.

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

    Mr. Chopra. Thank you, Mr. Chairman, Ranking Member Waters, 
and members of the committee. I appreciate you holding this 
hearing today. This is my 25th appearance before Congress in my 
career, and I am grateful to many of you on this committee, on 
both sides of the aisle, for taking the time to meet with me 
and provide advice to the CFPB on how to address the challenges 
and opportunities we must all tackle: protecting sensitive 
personal financial data; reducing credit reporting errors; 
preserving relationship banking; giving consumers more choice; 
and so much more.
    Since I was here in June, I am pleased to share that the 
CFPB has reached milestones on many of these issues, like 
accelerating open banking in the U.S. and protecting financial 
privacy, while continuing to enforce the law fairly and deliver 
results for consumers and law-abiding businesses. Today, I want 
to share some observations about household financial stability 
and highlight some progress on our areas of work.
    As we enter the holiday season after a sustained period of 
higher interest rates, the CFPB is sharpening its focus on the 
evolving patterns of household debt. And over the past few 
years, borrowing has accelerated across many key product 
segments. Americans now owe more than $17 trillion in household 
debt. Total outstanding credit card debt eclipsed $1 trillion 
last year for the first time since the CFPB began tracking it. 
Auto loans have grown quickly, to an estimated $1.6 trillion.
    The CFPB's analyses have found that rates and fees can 
contribute to persistent credit card debt for a growing number 
of consumers. Americans paid $130 billion in interest and fees 
on credit cards last year, while annual percentage rates rose 
far above the cost of offering credit. The CFPB is taking a 
number of steps to give consumers the ability to switch and 
take advantage of new offers.
    The return to repayment for Federal student loans continues 
to be an area that we are monitoring, particularly the effect 
on other loan obligations like auto, credit card, and others. 
Outstanding auto loan debt has grown, particularly given the 
higher cost of vehicles during the pandemic and higher interest 
rates. These payments are consuming a greater share of income 
for many consumers, and we are actively monitoring credit 
performance.
    Residential mortgage activity has unsurprisingly declined. 
The decline has been precipitous, while interest rates, fees, 
discount points, and other costs have increased. The result is 
that homebuyers have been paying much more. The CFPB is looking 
for ways to facilitate more refinancing activity, if and when 
prevailing mortgage interest rates subside, to ensure that 
borrowers who experience financial distress can navigate 
alternatives to foreclosure, and we are looking to streamline 
rules and procedures for servicers who are offering loan 
modifications.
    Since our Semiannual Report, the CFPB has proposed a rule, 
as the chairman mentioned, under Section 1033, to accelerate 
the shift to what is known as, ``open banking,'' in the United 
States. We have also initiated an early part of the process to 
improve accuracy in credit reporting, especially for data 
brokers. We are also taking steps to address very widespread 
inaccuracies on credit reports when it comes to medical bills.
    The CFPB's supervision and enforcement program is 
protecting both consumers and honest firms who must compete 
against those who egregiously violate the law. In the last 2 
years, we have obtained orders totaling $8 billion in victim 
redress and penalties. We are also tackling the junk fees that 
have been creeping across sectors of the economy and 
interfering with consumer choice.
    The CFPB has even shifted its supervisory resources toward 
many of the nonbanks due to the significant role that they play 
in financial services today. We have also proposed a rule to 
ensure that many of these large nonbank companies adhere to the 
same rules that banks, credit unions, and other financial 
institutions do.
    In August, our complaint database reached 4 million 
submissions, and I am proud of the CFPB's work in getting 
consumers the resolutions they deserve, often through referrals 
from local organizations, your offices, and many others.
    Again, Chairman McHenry, I want to thank you for the 
opportunity to appear before you today. We value all of your 
input, and I look forward to your questions.
    [The prepared statement of Director Chopra can be found on 
page 80 of the appendix.]
    Chairman McHenry. Thank you. I now recognize myself for 5 
minutes for questions.
    Director Chopra, as I mentioned in my opening statement, I 
think we have some alignment here on updating data privacy 
standards and your implementation of Section 1033. You noted 
the importance of empowering consumers to exercise their full 
data rights without being trapped by powerful incumbents and 
without losing control of their data. How does your proposal 
ensure that consumers can exercise full control over their 
financial data?
    Mr. Chopra. Pursuant to the statute, the rule requires that 
consumers are able to permission their sensitive personal 
financial data, and to prevent it being exploited by other 
actors, we have put in some safeguards to ensure that it is 
being permissioned only for the purpose of those financial 
services. I hope, Chairman McHenry, that you can legislate and 
figure out ways to address privacy more broadly. As you 
mentioned, this rule is just one piece, but I think a 
legislative framework on privacy would be hugely valuable.
    Chairman McHenry. Yes, and you allow for an opt-in 
provision. You ban the secondary use. There are some really 
smart things that you have approached this with, and you have 
taken input from a wide variety of people, correct?
    Mr. Chopra. Yes, and we looked at the discussions you all 
have had, especially where there is agreement. I really want 
this to be durable to last. I think it is important to restrict 
secondary use. You shouldn't be able to bait someone to get 
their sensitive data and then use it for a totally different 
purpose.
    Chairman McHenry. Is there a way for companies to use 
anonymized data that they have captured from consumers in order 
to build new products? Do you think that is a viable use?
    Mr. Chopra. That is a place where we are specifically 
looking for input. One of the challenges that we are dealing 
with in today's modern market is that re-identification is 
becoming easier to do, particularly with very advanced 
artificial intelligence. So, I think that is a challenge we are 
going to have to encounter and wrestle with through this 
process.
    Chairman McHenry. Okay. I look forward to continuing that 
conversation. Now, as I have asked other financial regulators, 
this summer, you announced that you have had discussions with 
the European Commission, and you, ``started a dialogue,'' on 
consumer financial protection issues. Under what authority are 
you taking those actions for those negotiations?
    Mr. Chopra. Just to be clear, I think many of the developed 
economies are seeing the growing role of China, Chinese 
technology firms, and financial data in the world. We are 
seeing that we have many issues in common when it comes to 
surveillance, and when it comes to payments. So this, just to 
be clear, is a meeting. One of my predecessors, Acting Director 
Mulvaney, launched an initiative to join a global financial 
innovation network. Again, we see this as a way to understand 
what other economies are doing, especially when it comes to----
    Chairman McHenry. Along those lines, they actually had 
public disclosures about those conversations--Director 
Kraninger, and Director Mulvaney. Do you intend to provide 
meeting minutes or any sort of public disclosure on what those 
conversations----
    Mr. Chopra. Yes. We will try and make sure that we provide 
transparency as to what is being discussed. I think the purpose 
of it, again, is, as we are seeing data being a growing factor, 
especially in financial services in the U.K. and Europe, all of 
us are dealing with new ways of fraud, especially generative AI 
fraud. So, we are really happy to do that.
    Chairman McHenry. But from our perspective, what we want to 
know is what you are doing in your job and whether or not our 
existing rules require disclosures for these international 
bodies? And I am asking you this specifically because your 
Bureau is doing this just like other financial regulators, and 
providing nothing in the way of disclosures around that other 
than to announce that you are having the conversations.
    Mr. Chopra. Okay.
    Chairman McHenry. We would like the transparency.
    Mr. Chopra. Okay.
    Chairman McHenry. Finally, digital assets. Under your 
proposed rulemaking, you interpret the word, ``funds,'' to 
include digital assets. Walk me through your thinking on that 
proposed rulemaking, but let's start with this: How many firms 
do you think you are touching with your notice of proposed 
rulemaking?
    Mr. Chopra. We put an estimate. We believe it is the 
largest tranche, and many of them are going to be known to you. 
These are large firms that have nonbank payment apps, 
essentially. I think with respect to the definition, we have 
seen a number of court decisions that have sought to interpret 
the meaning of, ``funds.''
    Mr. Chairman, we have taken a very judicious approach to 
this to essentially focus on what is really being used as a 
consumer payment, not other digital asset uses, especially in 
wholesale or trading or anything. We are really talking about a 
payment, and I know you all are thinking through stablecoins 
and payments. We really welcome the discussion on that as well.
    Chairman McHenry. Thank you. I now recognize the ranking 
member for 5 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman. Director 
Chopra, as I mentioned in my opening statement, more than a 
decade ago I worked closely with Congresswoman Velazquez to 
ensure that the Dodd-Frank Act included Section 1071 so that we 
could shine a bright light on the small business lending 
market. Unfortunately, we have seen time and time again how 
some small businesses and their borrowers, especially those 
that are minority-owned, women-owned, or in rural areas, have 
charged more than they should be charging, if their application 
was not denied in the first place.
    As you know, I have long been disappointed that the Section 
1071 rule took more than a decade to complete. Others were 
frustrated, too, including ReShonda Young, a Black woman who 
founded Popcorn Heaven, a small business selling gourmet 
popcorn in Waterloo, Iowa. In 2014, she joined others to 
successfully sue the CFPB during the Trump Administration to 
compel the agency to complete the rulemaking. Ms. Young 
explained that she was the victim of a discriminatory lending 
practice, saying, ``In several instances, there was just 
blatant discrimination, and in other cases, I found out about 
it later on, and it wasn't just me.''
    After the CFPB, then led by a Trump appointee, agreed to a 
court-supervised settlement to complete the rulemaking, Ms. 
Young said, ``I am just really humbled to be part of the 
process. Sometimes, we feel so small, and this is one of those 
things that shows that if we are willing to speak up, we 
actually can make a difference.'' Ms. Young has since sold her 
business and is now working with other investors to open the 
first Black-owned bank in Iowa, with the goal of being 
certified as a community development financial institution 
(CDFI) and offering small business loans in a more-equitable 
manner than she was served.
    Director Chopra, do you believe Congress should ignore 
entrepreneurs like Ms. Young and vote to rescind the CFPB's 
small business transparency rule? Specifically, who wins and 
who loses if the small business lending market continues to be 
opaque?
    Mr. Chopra. I think the pandemic showed how important small 
businesses were in our economy and to so many entrepreneurs who 
struggled to get loans. And I think it is important to have a 
small business loan market that is free of discriminatory 
practices. We have done this with mortgages, and I think 
Congress has told the CFPB, let's do this with small business.
    Ms. Waters. And, Director Chopra, would you also briefly 
discuss how the final rule minimizes the impact on community 
banks and credit unions?
    Mr. Chopra. We took a number of steps during the comment 
period to reduce many of the questions that are being asked. We 
took steps to extend when they would have to comply with it. We 
were under a court order. We completed our requirement under 
that court order in time. But our goal is to really make sure 
there is a lot of support to make sure that the smallest 
institutions can comply with this, and we also exempted a 
substantial number of them who do not make many small business 
loans.
    Ms. Waters. Director Chopra, the CFPB issued guidance in 
October to implement Section 1034(c) of Dodd-Frank, which 
generally prohibits large banks and credit unions from charging 
fees to provide basic account information to a consumer about 
their own account when they request it. Would you discuss the 
type of fees banks are charging consumers to access their own 
information and how you would expect this new guidance will 
help ensure financial institutions follow the law and do not 
impose these types of junk fees on consumers?
    Mr. Chopra. If we want consumers to be able to manage their 
financial lives, they need to be able to get the basic 
information about their accounts, and Congress made clear in 
the Act that large institutions cannot throw up big barriers or 
create obstacle courses for people to get that information. We 
have seen a number of fees that may be unreasonable. We have 
even seen a fake paper statement fee where they neither printed 
the statement nor mailed it. So, we are trying to make sure the 
law is being followed with fidelity.
    Ms. Waters. Thank you very much, Director Chopra. You are 
doing a fantastic job. I am so pleased that you are there 
heading the CFPB, and I yield back the balance of my time.
    Chairman McHenry. The gentleman from Arkansas, Mr. Hill, 
the Vice Chair of the committee, is now recognized for 5 
minutes.
    Mr. Hill. Thank you, Mr. Chairman. Director, it's good to 
have you back. I wanted to pick up on a couple of topics that 
we started on in June and follow up on Section 1033, and 
continue that conversation. And, of course, that rule is rooted 
in the statute of Dodd Frank, and I grant that, but we have had 
13 years to think about what the right direction is, and I want 
to see that we get it right the first time. We have had a 
couple of good discussions about that, but I want to continue 
that.
    When you testified in June, I asked you about the scope 
being considered for this proposal, which hasn't changed from 
the Small Business Regulatory Enforcement Fairness Act 
(SBREFA), Reg E, Reg Z, or the topic, and your focus on 
transaction data. But the proposal goes on, as it has now been 
released, and says supplemental rulemaking might come out for 
other covered persons and consumer financial products or 
services. We have had 13 years, and the agency has covered this 
and talked about it, and Congress has for 13 years. Why leave 
that open-ended perpetual rulemaking potential? What other 
covered persons and products or services besides Electronic 
Benefits Transfer (EBT) did the CFPB consider but ultimately 
decide against including in the proposal?
    Mr. Chopra. Yes. I like to follow in some ways the 80-20 
rule, which is, what can we get the most benefit for, and 
really start seeing it get moving, and what we found was that 
transaction data of your bank account or credit card was really 
going to power much of open banking in the U.S. And even, let's 
say, your auto loan or mortgage loan payment is often typically 
still reflected in your transaction account. So when it comes 
to mortgage, auto, and other places, that is a lot of other 
financial institutions, so we wanted to make sure we studied 
that a little bit more to see how much additional data it would 
actually provide.
    Mr. Hill. Okay.
    Mr. Chopra. But I appreciate what you are saying.
    Mr. Hill. Yes. The second issue that I raised in June, and 
you did not have an answer to, and now we have a proposal, is 
data breach liability. Where have you come ashore on who bears 
the liability for a data breach?
    Mr. Chopra. Generally speaking, when a consumer permissions 
their data, they are handing over their data to that new 
financial institution. We got some feedback that they wanted 
the rule to have some specific regulatory text on liability 
generally. I think one challenge is that we can't necessarily 
provide liability protection for every single law that exists. 
We are trying to figure out under which of our statutes can we 
make sure it is absolutely clear that it is the receiving 
institution that really is responsible for handling that data. 
And in the data-handling section of the rule, we do specify the 
requirements that the receiving firm would have.
    Mr. Hill. Right.
    Mr. Chopra. I don't know if we got it perfectly right. We 
definitely want to hear feedback on this.
    Mr. Hill. We will look at that, and we may follow up on 
that. Let me switch gears. In the last few days, you have 
issued a new rule, a large participants proposal by the agency, 
and it has new supervisory oversight over nonbanks offering 
digital payments and wallets. It is a pretty major step since 
you are really an enforcement agency, not a supervisory agency, 
I would say, principally. The proposal threshold for this 
supervisory oversight is based on the annual volume of consumer 
payment transactions, so I am not going to debate that, whether 
it is $1 million or $5 million. I am more curious about some 
clarity about who is covered. I assume that the six companies 
named in October orders are included: Amazon, Apple, Google, 
Meta, PayPal, and Square. Is that right?
    Mr. Chopra. Again, that is currently a proposal, and let me 
just share, Congressman Hill, we devote way more resources to 
supervision, and the rule we have proposed----
    Mr. Hill. You can send me a written answer to that. You can 
comment on that, but let's talk about this question.
    Mr. Chopra. Yes. No, I am trying to get to----
    Mr. Hill. Yes, but I want to get to it.
    Mr. Chopra. The top firms, what we have proposed is a 
threshold for which, if they are above that, they would be 
subject to supervision.
    Mr. Hill. Who is left, besides the ones that were named in 
October? Are big retailers covered on that?
    Mr. Chopra. Again, it is not always a matter of public 
record how many transactions or customers they have. What we 
are trying to do is get comments on the threshold, and we would 
then be able to determine who is above that. But if I were to 
speculate, and I am just speculating, the most popular nonbank 
payment apps would be covered.
    Mr. Hill. Okay. I look forward to following up with you on 
this.
    Mr. Chopra. Of course.
    Mr. Hill. Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman yields back. The 
gentlewoman from New York, Ms. Velazquez, is recognized for 5 
minutes.
    Ms. Velazquez. Thank you, Mr. Chairman, and Ranking Member 
Waters. Welcome to the committee, Director Chopra, it is really 
good to see you, and I just want to say that I really 
appreciate the CFPB's work protecting consumers, including 
servicemembers, older adults, and my constituents. And I want 
to join with Ranking Member Waters in our disappointment of the 
Republicans' attempt to overturn the Section 1071 rule. Let me 
state for the record that as the ranking member of the House 
Small Business Committee, I strongly support the Section 1071 
rule.
    Mr. Chopra, I was very pleased to see the joint statement 
on immigration status that the CFPB and the Department of 
Justice issued. Is this based on new information?
    Mr. Chopra. No. This is longstanding law from the Justice 
Department and the CFPB.
    Ms. Velazquez. To be clear, does the joint statement tell 
banks they have to make loans to immigrants?
    Mr. Chopra. No. At the CFPB, and the DOJ, we do not tell 
anyone to make a loan to a particular person.
    Ms. Velazquez. And can banks still consider an applicant's 
immigration status?
    Mr. Chopra. Yes. The guidance makes it very clear that a 
creditor may consider immigration status when making a lending 
decision.
    Ms. Velazquez. So, why did the CFPB issue this joint 
statement now?
    Mr. Chopra. It was clear, based on feedback from lenders, 
that there were court decisions and adjudications that raised 
some questions about the use of immigration status. We affirmed 
that you can use immigration status, but at the same time, we 
wanted to make sure that it was clear that national origin 
discrimination is completely prohibited.
    Ms. Velazquez. I want to thank you for issuing guidance. As 
the ranking member of the House Small Business Committee, I 
know that smaller institutions often cannot afford an army of 
lobbyists and big law firms, so more guidance is especially 
helpful for them. I also know that discrimination on the basis 
of race, national origin, or immigration status, unfortunately, 
is still very much present today, and I take it very seriously. 
I know what it is like to be judged by your name and 
stereotyped as a member of an ethnicity.
    I understand you recently took an enforcement action 
involving a blatant, intentional, egregious discrimination case 
against a population group that is prominently represented in 
New York City. As a proud member of the caucus that championed 
them, along with about 100 of my bipartisan colleagues, can you 
please tell me about Citi's discrimination against Armenian 
Americans?
    Mr. Chopra. We recently finalized an enforcement action 
that addressed intentional discrimination against Armenian 
Americans in Citibank's credit card business. They had a policy 
of essentially disqualifying anyone whose name has a suffix of, 
``Y-A-N,'' or, ``I-A-N.'' That is extremely common with 
Armenian Americans, and in many cases, Citibank provided false 
records about why those borrowers were denied and made up other 
reasons for it. And again, I think our guidance tries to make 
clear you can use immigration status, but you can't engage in 
national origin discrimination.
    Ms. Velazquez. Thank you. Mr. Chairman, I yield back.
    Chairman McHenry. The gentleman from Oklahoma, Mr. Lucas, 
is now recognized for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman, and Director Chopra. As 
you know, the House will vote this week on a Congressional 
Review Act resolution of disapproval to the CFPB's rule on 
small business lending, led by my colleague, Chairman Roger 
Williams. The Senate has already passed this resolution, which 
required a bipartisan vote, and while Congress is working to 
rescind the final rule, it seems this may be decided ultimately 
by the courts.
    In the meantime, I would like to focus on one aspect of the 
final rule on which I would appreciate clarification. The 
Paperwork Reduction Act requires agencies to determine the 
total paperwork burden by hours of major rulemakings. This 
measures the time required to generate and provide the 
requested information of the rule. CFPB estimated the total 
annual burden hours imposed by this final rule to be 8,302,000, 
which is the equivalent of 947 years. Director Chopra, would 
you discuss how the CFPB balances the compliance burden with 
the value of the paperwork being produced, because 8 million 
hours is a lot of time.
    Mr. Chopra. We try and analyze various ways to reduce the 
burden, and in the rule, we actually provided different 
flexibilities. They don't have to use a particular form, but in 
this case, Congressman, we were under a court order to complete 
the rule. It was a statutory mandate, so we knew we had to do 
it, and we tried to look at various ways that firms could be 
able to use industry associations to help them collect it. So, 
we always are looking at analyzing what kind of burden there is 
when thinking about how we ultimately implement it.
    Mr. Lucas. But broadly speaking, Director, how can the CFPB 
best maximize the utility and the quality of information 
received while minimizing, to the extent possible, the 
paperwork burden imposed on the American public?
    Mr. Chopra. We put a lot of thought into this, and I had a 
discussion with a few of you. One of the reasons why these 
rules can often create a lot of burden is when they are 
excessively complex. And I think, overall, we need to continue 
to shift to rules that are very bright line, that they are in 
or out, so that we can reduce the amount of overall kind of 
thinking about how to actually deal with it. In some cases, it 
is hard. Congress may specify certain aspects that need to be 
done, but we are looking at simplification wherever we can.
    Mr. Lucas. I am, by training, a director and an 
agricultural economist, and our main focus is on making sure 
that we have enough food and fiber to meet our needs in this 
country and in this world, and economics, by its nature, is, 
how do you allocate those finite resources and unlimited 
demands to maximize the return? Is there a volume of reporting 
that outweighs the cost, I guess is what I am asking? Just 
asking for every conceivable bit of information doesn't 
necessarily add to the quality of the result. Do you have 
economists, do you have people who work on those calculations 
as opposed to just, how much information can we squeeze out of 
people, but the value of it, again, the volume when it 
outweighs the cost?
    Mr. Chopra. Yes. We have an Office of Research where we 
have economists who help to look at all of this, and under the 
regulatory flexibility analysis that we are required to do, we 
talk through that. I will share, though, in terms of putting 
value on the benefits, it also can sometimes be hard to give a 
benefit and a number to not being illegally discriminated 
against or put in a loan that was unlawful. We try our best, 
and I won't say that it is always the easiest thing, but we put 
a lot of rigor into what we are doing.
    Mr. Lucas. We would suggest, Director, that with the vote 
in the United States Senate and the efforts of Chairman 
Williams here in the House, Congress is going to send a very 
clear signal to you about how to address these issues, and I 
hope that the agency will be responsive. But we shouldn't make 
the best job guarantee in the history of the world being a 
compliance officer at some financial institution, and that 
appears to be what we have done is provided job security for 
the folks who deal with these 8 million hours of paperwork, and 
I am not sure that adds to the quality of life of my 
constituents. And with that, I yield back, Mr. Chairman.
    Chairman McHenry. The gentleman yields back. The gentleman 
from California, Mr. Sherman, is now recognized for 5 minutes.
    Mr. Sherman. Mr. Director, I want to join with the ranking 
member and others in commending you for an outstanding job. You 
have dealt with 4 million consumer complaints, and returned 
$17.5 billion to consumers with just your rule on overdraft 
protection, saving consumers $5 billion. And that is just the 
tip of the iceberg because when you take action, you not only 
return money to wronged consumers, you deter bad practices 
through the whole industry so the consumers don't get ripped 
off in the first place. I want to commend your efforts on junk 
fees. Because of my focus on capital markets, I digress a 
little bit and mention that, unfortunately, the SEC is thinking 
of adding a junk fee to mutual fund investors or many of them, 
but that is not the focus of this hearing.
    I also want to say that I am relatively confident the 
Supreme Court will uphold your structure. It is so necessary to 
make sure that you have the independence you need to do the 
good work that you have been doing. I am also pleased that you 
issued proposed rules dealing with Property Assessed Clean 
Energy (PACE) loans. These loans seem to have perhaps a well-
intentioned purpose but are used by those who are predatory. My 
home State of California took action in 2017. Your rule builds 
on that work in California, providing not only the Truth in 
Lending Act protection, but especially those ability to repay 
determinations. Can I count on you not to weaken the rule as we 
get from proposed to final?
    Mr. Chopra. Yes. It is currently under process, but let me 
just say the ability to pay rules are very, very important to 
make sure that rulemaking meets its intended purposes. I 
completely share your view that there are a lot of well-
intentioned elements of PACE lending, but it can also lead to a 
lot of abuse.
    Mr. Sherman. We have these debt settlement companies that 
claim that they will have you pay off your debt without having 
to pay the amount you owe. Your website says that dealing with 
these companies can be risky. Some of these companies are 
discouraging consumers from making payments, causing them to 
default, and even encouraging them to take on additional debt. 
What can you do about those who are advising people not to pay 
what they owe and to even incur more debt they can't afford to 
repay?
    Mr. Chopra. Certainly, we have seen a number of issues 
where consumers are seeking help, but, instead, they become 
worse off. We recently finalized an order--we went to court to 
get it--against one of the largest debt repair conglomerates 
and obtained a judgment close to $3 billion. So, we continue to 
try and monitor what are the vectors in which people are being 
defrauded. We understand that there may be an uptick soon 
because TikTok will be allowing more ads on this business, so 
we are very much monitoring the situation.
    Mr. Sherman. Just another reason to be wary of TikTok. We 
have a real concern about Know Your Customer/Anti-Money 
Laundering (KYC/AML), with 1.1 million reports of identity 
theft. There is a thing called the credit header data, which is 
just the name and address and Social Security number, nothing 
else in the credit report. These are being used by financial 
institutions in order to verify identity and to prevent 
identity theft and to comply with the Know Your Customer laws. 
There is some discussion in your agency to qualify just this 
name, address, Social Security report as a consumer report. 
Will this adversely affect the ability to prevent identity 
theft and compliance with Know Your Customer laws?
    Mr. Chopra. No, I appreciate the question, and we have not 
proposed anything on this. We do not want to do anything that 
would jeopardize a financial institution's ability to really 
crack down on identity theft. I think certainly, though, we 
know that this data is being used outside of financial 
institutions, including to steal people's identity. So, I think 
that is what we are looking at with respect to data brokers and 
how we might handle some of this, but, again, we have not 
proposed anything on this front.
    Mr. Sherman. And finally, I hope you will make sure that 
you have protection for privacy as you move forward with these 
Section 1071 rules. I yield back.
    Chairman McHenry. The gentleman's time has expired. We will 
now go to the gentleman from Texas, Mr. Sessions, for 5 
minutes.
    Mr. Sessions. Mr. Chairman, thank you very much. Director 
Chopra, it's good to see you. I must applaud you for your 
glibness and your ability to effectively take questions from 
both sides of this committee and to respectfully offer back 
your viewpoint. I want to offer that to you, because I 
appreciate your forthrightness.
    Mr. Chopra. I appreciate that.
    Mr. Sessions. Mr. Director, as you know, The Wall Street 
Journal yesterday or the day before put an article out, ``The 
CFPB Targets an Antiterror Tool,'' and, essentially, it is 
talking about selling credit header data to law enforcement. 
But also, they had written another article, and been more 
specific also about credit information that would be available 
about what might be criminal history, that people who are going 
to lend money would have that opportunity to buy this data and 
information as they chose at the time they are going to give 
someone money, offer a loan. If you could please address both 
of those circumstances, because it seems like you are on the 
wrong side, at least in my opinion, of this issue.
    Mr. Chopra. Yes. And to be clear, we have not proposed 
anything. We are a law enforcement agency as well. We need to 
be able to identify bad actors. It has been nearly 4 years 
since then-Attorney General Barr indicted three members of the 
Chinese Communist Party's (CCP's) People's Liberation Army 
(PLA) with respect to Equifax. There is no question that 
sensitive data about each of us cannot just be used to steal 
identities, but also for use by state and nonstate actors. I 
think we want to make sure that data is being used in ways that 
is appropriate here in the United States. There is not an 
effort to stop law enforcement or, as Congressman Sherman 
mentioned, to help financial institutions detect money 
launderers, but we also need to think----
    Mr. Sessions. How about other criminal history?
    Mr. Chopra. On criminal history, I actually haven't heard a 
reference to anything we have been doing on criminal history. 
Generally speaking, for any sort of background report, 
including a credit report, a tenant screening report, or an 
employment background check, the only requirement that 
currently exists right now is that that data be accurate. If it 
is a consumer reporting agency, there are rights to dispute. I 
am happy to talk about it with you separately, but I am not 
familiar with the restrictions.
    Mr. Sessions. Good. I will just do it right here. I am 
going to ask unanimous consent to put into the record, Mr. 
Chairman, two articles: number one, ``The CFPB Targets an 
Antiterror Tool,'' that appeared in The Wall Street Journal; 
and number two, ``Remarks of CFPB Director Rohit Chopra at 
White House Roundtable on Protecting Americans from Harmful 
Data Broker Practices'' from the CFPB website on August 15, 
2023.
    Chairman McHenry. Without objection, it is so ordered.
    Mr. Sessions. Thank you very much, Mr. Chairman.
    Director, I think that the reason why we get specific about 
these items on both sides of the aisle is that we find that 
there is happy-talk conversation between us, and then something 
different appears, as in what might be the 1071 debacle that 
our colleague, my baseball coach, Roger Williams, Chair of the 
House Small Business Committee, headed up yesterday at the 
Rules Committee. Great discussion, great dialogue, but we are 
going to vote on it today. It received five Democratic votes in 
the United States Senate, I think, earlier in October.
    My point is that I would like to have, and I think you have 
offered this to me, a conversation about these pending matters. 
And while I do say that you offered that to me--sometimes in 
our haste, we do it here--but I would like to have a 
conversation about this because I think it would be in 
everyone's best interest, including the CFPB, that we see these 
rollouts of ideas closer to the same way.
    Mr. Chopra. I want to do that, and I think the chairman 
also mentioned this also relates to privacy, the Fourth 
Amendment. There are all sorts of issues. It's always the best 
thing when you can legislate on it----
    Mr. Sessions. Yes.
    Mr. Chopra. We are very happy to do that because the truth 
is, once you legislate on it, it is----
    Mr. Sessions. The Fourth Amendment is about privacy, but it 
is also about somebody not taking your data and information----
    Mr. Chopra. That is correct.
    Mr. Sessions. ----without a court order.
    Chairman McHenry. The gentleman's time has expired.
    Mr. Sessions. Thank you very much, Mr. Director. Thank you, 
Mr. Chairman.
    Chairman McHenry. The gentleman from Georgia, Mr. Scott, is 
now recognized for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman. Director Chopra, I want 
to begin by expressing my strong support to you and to your 
staff at the CFPB for ensuring that Americans' data is accurate 
and secure. You are doing a great job.
    In March of this year, the CFPB issued a request for 
information (RFI) on data broker practices, and you asked for 
information about how this market works and what consumers' 
experiences are with the data brokers. And I understand you 
received over 7,000 comments, and, overwhelmingly, comments 
from consumers expressed frustration with the lack of control 
over who has access to their data, who uses their data, and who 
is sharing their data, and comments over the difficulty 
consumers have with opting out of having their data shared. 
Even when they can identify data brokers, concerns were also 
raised that data broker practices result in large amounts of 
unwanted spam, marketing calls, emails, and, worst of all, 
leave people vulnerable to identity theft and data breaches.
    I know there has been some confusion about the Bureau's 
work in relationship to data brokers from some of my Republican 
friends. Can you explain how the comments received in the 
requests for information is going forward?
    Mr. Chopra. I appreciate that, and let me just say that I 
think it is becoming increasingly scary about the types of 
dossiers about us online--geolocation, religious attendance--
very sensitive data being compiled and often sold. The Fair 
Credit Reporting Act (FCRA) is our core statute for ensuring 
that those dossiers have some degree of transparency, that they 
are accurate, and that people can dispute it.
    So, we are trying to figure out what is the right way to 
make sure in the modern data broker industry that there is some 
evenhanded consumer protection. We have a lot of firms who 
follow that clearly. And we want to make sure that we are 
providing the appropriate clarity so we don't have an out-of-
control system. And I will share that a lot of these are being 
used and purchased by people overseas, and it is a huge vector 
for stealing identities and scamming people.
    Mr. Scott. Let me ask you this question that is important 
to all of us, and that is, we are all concerned about the 
extent to which data brokers are collecting and selling 
children's data--which is a big thing going on--and allowing 
the children's data to be used for marketing, targeting, and 
worse. One recent study found that 67 percent of phone 
applications used by very young children collected highly-
sensitive data and then transmitted this data to third parties. 
Tell us about this?
    Mr. Chopra. Many years ago, Congress passed the Children's 
Online Privacy Protection Act (COPPA), and with the advent of 
more data brokers, I think kids and seniors are going to be 
very important for us to think about as to how we safeguard 
their sensitive data. There is work on this committee that I 
think you can all do. We are happy to really work with you to 
figure out what are all the solutions we can get, because 
collecting all of this kids' data, too, when they are an adult 
can just be another way to defraud people.
    Mr. Scott. We really have to look out for our young people, 
our future generations, and make sure they are educated 
properly and that their interests are protected when it comes 
to this new technology. Thank you, Mr. Chairman.
    Chairman McHenry. The gentleman from Florida, Mr. Posey, is 
now recognized for 5 minutes.
    Mr. Posey. Thank you very much, Mr. Chairman. Many of the 
omnipresent defenders of the nonexistent problems of the people 
talk about all the junk fees you have eliminated. So, would you 
tell us what a junk fee is?
    Mr. Chopra. Junk fees are ones that are typically not 
subject to the competitive process. You have to click through 
the screen. You find them at the end. Sometimes, they are for a 
service that doesn't even really exist. Sometimes, they are 
just completely hidden and random, so there are lots of 
different ones. We have really tried to focus----
    Mr. Posey. Okay. Can you give me a couple of examples of 
those?
    Mr. Chopra. For example, I mentioned to one of your 
colleagues that we identified in one of our examinations and 
similar other places a paper statement fee that was charged on 
a recurring basis where the financial institution did not even 
print out a piece of paper, nor did they mail it.
    Mr. Posey. Yes. That just sounds like a fraud. Is there a 
statutory definition? Have you put in the statute somewhere a 
definition of a, ``junk fee,'' so we know exactly what we are 
talking about?
    Mr. Chopra. No, but we have tried to really articulate 
through the various laws that we enforce where certain fees may 
not be permitted under existing law.
    Mr. Posey. Don't you think you should articulate those more 
clearly or put them in writing so everyone knows what it really 
is?
    Mr. Chopra. We are trying to. We are trying to take the 
feedback of where we should be issuing guidance on this. 
Overall, I would say the market has really moved in many ways 
and is being more clear about how fees are being assessed. That 
is very, very good progress. But inasmuch that there are 
particular places you think we need to issue more guidance, we 
are very, very open to it. We have published some information 
where we give examples of what we have uncovered in enforcement 
and exams, that in some ways have been pretty egregious 
violations.
    Mr. Posey. How do you assess the impact of your regulations 
on the cost of access to credit?
    Mr. Chopra. Big picture or as it relates to fees or----
    Mr. Posey. Big picture.
    Mr. Chopra. Big picture, I think, as I mentioned to your 
colleague, we try and really look and have fidelity to the 
competitive market. We really want people to be able to compete 
for business and that it is clear the product they are getting 
and the price they are getting.
    Mr. Posey. Does that involve assessing the cumulative 
impact on the entire system of regulations?
    Mr. Chopra. Yes. One of the places of feedback that, in all 
my meetings with industry and that you all have given, is we 
all need to be thinking about all of the issues together. The 
CFPB is not the only one----
    Mr. Posey. Would you describe your process for considering 
the cumulative impact of your regulations on the access to 
credit?
    Mr. Chopra. We have a requirement under the statute, I 
believe it is the Regulatory Flexibility Act (RFA). We have to 
conduct an analysis about the impact of regulations and, of 
course, we have to look at that in the context of other ones 
that are current or are being implemented. In our proposed 
rules, we tend to outline that, and we include some data and 
estimates. We get comments on it and try and be able to refine 
based on that input.
    Mr. Posey. How do you use your cost-benefit analysis? Do 
you do cost-benefit analysis if any of your regulations rise to 
that level?
    Mr. Chopra. Sorry. I just couldn't hear a little bit.
    Mr. Posey. I said, have you done any cost-benefit analyses? 
Have any of your regulations risen to that level?
    Mr. Chopra. Risen to that level?
    Mr. Posey. Yes, the standard. The government says you can 
write a ridiculous rule, but if it doesn't harm people to the 
tune of over $100 million----
    Mr. Chopra. Right. The path we follow is really what is 
spelled out in the statute. As I mentioned, in the proposed 
rule, we have to spell out the cost. We articulate what the 
benefits are, and we follow exactly what is in the statute. We 
even collect comments on the analysis as well.
    Mr. Posey. Thank you, Mr. Chairman. I yield back.
    Chairman McHenry. The gentleman yields back. The gentleman 
from Illinois, Mr. Foster, is now recognized for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman, and Director Chopra. I 
was very encouraged to hear my Republican colleagues' support 
for your mission, and that they agree with roughly 80 percent 
of Americans that you are doing something useful here, and I 
find that especially reassuring in light of the fact that 
earlier this month, Republicans voted 140-78 to completely 
defund the CFPB. I will just leave that there.
    However, we have also heard a lot about the number of hours 
that have to be spent on compliance as a real cost here. Do you 
also track the number of hours that consumers lose, for 
example, through ID fraud when they have to spend all afternoon 
on hold replacing all of their credit cards?
    Mr. Chopra. It can be very hard, but we know there have 
been some reports that show the enormous amount of cost to 
consumers, not even counting their time, of dealing with 
identity theft, credit reporting errors, going back and forth 
about inaccuracies. It is an enormous amount of time.
    Mr. Foster. That is right, but quantifying it in the number 
of hours, if you could make an attempt to quantify the number 
of consumer hours that are sort of on the other side of the 
scale here, that would be----
    Mr. Chopra. We do know that there are millions of disputes 
filed on credit reporting-related issues which does involve a 
multi-step process.
    Mr. Foster. Right, so you multiply that by the average time 
the consumer wastes with a mistake on their credit file. We 
have to balance everything, and that is an important weight to 
put on the other side. I have been really encouraged to see 
that you have raised the alarm over artificial intelligence 
(AI) and where that is taking the whole thing. The leading edge 
of this is probably AI-enabled deepfake impersonations, which 
is going to have to result in our really raising the bar on 
secure digital identity and proving you are who you say you 
are. Where do you see that going and the role of----
    Mr. Chopra. Let me just say that I strongly support any 
efforts you all can make when it comes to getting better 
digital identity verification. The amount that we would save 
businesses and consumers in fraud would be enormous. I don't 
know how to do it necessarily, but using just publicly-
available information about someone to authenticate, and when 
we add in generative AI, we do have firms that allow you to 
authenticate into their system with your voice. You as public 
officials, it is becoming very easy to clone all of your voices 
because once it is in the public domain, there is a data set to 
be able to duplicate it. So, we have to make sure that we are 
not opening up even more fraud with some of this.
    Mr. Foster. Yes. In your conversations with other countries 
that have been sort of looked at skeptically at this hearing, 
have you taken a look at how they are dealing with it, because 
some countries are doing a much better job, frankly, of a 
secure, safe, privacy-preserving digital identity? And they did 
not, for example, have hundreds of billions of dollars for 
COVID benefit identity fraud, and it is a real decrease in the 
amount of what the fraudsters can get away with to have a 
secured digital ID.
    Mr. Chopra. A stronger digital authentication layer would 
have so many benefits, including other obligations that banks 
have. It could reduce their cost on anti-money laundering 
detection and really, overall, in our commercial economy.
    Mr. Foster. Yes. McKinsey has estimated, I think, between 2 
and 3 percent GDP loss from not having a high-quality digital 
identity. Other countries are doing a better job, so I think 
that is an area where you should pay attention to other 
countries.
    Okay. Now, there are other aspects of artificial 
intelligence that are going to be huge. During the last years 
when I was chairing the AI Task Force that we had set up on 
this committee, we were wrestling with sort of bias-type 
problems that happen when you just take a credit history and 
you put it into a neural net that is incomprehensible, and out 
comes an answer. And we are now going to be facing really even 
more complex ones where the next generation of AIs learn from 
their experience.
    Mr. Chopra. Yes.
    Mr. Foster. So, it is like a child. You raise your child 
perfectly, you make sure it is behaving properly, then you send 
it off into the world with no guarantee that it won't come in 
contact with things that make it become evil. How do you view 
the increased surveillance you are going to need on AI after it 
has been released in the wild?
    Mr. Chopra. Yes. I think there are a lot of questions you 
all have to answer. We have taken the view that it is important 
that existing law not be sidestepped on this, because at the 
end of the day, if there is generative AI making 
representations, communicating with consumers, that has to be 
truthful. When it comes to all sorts of uses, the existing law 
still applies, but there is a lot we have to do on this.
    Mr. Foster. Yes. When you figure it out, please let me 
know.
    Mr. Chopra. Yes.
    Mr. Foster. I yield back.
    Chairman McHenry. The gentleman from Missouri, Mr. 
Luetkemeyer, is now recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. My good friend, 
Mr. Williams, often starts some of the discussions by asking 
whether you are a capitalist or a socialist.
    Mr. Chopra. As I mentioned, I think I have appeared before 
Congress 25 times and have mentioned every time that I am very 
much a capitalist.
    Mr. Luetkemeyer. I appreciate that, but I was curious--I 
would assume that you believe the banking industry should be a 
for-profit industry?
    Mr. Chopra. Yes, and I think the banking industry is just 
as essential as our communications infrastructure, and as our 
electric grid.
    Mr. Luetkemeyer. Mr. Chopra, your actions are completely 
different, though, than what you say. During your tenure at the 
Bureau, the Administration has spoken of or taken actions on 
banks' operating expenses, the fees institutions can charge, 
interest rate caps on credit, increased capital requirements, 
and, of course, interchange fees, and contracts between private 
entities, just to name a few. You even sought to increase your 
control over the credit reporting agencies and, therefore, who 
can get a loan.
    Taken together, we are looking at massive losses of 
revenue, and loan and other credit losses, as well as very 
large additional costs of compliance. All of this results in 
higher costs and fewer banking services for customers and fewer 
financial institutions to provide those services, all the while 
giving the government more control over our personal finances. 
And it begs the question, at what point can we just publicly 
recognize that you and the Administration believe that 
financial services should be a utility provided to the public 
by the government?
    Mr. Chopra. Nothing we have said has suggested that. We 
want a lot of competing financial firms----
    Mr. Luetkemeyer. Mr. Chopra, you say----
    Mr. Chopra. And if you look at the profitability of the----
    Mr. Luetkemeyer. Excuse me.
    Mr. Chopra. Do you mind if finish this? If you look at the 
profitability of the finance industry, we have actually seen a 
way in which they have been able to be robust and create new 
products and new revenue streams.
    Mr. Luetkemeyer. Director Chopra, what is happening is that 
the regulation is running downhill and choking the small 
institutions. You sit on the FDIC Board, do you not?
    Mr. Chopra. I do.
    Mr. Luetkemeyer. You see the mergers and the continued 
consolidation of the industry, do you not?
    Mr. Chopra. We do see it. We do review merger applications.
    Mr. Luetkemeyer. I just had a meeting this morning with Fed 
Chairman Powell. He talked about the consolidation. It is 
there. It begs the question then, if you see this, what are you 
doing about it?
    Mr. Chopra. We should have a discussion actually about 
consolidation, because there are a few places where I think it 
has driven, and one of the ways some institutions get preferred 
cost of funding advantages because of perceptions about that.
    Mr. Luetkemeyer. Okay. So, you recognize the problem. Have 
you taken any actions whatsoever to relieve the regulatory 
burden on small banks?
    Mr. Chopra. One of the things we have done is we have tried 
to make sure we are making our supervision fit for the actual 
risks. We have shifted much of our supervisory resources to 
larger players----
    Mr. Luetkemeyer. Okay. You sit on the Financial Stability 
Oversight Council (FSOC), too, do you not?
    Mr. Chopra. I do.
    Mr. Luetkemeyer. Basel III is coming along. That is a 
detriment to all of the small businesses, small banks, and 
everybody else. It is going to hugely increase the costs. Can 
we get your support of trying to minimize the impact of that 
regulation on small banks?
    Mr. Chopra. Just to be clear, as I understand it, the rule 
that the agencies have proposed applies to banks with $100 
billion or more in assets.
    Mr. Luetkemeyer. Director, I just got done talking to some 
banks, and they were telling me the regulators are saying, 
look, we know it starts at $100 billion and up, but get ready, 
it is going to roll downhill. The banks are looking at it from 
the standpoint that if they don't comply with it, there is a 
wink and a nod going on here with the regulators that we have 
to be able to live with as well. And what happens is you are 
chasing consumers away from banks because banks are 
constricting services to the online lenders, offshore stuff 
where it is not regulated.
    I want to quickly get to one more question I have here for 
you with regards to a letter that I sent to you and the 
Department of Justice with regards to warning the creditors 
that unnecessary and overboard consideration of credit 
applicants' permanent residency status could violate the Equal 
Credit Opportunity Act (ECOA), despite consideration that the 
criteria being expressly permitted under ECOA's Regulation B. 
And I am concerned that by what you are doing, you are adding a 
lot of confusion to the situation here. I know you addressed 
some of this a while ago, but I am very concerned about the 
confusion here. We haven't gotten a response to our letter yet, 
and, to me, it looks like you are in direct violation of the 
Know Your Customer law. Can you explain your position on that, 
so it is not in violation, and there is no confusion for the--
--
    Mr. Chopra. Mr. Chairman, may I answer this? I am out of 
time, but----
    Mr. Luetkemeyer. You have 4 seconds.
    Mr. Chopra. Yes. May I answer?
    Chairman McHenry. You did for everybody else. Go for it.
    Mr. Chopra. Okay. I was going to say that, of course, the 
Know Your Customer (KYC) requirements absolutely are the 
initial part of the process.
    Mr. Luetkemeyer. It is the law.
    Mr. Chopra. The Bank Secrecy Act (BSA) requires, for a non-
U.S. person, to collect certain documentation. There should be 
nothing that is in conflict of it. The guidance that was issued 
explicitly allows the consideration of immigration status, but 
I take your point if there is confusion, and we will respond to 
your----
    Mr. Luetkemeyer. If there is confusion, the law should take 
precedence, which is KYC, not your joint----
    Mr. Chopra. Oh, KYC, of course, has to be----
    Chairman McHenry. And you will respond for the record.
    Mr. Luetkemeyer. Thank you. I yield back.
    Chairman McHenry. We will now go to the gentlewoman from 
Ohio, Mrs. Beatty.
    Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member 
Waters. And good morning and thank you, Director Chopra, for 
being here, and thank you for taking your time to testify today 
and for all the work that you do at the CFPB to protect our 
consumers. And let me join others in thanking you for traveling 
and listening, attending town halls, and going far beyond, and 
certainly, I have benefited from that. I'm very proud that a 
few months ago, you were in my district in Columbus, Ohio, 
meeting with consumers, and small business owners, and not only 
did you come, you stayed and I think almost missed your flight 
to answer all of those questions. And I really appreciate that 
because we had a very productive roundtable, and I appreciate 
you taking your work so seriously.
    I am going to try to get through two questions quickly. 
Director, we know that the CFPB's recently-proposed Section 
1033 rulemaking invites public input on the question of whether 
the rule should cover EBT accounts. And certainly, as you are 
no doubt aware, and more so for some of my colleagues and the 
public, EBT account holders, Americans who rely on programs 
like the Supplemental Nutrition Assistance Program (SNAP) to 
put food on their tables each month, constantly struggle with 
access to their account information electronically in a 
marketplace that is highly uncompetitive. My understanding is 
that the Section 1033 rule aims to improve competition and 
ensure consumers have reliable access to their own financial 
data. Given these goals, it seems to me that it is critically 
important that financially at-risk consumers and their EBT 
accounts be included.
    In addition, the proposed rule gives accountholders 
legally-enforceable rights to access their data and creates 
new, strong protections for data covered under the proposal. 
Now, we have seen a massive increase in theft from EBT 
accounts, and increased data access could help EBT 
accountholders detect and report fraud. I know that is a lot.
    Here's the question: Shouldn't the CFPB use this 
opportunity to give financially-vulnerable customers control 
over their financial data so they can protect themselves?
    Mr. Chopra. Let me just say I totally agree that those who 
are receiving EBT benefits and the transaction data they have, 
that is very valuable. We are collecting comments on that. I 
will share with you, and maybe we can talk offline--we are 
trying to figure out with the USDA and State and local 
governments, who really are the issuers of this, how it would 
work because there is a slightly different way compared to bank 
accounts. But we are trying to work through it, and it has 
opened up some other issues about, do EBT recipients have 
access to even knowing their balance? So, there are a whole 
bunch of things that I want to look at there.
    Mrs. Beatty. Okay. Maybe we can talk offline on that. Let 
me kind of switch topics here and now go to the Section 1071 
small business lending rulemaking. For decades before coming to 
Congress, I was a very successful small business owner, and I 
know we have colleagues on both sides of the aisle who will 
always say, ``I am a small business owner.'' I think it is 
critical to have a small business lending transparency rule 
that will help root out discrimination and ensure that small 
businesses have access to credit, especially those that are 
owned by females, women like myself, or people of color. And I 
believe that some of my colleagues on the other side of the 
aisle who claim to be advocates for small businesses, claim 
that this rule is too onerous for small lenders and are 
advancing legislation to actually rescind this. I want to give 
you my last minute to explain to us what provisions have been 
built into the rule to accommodate small lenders, and to set 
the record straight on how onerous the reporting requirements 
are. Tell us about the resources to make us a little more 
comfortable?
    Mr. Chopra. Based on the comments we received, we increased 
the threshold pretty substantially. It exempts a number of 
small lenders. We reduced some of the collection requirements. 
We are providing support and implementation guidance on how to 
make it work. We are giving smaller lenders much more time to 
comply. We are starting with the very largest banks. We really 
did our best to implement this law with fidelity, and I hope 
that we can really see the benefits of it over time.
    Mrs. Beatty. I know my time is up, but let me just say some 
of those questions came from Democrat and Republican small 
business owners. Thank you, and I yield back.
    Chairman McHenry. The gentlewoman from Missouri, Mrs. 
Wagner, is now recognized.
    Mrs. Wagner. Thank you, Mr. Chairman. Director Chopra, the 
CFPB's credit card late fees proposed rule attempts to help a 
small number of credit card customers at the expense of a vast 
majority of others. Cardholders who never pay late, which the 
CFPB's own data and report indicates is 74 percent of all 
Americans with credit cards, will not benefit from the reduced 
fees, and according to the proposed rule, they could 
experience, ``higher maintenance fees and lower rewards.'' The 
Dodd-Frank Act requires the CFPB to consider the cost of its 
rules. How does a rule that, by the CFPB's own admission, would 
help only a small number of consumers while increasing costs 
for cardholders across-the-board, survive a cost-benefit 
analysis?
    Mr. Chopra. Respectfully, I think the analysis suggests a 
number of different permutations, but in the Credit Card 
Accountability Responsibility and Disclosure Act of 2009 (CARD 
Act), there is a statutory prohibition on fees that are not 
reasonable and proportional. What we are doing is we are 
evaluating the Federal Reserve's----
    Mrs. Wagner. Did you do a cost-benefit analysis?
    Mr. Chopra. Just if I could, we are evaluating the first 12 
years of that rule, and what we are trying to do is to make 
sure that those firms are able to recover their costs, are able 
to really collect the fees they can, but not necessarily----
    Mrs. Wagner. Why should responsible cardholders, who pay 
their bills on time and typically never pay late fees, be 
forced to subsidize frequent late payers?
    Mr. Chopra. If you look at actually the profit and revenue 
models of the card issuers, I don't think you will see that 
subsidy occur.
    Mrs. Wagner. It absolutely does by virtue of the rule. 
Director Chopra, if this credit card late fee----
    Mr. Chopra. No. Actually, I would just respectfully say 
that----
    Mrs. Wagner. It is my time, respectfully. Director Chopra, 
if this credit card late fee proposal goes into effect, costs 
for consumers will increase, not because card issuers want to 
increase costs, but because they are required to do so. The 
prudential regulators require banks to manage and offset their 
credit risks, which banks would be required to do by taking 
actions such as raising APRs, eliminating rewards, reducing the 
amount of credit extended, or even restricting to whom it is 
extended. How has the CFPB accounted for actions that credit 
card issuers will be forced to take to properly manage credit 
risk and other prudential regulatory requirements?
    Mr. Chopra. This is a good question. With respect to the 
proposed rule on late fees, we do know that credit card issuers 
engage in risk-based pricing. That is the vast majority of the 
market. In other words, they develop a price that is specific 
to a person; they don't just have one price for everyone. So 
inasmuch that someone is engaged in not paying, they can 
substantially raise their rate. They can take all sorts of 
actions, lowering their credit----
    Mrs. Wagner. They will have to by virtue of the rule and by 
virtue of what the prudential regulators are doing in terms of 
safety and soundness. Did the CFPB engage with the prudential 
regulators when preparing this proposed rule to ensure that 
card issuers remain able to meet their safety and soundness 
obligations?
    Mr. Chopra. Yes. As part of how we think about----
    Mrs. Wagner. You did? You are telling me that you engaged 
with the prudential regulators on this?
    Mr. Chopra. Yes. I am saying, yes.
    Mrs. Wagner. Okay.
    Mr. Chopra. Yes, we do.
    Mrs. Wagner. Then, I don't understand. Let me get to my 
question then. If you engaged with them, how can the agency 
justify proposing a rule that would implicate these safety and 
soundness obligations? I don't know how you justify it.
    Mr. Chopra. Again, as I just mentioned, the way credit card 
issuers originate, they can engage in risk-based pricing, so 
they are able to raise rates for customers who are risky and 
lower them for those who are less risky. They use a lot of data 
in order to predict that. They have complex scoring models. We 
certainly try and look at all the factors that are driving 
pricing. What we do find right now in the credit card market is 
actually that rates have increased beyond what interest rates 
have been, so we are looking at all of those dynamics all the 
time, and I am truly happy to talk through this.
    Mrs. Wagner. You are taking responsible cardholders who pay 
their bills, sir, on time and typically never pay late fees, 
and you are forcing them to subsidize frequent late payers, and 
I see no cost-benefit analysis that says otherwise in this. 
This proposal is yet another example of the Biden 
Administration seeking to score political points rather than 
protecting American consumers. And, Mr. Chairman, I yield back 
the balance of my time.
    Chairman McHenry. The gentleman from California, Mr. 
Vargas, is recognized for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I want to 
thank you and the ranking member for holding this important 
hearing, and see if I can move over a little bit, Director, so 
you can see me, not that that makes a difference. Again, I want 
to thank you for testifying today, and I thank you for the 
great work that you and your Bureau do to protect the consumers 
of my district and across the country.
    Since 2011, the Consumer Financial Protection Bureau has 
protected consumers from unfair, deceptive, and abusive 
business practices. To date, the CFPB has returned over $20 
billion to 205,000,000 consumers. The Bureau is delivering 
results for students, veterans, and many other Americans across 
the country, and I appreciate that, and so do the polls. 
Notably, according to a recent nonpartisan poll, over 82 
percent of Americans support the CFPB and its mission to 
protect consumers in the financial marketplace, and I have to 
tell you, from my district, that seems to be correct. I get so 
many compliments for the work that you have done and your 
Bureau has done. I know it is tough. I know it is tough 
sometimes up here not being able to answer all the questions 
because you don't get time, but I appreciate the work you have 
done.
    Now, in the last question, you didn't have enough time to 
answer. Is there a subsidy then from the people who pay their 
credit cards on time and those who don't?
    Mr. Chopra. No. There is no forced subsidy from one group 
to another. We are trying to follow the law and be able to 
implement that faithfully, and you must understand that 
underwriting is increasingly individualized. It is not one 
price that anyone pays. It is risk-based.
    Mr. Vargas. The same thing happens in insurance, as you 
know.
    Mr. Chopra. Yes.
    Mr. Vargas. Absolutely, so I appreciate that. Now, in fact, 
one of the things I do want to talk about a little bit, and it 
has been talked about here, is cost-benefit analysis. How do 
you determine that? For example, discrimination against women, 
how would you weigh that? How many hours or what price is it 
against the discrimination that a woman feels, the humiliation, 
the opportunities that are missed? How do you weigh that, 
because that has been brought up here and hasn't been 
explained, as if a woman who is discriminated against, all of a 
sudden because she lost a thousand dollars, you have a thousand 
dollars' worth of time over here, it is an equivalent. I don't 
believe that personally, but how do you weigh that?
    Mr. Chopra. Yes. When there were widespread illegal 
mortgage foreclosures and there was an attempt at cost-benefit 
analysis, I believe one of the takeaways was that the children 
in the home of an illegal foreclosure actually lost three grade 
levels--I may not have that exactly right. You are right that 
it is very hard to put a price on that, and we did a rule to 
implement legislation you all passed on survivors of human 
trafficking and repairing their life. It is very, very hard to 
put a price on that, but, again, we do try our best to make 
sure we are limiting costs, but sometimes the benefits, when it 
comes to getting your life back, are extraordinary.
    Mr. Vargas. And I hope you keep that in mind, because I 
know there is a lot of pressure to just do a simple cost-
benefit analysis, dollars and cents, which doesn't take into 
account the family, the humiliation, the standard of living, 
really, that we all have, the belief and faith that we have in 
the government, and maybe a lot of us in God and other things, 
because you have to have right and wrong. I believe still there 
is right and there is wrong, and sometimes to do right costs a 
lot. I hope that you keep taking that into account instead of 
just some crude cost-benefit analysis.
    I do want to talk a little bit about AI. It is something 
that scares me, to be honest with you. Maybe I have seen too 
many darn movies about it, but it does seem like something 
that, as Mr. Foster said, unleashed into humanity could do 
great damage, especially to our financial system. Could you 
comment on that?
    Mr. Chopra. I certainly think the financial system, 
especially when it is highly automated, which it is, when you 
introduce very-opaque algorithms into it, I think there are 
some worries about systemic risk of that, the extent to which 
tremors could turn into earthquakes. I hope that you all can be 
thinking about all the various ways that there could be risk 
created. Now, AI, in some ways, in financial services, has been 
used forever----
    Mr. Vargas. For sure.
    Mr. Chopra. ----for credit scores, and other things. We 
have to make sure some of the existing laws on the books are 
being followed, and that is really what has been our focus. It 
is a much longer discussion about how we deal with generative 
AI and fraud, the lending algorithms, but we are trying to make 
sure we are beefing up our technology core so that we really 
understand what is going on before it is too late.
    Mr. Vargas. My time is up. Thank you. I yield back.
    Mr. Barr. [presiding]. The gentleman yields back. The Chair 
now recognizes himself for 5 minutes.
    Director Chopra, let me start with your policy statement 
defining, ``abusive practices.'' Do you believe that financial 
services companies should be held liable for not complying with 
novel guidance or regulations that you have only recently 
published on a retroactive basis?
    Mr. Chopra. No, and, in fact, the abusive policy statement 
really was an attempt to try and avoid situations where people 
didn't know.
    Mr. Barr. I appreciate that, and you have said that before 
in this committee. I do appreciate that. So, can I take it from 
your testimony that your policy statement will only apply 
prospectively?
    Mr. Chopra. The issue is that the statute has always 
existed, but----
    Mr. Barr. Okay. Fair enough. Reclaiming my time, I am 
generally glad to hear what you just said, because I don't 
think it is fair to punish companies for operating within the 
boundaries of the law at the time the company was engaged in an 
act or practice that was lawful at the time, even under the 
preexisting statute. I do, however, plan to introduce a bill 
which ensures that the Bureau does just that and does not try 
to retroactively apply new requirements onto activities that 
occurred in the past. And I would appreciate your input on that 
and your working with me on that legislation to make sure that 
we are achieving our mutual goal.
    Mr. Chopra. And I want this to be durable and not ping pong 
and not----
    Mr. Barr. Right. Great.
    Mr. Chopra. Sorry.
    Mr. Barr. Great. Director Chopra, if a small business 
begins a loan application process, can a lender under your 
Section 1071 proposal disclose to them that they are required 
to collect information under the direction of the Federal 
Government?
    Mr. Chopra. I need to look at the specific regulation, but 
my understanding is that even the model form makes very clear 
that this is a government requirement.
    Mr. Barr. Okay. Does a small business loan applicant have 
the right to refuse to provide this data under your proposal?
    Mr. Chopra. Yes. It is actually not under the proposal. It 
is in the statute.
    Mr. Barr. Great. I agree, it is in the statute. So, under 
1071 and under the statute, small businesses are not legally 
obligated to provide data in connection with any application of 
credit, but do you believe a small business owner should know 
why an institution, before any underwriting occurs, is 
collecting demographic information about them?
    Mr. Chopra. If I understand your question, I think, yes, 
that is right, and in the Home Mortgage Disclosure Act (HMDA), 
I believe there is a similar type of framework.
    Mr. Barr. Okay.
    Mr. Chopra. I would need to check.
    Mr. Barr. Do you recognize that if a small business owner 
fails to understand why the data is being collected, it could 
lead to confusion and misunderstanding and potential liability 
for a financial institution? In other words, if they are asked 
to disclose their race or their ethnicity or their LGBT status 
before underwriting occurs, then that loan application is 
denied, that could lead to confusion as to the basis for the 
denial of the application? You do understand that?
    Mr. Chopra. I understand that.
    Mr. Barr. Yes. And based on your response, I believe you 
would agree with me that providing a simple document to 
consumers or small business owners explaining all of this would 
help clear up confusion in the small business lending space.
    As chairman, I am asking myself for unanimous consent to 
submit for the record a potential questionnaire crafted by the 
Kentucky Bankers Association that would do just that.
    Without objection, it is so ordered.
    Director Chopra, my constituents who provide small business 
loans in my district in Kentucky tell me that your 1071 rule 
would force them to exit small business lending and will, 
therefore, decrease availability and increase the cost of 
credit for small Main Street borrowers. I believe this 
questionnaire could help clarify the need for, or the lack of 
any need for, this data collection effort and reduce incentives 
for firms to exit the market because of fear of legal 
repercussions.
    Mr. Chopra. By the way, I am very open to that.
    Mr. Barr. Okay. I will share it with you, and I appreciate 
your feedback. My final question is about funding and the 
Supreme Court and what the Supreme Court is about ready to do. 
Did you see that the Fiscal Year 2024 Financial Services and 
General Government Appropriations bill that we just took up in 
the Congress, that the Congress funded the CFPB in that bill at 
current levels? Did you notice that?
    Mr. Chopra. I did.
    Mr. Barr. And did you notice that Republicans, the 
Republican Majority, with Democrats, voted down an amendment 
that zeroed out the CFPB's funding?
    Mr. Chopra. I didn't catch that, but your colleague 
mentioned it, yes.
    Mr. Barr. Yes. Clearly, some Republicans voted to zero it 
out, but that amendment failed. I want you to take notice of 
that, and I want the Supreme Court to take notice of that 
because it demonstrates that the Congress is not about 
eliminating consumer protection or the Bureau. It is about 
upholding the Constitution and the separation of powers, and if 
our bill were enacted, the agency would continue to operate. 
The only difference would be that Congress would oversee the 
agency spending in the same way it does for most other consumer 
protection agencies, and I believe it is time for Congress to 
regain its most important oversight tool, and that is the power 
of the purse.
    And with that, I will recognize the gentleman from 
Illinois, Mr. Casten.
    Mr. Casten. Thank you, Mr. Barr. Director Chopra, it's 
great to see you again. I want to follow up on the conversation 
we had last June. We talked at that time about the 2022 
complaint bulletin that had been issued looking at complaints 
on digital assets that, I think, specifically said fraud, 
theft, hacks, and scams are a significant problem in the crypto 
asset markets, and it appears to be getting worse. I am just 
curious, in the last 5 months, are things getting better, are 
things getting worse, or are they about the same?
    Mr. Chopra. I don't have a great answer on this. It can 
often be difficult to determine. We look at our complaints. I 
will say that people have lost a lot of money through hacks.
    Mr. Casten. Yes.
    Mr. Chopra. They have been cleaned out there, and another 
thing is that it used to be gift cards. People would ask 
someone to purchase a gift card in a fraud context, and now, it 
is often a new technology like this.
    Mr. Casten. Yes.
    Mr. Chopra. It is something that the Justice Department and 
others were trying to deal with, especially when it comes to 
targeting the elderly.
    Mr. Casten. I appreciate the confusion, and part of the 
reason I asked the question is, we have seen a lot of public 
actions by Treasury, by the Justice Department, and of course, 
the Binance news and the shutdown that is there, and obviously, 
a lot of information will come out of there. While we were 
sitting here, I think the Treasury Department just announced 
that they are sanctioning Sinbad, a virtual currency mixer that 
is being used to launder stolen assets, primarily to fund the 
North Korean nuclear program, as far as I can tell from the 
public reporting. The Binance reporting said that the platform 
was being used to fund child abusers, sanctions evaders, and a 
whole host of bad terrorist groups, and remarkably, never filed 
a single suspicious activity report (SAR). And I am not ranting 
to criticize them, but I am just curious if that is a sign that 
we have this under control or are we just getting at the tip of 
the iceberg----
    Mr. Chopra. I think when we talk about new uses of data, 
and certainly when it comes to AI, digital assets, there are 
all sorts of ways that we constantly have to think about how it 
could be misused and not just----
    Mr. Casten. Can you just, on that point, in the 2022 report 
you talked about the use of crypto for, ``pig butchering.'' Can 
you just explain for the committee what that is, as it is 
related to this thing about--I guess it is like a high-tech 
gift card?
    Mr. Chopra. A major way in which people are defrauded is 
often through romance scams, including through online dating 
websites, and social media. And, ``pig butchering,'' is the 
concept of building trust over time, to, at the end, ultimately 
wipe them out of their financial assets. And you see, 
unfortunately, a lot of that, and it can be very challenging, 
particularly when the fraudster has so much information about 
the target that they might be able to really trust them.
    Mr. Casten. This shouldn't need to be said, but I am proud 
to say that we have a bipartisan opposition to, ``pig 
butchering,'' to funding North Korea nuclear programs, to 
funding Hamas, and to child trafficking. I think all of us on 
this committee want to make sure that we stop those things.
    I am troubled by the fact that there is a common nexus in 
all those, which is crypto networks that are used to evade 
anti-money laundering rules. And I think we on this committee 
have some accountability to do with the fact that just within 
this term, the majority has passed two bills on a straight 
party line basis that would actually limit the ability of 
regulators like yourself to pursue anti-money laundering rules, 
to even have any authority to go after folks who are using 
unhosted wallets, these cryptographic assets. And if we 
genuinely oppose these things, we should stop the ways they are 
getting used.
    I just want to raise a concern with some public reporting 
that has come out this week that Chairman McHenry has been 
threatening to hold up the Defense Authorization Act unless we 
get a crypto-friendly bill, which is not going to make this 
better. And there has also been some public reporting that 
perhaps the currency will be to take out some protections 
against fentanyl use, which, of course, has also been listed in 
a lot of these reports as one of the common uses of 
cryptographic money.
    I realize this isn't your concern, but I want to thank 
Ranking Member Waters for her efforts to block that. And I want 
to thank Chairman Brown and the Senate for blocking that, and 
just urge them to continue to do so because we do need a fully-
funded Defense Authorization Act. We do need to make sure that 
our financial regulators have the tools to shut down money 
laundering. And my goodness, we would like to put a stop to pig 
butchering, terrorism, North Korean nuclear programs, and child 
trafficking. Thank you, Director Chopra, and I yield back.
    Mr. Barr. The gentleman yields back. Let me remind Members 
to refrain from referencing the chairman when he is not in a 
position to represent his side of the story, and represent his 
views in response. With that, the gentleman from Texas, Mr. 
Williams, is now recognized.
    Mr. Williams of Texas. Thank you, Mr. Chairman. Director, 
it's good to see you again.
    Mr. Chopra. Same.
    Mr. Williams of Texas. Consistently, you have come before 
this committee saying you would protect the interests of small 
business. You have said that today. Yet, ever since you joined 
the CFPB, your agency continues to add burdensome requirements 
without consideration of their impact on small business and 
small lenders, and you know I am a small business person. For 
the past 6 months, I have been consistently hearing from small 
and community bankers back in my district in Texas and across 
the country on how unprepared and terrified they are about the 
CFPB's Section 1071 Small Business Data Collection Rule. Small 
lenders are concerned that the complicated reporting 
requirements, which add 81 new data fields, will tie up loan 
officers and increase compliance costs, ultimately forcing them 
to pass these costs down to whom? The customer. Furthermore, 
small lenders are worried this rule will push the industry 
towards a standardized small business loan product and kill 
relationship banking, which all of us are familiar with and 
have grown up with. This overly-burdensome rule will limit the 
banks' lending abilities and make it harder for small 
businesses to access the capital they need.
    Now, I have been working with members of this committee and 
the Senate to push back against the rule, and I am glad to say 
that our CRA is coming to the House Floor for a vote this week. 
So, it is critical that we pass this bill to overturn the rule, 
stop the regulatory overreach, and protect Main Street America. 
This will be an easy yes-or-no answer for you, I think, 
Director. Congress is elected by the American public, and you 
are an appointed bureaucrat. The question is, will you respect 
the views of the American people and overturn the 1071 rule 
should both Chambers vote in favor of nullifying this rule? Yes 
or no?
    Mr. Chopra. If it is enacted into law, pursuant to the 
Congressional Review Act (CRA), of course, we will comply with 
that.
    Mr. Williams of Texas. Thank you. The funding structure of 
the CFPB minimizes congressional oversight and budget authority 
and, instead, relies on allocations from the Federal Reserve. 
This unconventional funding approach has sparked numerous legal 
challenges, raising concerns about the Bureau's lack of 
transparency and accountability to the American people. This 
funding mechanism is vastly different than other Federal 
banking agencies. In order to have a check on the CFPB's power, 
it is imperative that your operations be subject to 
congressional operations or appropriations.
    So, Director, while we wait for the court's decision on 
your agency's funding, how are you ensuring that you are 
remaining transparent and accountable to the American people?
    Mr. Chopra. Respectfully, we try and do everything we can 
with respect to our spending. We have not only complied with 
the statutory requirements on audits, providing reports, we 
have tried to answer all sorts of questions that people may 
have and, frankly, taken a lot of feedback. We have also looked 
very carefully at spending that can be eliminated. We have 
spent below our budget cap that is given to us from the Federal 
Reserve and have not even requested the full amount. We 
continue to look at how we are going to have a workforce that 
can help us deliver what Congress said, but, of course, we 
await the Supreme Court's ruling. The CFPB, the Fed, the OCC, 
the FDIC, and others are funded very similarly, so we are all 
looking forward to getting a conclusion to that issue.
    Mr. Williams of Texas. Okay. The CFPB has indicated that 
they are in the pre-rule stage of creating a new overdraft rule 
that would reclassify overdraft fees and finance charges. This 
proposal is widely unreasonable and burdensome for consumers 
and providers. Overdraft is a key tool that allows consumers to 
withdraw more money than is available in their accounts so that 
they may make a payment with these temporary funds. With the 
rising cost of everyday needs due to the Biden economics that 
we see today, this feature is helpful in situations that are 
dire because of Bidenomics, and this feature is helpful in 
situations where a consumer has unexpected expenses or delays 
in income. Overdrafts allow them to continue with the purchase 
of whatever they may need, so this safety net is key for 
consumers and must be protected.
    So, Director, is the CFPB actively working to eliminate 
overdraft programs that consumers rely on to meet day-to-day 
needs, like groceries or other essentials?
    Mr. Chopra. As I have shared before, we do believe that all 
forms of credit, including overdraft services, have a role to 
play. Our focus has been to focus on where it has been 
illegally done, and we have received requests to look at a 
rulemaking to provide clarity, but there is not an effort to 
eliminate that need that you share.
    Mr. Williams of Texas. Okay. Thank you, and I yield back.
    Mr. Barr. The gentleman yields back. The gentlewoman from 
Texas, Ms. Garcia, is now recognized.
    Ms. Garcia. Thank you, Mr. Chairman, and it is always great 
to have you with us, Director Chopra. You are always a breath 
of fresh air, always willing to respond to all the questions 
and with such candor and precision. I was a little taken aback 
by my colleagues' comments that you are running your agency in 
a lawless manner, acting outside of the law. I feel like I know 
a little bit about the law, being a lawyer and a former judge, 
and I think if you were doing anything lawless or outside of 
the law, I would probably be the first one to raise the red 
flag. Can you assure the public today and those listening that 
you are, in fact, following the law and doing everything that 
is mandated by Congress?
    Mr. Chopra. Yes, and we take those congressional mandates 
seriously. We are implementing each and every piece that has 
been required of us, and we just take that responsibility 
seriously.
    Ms. Garcia. Right. And as you responded to an earlier 
question, if the law is passed and is signed into law, of 
course, you are going to follow that law.
    Mr. Chopra. Yes, and I actually would recommend you putting 
deadlines on that because it makes sure that it happens. We do 
have issues with other agencies where it is passed and never 
gets done.
    Ms. Garcia. Thank you. It is reassuring, and I had full 
confidence that would be your response, but I thought it was 
necessary to put that in the record because under your 
leadership, the CFPB has taken unprecedented action to combat 
junk fees and medical debt, while holding credit card reporting 
companies accountable and curbing predatory lenders. As always, 
you have been there up front with a commitment to protecting 
our nation's consumers.
    I would like to begin by discussing your outstanding 
efforts to tackle the junk fee situation. Prior to today's 
hearing, I reviewed a useful fact sheet about the CFPB's whole-
of-government approach to addressing junk fees, and it briefly 
mentioned the CFPB's enforcement actions against MoneyGram, an 
international remittance provider. This was of great interest 
to me because, as you know, my district is 77-percent Latino, 
and many people in my district either know someone or have 
relatives in Mexico. And, in fact, Texas has the second-highest 
amount of remittances that go to Mexico within the United 
States. In 2021, in fact, $7.7 billion in remittances were sent 
from Texas to Mexico, making up 15.9 percent of all 
transactions.
    In 2012, the CFPB implemented its remittance rule, 
requiring companies that offer remittances to provide 
consistent disclosure regarding the price of a transfer before 
the consumer makes a payment. Less than 10 years later, 
consumer and immigration groups have found that U.S. consumers 
lose approximately $8.7 billion in hidden fees due to the 
exchange rate markups.
    In June of 2023, you testified before this committee and 
recognized this issue where remittances are advertised at zero 
cost, but a hidden foreign exchange markup is added. These junk 
fees impact a large number of my constituents who send 
remittances to their families. Director Chopra, what action has 
the CFPB taken since June to eliminate these junk fees within 
remittances, or what other action can we expect from you soon?
    Mr. Chopra. Let me first share that remittances are such an 
important market for us to be focused on. We also know that 
remittances are a key part of U.S. national security policy as 
well, given the volume that takes place, so let me share this. 
I do share your concerns about advertising, especially that 
something is free, when, in reality, it has a big cost.
    We have actually taken a number of enforcement actions over 
the last 2 years, including fairly recently, to go after 
violations of the remittance rule. I think as more consumers 
are doing this digitally, we are going to need to evaluate 
whether those rules need any updates so that they are fit for 
the modern times. We do see that there are many people who are 
sending them through apps, and we want to make sure they can 
compare, get a good offer, and really know what they are 
getting into.
    Ms. Garcia. Great. Also, I read your Semiannual Report, 
which notes the efforts to diversify in terms of your 
contractors, with 43 percent of contracts going to minority- 
and women-owned programs. However, when we looked at the 
breakdown of the contract, it only showed .2 percent--not even 
1 percent--.2 percent of the dollars spent went to Latino-owned 
businesses. What steps is the CFPB taking to ensure that Latino 
contractors are at the table and get some of those contracts?
    Mr. Chopra. Yes. We have our Office of Minority and Women 
Inclusion that is required to oversee that. I am happy to 
answer more questions for the record.
    Ms. Garcia. Mr. Chairman, I will submit those in writing. 
Thank you.
    Mr. Barr. Thank you. The gentlelady's time has expired. The 
gentleman from Georgia, Mr. Loudermilk, is now recognized.
    Mr. Loudermilk. Thank you, Mr. Chairman. Mr. Chopra, thank 
you for being here and for being willing to answer questions. I 
agree with some of my colleagues that there are some things 
that we share that are important, and one is data privacy. That 
is something I have been working on since I have been here in 
Congress, and it seems that we continue to go backwards, not 
forwards. I am talking about the Federal Government in general. 
One of the things about data privacy is it is intrinsically 
tied to data security, and one of the best ways to protect data 
is to not have it. You don't have to protect what you don't 
have, so only collect what you need, but that is a conversation 
for another day.
    I want to ask about the data breach that happened in 
February of this year. Obviously, you are aware of this as you 
have communicated this in the past, but I do want to ask some 
questions about that, especially as early as 2014, the Bureau 
was warned that vulnerabilities in its information security 
program put it at risk of a breach, and the latest Office of 
the Inspector General (OIG) report indicates the Bureau hadn't 
addressed any of these cybersecurity action items that were 
previously recommended. Have you implemented any of these 
recommendations since the publication of the report? This 
report was in February of 2023.
    Mr. Chopra. Yes. We have gotten from our Federal 
Information Security Modernization Act (FISMA) audit, our OIG, 
and our third-party review, a whole slew of things that, over 
time, we have been able to successfully implement. I want to 
give you the appropriate details of that, and we do know which 
ones have been fulfilled, and we work with the Inspector 
General to see if it is also to their satisfaction. But let me 
just share that, of course, the misappropriation of data that 
occurred earlier this year was extremely serious. One of my 
reflections on it is that we are talking about an insider 
threat.
    Mr. Loudermilk. Yes.
    Mr. Chopra. So, part of what we are doing is not just 
making sure that systems are not penetrable from outside, but 
also from the inside, making sure that there is limited access, 
only where there needs to be. There will employees who have 
access to information. We have made some system changes, too, 
to limit the information that is accessible. I can confirm the 
issue was not related to any sort of intelligence operation by 
a foreign state actor. The individual is no longer employed at 
the agency, but there is work to do as it relates to insider 
threats across the----
    Mr. Loudermilk. Right, and in a lot of cases, access by 
foreign actors, criminals, come as the result of improper 
actions by an internal operator, as we saw with Equifax a while 
back, right?
    Mr. Chopra. And ultimately, we know it was not just 
Equifax, but Marriott, and the Office of Personnel Management 
(OPM).
    Mr. Loudermilk. Yes.
    Mr. Chopra. It was bad actors affiliated with the Chinese 
Government, that we have to make sure that we know this data is 
used for all sorts of purposes.
    Mr. Loudermilk. I just want to ask you specifically some of 
these questions and bring it back up.
    Mr. Chopra. Sure.
    Mr. Loudermilk. You may not have the answer now, but if you 
could respond in writing for the record, that would be great. 
There are specifically three in the OIG report. The first was 
to develop and implement a cybersecurity risk register and 
associated process to identify and manage organizational-wide 
cybersecurity risks. These were showing that they had not been 
completed by February of 2023, but the response from the Bureau 
was, ``implementation in progress,'' and, ``estimated 
completion is this year,'' and we are running out of time. The 
other two, and I can provide these to you, all three of these--
we will provide them in written format.
    Mr. Chopra. Of course.
    Mr. Loudermilk. If you can respond where you are on these, 
I would appreciate it.
    Mr. Chopra. On that one, we know that part of it was, I 
believe we were procuring a new system, and it would replace 
and implement something. We have tried to also complete these 
in a way that is deliberate and also to the satisfaction of our 
office.
    Mr. Loudermilk. Okay. I am running out of time quickly, and 
I need to ask this: How and when were the victims of the CFPB 
data breach notified? Congress wasn't notified until May. Were 
the businesses or the individuals that were potentially 
breached, were they notified at any time----
    Mr. Chopra. Yes.
    Mr. Loudermilk. ----and if so, was it before Congress or 
after Congress?
    Mr. Chopra. We notified Congress completely pursuant to the 
guidance, and actually, when we found out, we looked to see 
when the data may have left the system by the insider threat. 
We did the customer notifications, and we had to work with our 
supervised entity, because sometimes it was complicated, and my 
staff just shared that Congress was notified in March.
    Mr. Loudermilk. Right, but when were the customers 
notified, before or after Congress?
    Mr. Chopra. We actually didn't have their contact 
information in most situations, so we had to work with the 
institutions.
    Mr. Barr. The gentleman's time has expired.
    Mr. Loudermilk. Thank you.
    Mr. Barr. The gentlewoman from Massachusetts, Ms. Pressley, 
is recognized.
    Ms. Pressley. It's good to see you, Director Chopra. I 
always smile when I see you because I actually know what it is 
that you do. I am grateful for your service and certainly your 
resilience. Despite the destructive efforts by Republicans to 
sabotage the Consumer Financial Protection Bureau, I commend 
you on your work to support vulnerable consumers. From cracking 
down on junk fees and predatory lenders, to working to remove 
burdensome medical debt from credit reports, and protecting 
seniors against fraud, the CFPB's record speaks for itself.
    Now, I want to talk about the $2-trillion crisis that is 
student debt. You have heard the expression, ``like a dog with 
a bone.'' I am no dog, but I am a Congresswoman with a cause, 
and some of my colleagues may be tired of me bringing up 
student debt, but imagine how tired our constituents are of 
living with it. For borrowers who live in my district, the 
Massachusetts 7th, whether it is a father juggling part-time 
jobs, or a third grade teacher who spent a decade in the 
classroom making payments month to month, their situations are 
as precarious now as they were 3 years ago when payments were 
first paused, and student loan servicers are not making it any 
easier: high wait times when you call; false information when 
you get someone on the phone; and wrong billing amounts when 
they ask for money.
    Just last month, MOHELA, the largest student loan servicer 
in the country, proved its incompetence: 78,000 borrowers 
received the wrong information for the SAVE Income-Driven 
Repayment Plan; 153,000 borrowers did not receive a bill until 
after it was due; and for the ones who did receive a bill, 
21,000 borrowers received bills that were very high and far 
from correct, including some who received a bill for $100,000. 
Now, imagine opening your mail and seeing a bill for $100,000. 
This is ridiculous, and it is proof that the CFPB's work is 
more critical now than ever before.
    Director Chopra, could you describe what steps the Bureau 
is taking to protect student loan borrowers from the gross 
incompetence of student loan servicers?
    Mr. Chopra. Those servicers, just like mortgage servicers, 
impact people's lives so much. We have seen, over the course of 
the past 15 years, illegal foreclosures and other harms in the 
mortgage market. But in the student loan market, a wrongful 
default or a major error can hit people so hard early in their 
financial life and eliminate their ability to even get an auto 
loan or do anything else. They may not be banks, but they have 
to follow the same laws. We are allocating real attention to 
this, including the return to repayment, because many of those 
servicers shrunk quite a bit during the payment pause, scaling 
up, and we will be releasing more information about some of our 
findings. We have taken enforcement actions, and it is very, 
very important that people are not the victims of an unlawful 
practice.
    Ms. Pressley. Thank you. And, Director Chopra, what is your 
advice--sort of consider this a PSA, if you will--to borrowers 
who are dealing with predatory student loan servicers, 
scammers, and malicious actors?
    Mr. Chopra. Certainly, be very, very cautious about talking 
to someone who isn't the loan servicer. They may be using 
information about you in order to get you to pay something that 
you don't owe them. We also say if you are having trouble, 
please file a complaint. We are often able to get those 
individuals across the country fixes and sometimes clear 
answers on what really needs to happen. This whole thing has to 
work, or there are going to be big problems.
    Ms. Pressley. Thank you, Director Chopra. Like many 
Americans, I took on student loans to pursue higher education, 
not because I wanted to, but because I had to. It was the only 
way. It took me over 20 years to pay them off while I was a 
caregiver to my mother and often working multiple jobs, 
including as an aide in the House and in the Senate, but I want 
an easier road for the next person. The people demand and 
deserve student debt cancellation. In the meantime, we must 
provide relief for our borrowers wherever and however we can, 
and that includes holding student loan servicers accountable 
for their incompetence. I thank you again, Director Chopra, and 
your entire dedicated team, and I look forward to continuing to 
work together.
    Mr. Barr. The gentlelady yields back. The gentlelady--no, 
the gentleman from Ohio, Mr. Davidson, is now recognized.
    Mr. Davidson. I'm glad we got that right. Thanks, Director 
Chopra. I appreciate you being here, and I appreciate your work 
on privacy. I have really enjoyed the prominence of the Fourth 
Amendment in this hearing, and I know you know that I share 
your fondness of the respect for privacy and the sense that it 
really needs a lot of attention right now.
    I have been developing a bill called the Payment Privacy 
Act that would ban the sale or distribution of consumer 
financial data unless the consumer provides express consent. 
This consent would only be legal if the consumer can identify 
who will receive their data at the time the consent is given. 
We still have a few things to work out, but it is close to 
being done, and most notably, we are trying to make sure that 
enforcement and damages provisions match the impact of the data 
breaches. This is clearly something that you touch on with some 
of the rulemakings that you have been in process with, and I 
look forward to continuing to work with you and your office on 
that, so I appreciate that.
    But as we talk about Section 1033, one component of it 
would allow tokenized account numbers when making data 
available to consumer-permission third parties, so they could 
tokenize it, it kind of anonymizes the data in a sense. This 
means the account identifier would mask that identity from the 
third party. Has the Bureau considered any alternative 
approaches to protecting consumer account information?
    Mr. Chopra. Yes. In many ways, Congressman, we also have to 
think ahead. I have talked to some of you on this committee 
about quantum decryption and the risk of re-identification, and 
we want to think of ways that are timeless, so we are very open 
to feedback on other alternatives. We don't want any sort of 
specific technology built in, but I do fear that if we don't 
make sure that the rule has some real data protections, it will 
be a haven for misuse.
    Mr. Davidson. I think that is the point of not just 
protecting the consumer privacy. They clearly didn't disclose 
it. This is a way to bypass the fact that they haven't 
disclosed it and technology kind of escalates.
    Mr. Chopra. I see. That could sidestep it.
    Mr. Davidson. Right.
    Mr. Chopra. Oh, I'm sorry. I misunderstood.
    Mr. Davidson. And I am also fond of zero knowledge proofs, 
for what it is worth, and this touches on a transition point to 
digital assets briefly.
    Director Chopra, the former Director of the CFPB, Director 
Kraninger, previously stated that the CFPB's authority over 
digital assets is murky at best because there is a lack of 
jurisdictional clarity. Given that the, ``larger payment 
participant rulemaking,'' attempts to sweep in digital assets, 
how do you see the scope of the CFPB's role in digital assets 
and, in particular, with respect to protecting self-custody and 
privacy?
    Mr. Chopra. Yes. It is really when it is being used for a 
consumer payment, so we do have a lot of nonbank payment apps. 
To the extent to which they are using something that is just 
for a consumer payment, there is case law which shows that is 
covered under the Electronic Fund Transfer Act (EFTA), and that 
is what we supervise for. I think we have tried to be very 
cautious about this, and also, inasmuch that you are 
legislating on it, we are happy to provide any input on it. But 
when it comes to that, we are really trying to address those 
large payment apps that we have to make sure are following the 
same set of laws as the banks.
    Mr. Davidson. Right. Yes. The general trend is to make 
everything account-based, and one of the best things is self-
custody. So if I have cash, my identity is pretty well 
protected.
    Mr. Chopra. Yes.
    Mr. Davidson. And if I want to exchange that with someone 
else, then we don't really have a lot of risk of data breach or 
privacy issues. Now, for many of my colleagues, that level of 
privacy is too much privacy. They like the spying-on-people 
features of account-based systems, and I am really concerned 
that we protect self-custody because that is at the core of 
privacy. That is at the core of protecting your money because 
someone's not skimming part of it for providing services unless 
you want them to.
    One other thing that I just want to touch on is that in the 
last numbers I saw on Buy Now, Pay Later for Black Friday and 
Cyber Monday, spending was $940 million. That is about a 42-
percent jump over last year. The pros of Buy Now, Pay Later are 
really apparent. There is no credit check. It is interest free 
up front. So if you want to buy something for, say, $200, and 
you pay $50 now, you can pay 3 more payments of $50 and do it. 
Does that, at some point, especially if you don't make that 
next payment, start to look a lot like credit? You did some 
work on this.
    Mr. Chopra. Yes. We are trying to make sure that those 
similar types of use cases have similar treatment. Buy Now, Pay 
Later is an option for many, many people, and you are right, it 
has grown, and there are a lot more providers. I think there 
are some issues, some credit reporting issues and other things 
that we do need to keep thinking about.
    Mr. Davidson. Okay. Thank you. My time has expired, and I 
yield back.
    Mr. Barr. The gentleman yields back. The gentleman from 
Nevada, Mr. Horsford, is recognized.
    Mr. Horsford. Thank you very much, Mr. Chairman, and thank 
you to the ranking member for this hearing, and thank you, 
Director Chopra, for returning to discuss the continued 
consumer protection efforts that your Bureau has undertaken 
since we last spoke. Americans everywhere deserve to have 
someone in their corner every day to keep a watchful eye on the 
financial sector and to protect hardworking people from 
discrimination and fraud.
    I was pleased to receive your report. In it, you identified 
950,000 complaints that were received in the time period 
encompassed by the report, with an impressive 99-percent 
response rate from the respective companies. The CFPB is not 
just standing idly by, but is actively securing redress for 
harmed consumers. Under your leadership, I have been glad to 
see the CFPB standing up for consumers, combating the negative 
effects of medical debt, ensuring that fair lending standards 
are adhered to, and holding bad actors in our financial sector 
accountable.
    I want to point to the issue of the Office of Servicemember 
Affairs and how they are working to address the growing number 
of complaints that members of our Armed Forces have regarding 
their consumer protection needs. As you are aware, in June your 
agency reported that there was a staggering 66,400 complaints 
filed by servicemembers in 2022 alone. This is a dramatic 55-
percent increase from the prior year. Unfortunately, for my 
home State of Nevada, the volume of complaints from 
servicemembers ranks third in the country on a per capita 
basis.
    Director Chopra, your report on Servicemember Affairs shows 
that active-duty personnel are 76 percent more likely to become 
victims of identity theft than the general population. What are 
your insights into why this may be the cause, what 
characteristics make them most susceptible to theft, and what 
recommendations do you have to further protect them from this 
abuse?
    Mr. Chopra. We have seen time and time again, active-duty 
servicemembers' personal data being weaponized. It used to just 
take the form of putting a fake debt on their credit report and 
bullying them into paying something they didn't owe. Now, it is 
getting even more sophisticated. We see that all sorts of data 
companies are collecting information on military personnel. 
Identity theft is just one piece. There are real national 
security implications. We don't just care about these families 
because they serve our country. They are often the canary in 
the coal mine for everyone else, and that is why we pay a lot 
of attention to it.
    Mr. Horsford. I am glad you are. As you said, it does take 
attention away from national security. It has serious negative 
effects on morale and can even interrupt their service if it is 
not addressed, so I look forward to working with you on that 
issue. Private identity verification companies are fortunately 
able to prevent some of these issues, so I am glad that while 
the CFPB has enhanced capabilities to protect these 
populations, fraudulent applications and identity theft can be 
disastrous for any American.
    As we look to continue to expand access to credit across 
the country, have you considered that these unintended 
consequences of your upcoming Fair Credit Reporting Act 
rulemaking could lead to more legitimate applicants being 
inappropriately rejected due to their perceived fraud risk by 
financial institutions?
    Mr. Chopra. Yes. We haven't proposed anything as of yet, 
but we are trying to look at all the ways that data could be 
used or misused and, ultimately, look at the downstream 
effects. Absolutely, we are looking at all aspects before we 
propose anything.
    Mr. Horsford. Thank you. Dr. Chopra, I have also been 
pleased to see that the CFPB has brought about enforcement 
actions to curtail the unscrupulous actors in the credit repair 
marketplace. Unfortunately, in an industry rife with 
malpractice, there are still bad actors operating in blatant 
violation of your recent court ruling regarding deceptive 
telemarketing practices. The Bureau should apply this decision 
uniformly across the credit repair space to protect our most-
vulnerable consumers from being scammed by products that will 
actually do little to improve their credit. Do you believe that 
there is a benefit to providing clear, consistent guidance 
regarding the telemarketing sales rule's advanced fee 
prohibition in order to prevent bad actors from continuing to 
take advantage of consumers?
    Mr. Chopra. Yes, and the telemarketing sales rule, while we 
enforce it, it is not administered by the CFPB. The Federal 
Trade Commission (FTC) is the one that issues rules and 
guidance, but I think certainly as these scams develop, we can 
have a conversation with them about that.
    Mr. Horsford. Thank you very much. I look forward to 
continuing to work with you. I yield back.
    Mr. Barr. The gentleman yields back. The gentleman from 
Michigan, Mr. Huizenga, is now recognized.
    Mr. Huizenga. Thank you, Mr. Chairman, and I apologize for 
my tardiness. I was in the Budget Committee testifying on our 
debt commission that, I think, is also another significant 
issue for us. But thank you, Director Chopra, for being here 
today. I have a couple of topics I want to cover this morning, 
so I ask for concise answers.
    You have been employed by the U.S. Government for about a 
decade. Is that correct?
    Mr. Chopra. Yes, all told.
    Mr. Huizenga. And holding several senior positions 
throughout that time?
    Mr. Chopra. Yes.
    Mr. Huizenga. Yes. Okay. You have served on the FDIC's 
Board of Directors since October of 2021, correct?
    Mr. Chopra. Yes.
    Mr. Huizenga. Since you have been a Director on the FDIC 
Board, were you ever made aware of the July 2020 FDIC Office of 
Inspector General report on the sexual harassment charges that 
were happening at the FDIC?
    Mr. Chopra. I can't recall when, but I did review, prior to 
coming to the Board, all ofthose reports that the Inspector 
General and others had issued on a wide range----
    Mr. Huizenga. Had the Inspector General run you through 
those and the Board? Who made you aware of those?
    Mr. Chopra. Prior to being confirmed, I personally reviewed 
all of those for the CFPB and others as well to prepare. I do 
have periodic discussions with the Inspector General about 
that. And with respect to implementing any recommendations, the 
executives of the Corporation do file periodic reports about 
where things are. So, we try our best to ascertain where the 
issues are.
    Mr. Huizenga. Are you alarmed by the FDIC OIG's findings of 
underreporting and fear of retaliation at the FDIC?
    Mr. Chopra. Yes, and, in fact, at the CFPB, we actually 
implemented a number of new steps to make sure that there were 
many ways for employees to report these issues. From a risk 
management perspective, you want to be able to be sure you are 
getting these complaints, and every agency is trying to do----
    Mr. Huizenga. Okay. Well, maybe not every agency is trying 
to do that.
    Mr. Chopra. Well, I can speak for the CFPB.
    Mr. Huizenga. Okay. So, you are speaking for yourself, and 
you are saying--I am not trying to put words in your mouth--you 
are saying you took your experiences and what you witnessed at 
the FDIC, and you are trying to improve the CFPB's operations, 
correct?
    Mr. Chopra. Sure, and other agencies.
    Mr. Huizenga. Okay. Now, I have been, and I think a number 
of my colleagues have been a bit critical of your role in 
ousting the last Chair of the FDIC and sort of what happened 
there. Why weren't you as concerned or as aggressive with this 
particular Chair?
    Mr. Chopra. To be clear, the last Chair resigned. There was 
an issue about the law----
    Mr. Huizenga. There was significant palace intrigue behind 
that.
    Mr. Chopra. There was a violation of the law, in my view 
and others, but I know you don't want to get----
    Mr. Huizenga. Okay, a violation of the law. We have some 
very, very serious charges with people at the FDIC, including 
this Chair, and whether he knew and whether he was involved or 
how he was involved, so why not take that same passion to the 
FDIC?
    Mr. Chopra. Certainly, any type of these issues are 
serious. The Board has created a bipartisan special committee 
that will have full authority to investigate it, to hire 
outside players, to determine if appropriate actions were 
taken, and to identify what needs to change.
    Mr. Huizenga. I am going to remind some of my newer 
colleagues that it wasn't that long ago we had another head of 
an agency--the Federal Housing Finance Agency (FHFA)--Mel Watt, 
our former colleague on this committee, who was before the 
committee to discuss allegations of inappropriate behavior, and 
it was a bipartisan effort then. I hope the discussion of the 
FDIC is a bipartisan effort now. As Chair of our Oversight and 
Investigations Subcommittee, I hold our government officials 
accountable, and I hope and expect that the FDIC Chair and 
others are going to cooperate fully.
    Let me turn very briefly here to a recent enforcement 
action of yours--Mr. Barr had brought this up earlier--about 
the CFPB using the fine print, pop-ups, dropdowns, different 
sort of criteria, as labeling that abusive. Now, in this 
instance, the company in question was following the laws of the 
State in which they were operating. And while your agency did 
not accuse the finance company of breaking any laws, you still 
went forward with an enforcement action. Last night, I sent you 
a letter on this specific issue.
    Mr. Chopra. That is not true. We did plead a violation of 
law in the complaints. Every enforcement action, if it is being 
litigated, has specific allegations of what law is being 
violated, and that will be adjudicated.
    Mr. Huizenga. My time has expired, but last night, I sent 
you a letter on this specific issue, and I expect a------
    Mr. Chopra. We will respond.
    Mr. Huizenga. ----response in a timely manner. Thank you. 
Mr. Chairman, I yield back.
    Mr. Barr. The gentleman's time has expired and I thank him 
for his good work as our Oversight Subcommittee Chair. The 
gentlewoman from Michigan, Ms. Talib, is now recognized.
    Ms. Tlaib. Thank you so much, Mr. Chairman. And thank you 
so much, Director Chopra. I want to talk about something that 
my residents are actually asking me about specifically. Of 
course, the CFPB has been incredibly responsive with a number 
of fraudulent cases, issues that are coming up with folks' 
credit card companies, so I appreciate your team and your staff 
being so responsive to my team. They really are getting 
callbacks and feeling like they have an advocate in the CFPB.
    As you know, nearly 1 in 5 American adults are burdened 
with medical debt, and this is something that I have been 
continuing to talk about with many of my colleagues here. I 
feel like it is completely wrong to have medical debt weighing 
down credit reports. And you and I know no one chooses to get 
sick, and I know you have personal stories yourself, but 
medical debt should not prevent somebody from securing a home 
or even education, basic needs. I have even had residents talk 
to me about the fact that they had to sell their home because 
of medical debt or get another loan on their home because of 
medical debt.
    In my own district, we have had residents who are veterans 
or seniors report difficulty in paying $3,000 to $4,000 in 
medical bills, and they are on a fixed income. And these are 
folks, by the way, who get their stuff garnished, they go after 
them, and these are people who are actually insured. Let's 
understand that. They are not uninsured. They are actually 
folks with health insurance, who are still facing a high burden 
of medical debt. And for me, I was so incredibly excited that 
the CFPB announced a rulemaking process to remove medical debt 
from consumer credit reports, which I also called for in my 
Restoring Unfairly Impaired Credit and Protecting Consumers 
Act.
    Director Chopra, can you describe, because I think it is 
important for my colleagues to listen to this--this is 
important, because even Chairman McHenry talked about the fact 
that he paid his bill, and it still showed up, and the 
inaccuracy of debt that is showing up on people's credit 
reports. Collections are inaccurate. Things are already paid. A 
medical service that occurred many, many years ago is all of a 
sudden appearing from decades prior on people's credit. It is 
really unbelievable the stories that are coming from many 
folks. Can you describe some of the billing and collection 
practices that motivated the CFPB to take action?
    Mr. Chopra. What we saw is that the largest delinquent, 
derogatory items on a credit report were no longer credit 
cards, and no longer a normal loan. It was allegedly unpaid 
bills, and the very common experience was people say, I am 
disputing this, this is wrong, and then, they go through this 
endless paperwork process to do it, and we know this is not 
like a normal loan. This is a situation where there is a back 
and forth between the insurance company, the provider, and the 
facility, and we have found very serious inaccuracies. And I 
think it has just raised the question about, given its limited 
or almost no predictive value in cases, is the credit report 
just a way to coerce someone to pay something they don't owe?
    Ms. Tlaib. Exactly. And I think you led a little bit on 
this, but your own research at the CFPB found that using 
medical billing data on a credit report is less predictive of a 
credit risk or performance than non-medical collection. So, 
there is no benefit in having medical debt on credit reports 
and weighing down on so many of our families, from cancer to 
even folks who have really awful car accidents that lead to so 
many charges, including physical therapy. Folks have told me 
that they have insurance, but it didn't cover everything, and 
years later, they are getting all this stuff showing up on 
their credit report.
    There is something that I talked to you about, and I really 
want to take a moment, and I know you may not have coverage 
over, but right now, auto insurance companies are using non-
driving factors, Director, and I talked to Treasury Secretary 
Yellen about that this this morning. It really has had a 
disparate impact on my residents, using marital status and 
education level for credit scores. I just feel like that 
practice is a way to discriminate, especially when I see folks 
with DUIs but high credit scores paying 3 times less than 
somebody with no DUI and a lower credit score. And I wanted to 
see if you had anything to say about that?
    Mr. Chopra. Yes. You are right, we don't regulate 
insurance, but I think there are serious issues with how credit 
scores are being used sometimes. For many people, it just 
doesn't seem to make sense.
    Ms. Tlaib. No. Somebody with a Ph.D. is not necessarily 
going to be a better driver. I don't understand the rationale 
that auto insurance companies use in this data.
    Mr. Chopra. I think sometimes, they will say it reflects on 
whether their premium is going to get paid, but sometimes, it 
is so variant, and, again, we don't have authority over here. 
We just cover the credit report and credit score, but 
certainly, if Treasury's insurance office does further work on 
this, we are happy to provide information on the State 
insurance regulators. I know many of them are also wondering 
the same thing.
    Ms. Tlaib. Yes. Some States have done that, but thank you 
so much. Chairman, I yield back.
    Mr. Fitzgerald. [presiding]. The gentlelady yields back, 
and we will take a 5-minute recess.
    [recess]
    Mr. Fitzgerald. Okay. We are back, and next, we are going 
to go to the gentleman from Tennessee, Mr. Rose, for 5 
minutes..
    Mr. Rose. I want to thank Chairman McHenry, and thank you, 
too, Director Chopra for being here today.
    Director Chopra, last month, The New York Times ran an 
article with a headline calling you, ``Wall Street's Most Hated 
Regulator,'' and stated that bankers believe that you are a 
regulator gone rogue. Do you agree with the characterization 
that you are Wall Street's most hated regulator and a regulator 
gone rogue?
    Mr. Chopra. Certainly not, but you will have to ask them. 
We try and make sure that all of our work is really with the 
public interest in mind, including honest financial 
institutions.
    Mr. Rose. Thank you for that. I want to say this to you, 
because I feel this very strongly about all of our Federal 
regulators, that in my view, your first responsibility is to 
help those who you regulate comply with the regulations, and 
that your entire approach to that regulated community that you 
deal with should be to empower, enable, inform, educate, and 
facilitate their compliance with the regulations that are 
intended to protect the consumers of this country. Do you agree 
with that observation?
    Mr. Chopra. Yes, and, in fact, we spend much more of our 
energy on supervision, and most of the issues are not dealt 
with in litigation or enforcement actions. In many cases, they 
are when they are serious or repeat offenses, but we do take 
that as examiners looking at where there are issues and being 
constructive about how it can be fixed.
    Mr. Rose. I worry then a little bit. I know earlier in your 
remarks, you highlighted the amount of fines that you have 
recovered from the regulated community, and I just----
    Mr. Chopra. Restitution.
    Mr. Rose. ----would caution you that I don't think that is 
the objective. I don't think that is what we ought to be 
measuring your success by. I think compliance with a regulated 
community that understands what they are supposed to be doing 
to protect consumers is the goal, and what I would like to hear 
is measures that affirm the agency's understanding, the 
Bureau's understanding.
    Mr. Chopra. And just to comment on that, we have really 
focused on repeat offenders and others. We are not trying to 
target with, ``gotcha,'' actions. I saw that at the Federal 
Trade Commission, where that agency had a history of targeting 
small businesses, strong-arming them into settlements. We just 
are taking a very different approach.
    Mr. Rose. Thank you. Director Chopra, as has already come 
up today, and I am sure you are aware, of course, of the FDIC 
Inspector General starting an investigation into the extremely 
serious workplace misconduct allegations first raised by The 
Wall Street Journal. As a Board member of the FDIC, will you 
commit to fully cooperating with any requests made by the FDIC 
Inspector General regarding their investigation?
    Mr. Chopra. Oh, of course, and, in fact, we cooperate with 
all sorts of inquiries on this.
    Mr. Rose. Thank you. And will you commit to fully 
cooperating with congressional investigations into workplace 
misconduct allegations at the FDIC, including promptly turning 
over any requested information and documents?
    Mr. Chopra. As always, we will work with you to accommodate 
your request. Obviously, it is another agency we have, the 
CFPB, but you are right, I am a Board member, so we will do our 
best to accommodate that.
    Mr. Rose. Thank you. Director Chopra, have you ever been 
investigated for workplace misconduct?
    Mr. Chopra. I have never been a target of an investigation. 
Of course, where there have been issues, there are lots of 
other investigations. We always cooperate, but I have never 
been a target of one.
    Mr. Rose. Do you believe that consumers should have the 
financial freedom to make their own financial choices as long 
as loan terms are clearly disclosed?
    Mr. Chopra. Yes. I think that is right. I think we want 
consumers to have lots of choice and to be able to compare one 
with the other. I think in the digital economy, there are new 
issues about how they can present certain information, so-
called dark patterns, but yes, we want to give consumers that 
informed choice.
    Mr. Rose. Thank you. And as our time winds down here, would 
you help to explain how you and the Bureau are ensuring that 
the costs of regulations and other CFPB actions do not outweigh 
any potential benefit, especially since those costs, of course, 
will likely be passed on, ultimately, to the consumer?
    Mr. Chopra. Yes. We never want to do something that makes 
the public worse off. I think your colleague asked me a 
question about when there are benefits--Congress had passed the 
Debt Bondage Repair Act, which the CFPB implemented. That is 
about a human trafficking survivor getting their life back. It 
is sometimes hard to put a dollar figure on it, but we do our 
best in the required analyses in those rules.
    Mr. Rose. Thank you very much, and I yield back.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentleman from North Carolina, Mr. Nickel, for 5 minutes.
    Mr. Nickel. Thank you very much. I want to thank Chairman 
McHenry and Ranking Member Waters for their work on these 
issues. And it is great to see you, Director Chopra. My 
colleague from Tennessee referenced the article where you are 
the most-hated regulator on Wall Street. I was just on Wall 
Street yesterday, and I definitely don't think you are the most 
hated. I can feel pretty confident about that. I don't know if 
that is much of a consolation prize, but----
    Mr. Chopra. It is not a popularity contest, so yes.
    Mr. Nickel. Yes. And 25 of these, when you get down to the 
final row here of Democrats, it has been a while, so thank you 
for your testimony and being here. I want to thank you for the 
work you and your colleagues at the Bureau do daily to protect 
consumers, Democrat or Republican. All of our constituents rely 
on the CFPB to protect them from financial harm. In fact, over 
82 percent of Americans want the Bureau to continue doing its 
job. I think that is a good record of success. And earlier, I 
heard from some of my Republican colleagues, and I was glad to 
hear them voicing words of encouragement and support for open 
banking. I want to talk a little bit about open banking.
    I am glad the CFPB proposed the Personal Financial Data 
Rights Rule last month to accelerate the shift towards open 
banking. Open banking would give consumers the right to control 
their financial data, which is long overdue. As an example, if 
one of my constituents has a checking account at a bank but is 
receiving bad service, high fees, under the current system, 
they would have to jump through a significant amount of hoops 
to, ``break up,'' with that bank and move their data to another 
financial services company, whether it is a bank or a fintech. 
They would likely lose some of their data along the way, and 
spend countless hours trying to piece it all together as they 
make that shift. But open banking will change this, make life 
easier for consumers, drive down costs, and promote financial 
inclusion. Can you share your thoughts on how open banking is 
transforming the financial landscape for consumers in the U.S.?
    Mr. Chopra. Yes. I think the more we can give people the 
ability not to just solely be judged by a three-digit score but 
also their financial history, being able to give that data, to 
be able to get a better term, to avoid illegal conduct, to 
really have more of a driver's seat, I think this is really a 
way to make banking a way to give consumers a wider range of 
options. And I think smaller entities are really going to be 
able to compete more easily with the big players this way. 
Rather than being locked in with one provider, local 
institutions or startups will have more of a chance to win on 
the merits.
    Mr. Nickel. Yes. Under this proposed rule, the CFPB would 
rely on a separate standard-setting organization to establish 
the technical standards and certifications for consumer 
permission sharing. Given that this organization would be a 
separate entity from the CFPB and not subject to its oversight, 
how would you ensure that all parties have a seat at the table 
and that this arrangement doesn't result in anticompetitive 
behavior, while also meeting its standard-setting obligations 
in a timely manner?
    Mr. Chopra. It is a huge concern to make sure that there 
are not a small set of actors who get to dictate, in an 
anticompetitive way, so we would have oversight. Under our 
proposed rule, the CFPB would have to recognize the standard-
setting body, and pursuant to longstanding guidance, that body 
would need to be inclusive of all perspectives. It can't just 
be the incumbents or it can't just be the fintechs. It really 
has to have everybody. We are collecting comments on that now, 
but that is going to be a big piece in determining how open 
banking accelerates.
    Mr. Nickel. Thanks so much. And in the remaining time, I 
want to just touch on credit repair scams. I have been working 
on legislation in a bipartisan way to finally stop credit 
repair scams, and I know we have talked about this in my 
office. I appreciate your work and your leadership here. These 
companies market themselves to financially-distressed 
consumers, falsely promising to increase credit scores while 
charging exorbitant fees in monthly subscription services that 
can cost thousands of dollars but yield few positive results. 
While the Bureau took enforcement action against one of the 
largest credit repair organizations earlier this year, are you 
concerned that these scams will continue by new organizations, 
especially as household debt increases?
    Mr. Chopra. Yes. I am also worried about how they might be 
targeted using very sensitive information about people, 
particularly on social media, but not exclusively. We are 
trying to look at how people can actually navigate ways to 
address their debt issues without ending up worse off in the 
process.
    Mr. Nickel. Thanks so much, and I yield back.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentleman from Wisconsin, Mr. Steil, for 5 minutes.
    Mr. Steil. Thank you very much, Mr. Chairman. And thank you 
for being here, Director Chopra. I think we are discussing 
really important topics.
    Let me go back to your opening statement, if I can, for 
just a minute. In your opening statement, you noted that credit 
card debt is increasing now north of a trillion dollars. Auto 
loans are increasing north of $1.6 trillion. Mortgages have 
increased dramatically. The median mortgage in the United 
States, over the course of 3 years, went from $1,200 to $2,400. 
That is significant. It is a major concern. The driver of that, 
I think should be noted, is largely the inflationary policies 
put in place by the Biden Administration, in particular, 
reckless spending, the war on energy, and paying people not to 
work after the pandemic. And as we look at the drivers of 
increasing debt for Americans, I would encourage my colleagues 
on the left side of the aisle to join us to work to bring down 
inflation. That is outside your wheelhouse, but I wanted to put 
that out there because I think it is a really important point 
to your earlier points and your opening remarks.
    Let me jump into Earned Wage Access (EWA), which gives 
individuals access to wages that they earned. Improving the 
connection between pay and work in a more timely manner, I 
think is a great opportunity that is out there. You commented 
in the press that the CFPB is re-examining the 2020 guidance 
that maintained that EWA was not a credit product. Can you give 
me an update as to when you expect the review to be completed?
    Mr. Chopra. I am hoping we will be able to answer more of 
the questions that we have been getting in the next few months, 
and, specifically, there has----
    Mr. Steil. So, you expect that in the next few months, that 
rulemaking process will be concluded?
    Mr. Chopra. I think we are going to try and provide 
additional guidance on it. The original guidance that was 
provided a few years ago covered a pretty narrow set of 
circumstances. It is essentially ones that were free, so earned 
wage advance, earned wage access, some of it is with the 
employer, and some of it is separate from the employer----
    Mr. Steil. There is a significant development in the public 
space----
    Mr. Chopra. There have been significant developments in the 
last few years.
    Mr. Steil. So, you are expecting that in the next few 
months, you will be coming forward with that. As you are going 
through that process, I would like you to make sure that we are 
not reducing consumer access in that space.
    Let me follow up on my colleague, Andy Barr's, earlier 
comment as it related to nonsufficient funds and your review of 
that. I would echo his comment that I think it is important 
that these rules are enforced prospectively and not 
retroactively in light of the previous guidance from the CFPB.
    I will jump to one more topic here, the proposed rule that 
the Bureau's new supervisory powers, in particular, as it 
relates to digital apps in wallets. You noted in your remarks 
that consumer complaints is one justification of the proposed 
rule, so if you could expand on how much complaints rose and 
over what period of time?
    Mr. Chopra. I can't recall. As part of that rule, we are 
supposed to look at risk using a multifactor analysis, and----
    Mr. Steil. No, I understand, but if you could get back to 
me on the complaints, how they came back?
    Mr. Chopra. Yes.
    Mr. Steil. Is there a portal at the CFPB where someone 
could issue a complaint, or do you know how the CFPB would 
receive those complaints from individuals?
    Mr. Chopra. Yes. We receive them through our website, 
through the phone, and other ways. We receive thousands each 
week.
    Mr. Steil. Okay. And then, an analysis is taken into 
account on how many complaints are resolved?
    Mr. Chopra. Certainly, we look at all of those factors, but 
with respect to that proposed rule, that is one issue, but 
there are many, many other reasons for the rationale for that 
proposal. It really focuses on the consumer payment apps.
    Mr. Steil. No, I understand. In the proposed rule, it is 
noted that one of the justifications for this is a rise in 
consumer complaints. If there are consumer complaints, I would 
like to know.
    Mr. Chopra. Yes.
    Mr. Steil. I think that is a valid thing that we should be 
thinking about on this committee.
    Mr. Chopra. Totally.
    Mr. Steil. I am just looking for some clarity as to what 
the rise in consumer complaints is, and I understand you don't 
have know off the top of your head. That is fine, but if you 
can get back to me in writing as to what that is in a numerical 
analysis, I would appreciate it.
    Mr. Chopra. Yes. We will answer questions for the record, 
and we will provide numbers of where we----
    Mr. Steil. Perfect. Let me do one final piece here. Last 
year, when you testified in front of the committee, I asked if 
your speeches, press releases, and blog posts are reviewed by 
attorneys. You responded that it is sometimes the case. You 
were kind of open to the feedback that we had because I think 
your words have very serious implications for consumers and 
markets.
    And I remain concerned that some statements that you have 
made are more in light of shaming businesses into doing what 
the agency wants rather than going through a traditional 
rulemaking process. So, I would just continue to encourage you 
to engage legal counsel in the review of your posts on blogs or 
at other locations because I do think they have market-moving 
influence. I am concerned that that is outside of the 
functional rulemaking process, and I appreciate you being here. 
Mr. Chairman, I yield back.
    Mr. Fitzgerald. The gentleman yields back. We now recognize 
the gentleman from Texas, Mr. Gonzalez, for 5 minutes.
    Mr. Gonzalez. Thank you, Mr. Chairman, and thank you, 
Director Chopra, for being here with us today.
    Let's talk about medical debt. The State of Texas has the 
highest rate of uninsured working-age adults in the country, in 
part due to the State Government and the Governor who refuses 
to comply with Federal law to expand Medicaid. Most of my 
constituency is severely unbanked or underbanked and do not 
have the up-front capital to pay for healthcare costs, leaving 
many with medical debt. The ding on their credit report for 
medical debt, which is not an accurate measure, as you know, of 
credit risk, also means it is harder for them to access 
traditional sources for credit like bank loans and credit 
cards. I was excited to learn of the proposal announced in 
September of this year by the CFPB that would address this 
issue head on. If this goes into effect, could you outline the 
steps for the CFPB, the steps they would take to ensure that 
creditworthy consumers are not unduly prevented from attaining 
credit or even a job simply because of a debt they owe or a 
debt they owe from a loved one who has gotten sick?
    Mr. Chopra. Yes. Thanks for the question. I think really 
our lodestar on this has been the real challenges of accuracy, 
and, again, I mentioned to your colleagues, it is not like a 
normal loan, and it is often a bill that is put on your credit 
report. You mentioned uninsured, but a lot of the issues are 
even people with insurance. There are many parties. There is a 
provider. There is a facility. There is an insurance company. 
There is a patient. There is a debt collector. There is a 
credit reporting agency. And over many years, I think there is 
been a consensus that there is extremely limited predictive 
value of this. And given the inaccuracies, you worry a lot that 
people, when they are applying for a job or credit, are just 
paying something that they don't owe. The big credit reporting 
conglomerates have taken some steps, but we are looking at 
whether we might propose a rule to address it more directly, 
and we are currently collecting feedback from small entity 
representatives on that, and that will inform any proposed 
rule.
    Mr. Gonzalez. I can't agree with you more, and thank you 
for these steps you are taking. Also, as you know, in 2012 the 
CFPB implemented its remittances rule requiring companies that 
offer remittances to provide consistent disclosure regarding 
the price of a transfer before consumers make payments. While 
the remittances rule created essential protections for millions 
of immigrants, servicemembers, students, and others who send 
money to other countries, providers have found ways to get 
around it. According to consumer and immigration groups, U.S. 
consumers lose approximately $8.7 billion a year due to hidden 
fees, or they sometimes can change it under exchange rates and 
recover it in the other country.
    In June of 2023, you testified before this committee and 
recognized this issue. Like my colleague, Mr. Vargas, has 
stated in the past--he calls them junk fees, which I agree 
with, and they have impacted our constituents who send 
remittances to their families abroad. The money earned by these 
hardworking people should not be lost to hidden fees or extra 
fees but go to their families. So I ask, what is the CFPB doing 
to protect consumers and ensure hidden fees aren't being folded 
into exchange markup rates? Is there a plan in place to prevent 
remittances providers from continuing this practice?
    Mr. Chopra. Yes. We have taken a number of actions against 
providers that have egregiously violated the law on this front, 
but I think there is this question of, how will a consumer be 
able to get a competitively-priced remittance? They are paying 
for it, and when you are looking at multiple levers, the 
exchange rate, sometimes, there is an advertisement where it 
says, ``free,'' and you know when it is really not free. That 
is what we are really focused on. We are seeing if that is 
working or not. There are a lot of other places where people 
may have options on sending remittances that they may not even 
be aware of, so we are looking at all of that.
    Mr. Gonzalez. Yes. Certainly, things have improved since 
the 1990s, but the concern is whomever their partners are in 
the receiving country----
    Mr. Chopra. The other side.
    Mr. Gonzalez. Right. And I know for Mexico, for sure, they 
get shortchanged on the exchange rate, and I think that is 
happening around the world. Thank you for the work you are 
doing, and we hope that you continue looking into this issue 
that impacts millions of people here and around the world.
    Mr. Chopra. I appreciate it.
    Mr. Gonzalez. Thank you, and I yield back.
    Mr. Fitzgerald. The gentleman yields back. The gentleman 
from South Carolina, Mr. Timmons, is now recognized.
    Mr. Timmons. Thank you, Mr. Chairman. The CFPB has kicked 
off a massive rulemaking to revise Regulation V, which 
implements the Fair Credit Reporting Act (FCRA). The FCRA and 
Regulation V set strict guidelines for the credit reporting 
system, and these guidelines enable our credit economy to 
function. Thus, changes to this foundation should not be made 
lightly, nor should they be rushed.
    Accordingly, I have concerns with the FCRA SBREFA proposal 
that seeks to designate specific data breaches as FCRA 
violations. Numerous Federal and State laws already mandate 
data security measures and breach notifications to consumers. 
Nevertheless, the CFPB seems inclined to introduce a strict 
liability standard concerning data breaches or unauthorized 
access to consumer data by third parties.
    But before I move on, the CFPB had its own data breach 
impacting a quarter million Americans. Would a strict liability 
standard be appropriate for the CFPB's own data breach?
    Mr. Chopra. Just to be clear, we have not proposed a rule. 
We have been looking at multiple options on data brokers as 
well as how there may be access to data, but of course, the 
situation at the CFPB with an insider threat was very, very 
serious. We did the consumer notifications and we erred on the 
side of making sure it was clear. We talked to our supervised 
entities. In some ways, there were automatic triggers that led 
us----
    Mr. Timmons. How will they be made whole? How will the 
victims be made whole? If it was a private business or a bank, 
they would have to pay restitution. The CFPB has hundreds of 
millions of dollars. Is there any restitution that is going to 
be offered to these victims?
    Mr. Chopra. Fortunately, we have no indicia, and it is 
really based on the type of data that it could be used for any 
type of identity theft. It didn't include----
    Mr. Timmons. Like filing unemployment claims fraudulently?
    Mr. Chopra. It didn't include the type of information that 
could lead to that, but of course, I take your point. It was 
very serious, and we are taking steps to address it. And with 
respect to that outline, we are really trying to make sure we 
are guarding privacy, and I agree with you that actually the 
credit reporting system is foundational, and we want to be 
judicial.
    Mr. Timmons. Do you know of any other example of data 
security and breach notification requirements that are enforced 
with a strict liability standard?
    Mr. Chopra. I do believe that some State laws do have that, 
but I can look it up and answer the question for the record.
    Mr. Timmons. Okay. That would be great. I guess I am just 
concerned about what impact this standard would have on 
economic activity. Almost every corner of the financial 
services industry will tell you that their cybersecurity teams 
spend more time and money on compliance than on actually 
keeping their data safe. I think the last thing we need is yet 
another redundant regulation taking resources away from these 
entities providing actual cybersecurity.
    Mr. Chopra. And we don't want to do anything redundant, 
that is for sure.
    Mr. Timmons. Thank you for that. Director Chopra, it has 
been reported that the CFPB is readying a proposal focused on 
bank overdraft fees, and apparently doing so just conveniently 
right after your appearance on Capitol Hill this week. Is this 
report accurate, and what are you proposing in that rule?
    Mr. Chopra. We did put on our regulatory agenda many months 
ago that we would be looking at overdraft and NSF. We haven't 
made any decisions on it, but one of the places that we got 
input on is people wanted some clarity on what the rules would 
be. There have been guidance documents. There are a number of 
places. We are trying to sift through all that and ideally 
propose something that makes sure that there are not overdraft 
abuses.
    Mr. Timmons. I guess overdraft is a service provided by 
financial institutions for consumers to manage their finances. 
I am curious, given your previous statements today about 
attempting to foster competition in the banking sector, why do 
you think it is a good idea for government to set the price for 
a clearly-disclosed service offered to customers in the private 
sector?
    Mr. Chopra. It is not about setting a price. I think there 
have been certain places where prices are a safe harbor to 
avoid some of the cost of compliance, but what we are looking 
for is for there to be a competitive market. When people are 
borrowing, we want them to have lots of choices and to be able 
to get it in a way that is the function of the market.
    Mr. Timmons. I guess that is just the free market. If they 
want to go to a different service provider to get a better 
rate, they should. I am just worried that such a rule will 
merely result in denying overdraft protection for millions of 
Americans. These are the Americans who need it most, and if we 
start impacting the free market, I fear that they are not going 
to be able to have access to overdraft protection, so the 
people who need it most, their transactions will ultimately be 
declined. I appreciate the intent, but the outcome will be 
detrimental to those that you are seeking to protect. As you 
consider this issue, just appreciate that the banks are not 
going to offer overdraft protection if they are not able to 
charge a fee for it.
    With that, Mr. Chairman, I yield back. Thank you.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentleman from New Jersey, Mr. Gottheimer, for 5 minutes.
    Mr. Gottheimer. Thank you, Mr. Chairman. Hello, Director 
Chopra. While I know that you don't have direct oversight over 
tolling, you do have oversight over our financial institutions, 
particularly with regard to revenue from exorbitant fees 
charged to consumers. It has come to my attention that some 
financial institutions are providing favorable credit terms to 
New York's Metropolitan Transportation Authority, the MTA, 
based on enormous and outrageous fees, including a new $23-a-
day congestion tax just to drive into New York City. That will 
be paid by hardworking families, particularly my constituents 
in New Jersey, and you are a Jersey guy, so you know about 
these issues I am talking about.
    We are talking about charging nurses, cops and 
firefighters, labor, restaurant workers, and other hardworking 
families $23-a-day just to drive into New York City. You 
understand consumer fairness perhaps better than anyone else in 
this room. Are you concerned at all that these banks will be 
making money off of gouging middle-class Americans with 
exorbitant tolls from their new congestion tax, and will you 
commit to investigating the revenue that financial institutions 
are making from this congestion tax?
    Mr. Chopra. I actually have not heard this. I am from 
outside Philadelphia, but my uncle worked for the New York MTA 
for a long time. But I will look into this and get back to you.
    Mr. Gottheimer. I would really appreciate if you would do 
that. I would be very grateful, and I will follow up with you.
    I am working with Representative Cartwright on legislation 
that would require the 6-percent interest rate cap for loans 
made to active-duty servicemembers to apply to all applicable 
accounts held by the servicemember at a particular financial 
institution. This is an issue I have been following closely, 
and I know the CFPB released a credit card market report last 
month which found that many credit card companies are not 
proactively checking servicemembers' military status to ensure 
that they receive the benefits they have earned in return for 
their sacrifices and service to our great nation. What needs to 
be done to make sure that more credit card companies are 
proactively checking?
    Mr. Chopra. This is a very good point, by the way. With 
higher interest rates, you actually have a lot more people, 
including on their mortgage, where the Servicemembers Civil 
Relief Act protection is going to kick in. We released some 
analysis about the low levels of take-up for National Guard and 
reserve who were activated. Our Servicmember Affairs Office and 
I put out some recommendations on what institutions can do to 
make sure that they are covering everyone. It is voluntary. We 
know some are doing it, but I do think there are some good 
questions about whether it should be required to simply make it 
go through the process rather than having the servicemember 
deal with every single notice through that process, and there 
is a database. So, we can get back to you with some further 
details on that, but it is a good, worthwhile idea.
    Mr. Gottheimer. Yes. I would really like to follow up with 
you on that as well. That would be great.
    And Director, this committee, as you might know, has 
recently discussed Earned Wage Access, known as EWA, products 
which offer individuals the ability to draw money from their 
paychecks before payday. Several States, such as Maryland and 
Connecticut, have classified EWA products as credit products. 
Other States, like Nevada and Missouri, do not recognize EWA 
providers as lenders. Director, does the CFPB view EWA as forms 
of credit, and if so, does the Bureau plan to treat this 
product on a level playing field with other credit products, 
including by requiring the providers to disclose the cost of 
credit?
    Mr. Chopra. Yes. Earned Wage Access (EWA) is often a 
branding term. It can be an earned wage. It is a cash advance. 
Sometimes, it is through the employer, and sometimes, it is 
not. The CFPB, a few years ago, did issue some guidance that 
was pretty narrow. It essentially involved free earned wage 
advance, so we know the market has developed a lot. Of course, 
Federal law still applies. There is Federal and State law. We 
live with federalism. We are looking, as I mentioned to your 
colleague, at updating the guidance, given all the evolution in 
the marketplace.
    Mr. Gottheimer. Thank you so much. It is critical we 
classify, in my opinion, and govern these products 
appropriately.
    I would like to shift gears quickly to open banking. One of 
the most prominent consumer protections is protecting consumers 
from fraud, as you would agree, and as you know, fraudsters' 
practices are evolving constantly, and the industry needs to be 
able to continue to innovate to be more effective in curbing 
bad actors. I am concerned that the open banking rule as 
written will hinder critical industry efforts to fight fraud by 
prohibiting the use of consumer data to develop or improve 
fraud identification products. Can you please clarify how the 
proposal permits the development and improvement of antifraud 
tools?
    Mr. Chopra. I think what you are referring to is there are 
limitations on secondary uses of the data, in other words, that 
it is really to prevent fraud. We don't want someone baiting a 
consumer to hand over their data, and say, I am going to give 
you an auto loan, when in reality, they are using it for all 
sorts of other purposes. Really, the goal is to protect the 
consumer, to reduce bad actors. I think there are some 
questions in the notice of proposed rulemaking about how data 
can be used. We are collecting comments on that, but of course, 
we do want to make sure that fraud is reduced. Congressman 
Foster raised the issue of identity verification. There is 
really a lot to work on, on this front. Thank you.
    Mr. Gottheimer. Thank you. I yield back.
    Mr. Fitzgerald. The gentleman yields back. I now recognize 
the gentleman from South Carolina, Mr. Norman, for 5 minutes.
    Mr. Norman. Thank you, Director Chopra, for testifying 
today. I am going to move through a couple of questions, and 
for any we can't get through, we will write a letter, and if 
you could just get back to us.
    One question that has come up has been the funding for the 
CFPB before the Supreme Court. You mentioned that you all have 
undertaken a pretty extensive review of expenses, trying to cut 
the costs, I guess, of the CFPB. Has that been successful?
    Mr. Chopra. Just to make sure it is clear, we are always 
looking at ways to sunset old contracts that are no longer in 
use, and reduce waste. We try our best to constantly be doing 
that and to find more ways to get value out of every dollar 
with our procurement, and I have seen places where we are 
making inroads on it. At the same time, we have to execute our 
mission, and that requires expenditure.
    Mr. Norman. When you look at what the history is, I think 
what the CFPB has done is, they can issue a 1-page letter to 
the Federal Reserve and fund up to 12 percent of the Federal 
Reserve's expenses. In 2021, it was $717 million for Fiscal 
Year 2021, and then, in 2022, it was $734 million. Has 2023 
seen an increase from the $734 million?
    Mr. Chopra. Yes, I believe so, and, in fact, we have to 
consider a number of factors, and, of course, a big driver is 
wages and compensation. That is our biggest piece.
    Mr. Norman. But it's fair to say it has gone up?
    Mr. Chopra. Oh yes, it has gone up. I don't think the 
projections are out of line with other banking regulators. I 
think, in some cases, it is lower.
    Mr. Norman. I think it was brought up about how we voted on 
doing away with the CFPB. I was one of 148 to vote to do away 
with it because of funding. Congress ought to have some type of 
oversight, and that a governmental agency can just submit a 1-
page letter and get funded, I think is unfair to the taxpayers.
    In a sweeping change of topics, I think the CFPB has 
removed or is in favor of removing all medical debt from credit 
reports. Is that right?
    Mr. Chopra. No. We haven't proposed it yet, but we are 
collecting feedback from small entity representatives on that. 
And I think, again, it is interesting because it is not like 
another loan, and the inaccuracies and dispute rates on them 
are extremely high compared to other products, and we also see 
that FICO, and others----
    Mr. Norman. You wouldn't be in favor of taking it off the--
--
    Mr. Chopra. Oh, we haven't proposed it yet, but that is one 
serious consideration that we are collecting comments on.
    Mr. Norman. What is your opinion of it, briefly, because I 
want to get to another one.
    Mr. Chopra. Based on the data over the past 10 years, I do 
think that the harms associated with inaccurate medical debt 
reporting cause a nightmare for people----
    Mr. Norman. So, you would take it off?
    Mr. Chopra. ----relative to the benefits. I kind of want to 
see how it all works.
    Mr. Norman. Okay.
    Mr. Chopra. The difference is, medical debt, we think of 
separately from the medical bills that you don't apply for in 
advance as opposed to the medical loans and----
    Mr. Norman. I get it. Let me ask you this. You have a Small 
Business Review Panel. Whom have you dealt with, or, I guess, 
whom have you gotten opinions from? Has it been from medical 
providers? Have you interviewed them?
    Mr. Chopra. Yes. In terms of the panel, we will need to get 
you more information on who is on it, but I have personally 
talked to a number of medical professionals, including medical 
debt collectors who are inside the hospitals, inside the----
    Mr. Norman. You have met with them to get their opinion of 
this?
    Mr. Chopra. Yes, and I think----
    Mr. Norman. And I will get a letter if you could just 
respond who you have gotten with.
    Mr. Chopra. And we can even share with you some conferences 
where we have given presentations. What is interesting is many 
of the hospitals actually don't send it to credit reporting, so 
there is a lot of heterogeneity in the practices.
    Mr. Norman. Okay. I am out of time.
    Mr. Chopra. Okay. Sorry.
    Mr. Norman. If you get can the information to us.
    Mr. Norman. Now, on Regulation F, where consumers can 
consent to receive accounts receivable via text, you have 
certain companies that are blacklisting, that are not sending 
texts, even though the consumer wants them to, like in 
Operation Choke Point. Do you think this is right?
    Mr. Chopra. Wait. Say that again, some----
    Mr. Norman. If a consumer asks for the accounts receivable 
to be received, the information on it via text, some companies 
just are not doing that.
    Mr. Chopra. Let us know about it. I will say the regulation 
doesn't require that debt collectors provide information by 
text. It just allows them if that is a choice, but we are happy 
to follow up with you on it.
    Mr. Norman. Okay. Thank you so much. I appreciate it.
    Mr. Fitzgerald. The gentleman's time has expired. We now go 
to the gentleman from Massachusetts, Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman. Welcome, Director 
Chopra. It's good to see you again. Thank you for all your good 
work.
    I wanted to ask you about the proposed rulemaking that was 
announced in November. We have a bunch of these larger fintech 
firms that are using digital wallets, and in a way, they are 
sort of blurring the line between regular commerce and banking. 
I know that the original announcement was that you were going 
to look at some of these larger firms and require them, because 
they are in a good part of the banking business, to report, as 
we require small banks and credit unions. I wanted to just get 
some of your thinking behind that on how big does a fintech 
firm need to be before they would come under this reporting, 
which I think is appropriate for some of these larger and 
busier firms?
    Mr. Chopra. It is interesting. You have a lot of nonbanks, 
particularly with apps, that are transmitting, I think it is 
now trillions of dollars globally. In many ways, they look a 
lot like what we see emerging in China where large tech firms 
have a lot of ability to collect data, and move payments.
    Mr. Lynch. Yes.
    Mr. Chopra. We have proposed bringing in some of those 
firms and subjecting them to supervision. We already have 
enforcement authority over them.
    Mr. Lynch. Right.
    Mr. Chopra. We think the supervision actually makes sure 
there is a level playing field between the banks that are doing 
it and the nonbanks. There are a number of issues--fraud, 
privacy--but I think there is going to be a lot of value in 
that. We are collecting comments on the specific threshold, but 
we estimate it is about 1 or 2 dozen that could come under.
    Mr. Lynch. I was reading that one of your enforcement cases 
recently was Inova. Was that the name of it?
    Mr. Chopra. Yes, Inova.
    Mr. Lynch. They actually went in and took money out of 
their customers' accounts.
    Mr. Chopra. Yes. Can I just share, Congressman?
    Mr. Lynch. Yes, please.
    Mr. Chopra. We have a lot of situations where people are 
able to get information about a customer, and then they can 
just grab the money. There are lots of issues that impacts. So, 
making sure that our payment system has a lot of fidelity is so 
important to the lowest-income people in our country because a 
wrongful debit in their account can send them into a tailspin.
    Mr. Lynch. Right, and there are credit rating issues there 
based on much of that difficulty. I know one of my colleagues 
raised an issue earlier today about, I think it was Citibank, 
and there was a discrimination issue there with Armenian-
sounding names, I guess.
    Mr. Chopra. It was actually names, particularly, that ended 
in Y-A-N and I-A-N.
    Mr. Lynch. I have a big Armenian population in my district, 
so I am quite familiar with that.
    Mr. Chopra. And those are obviously going to impact the 
Armenian community.
    Mr. Lynch. Where does that come from? Do you have any sense 
of----
    Mr. Chopra. As we have investigated in the enforcement 
action, they actually filed false reports to those borrowers as 
to why they were declined, and they ostensibly said it was to 
detect and prevent fraud. But we allege, and I think provided 
very strong evidence that it was prohibited national origin 
discrimination. We have laws on the books that don't allow it 
to say, ``you type of people.''
    Mr. Lynch. These are Armenian Americans, though, aren't 
they?
    Mr. Chopra. Yes.
    Mr. Lynch. Yes, in this country. I was just curious what 
the underpinnings of what the motivation might have been there, 
if anything, during your investigation.
    Mr. Chopra. Yes. We can share more, but they were excluding 
people from the Glendale, California, area, which has a very 
high concentration of Armenian Americans, as well as people 
with that last name suffix.
    Mr. Lynch. Okay. Maybe, we can talk offline about that. I 
do appreciate your good work, however, and how readily 
available you have been to members of this committee. I think 
it is commendable the way you have handled your 
responsibilities. Thank you, and I yield back.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentleman from Pennsylvania, Mr. Meuser, for 5 minutes.
    Mr. Meuser. Thank you, Mr. Chairman. And thank you, 
Director Chopra. It's good seeing you, and I, too, believe that 
your work is focused on improving situations, but I can't help 
but have a number of questions, and maybe you can help clear 
some things up for me.
    Your mission at the CFPB, part of it anyway, is to aim to 
make consumer financial markets work for consumers, and 
responsible providers, so both, and the economy as a whole, to 
protect consumers from unfair, deceptive, or abusive practices 
and take action against companies that break the law. However, 
there are many in the banking and business communities that 
think that the CFPB is guilty of practices that are unfair and 
perhaps abusive and that there is tremendous overreach, and 
that very often, rather than the bright-line concept, there is 
ideology over specific rules. And this isn't just from one set 
of resources. It is from large banks, small banks, super large 
banks, super regionals, $1 billion banks, $10 billion banks.
    I put out a text a little while ago to a few banks saying, 
``Hey, give me some of your thoughts on the CFPB.'' And my 
phone is blowing up with negative comments, for instance, 
``1071, it will impose significant costs on banks, costs that 
will be felt most acutely by small community banks that will 
negatively affect their small business customers.'' This was 
from a group.
    From another group, ``The proposed rule's scope is 
unnecessarily far-reaching. It would exempt very few community 
banks, define small businesses so broadly as to include tens of 
thousands of large businesses, and require institutions to 
collect and report data on numerous data points, in addition to 
the congressionally-required data points.''
    Next one: ``The CFPB 1071 rule would create onerous 
reporting requirements for both small business owners and 
financial institutions.'' Here is one as well: ``The biggest 
issue with the CFPB--and I know this person personally, a small 
bank, with probably a billion dollars--is the regulations 
restrict banks from residential lending, limiting options for 
borrowers, and forcing community banks to lend to more 
commercial customers.''
    I will leave it to you. How is this working? Everybody, 
what a great job is being done. Okay. I would love to see a 
great job being done. I want consumers to be protected. I don't 
want bad characters to be able to play out, and that should be 
a good thing. But the fulfillment of all of this needs to have 
a feel that there is some sort of synergy or at least 
improvement in line with what is best for the economy as a 
whole. That is a somewhat general question, Director, but I 
will ask you to comment on some of those comments I read.
    Mr. Chopra. It is true that when regulators are doing their 
job, we won't always be the most popular when it comes to those 
whom we enforce the laws for, when it comes to detecting where 
there are potential crimes. I get it. Many of the things you 
mentioned are things that Congress enacted in order----
    Mr. Meuser. We are talking about 90 percent of the banking 
community here whom I am referring to----
    Mr. Chopra. I hear from a lot of financial providers who 
are eager for us to crack down on some of the abuses that we 
see, because they have to compete with these people. They have 
to be the ones competing online often with these 
misrepresentations. So, we take all the feedback. I have met, I 
think, with every State bankers association representing people 
on this committee, and maybe even more. We want to make sure 
that the law-abiding businesses are not disadvantaged by those 
that----
    Mr. Meuser. I understand that, but----
    Mr. Chopra. And, again, it is not a popularity contest.
    Mr. Meuser. You are not receiving the feedback that, and 
you said to me in the last hearing that you would reach out 
more and have more of a comprehensive relationship or even get 
feedback from those who are knocking themselves out. You went 
to the Warren School of Business. I know you have to believe in 
capitalism to an extent. It is a competitive marketplace. They 
are trying to win customers. They are not trying to abuse their 
customers. That would be ridiculous because they would go out 
of business. That is how it works. The 81 total data points, 
the questions that were added, last time we spoke, you said it 
is not 81. I forget what you said. It is, like, 18 or 
something--no, it is, in fact, 81.
    Mr. Chopra. It is not 81. If you are asked a multiple 
choice question of what State do you live in, that is not 50 
questions. That is one.
    Mr. Meuser. You expanded upon congressionally-authorized 
questions that you were given. Why is sexual orientation 
something that a bank is supposed to ask----
    Mr. Chopra. Because in the statute, there are requirements 
on----
    Mr. Meuser. Not that.
    Mr. Chopra. ----the demographic----
    Mr. Meuser. Not in the statute.
    Mr. Chopra. The Supreme Court has ruled that discrimination 
based on sex----
    Mr. Meuser. That is an overreach. It is not in the 
congressional statute. I yield back, Mr. Chairman.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentleman from New York, Mr. Torres, for 5 minutes.
    Mr. Torres. It is always a pleasure to see you, Director, 
and I have found you to be as impressively communicative and 
responsive as any agency head in the Federal Government. Thank 
you for your commitment to protecting working people from 
predatory fees.
    My first question is about remittances. I represent a 
district in the Bronx where families have to pay excessive fees 
in order to transfer their own money to loved ones abroad, and 
the high fees and long delays of the existing remittance system 
imposes a hardship on the lowest-income Americans, particularly 
immigrants. And as a nation of immigrants, as you know, the 
United States is by far the largest source of remittances, with 
$72 billion in 2021 alone. In your view, what can and should be 
done to create a better, cheaper, and faster remittance system 
for the most-vulnerable among us?
    Mr. Chopra. There is so much. One, we need to make sure 
that the existing providers are not engaged in bait and switch, 
that they are telling the truth about how much it costs, and 
they are not hiding things with junk fees, but I think with 
digitization, we have also have to think more broadly. Lots of 
you have constituents who send money abroad. I see how in big 
commercial contexts, there are often agreements between large 
banks, between central banks. We should be thinking about the 
plumbing of the financial system so that people can send things 
cheaply and safely, and I think that requires the attention of 
us, the Federal Reserve Board, and many others.
    Mr. Torres. I have a question about blockchains and 
stablecoins in the context of remittances. Blockchains can 
enable real-time transactions. Stablecoins can digitize the 
dollar. Do you believe that the combination of blockchains and 
stablecoins, if properly regulated, has the potential to play a 
role in creating a better, cheaper, and faster remittance 
system?
    Mr. Chopra. Yes. We have seen that some digital apps and 
other products have been able to actually help people send 
money to a family member who is in a very remote area.
    Mr. Torres. Yes.
    Mr. Chopra. They may not actually live near a bank or a 
place that has a remittance provider and are sometimes able to 
use that in ways that really kind of bridge the divide. Now, on 
the underlying technology, obviously, it is complicated. We 
want to make sure that it is well-regulated, that there is not 
fraud, that people have a fair sense of what it is, but I am 
totally open to working with all of you as you think through 
that.
    Mr. Torres. Much has been said about AI, and AI is the most 
revolutionary technology of our time. I have found the 
discourse about AI to be pessimistic to the point of 
apocalyptic. So, I am curious, what do you see not only as the 
greatest risk, but also the greatest reward of AI when it comes 
to consumer protection in the field of financial services?
    Mr. Chopra. Yes. In some ways, AI is not totally new. It is 
really advanced computational methods. There are lots of good 
ways to prevent fraud. There may be ways in which you could 
detect some sort of error in your finances, to help you 
automatically dispute something. There are certainly going to 
be consumer use cases. I think a little bit of where we should 
be cautious is throwing it out into the world and just kind of 
seeing what happens. I think we should be thoughtful about how 
are the different use cases, generative AI and copying of 
biometric data lending and how it would work in algorithms. So 
we should be precise on it, but I think there are 
opportunities. I am not apocalyptic, but I want to make sure we 
are being cautious.
    Mr. Torres. Is the CFPB exploring how to harness the power 
of AI to enhance enforcement?
    Mr. Chopra. Yes. I think we are always looking at more 
advanced tools on how we analyze our compliance data, and other 
data to detect and deter wrongdoing, just as other law 
enforcement does.
    Mr. Torres. On the subject of crypto regulation, the 
agencies that typically come to mind are the CFTC and the SEC. 
What is or should be the role of the CFPB in the field of 
crypto regulation?
    Mr. Chopra. It is less about the underlying technology and 
more about the use case. There has not been a huge 
intersection, but, certainly, if you have a stablecoin that 
very rapidly scales on one of these payment apps, like another 
consumer payment, that is certainly a consumer use case there, 
so that is a real place that we are watching it. But most of 
the other uses that we see in the financial markets are indeed 
outside of consumer financial products.
    Mr. Torres. What are your existing authorities with respect 
to stablecoin regulation?
    Mr. Chopra. The relevant ones that come up a lot are the 
Electronic Fund Transfer Act, which is kind of fraud movement 
of digital money, and privacy and the Gramm-Leach-Bliley Act 
privacy provisions, but there are some other ones that get 
implicated as well.
    Mr. Torres. I see my time has expired. Thank you for your 
service.
    Mr. Chopra. Thank you.
    Mr. Fitzgerald. The gentleman yields back. I am now going 
to recognize myself for 5 minutes.
    I would like to insert a letter into the record from the 
Consumer Bankers Association commenting on today's hearing.
    Without objection, it is so ordered.
    Director Chopra, your recent Fair Credit Reporting Act 
proposal on data brokers and consumer data doesn't include a 
fraud exemption when an entity is using data to help verify a 
customer's identity. The treatment of credit header data 
described in the outline would prohibit financial institutions 
from using it for the essential antifraud purposes, for what it 
is used for today, I guess. As you know, identity verification 
and consideration for creditworthiness are two distinct actions 
with their own legal frameworks, KYC laws and the FCRA. Have 
you consulted with prudential regulators and the Financial 
Crimes Enforcement Network (FinCEN) to understand how capturing 
identity verification activities under the FCRA may impede 
compliance with the Know Your Customer requirements if, in 
fact, the data is considered a consumer report?
    Mr. Chopra. Yes. Just to be clear, we have not put forth a 
proposed rule. One of the places that we know there is a huge 
desire for fraudsters to take control over is really that 
identity-related data. So, we are trying to think of all the 
ways in which we can protect it but not undermine what banks 
and lenders are legitimately trying to do for financial 
services. To answer your question, yes, certainly we have 
discussions with the Treasury, FinCEN, and others on a wide 
range of issues, and I can assure you that I hear your message 
here loud and clear.
    We don't want to do anything that undermines some of the 
legitimate financial companies' work, and I think it also goes 
back to something Mr. Foster said about identity verification. 
I really think all of us need to work on what is the future of 
identity verification because it can open up a lot of questions 
for harms in the country if we don't have a robust one.
    Mr. Fitzgerald. Very good. Let me shift gears here. A small 
pediatrician office in Sheboygan, Wisconsin, has estimated that 
the CFPB's proposal to remove medical debt from credit reports 
will lead to a revenue decrease by 11 percent, or $11,000. I 
worry that further reducing the information that lenders have 
on borrowers is just going to result in higher costs and higher 
rates for all. Is there any way that CFPB has studied this or 
tried to figure out what the impact would be on individual 
medical clinics?
    Mr. Chopra. Yes. I think we are thinking about it in two 
different contexts: the medical provider facilities; and then, 
separately, the lenders. You raised two parts: what will be the 
impact for them; and what would be the impact on the credit 
reporting system? On the second part, there has actually been a 
move away because of the limited predicted value of medical 
bills on credit reporting. We have talked to a number in the 
medical industry, and many of them actually don't put it on 
credit reports, and actually for most small players, I believe 
they don't. We are really looking at all of that, and, again, 
we have not proposed a rule. We are going through the process 
of collecting input in advance of proposing. We will then have 
public comments before we pursue it. But I will tell you, I am 
concerned about widespread inaccuracies in medical debt credit 
reporting.
    Mr. Fitzgerald. Very good. One more on privacy. We have 
heard from many Wisconsin bankers in discussions with their 
small business customers about the 1071 reporting requirements, 
which have been discussed many times today. They are concerned 
about the public release of the data.
    Mr. Chopra. Yes.
    Mr. Fitzgerald. We are talking about villages of a thousand 
people, and some counties, actually, would find themselves, I 
think, in a similar situation. It would be very easy for 
somebody to sit down and kind of figure out who this is or 
which family this is. Considering how important privacy is to 
the Bureau, why wouldn't you first publish the results of the 
re-identification study and then take comments, as required by 
the Administrative Procedure Act (APA), to balance the risks 
and the benefits of the disclosure?
    Mr. Chopra. We are pretty far away from any publication on 
it, and let me just share with you that compared to mortgage 
data under the Home Mortgage Disclosure Act, the data here is 
going to be totally different. Like you said, there may only be 
one type of small business type in an area, so we are going to 
look at that. I will take that suggestion about how we might 
proceed with that, but we are many years away.
    Mr. Fitzgerald. Very good. I yield back. And at this time, 
I recognize the gentlewoman from Colorado, Ms. Pettersen.
    Ms. Pettersen. Thank you, Mr. Chairman, and it's great to 
see you, Director Chopra. It is wonderful to have you here. You 
do a very good job of being in the hot seat.
    Being last, all of my questions have been asked, but one 
thing that I have thought a lot about sitting through this is 
what it was like to live in poverty, what it was like when I 
was younger, having multiple jobs while I worked my way through 
college, putting myself through school, being just one 
financial emergency away from being unable to pay for rent and 
put a roof over my head. And when I think about those life 
experiences that are so important to have when you are sitting 
in these seats, and understanding what people are struggling 
with every day, and how important your work is in fighting for 
regular people, and who these junk fees can really have an 
enormous impact on, or zombie debt. So, I just want to thank 
you for the work that you and your team do every day.
    And when I think about zombie debt in particular, I was 
reflecting on when I was younger, in high school, and I had to 
go to the emergency room. I paid for it. Later on, when I was 
qualifying to buy a house, it showed up again.
    Mr. Chopra. Credit report?
    Ms. Pettersen. No, I paid for it, but then it was sold off. 
So zombie debt, where it is paid years later, and you have no 
proof, oftentimes lose that, and they know that, so they sell 
it off knowing that is likely, and so many people in my life 
have dealt with this. And I remember being a young person and 
feeling like there was no accountability, nowhere to go. And I 
know recently, the CFPB had a field hearing on this issue 
around zombie mortgages specifically, and I wanted to see how 
you all are thinking about what to do about zombie mortgages 
and how they are targeting seniors, but also if there are gaps 
that Congress should consider addressing?
    Mr. Chopra. Yes. Thank you for that, and let me just share 
one of the things that is really great about the work we do is 
that we actually get to hear directly from thousands of people 
a day about exactly those situations, and how it affects them, 
and how we can fix things for them.
    On zombie mortgages, there was, and we think this is quite 
targeted in a few metro areas, but maybe nationwide, second 
mortgages that were considered satisfied, but that have 
reemerged and are targeting people sitting on home equity, 
often seniors, zombie debt, more broadly, of things that just 
keep popping up over and over again, and the consumer is often 
put in a place to prove they have paid it, even though it may 
be long ago. I think there are a lot of ways in which the 
credit report, too, is used to coerce people into paying this 
debt, debt parking.
    We do use our authorities under the Fair Debt Collection 
Practices Act and the Fair Credit Reporting Act, but I think it 
is worthwhile to think if we need any sort of enhancements to 
it in order to make sure that this type of what I see often as 
fraud doesn't recur.
    Ms. Pettersen. Great. Thank you for that. I know that you 
are trying to change behavior by doubling down on going after 
junk fees, and I don't know if you want to talk quickly about 
how you all are identifying junk fees, and then also what you 
are seeing with behavior changing from businesses and what that 
means for consumers?
    Mr. Chopra. Yes. I think we have seen a number of very 
large banks which engage in some hyper-aggressive illegal 
practices. We reached two major enforcement actions: Wells 
Fargo, and Regions Bank. It was pretty bad conduct. We have 
seen, though, a pretty big shift in the market of moving away 
from some of these junk fees, and I think we have tried to go 
to other industries to see where are they charging something 
that really is for nothing. I mentioned earlier to your 
colleague that we found a paper statement fee that they didn't 
print or mail, so we have to make sure that this is just not 
another way to cheat people. We are very proud of that work, 
and I think it has made a difference of billions of dollars.
    Ms. Pettersen. Great. With 20 seconds remaining, is there 
anything else you want to add? I know that there were a lot of 
talk----
    Mr. Chopra. I have known some of you now for many years, 
and I do hope that there are some things that we all see eye to 
eye on, including protecting data privacy, and junk fees. I 
think there is a lot we can do to really row in the same 
direction, so I appreciate all of you who have met with me to 
really help inform our work.
    Ms. Pettersen. Thank you very much. I yield back.
    Mr. Fitzgerald. The gentlewoman's time has expired. We will 
now go to the gentleman from New York, Mr. Garbarino.
    Mr. Garbarino. Thank you, Mr. Chairman. Director, it is 
good to see you. It is great that Ms. Pettersen just asked 
about junk fees, because one of my other colleagues asked about 
it before as well, and I am trying to get an actual answer. Are 
fees for negative business transactions, late fees, overdraft 
fees that are part of the contractual services provided by 
financial institutions to customers who sign up for products 
such as credit cards and checking accounts--would you consider 
those junk fees? Would you consider if someone signs up for a 
credit card or a bank account, a late fee or an overdraft fee?
    Mr. Chopra. Some of it is how it is assessed. For example, 
I mentioned those two enforcement actions. Sometimes, they 
assessed it by mixing around the transactions, and sometimes, 
they didn't even deliver it.
    Mr. Garbarino. I agree. If they don't deliver, if there is 
no overdraft and they charge an overdraft fee, that is a 
problem, but if the statement says if you are late with your 
payment or if the contract says if you are late with your 
payment, we are charging you a late fee, or if you overdraft 
and it is a legitimate overdraft, we are charging an overdraft 
fee.
    Mr. Chopra. Yes.
    Mr. Garbarino. Are those junk fees? Would you consider----
    Mr. Chopra. I think I am in agreement with the spirit of 
what you are saying. The issue is that it can't override 
Federal law, so there can't be deception around it. There are 
other congressional prohibitions. And again, like Congresswoman 
Pettersen said, I do want to recognize that the industry has 
made some real moves on this, which I think are commendable.
    Mr. Garbarino. I get that, but late fees and overdraft fees 
aren't blatantly junk fees.
    Mr. Chopra. It depends on how----
    Mr. Garbarino. I agree, but----
    Mr. Chopra. Yes, I take your point. Look, the way we define 
junk fees are ones that are not subject to the competitive 
process, really are hidden, or are sometimes for things that 
are not even services or not even provided.
    Mr. Garbarino. I get that.
    Mr. Chopra. We try and focus on where it is illegal, or 
fraudulent, but there are other places where you have a lot of 
honest banks out there competing on the upfront price and then 
others building a business model off of something.
    Mr. Garbarino. I understand that. My point is, if a 
contract says that if you are late paying your credit card 
statement, we are going to charge you $25, and somebody is a 
week late, it is pretty straightforward.
    Mr. Chopra. Yes. It also has to comply with Federal law.
    Mr. Garbarino. Of course, yes. I want to move on to 
something else. I want to talk about an issue, and it is 
related to the Fair Credit Reporting Act (FCRA) proposal and 
the data brokers. From what I understand, the CFPB is 
considering significant changes to the FCRA, including 
broadening the scope of what constitutes a consumer reporting 
agency to basically any entity that compiles and makes 
available consumer financial information, whether or not it is 
used for eligibility decisions. Currently, the Bureau's 
authority is limited to regulations that are necessary and 
appropriate to carry out the objectives of the FCRA. However, 
the SBREFA includes a broad and novel definition of, ``data 
broker,'' which seems to contradict decades of regulatory 
guidance, case law, and congressional intent. It also creates 
conflicts with the KYC requirements.
    Given those contradictions, where in the CFPB's limited 
rulemaking authority does it have the ability to create the new 
definition of, ``data broker?''
    Mr. Chopra. Yes. I don't agree with what you just shared 
there. One of the pieces of input you all have given us is to 
try and avoid, where we can, regulation by enforcement. There 
are a lot of companies out there that meet the definition and 
activities of a consumer reporting agency. Yes, we could go and 
litigate it, bring enforcement actions. The goal is, in some 
ways, to provide some clarity about the business model of a 
consumer reporting agency, which now you have a lot of 
different firms that are collecting these dossiers on us, and 
to create a level playing field around it.
    You mentioned the issue of KYC fraud. As I shared with 
Congressman Fitzgerald, we are taking that very seriously and 
looking at all of the uses of it. But I think we need to be 
careful about data brokers often compiling information about 
Americans and often selling our most-sensitive data to bad 
actors overseas, including to defraud people.
    Mr. Garbarino. I understand, but I just want to make sure, 
so you think you already have the authority, the CFPB already 
has the authority to do all this with the new----
    Mr. Chopra. Yes, because we have to make sure that we are 
administering the Fair Credit Reporting Act, and if you look at 
even the legislative history----
    Mr. Garbarino. You believe you have it under the----
    Mr. Chopra. Yes. We can't propose a rule on anything that 
we wouldn't have it.
    Mr. Garbarino. I understand. I think there is a 
disagreement of whether or not----
    Mr. Chopra. We can talk about it. I am happy to talk about 
it.
    Mr. Garbarino. Okay. I appreciate that. I have another 
question, but I am down to 10 seconds, and I know I won't get 
it out. I will submit it to you for the record.
    Mr. Chopra. Sure.
    Mr. Garbarino. Thank you. I yield back.
    Mr. Fitzgerald. The gentleman yields back. Next, we have 
the gentleman from Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the ranking 
member as well, who is not here at this time, but I also thank 
Ms. Garcia. And I thank you for appearing today, sir. It is my 
belief that if we did not have the CFPB, we would need to 
create it, and what I would like to do is explore some of the 
rationale for my contention.
    The staff has done an excellent job in providing 
intelligence. There is an indication that the agency has 
required financial firms that violate the law to pay more than 
$4.1 billion in civil penalties. As a former litigator, I 
understand the difference between a class action and a small 
action. What would these persons have to do, if not for the 
CFPB, to collect this amount in penalties? What would they have 
to do without the CFPB?
    Mr. Chopra. Yes. We have obtained, I believe, about $20 
billion in forfeitures. There is no way that people would have 
been able to get all of this on their own, and in some ways, 
Congressman, they may not have even known about the error or 
the mischarge. We have been using our complaints and sometimes 
can see the trends that it is not just 30 or 40, but it is 
30,000 or 40,000, and I think we have had maybe tens of 
millions of people who directly benefited from those. And look, 
we should want a marketplace where people are playing by the 
rules, and we try and help firms that do, but where they don't, 
we do have to take action.
    Mr. Green. I am proud that you do. Let's explore one 
additional area: illegal discrimination. We found that a 
certain bank--no need to mention the name--discriminated and 
was ordered to pay $25.9 million. This type of litigation 
usually is long term, meaning it would be 3 to 5 years. This is 
what the consumer would have to suffer, just the time alone, 
and then to find a lawyer who would do this for an individual, 
you would have to have some deep pockets. Explain, if you 
would, as tersely as you would like, why it is so important 
that you engage in these illegal discrimination actions?
    Mr. Chopra. Many times, people wouldn't even know they were 
the victim of it. In the case you mentioned, those individuals 
were given fake reasons why they were denied, but in reality, 
it was because they were Armenian American. They wouldn't have 
even known to do it, and so we have to make sure that we are 
detecting it and taking action.
    Mr. Green. I started with the premise that if we didn't 
have the CFPB, we would need to create it. Sadly, this Congress 
would never do it. Thank God, we have it now, because we 
couldn't get it if we didn't already have it. I yield back the 
balance of my time.
    Mr. Fitzgerald. The gentleman yields back. We now go to the 
gentlewoman from California, Mrs. Kim.
    Mrs. Kim. Thank you. And, Director Chopra, thank you for 
being with us today. From its inception, the way the CFPB was 
designed disregarded longstanding checks and balances. Under 
our Constitution, no one agency or person shall have absolute 
power to do as they please. Even the President is accountable 
to Congress and to the power of the purse, and the CFPB should 
not be the exception to longstanding constitutional rules. I 
think we agree on that.
    And I do agree with the mission that consumers must be 
protected from bad actors. The CFPB, in the name of consumer 
protection, is being used to divert the public's attention from 
the real challenges faced by individuals and families. And the 
CFPB, under your watch, Mr. Chopra, has not addressed the root 
causes of indebtedness, of poor economic conditions for 
millions of Americans. And in your testimony, you highlight 
that for the first time ever, credit card debt eclipsed $2 
trillion last year, and you also mentioned the cost of high 
interest rates for consumers, but unfortunately, you don't 
mention inflation once in your testimony.
    You are a member of FSOC, and so you should have been privy 
to discussions on how fiscal expansionary measures fueled 
inflation. If you recall, everyone in the Biden Administration 
was stating that inflation is transitory, when, in fact, we all 
know that it wasn't. Why did you fail to mention inflation in 
your testimony?
    Mr. Chopra. Certainly, higher cost of goods--I think I 
specifically mentioned examples of it, I am happy to look back 
at it, and the examples of higher vehicle prices. There are 
certainly issues with higher home prices. Of course, prices and 
the rate environment, we do see both as being drivers. The rate 
environment, I think, has also, as mentioned by one of your 
colleagues, dramatically increased the price of new mortgage 
origination. So, they are both certainly something we think 
about in consumer financial products.
    Mrs. Kim. Thank you. Since consumers had to pay more for 
goods and services, would you agree that inflation played a 
role in increasing indebtedness to Americans?
    Mr. Chopra. If you look at the amount of household debt 
relative to net worth, we can share with you the trend lines, 
but it is not our job to really look at what exactly is 
happening with respect to each individual good. But we, of 
course, know that when there are higher prices, when there are 
higher rates, that is going to affect people, and certainly the 
Federal Reserve Board is the one that----
    Mrs. Kim. Thank you. I mentioned that, because we had a 
peak of 9.1 percent inflation in 2022, I think around June, and 
that was the highest rate in 40 years, so I just wanted to 
point that out. I know Chairman McHenry mentioned this earlier, 
and I share his concern, because back in August of last year or 
this year, I led a letter with the Chair of our Financial 
Institutions Subcommittee, Chairman Andy Barr, and there were 
17 of my colleagues who sent a letter voicing our concerns 
regarding the announcement of the informal dialogue between the 
CFPB and the European Commission, and in that letter, we 
specifically asked the CFPB to brief this committee. I want to 
ask you again, will you commit to briefing this committee, 
because we want to ensure that the EU is not exporting their 
financial laws and regulations in the United States.
    Mr. Chopra. Certainly. Let me be clear, we are not cutting 
and pasting anything from there. We are having a meeting, a 
series of meetings because many of the issues, particularly----
    Mrs. Kim. I just need your commitment. We haven't gotten 
the briefing----
    Mr. Chopra. Actually, if I could just finish----
    Mrs. Kim. ----that we asked for.
    Mr. Chopra. We face some serious global threats when it 
comes to some of the issues, particularly from bad actors based 
in China and Russia, and I do think that we need some global 
cooperation on this. Yes, we will brief you----
    Mrs. Kim. Okay. Thank you.
    Mr. Chopra. ----but we are having meetings with them.
    Mrs. Kim. Then, we can have that further conversation----
    Mr. Chopra. We are having meetings with them----
    Mrs. Kim. ----when you come and brief us----
    Mr. Chopra. ----because there are some very serious issues.
    Mrs. Kim. Let me reclaim my time, because I do want to ask 
another question regarding the CFPB's SBREFA outline because on 
that, the FCRA proposal raised concerns about legal versus 
factual disputes, and there is considerable case law and 
supervision guidance around factual disputes because those 
questions can be determined by reinvestigation. The resolution 
of a legal dispute depends upon information that is generally 
not reported to a consumer reporting agency, so how could a 
credit bureau make a determination on a legal matter?
    Mr. Chopra. Mr. Chairman, may I respond?
    Mr. Fitzgerald. The gentlelady is out of time.
    Mr. Chopra. We will answer for the record.
    Mr. Fitzgerald. We can get that in writing, I am sure.
    Mrs. Kim. Okay. Thank you.
    Mr. Fitzgerald. What we are going to do is, because there 
is an open roll call going on right now, we are going to go to 
Congressman Flood, and then we are going to recess. We have 
four more members, but it should be very quickly because there 
are only two votes, and then we will come back in and finish 
with those four members. Next, we will recognize the gentleman 
from Nebraska, Mr. Flood.
    Mr. Flood. Thank you to the very capable chairman from 
Wisconsin. Mr. Chopra, I would like to focus on the CFPB's 
recent rulemaking for larger participants in the market of 
digital consumer payments. This rulemaking covers a lot of 
ground, from third-party platforms used in small businesses 
across the country, to digital asset wallets. Let's start with 
the implications for digital assets.
    When describing the supervisory authority that the Bureau's 
larger participant rulemaking would give to the CFPB, there is 
a footnote explaining, and it says, ``The CFPB's supervisory 
authority is not limited to the products or services that 
qualified the person for supervision, but also includes other 
activities.'' In my view, this footnote signals that the 
rulemaking will cover far more than the, ``general use digital 
consumer payment applications.'' Can you comment on the CFPB's 
intentions surrounding the scope of this rulemaking?
    Mr. Chopra. I wouldn't misread that. We are looking to make 
sure there is a level playing field between the banks and 
credit unions that offer these services and the large nonbanks. 
We already have enforcement authority over all of these 
entities that would be covered. It wouldn't create any kind of 
new jurisdiction, but what we are doing is going through the 
rulemaking process to establish for certain larger 
participants, are they following the existing law? We could go 
through that process by an enforcement investigation. That is 
more adversarial.
    I think this is a little bit more of a way to make sure 
that there are not harms, given some of them really are 
touching tens of millions of customers. But I think I hear the 
concern, which is kind of going outside of the jurisdiction, 
but we can only supervise and enforce the laws that Congress 
has specifically designated for us.
    Mr. Flood. Given that the rule does not cover some digital 
asset transactions, like an investor purchasing bitcoin through 
a brokerage account, but does cover others, how would the CFPB 
distinguish between the different types of transactions 
conducted by the same digital asset wallet?
    Mr. Chopra. Yes. We are going to have to deal with that. I 
think most of what we are going to be doing is focused on ones 
where it is really consumer payments. Inasmuch that they are 
doing two different activities, we have a lot of familiarity 
with how to do this. Many of our banks have broker-dealers 
affiliated with them. They have commercial businesses that we 
don't cover, so when we do an examination, we explain we are 
covering the activities under Federal consumer financial 
protection.
    Mr. Flood. Do you think the CFPB has Regulation E authority 
over transactions using a digital asset, like a stablecoin, to 
purchase a consumer good or service?
    Mr. Chopra. The Electronic Fund Transfer Act covers the 
transfer of funds. There are certain exceptions for when it is 
for trading of securities. I think there are other exceptions 
there. Overall, when you have a consumer payment for household 
use, I think the case law would suggest that is covered, but we 
are collecting comments on this just to make sure, and we have 
been pretty judicious on this point. I have raised with 
Chairman McHenry and others that, inasmuch that you all enact 
anything, we will need to make sure that it is well-reflected.
    Mr. Flood. I would like to quickly switch gears and discuss 
some of the non-digital asset implications of the rule. Given 
that third-party payment processing tools are popular among 
small businesses, how can you be sure that this rule wouldn't 
result in some of the cost of compliance being passed down to 
these small businesses?
    Mr. Chopra. The rule proposes only for larger participants, 
so we proposed a threshold for which we are getting comments, 
so it is really not supposed to implicate small businesses, and 
it is really focused on those consumer payments. I will keep my 
eye out for that, but again, there is not any kind of new 
authority. We currently have enforcement and other authorities 
over these firms already.
    Mr. Flood. I appreciate that. The cost-benefit analysis in 
this rule states that the Bureau lacks sufficient information 
to predict how compliance costs would be, ``borne by providers 
or passed on to the consumers.'' However, you certified that 
the proposed rule would not have significant impacts on small 
entities, and therefore, the rule wouldn't need to go through 
the small business panel process. I have 20 seconds left, so 
quickly, how can you assert the rule will not have an effect on 
small businesses if the analysis fails to even attempt to weigh 
the rule's compliance costs?
    Mr. Chopra. I think the proposal exempts small business.
    Mr. Flood. Okay. I will look at that. Thank you, Mr. 
Chairman.
    Mr. Chopra. I will let you know if it is something 
different.
    Mr. Flood. Thank you.
    Mr. Fitzgerald. The gentleman yields back. We will now take 
a brief recess.
    [recess]
    Mr. Fitzgerald. Director Chopra, thank you for hanging in 
there, and we will go first to the gentleman from Iowa, Mr. 
Nunn, for 5 minutes.
    Mr. Nunn. Thank you, Mr. Chairman, and thank you, Director 
Chopra, for hanging in here. It is a marathon today, but it is 
important for all of us to be able to go through this.
    I want to follow up on a number of items that were brought 
up from some local bankers in my community in Iowa. There are 
many folks in the Midwest who are trying to do the best they 
can to keep up with what seems like an ever-changing regulatory 
environment, and it puts both an economic burden on them as 
well as just a challenge to be able to support the customers 
and communities that I exist in. Some of the words that they 
have described to me in their dealings with your agency have 
been that the guidance is unclear. It is not always concise. In 
fact, sometimes it is conflicting. Some have called it 
partisan, and others have said that it is analytically weak.
    To get us all on the same page here, I would like to just 
go over what the CFPB has that is unique to your organization, 
that is different from a lot of others. First, let's be clear: 
You are not under the appropriations clause, correct?
    Mr. Chopra. The appropriations clause?
    Mr. Nunn. Yes. You are funded by the Federal Reserve, not 
directly through any appropriations?
    Mr. Chopra. The appropriations clause is in the 
Constitution.
    Mr. Nunn. Right, and you are not under it, correct?
    Mr. Chopra. Not right now.
    Mr. Nunn. Yes. Second, you don't have an independent 
Inspector General, do you?
    Mr. Chopra. Our Inspector General is with the Federal 
Reserve. They oversee both of us.
    Mr. Nunn. They oversee the Federal Reserve, but you don't 
report to the Inspector General. They oversee the entire aspect 
of it. Do you have an executive board?
    Mr. Chopra. No.
    Mr. Nunn. Okay. I find the collection of those three things 
concerning, and that is an issue for Dodd-Frank that we can 
take up as we go forward. Now, when you and I last spoke, we 
came on the heels of roughly a quarter of a million Americans 
who had had their data hemorrhaged by the CFPB. I was hopeful 
that when we spoke in June, we were going to get a written 
after-action report on this. Has your office had the time to 
review this and provide any kind of written after-action report 
on what happened with that leak?
    Mr. Chopra. Again, the misappropriation theft of data by an 
insider threat was completely serious. We are continuing to 
cooperate with all law enforcement related to that, including 
any criminal law enforcement. With respect to changes we have 
made, we are happy to brief you----
    Mr. Nunn. I am asking you, Director, if you have provided a 
report to Congress on exactly what happened?
    Mr. Chopra. We have complied with all of the pieces of it. 
If there are specific questions about what happened----
    Mr. Nunn. I want to make sure this doesn't happen again.
    Mr. Chopra. I do, too.
    Mr. Nunn. Please provide us with a written after-action 
report on what occurred so we don't have this again. Thank you.
    I want to turn now to Section 1071. I know it has been part 
of an ongoing conversation today, and you are statutorily 
obligated under Dodd-Frank to collect a number of data points. 
As I understand it, it has now swollen to 81. In fact, you have 
exceeded your mandate by about 25 points.
    Mr. Chopra. Sorry. Just to be clear, that is not accurate.
    Mr. Nunn. Okay. Please describe to me where I am incorrect?
    Mr. Chopra. There are 81 data fields, so I am just going to 
give an example, which is not in the rule, but it helps to----
    Mr. Nunn. I think that we can equivocate over how you want 
to call it.
    Mr. Chopra. But if you----
    Mr. Nunn. There are 81 different items that members who 
want to review this would have to fill out. Is that correct?
    Mr. Chopra. Again, I am trying to explain that. There are 
not 81 different items. We create a template for how people can 
report. So if you have a first name, a middle name, a last 
name, and a suffix, in order for the data to be cleanly 
understood, that might count as five----
    Mr. Nunn. So, there are a total of 81 different fields that 
need to be filled out. I am going to follow up on this because, 
again, you went above and beyond the requirement here by 25 
additional requests. I want to understand how this information 
is going to be used. Let's be very clear here. Is this 
information going to be publicly available?
    Mr. Chopra. There is not going to be personally 
identifiable information. We're going to----
    Mr. Nunn. Will any of the information be publicly 
available?
    Mr. Chopra. If you will let me finish, we are going to go 
through a process, just like exists in mortgage data, to figure 
out what type of----
    Mr. Nunn. Director, are you going to provide this 
information publicly, or is it going to stay internal to the 
CFPB?
    Mr. Chopra. As I just shared, just like the Home Mortgage 
Disclosure Act data, there will be certain analyses and data 
that will be made public, but that is years away.
    Mr. Nunn. I believe it is the intent of the CFPB right now 
to potentially publicly shame a number of organizations, 
including my bank, Union State Bank, in East Peru, Iowa. It has 
15 employees, a population of 200 citizens, and they have a 
very different profile than what may be in a place like 
Pittsburgh. But East Peru, for them, if they don't meet the 
standards that you have laid out here in your diversity and 
inclusion, there is a real chance that they could be publicly 
shamed.
    Mr. Chopra. No, that is not true, but the data that will be 
used for the Community Reinvestment Act are not going to be 
duplicative data. I am out of time, but I am happy to take that 
question.
    Mr. Nunn. I want to----
    Mr. Fitzgerald. The gentleman's time has expired.
    Mr. Nunn. I yield back.
    Mr. Fitzgerald. Next, we will go to the gentlewoman from 
Texas, Ms. De La Cruz.
    Ms. De La Cruz. Thank you, Mr. Chairman, for holding this 
hearing today, and thank you, Director Chopra, for appearing 
before us today.
    I serve a largely rural community, a Latino community in 
deep South Texas, south of San Antonio, and my constituents 
rely heavily on smaller banks, community banks, and credit 
unions. And this is really important for their livelihoods, and 
for the economic development of our communities. It worries me 
increasingly, as I hear from these community banks that your 
agency remains insulated and unchecked by Congress while 
creating rules that directly impact constituents in my area.
    The rule that really concerns me is the 1071 rule. We have 
heard over and over today how it is going to affect community 
banks, how it is going to affect small business owners like 
myself, and, ultimately, who is most important are the 
consumers, the entrepreneurs. So, I hope that today you are 
hearing the message that the 1071 rule is just simply not 
working. It is not going to work for community banks, it is not 
going to work for communities that want to thrive, and it is 
not going to work for small business owners.
    This seems to be an expensive endeavor for community banks 
to implement, not only with training for staff, but 
implementation of new software. For the people listening right 
now on C-SPAN, we are talking about going from 15 data points 
to 81 data points. That is an incredible increase, and what it 
is really doing is profiling customers who have never been 
profiled before. Not only is it going to take a significant 
amount of time to profile these customers, asking questions 
such as sexual orientation, which, remember, banking has been 
built on being able to look at a project, look at credit 
scores, look at debt ratios, and to be able to make an analysis 
away and apart from profiling customers. Now, because of the 
1071 rule, they are actually going to have to start 
implementing and profiling customers. I am worried about the 
costs that it is going to take to comply with the 1071 rule.
    I want to know, do you recognize that this rule may result 
in less availability of credit to small businesses that it 
targets, particularly if it leads to smaller banks having to 
pull back from lending due to the costs associated to the 1071 
rule?
    Mr. Chopra. Let me just share with you what we saw during 
the Paycheck Protection Program (PPP), that actually the small 
community institutions you mentioned really punched above their 
weight class when it comes to serving small businesses. Many of 
them have those relationships, so we were under a court order 
to complete the final rule by March of this year. The CFPB was 
sued a few years ago for not doing the rule. We complied with 
the court order. We increased the loan threshold, which 
exempted a large number. I don't have the exact number of small 
banks, but, of course, I share with you that we want a robust 
and really fair small business lending market. This is really 
the fabric----
    Ms. De La Cruz. I am going to reclaim my time quickly here. 
When was the last time you actually spoke to a community bank 
about this rule?
    Mr. Chopra. I have conducted sessions with, I think, every 
single bankers association represented in this committee and 
more. I think I have met now with thousands of community 
bankers, and you are right, many of them, in fact, do mention 
this and other issues. I have done branch visits as well in 
several places----
    Ms. De La Cruz. And I am going to reclaim my time again. I 
think it is more than just a couple of them or some of them. 
Every single community bank that I hear from says this is a 
problem, and this is going to create a lot of problems for not 
only the banks, but the consumers, the small businesses, and 
for the economic well-being and prosperity of our communities. 
I yield back.
    Mr. Fitzgerald. The gentlewoman yields back. We now go to 
the gentlewoman from Indiana, Mrs. Houchin.
    Mrs. Houchin. Thank you, Mr. Chairman. Thank you to the 
ranking member. And thanks, Director Chopra, for your testimony 
and for being here on this long day.
    Since you were last here a few months ago, the CFPB has 
continued to put forward what I view as politically-motivated 
rules that go beyond your statutory authority. Despite my 
colleagues and I making our concerns known to you at the last 
hearing, I still frequently hear from constituents about the 
lack of input on rulemaking, the failure to tailor regulations 
towards smaller institutions, and an almost impossible-to-
navigate landscape that comes from the CFPB's continued 
regulation by press release. It is beyond concerning, and we 
are going to continue to push on these issues.
    Director Chopra, my colleagues and I have previously made 
our concerns known to you about the continued pattern of 
regulation by press release, and when that fails, regulation by 
enforcement. To one of my colleagues earlier in this hearing, 
you said that the Bureau has, ``tried to articulate guidance 
through the various laws that we have enforced.'' How is a 
business supposed to know what guidance exists if they aren't 
made aware of any wrongdoing until the CFPB alleges misconduct 
has occurred and forces a business to pay a fine?
    Mr. Chopra. I don't think that is the case. I think that we 
try our best, and based on feedback from many industry groups, 
including the Consumer Bankers Association (CBA), to be able to 
publish information that answers questions about how to comply.
    Mrs. Houchin. I am glad you mentioned the Consumer Bankers 
Association. They recently reached out to me on Dodd-Frank 
Section 1034(c) and the advisory opinion that was recently 
published by the Bureau. They are concerned that it is 
difficult to understand, and it is vague in what is the scope 
of it and what isn't. It is a significant policy. Stakeholders 
are required to comply with this within 2 months. And I 
understand that the Consumer Bankers Association recently 
reached out to request a meeting with CFPB staff, but the CFPB 
rejected their meeting request. Why would your staff reject a 
meeting with an important stakeholder like the CBA, and will 
you ensure this is corrected so that industry stakeholders can 
engage with you and get a deeper understanding of what is 
required?
    Mr. Chopra. You actually raised such a good example. 
Congress passed that part of the statute. That is law. It is 
the law of the land.
    Mrs. Houchin. My question is, why would----
    Mr. Chopra. If I could finish.
    Mrs. Houchin. The question is----
    Mr. Chopra. Instead of just bringing----
    Mrs. Houchin. I am reclaiming----
    Mr. Chopra. ----an enforcement action----
    Mrs. Houchin. You are not answering my question, 
respectfully. Why would your staff refuse a meeting with the 
CBA, and will you ensure it is corrected so these stakeholders 
can engage with you to get an understanding----
    Mr. Chopra. I am happy to look into that and make sure 
that----
    Mrs. Houchin. Will you, yes, ensure that you will meet with 
the CBA?
    Mr. Chopra. I think our staff meets with associations all 
the time, but I will check into that for you.
    Mrs. Houchin. Will you commit that your staff will meet 
with the CBA?
    Mr. Chopra. Sure.
    Mrs. Houchin. Okay.
    Mr. Chopra. We will have someone meet----
    Mrs. Houchin. Thank you.
    Mr. Chopra. They have meetings with us regularly.
    Mrs. Houchin. Perfect. I want to go back to this regulating 
by press release. Under what authority does the CFPB govern by 
press release, and why is it not clearly declaring rules and 
going through the appropriate regulatory and administrative 
processes, such as the APA?
    Mr. Chopra. We are complying with the APA, and if you want 
to share more detail about, ``regulation by press release,'' I 
don't even actually know what that term means. We put out 
regulations through the regulatory process. We have received 
feedback that we should publish important developments, and 
yes, we do post information on our website.
    Mrs. Houchin. So until a rule is made final, any 
announcements you have made to the fact are not enforceable?
    Mr. Chopra. No, the regulation and the statute is what 
governs it.
    Mrs. Houchin. Great.
    Mr. Chopra. The press releases are there to say we are 
collecting comments. We have published this guidance. We have 
issued this report.
    Mrs. Houchin. So, you are not making enforcements based on 
rules that have not been promulgated 100 percent?
    Mr. Chopra. We would not win those in court.
    Mrs. Houchin. But the question is not would you win them in 
court, but are you making enforcement actions?
    Mr. Chopra. If you have a specific example of that, I am 
happy to discuss it with you, but we are often attempting to 
issue the guidance in response to industry questions. This is a 
program that Director Kraninger, my predecessor, started that 
we have continued. And I am happy to address real concerns 
wherever they emerge.
    Mrs. Houchin. Do you agree with the well-established 
principle that if an action is establishing a new obligation on 
covered entities, it must go through the notice-and-comment 
rulemaking process in order to be enforceable?
    Mr. Chopra. The statute often creates the obligations. We 
often issue guidance to say this is really how we intend to 
supervise for it. It is for transparency. I am trying to also 
react to you are saying that there is regulation by 
enforcement. We are doing all these things to help avoid that.
    Mrs. Houchin. I just want to know if you are, and I would 
be happy to talk to you----
    Mr. Chopra. We are complying with the Administrative 
Procedure Act (APA).
    Mr. Fitzgerald. The gentlewoman----
    Mrs. Houchin. ----further about this. I appreciate it.
    Mr. Fitzgerald. The gentlewoman's time has expired. We now 
go to the gentleman from New York, Mr. Lawler.
    Mr. Lawler. Thank you, Mr. Chairman. Director, thanks for 
being here today, and you are here today at a time of 
significant economic concern, as concern continues over 
inflation, rising interest rates, and families struggling with 
expenses. I know some of my colleagues have alluded to 
significant concerns about the effects of regulations coming 
out of your agency and the potential cost-benefit analysis. And 
clearly, we have serious concerns about how you are ensuring 
the cost of regulations and other CFPB actions do not outweigh 
any potential benefit, particularly since those costs will 
likely be passed on to consumers.
    The fintech sector has helped to provide credit access, 
particularly for low- and middle-income individuals, and many 
of these providers are also pioneering strong consumer 
protection. I am concerned that overly-broad regulations 
threaten to kill innovative, law-abiding fintechs, registration 
of nonbanks, for instance, or the 1071 small business lending 
rule. What kind of cost-benefit analysis is the CFPB engaging 
in to make sure that you are not harming vulnerable consumers 
in the name of protecting consumers?
    Mr. Chopra. Certainly, with respect to rulemaking, we are 
under certain obligations to publish a regulatory flexibility 
analysis, including to look at where the costs are. Sometimes, 
when it comes to benefits, such as the benefits of getting a 
credit report corrected, or avoiding an illegal foreclosure, it 
can be hard to estimate, but we comply with all of that. And 
let me just share, I agree with you that we want all sorts of 
companies, particularly small and new ones, to be able to 
compete against the big guys, and ideally, rules, including 
laws that you pass, can be clear and even bright line so that 
there is no ambiguity about it. And sometimes we strive for 
that, but often the laws that are passed, new situations come 
up, and we are trying to figure out how to make sure that those 
small and nascent players can really compete to the benefit of 
everyone.
    Mr. Lawler. Are there instances where you could see low- 
and middle-income consumers being harmed by an overly-
aggressive CFPB regulatory regime?
    Mr. Chopra. Certainly, I have seen many instances. I used 
to be a Commissioner at the Federal Trade Commission, and that 
agency, many years ago, used to have a history of targeting 
small businesses who couldn't defend themselves, and strong-
arming them into settlements, and that kind of fear, obviously, 
could impact those entrepreneurs and those consumers.
    Mr. Lawler. Do you see that happening now at the CFPB?
    Mr. Chopra. No. Actually, one of the things we have done is 
we really try to focus, especially on the enforcement side, on 
repeat offenders, large players, those who know they were 
engaged in wrongdoing. We also make sure that in our 
supervision program, we are really tailoring it based on risk 
and not overburdening. Again, I take the feedback seriously. We 
always need to push ourselves to make sure that the system is 
serving everybody well, and there is fierce competition.
    Mr. Lawler. Previously, the CFPB's Office of Innovation was 
focused on encouraging consumer-friendly innovation by creating 
approved safe harbors, removing barriers to entry, and 
enhancing competition in the marketplace. In 2019, the CFPB 
rolled out several policies, including the Compliance 
Assistance Sandbox Policy and the No Action Letter Policy, to 
facilitate compliance and promote innovation. Just 3 years 
later, however, the CFPB rescinded these policies entirely. Why 
did the CFPB reverse its decision to help emerging fintech 
companies enter the market, especially considering the Bureau's 
focus on the importance of competition?
    Mr. Chopra. Pretty recently, we have made sure that some of 
those programs are still doing work. We approved an application 
for those representing small banks on construction loans to do 
alternatives, and we are going through that process. Some of 
the programs you mentioned, we did a review of, and they 
basically did nothing to spur innovation or competition, and we 
found that the recipients of those letters were, in some cases, 
marketing themselves as endorsed or approved. So, I think what 
we are focused on is programs that affect lots of market 
participants, but don't crown one winner. Government shouldn't 
be picking winners and losers like that.
    Mr. Lawler. My time is expiring, so I yield back.
    Mr. Fitzgerald. The gentleman yields back. We now recognize 
the gentleman from Florida, Mr. Donalds, for 5 minutes.
    Mr. Donalds. Director Chopra, how are you doing? It's good 
to see you again.
    Mr. Chopra. It's good to see you, too, sir.
    Mr. Donalds. Okay. It has been a long day. Hey, listen, 
from what I understand, the CFPB is considering significant 
changes to the Fair Credit Reporting Act, including broadening 
the scope of what constitutes a consumer reporting agency to 
basically include any entity that compiles and makes available 
consumer financial information, whether or not it is used for 
eligibility decisions. The Bureau's authority is limited to 
regulations that are necessary and appropriate to carrying out 
the objectives of the Fair Credit Reporting Act. The Small 
Business Regulatory Enforcement Fairness Act outline includes a 
broad and novel definition of, ``data broker,'' which seems to 
contradict decades of regulatory guidance, case law, and 
congressional intent. In your view, where is the CFPB getting 
the authority, under its limited rulemaking provisions, to 
create this new definition of a data broker?
    Mr. Chopra. I am happy to share more information with you 
from the outline, but we have lots of data brokers assembling 
dossiers on all of us that are being used for a whole set of 
purposes, including sales to state and nonstate actors.
    Mr. Donalds. I understand that, but----
    Mr. Chopra. We are trying to----
    Mr. Donalds. Hold on.
    Mr. Chopra. Go ahead.
    Mr. Donalds. But, Director, where does the CFPB get the 
additional authority to make a rule around this or to expand 
that definition, because that is a congressional provision? 
That is not for an agency to make that determination.
    Mr. Chopra. If it is a consumer reporting agency, and I 
shared this before, I think it is better for us to go through 
the process of explaining what are the indicia that would 
trigger these obligations. We can pursue it through an 
enforcement-only process, but we are studying the market to see 
how these consumer reporting agencies have evolved over time. 
We have lots of background screening companies, tenant 
screening companies, and others. They all comply.
    Mr. Donalds. I am well aware----
    Mr. Chopra. That is what we are trying to do. We are only 
going to use the statute as Congress has written it.
    Mr. Donalds. I would say that sounds good, but looking at 
the history of agencies in Congress, when we are initially 
told, ``we will only use it for,'' it is always expanded at 
some point in the future. That is my concern. But I want to 
switch gears.
    Mr. Chopra. You should amend the statute, then.
    Mr. Donalds. Now, that is something that I think we 
probably would find agreement on----
    Mr. Chopra. I totally support----
    Mr. Donalds. Congress should do its job and amend statutes 
as necessary.
    Mr. Chopra. I totally support that, and it is easier for 
the agencies when you all agree on these privacy issues, 
emerging issues. We are very happy to work with you on them. It 
makes things easier.
    Mr. Donalds. I am going to reclaim my time.
    Mr. Chopra. Sorry.
    Mr. Donalds. One thing I would say is that I think that if 
Congress actually takes its article on power seriously, which I 
think we should, we should go through and review a whole host 
of financial regulatory statutes to make sure that the credit 
raising and capital disbursement mechanisms of our economy are 
clear and not bogged down by red tape, which, unfortunately, 
has occurred over many decades, far before you and before me, 
and we have to get that cleared up.
    One thing I want to discuss quickly is dealing with data 
breaches. It appears that the CFPB intends to include a strict 
liability standard with respect to data breaches or 
unauthorized accesses to credit report information by third 
parties. Do you think the compliance costs are overly 
burdensome on these institutions if, essentially, the 
institutions are going to have a strict liability standard tied 
to them?
    Mr. Chopra. Yes.
    Mr. Donalds. It is not like the companies are begging to 
get breached.
    Mr. Chopra. I think the question is often on unauthorized 
access. We have not proposed that. It is something that we are 
talking to the small entity representatives through the SBREFA 
process about how a set of data might be used or shared. There 
is sometimes an issue where they are sharing it, but then it 
says that it was unauthorized, so we are working through all of 
that before we propose----
    Mr. Donalds. Okay. The one thing I would vehemently stress 
is we should not be assigning strict liability standards to any 
of these institutions. Obviously, the regulatory burdens here 
in the United States of America are large enough as is. 
Applying strict liability over data breaches when it is clear 
that unless there is proof that the institutions actually 
invited the data breach on purpose, we should not be applying 
that level of liability to them. Nobody wants to see data 
breaches, I want to be clear on that, but we have to be careful 
and mindful of the fact that our financial institutions don't 
want that either.
    Quickly, the Section 1071 rule compilation of data for 
minority- and women-owned businesses, and obviously 
understanding that we want everybody to have full access to 
capital in our economy, do you feel that the level of data 
being proposed in this rule is actually going to be more of a 
hindrance and a burden as opposed to opening up flows of 
capital in the United States?
    Mr. Chopra. I am hopeful that, based on how we incorporated 
the comments, we complied with the statutory requirement, and 
there are lots of use cases for it, but we are doing exactly 
what Congress asked us to do.
    Mr. Donalds. I would argue that what Congress asked for 
under the Dodd-Frank Act was ridiculous, but that was another 
time. I hope to change that as well. I yield back, Mr. 
Chairman.
    Mr. Chopra. Thank you.
    Mr. Fitzgerald. The gentleman yields back. I would like to 
thank Director Chopra for his time today and his testimony.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    I ask Director Chopra to please respond no later than 
December 29, 2023.
    And with that, this hearing is adjourned.
    Voice. Good job, Mr. Chairman.
    Mr. Fitzgerald. Thank you.
    [Whereupon, at 2:53 p.m., the hearing was adjourned.]

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                           November 29, 2023

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