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▶ 0:17:54okay the subcommittee on financial institutions will come to order with without objection the chair is authorized to declare a recess of the committee at any time this hearing is titled a new era for the cfpb balancing power and rep prioritizing consumer protections without objection all members will have five legislative days within which to submit extraneous materials to the chair for inclusion in the record I now recognize myself for four minutes
▶ 0:18:24for an opening statement thank you to our Witnesses for joining us today for our first financial institution subcommittee Hearing in the 119th Congress I'm excited to lead this subcommittee again especially at a time when we have an Administration which understands the costs of burdensome overregulation nowhere has overregulation and overreach been more evident than at the Consumer Financial Protection Bureau which became the most unchecked and unaccountable
▶ 0:18:54agency in the entire federal government under the previous administration under former director Chopra the cfpb prioritized politics over sound policy leading to disastrous outcomes for American consumers the good news is that a new era has begun under President Trump an era where businesses are not attacked through press releases or tweets curtailing their ability to offer financial services and products instead they are
▶ 0:19:24encouraged to provide them in a competitive safe and sound manner an era where the bureau's approach is not opaque and abusive but transparent and fair an era where those in charge prioritize administrative law over overregulation by enforcement avoiding extortionary civil investigative demands or cids I look forward to working with the cfpb in this new era past abuses like those under director Chopra stem from
▶ 0:19:54significant structural flaws at the cfpb which reduce accountability and lead to regulatory swings that stifle Innovation and competition Republicans have long called for reforms to ensure the bureau is accountable to the American people today we'll propose transitioning the cfpb to a bipartisan commission and bringing it under Congressional Appropriations I recently reintroduced the tabs act which would require
▶ 0:20:25the cfpb to go through the traditional Congressional Appropriations process this would restore the power of the purse to Congress and ensure that the elected representatives of the American people have a say in the bureau's operations and budget beyond the structural flaws that we will explore today I want to highlight two areas where the cfpb has abused its power and threatened not helped consumers in the process the first is the abuse of Cs
▶ 0:20:56under director choa the bureau forced law abiding Financial Services providers to sift through thousands of pages of business documents and sit for hours of oral testimony without specifying alleged wrongdoing just hoping to find something these fishing Expeditions were designed to litigate companies into bankruptcy or destroy their reputations doing nothing to protect consumers but harming them by eliminating products and services from the market alarmingly
▶ 0:21:26director Chopra acted as judge and executioner in each case rejecting even the appearance of due process in response I introduced the C Reform Act to impose guard rails on the on the use scope and process surrounding cids the second is the bureau's udap authority the abusiveness prong in the cfpb's udap authority is undefined under director Chopra the cfpb identified abusiveness in the same way Supreme Court Justice
▶ 0:21:56Potter Stewart did in describing his threshold test for obscenity I know it when I see it this lack of guidance gives institutions no Clarity on how to comply and opens the door for abuse by a rogue director during President Trump's first term Bureau director Kathy ker defined abusiveness unsurprisingly director choer revoked this much-needed guidance my bill rectifying udap act defines abusiveness to inject Clarity and certainty encouraging Financial Services providers to operate confidently and in turn
▶ 0:22:26increasing consumer access to vital products and services the best consumer protection is consumer Choice a transparent law binding Bureau will Foster an environment that promotes competition and delivers better outcomes for all Americans I look forward to discussing these issues today and I yield back the chair now recognizes the ranking member of the subcommittee Dr Foster for four minutes for an opening statement five oh five minutes uh excuse me five minutes for opening statement well thank you chair ofar and
▶ 0:22:57to our Witnesses under normal circumstances a change in administration will naturally result in a recalibration of policies and introducing new legislation with ideas old and new to reflect those shifts and and policies will be part of that our Witnesses today make some valid points about some cfpb policies which could be discussed but these are not normal times since taking office president Trump Elon Musk and Russell vote have abused their authority to shut down the cfpb
▶ 0:23:27and other agencies that are Americans rely on for their Financial Security after Doge employees raided the bureau's headquarters cfpb employees were told to stop all work hundreds were let go its contracts were cancelled lawsuits brought by the agency against Bad actors were summarily dropped and even the bureau's name was ripped from the building these are not reforms they are illegal attacks on the cfpb's congressionally mandated existence and also attacks on the dedicated
▶ 0:23:57civil servants that fight every day to protect consumers and hold big Financial firms accountable in fact this hearing today discussing tweaks to the cfpp policies and organizations feels a bit like Republicans rearranging the deck chairs on the Lucitania after they torpedoed it members who are in office in the wake of the 2008 financial crisis will never forget what it was like holding workshops for terrified families facing foreclosure and bankruptcy but the unregulated
▶ 0:24:27storefront mortgage Originators that talked them into those mortgage contracts had all gone bankrupt they were being squeezed by credit card companies using a parade of horribles like double cycle billing and universal default with pages of fine print deliberately written to be so complex that no human beings could ever read and understand them but there was almost nothing that we could do to help them they had signed contracts and we are a country of laws the best that we could do is to make sure that never happened again so following the financial
▶ 0:24:57crisis Congress Congress established the cfpb as the primary agency responsible forfor enforcement of Consumer Financial Protection laws since its creation the financial watch dog has helped millions of Americans get more than 21 billion back from scammers and financial companies that have violated the law the bureau's office of service member Affairs returned more than $363 million to military service members harmed by Financial companies the cfpb's office for older Americans monitored for
▶ 0:25:27abuses targeting senior citizens shut down nationwide telemarketing scams just just one enforcement action by The Bureau returned more than $53 million to American seniors who had been cheated despite these accomplishments after the Doge rate on the cfpb bureau employees were informed that new leadership intends to turn the cfpb into a single room with quote five men and a telephone that is not congress's intent in the last Administration
▶ 0:25:57the fpb wrote important new rules protecting Americans from overdraft fees rules giving consumers control over their financial data and rules to ensure that a medical emergency domestic violence elder abuse will not ruin an individual's credit score and financial future the bureau also regulates non-bank Financial companies I expect many of our Witnesses today would agree that non-bank Financial companies should face similar regulatory requirements to Banks and Credit Unions if they offer similar services but with a
▶ 0:26:28fpb shut down that's not going to happen the cfpb was the only cop on the beat for Consumer Finance and without it it will once again be open season for scammers paying praying on hardworking American families big Tech big tech companies will have a free reign to invade the regulated Financial system without accountability while Banks and Credit Unions continue to be highly regulated finally I don't believe it's an accident that Elon Musk and his doge crew shut down the cfpb exactly at the time that musk is
▶ 0:26:58to turn X into a payments and financial platform that the cfpb would naturally have the authority to regulate the cfpb was created to protect consumers from abuses by some of the most powerful financial institutions in their lives the bureau's work is important it is constitutional and consumers benefit when Financial firms are held accountable we do need to reopen the cfpb and let its employees do their jobs I yield back the gentleman yields the chair now recogniz is the chairman
▶ 0:27:28of the full committee Mr Hill for one minute thank you chairman bar I appreciate your leadership for holding this hearing on the cfpb since its creation the cfpb has acted as an overreaching regulator partisan political agendas have led to burdensome regulations and truly redundant duplicative supervision that overlooks the impact on Americans access to credit and discouraging Innovation the cfpb urgently needs reform to ensure accountability and transparency to Congress and the American
▶ 0:27:59people financial institutions particularly smaller Banks and Credit Unions have reported increased compliance burdens that are making their operations unnecessarily difficult today's witnesses will discuss real world consequences of the cfpb's misguided policies I look forward to hearing these ideas for reforms today that will Foster Clarity and consistency so that financial institutions in fact can innovate grow and better serve their customers because its competition Innovation not
▶ 0:28:29government mandates are the best way to improve access and reduce costs for financial services I yield back gentleman yields thank you and today we welcome the testimony of Mr Brian Schneider a partner at Manet Phelps and Phillips in Chicago Illinois where he focuses on advising clients through the gamut of Consumer Financial Services Regulatory and enforcement matters particularly as it relates to supervision enforcement and fair lending he previously held roles at the Consumer Financial Protection Bureau and was
▶ 0:29:00secretary um uh of the Illinois Department of Financial and Professional Regulation under Governor Bruce rer Mr David pomeran is general counsel and head of Regulatory Affairs at the consumer Bankers Association a trade Association representing financial institutions offering retail lending products and services Mrs Anna fona is the CEO of logic's Federal Credit Union in Valencia California and is testifying on behalf of America's Credit Unions
▶ 0:29:30she has been with Logix for over 20 years and previously served as Chief Operating Officer and Chief Financial Officer Mrs Rebecca Kean is a partner with Hudson LLP uh a consumer financial services law firm in Washington DC where she counsels businesses on compliance with financial and consumer laws Fair lending and other federal and state regulations she was formerly an assistant director for the division of privacy and identity protection at the Federal Trade Commission where she
▶ 0:30:00was responsible for leading enforcement policy Outreach and rulemaking activities for the ftc's Fair Credit Reporting Act program and finally Mr Seth f frotman is the former general counsel and Senior adviser to director rohi choa at the Consumer Financial Protection Bureau we thank each of you for taking the time to be here each of you will be recognized for five minutes to give an oral presentation of your testimony without objection your written statements will be made part of the record Mr Mr Schneider you are now recognized for 5 minutes for your
▶ 0:30:30oral remarks thank you Mr chairman uh ranking member Foster and members of the subcommittee uh thank you again for the opportunity to testify at today's hearing my name is Brian Schneider I work at the law firm of bat Phelps and Phillips where I focus my practice primarily on advice concerning consumer financial matters the views I offer today however are my own I previously served as associate director for supervision enforcement and fair lending at the cfpb and prior to that that I did serve as Secretary of the Illinois Department
▶ 0:31:00of Financial and Professional Regulation the chartering licensing and supervisory Authority for all financial services companies operating in the Land of Lincoln I appreciate the opportunity to submit written testimony and I'll highlight at this time some points that I believe could be most relevant as you and your colleagues consider options for setting new priorities for Consumer regulation acting through rigorous compliance with the administ ative procedure act and related laws is indeed
▶ 0:31:30the Hallmark of careful regulation similarly risk-based supervision is key to the successful oversight of the financial services system supervision facilitates the prevention of consumer harm before it occurs but supervision must be built on confidence that a supervisory exam is not a civil enforcement investigation by another name the involvement of enforcement St in the planning or execution of supervisory exams
▶ 0:32:01should be prohibited enforcement is a tool that is essential to the cfpb's mission during my tenure at the bureau we brought dozens of enforcement actions that enforcement should be reserved for situations in which the cfpb has determined that it must proceed against a bad actor whose Behavior has caused significant consumer harm and has allowed it to operate out of compliance to the detriment of its competitors that follow the law the aim of enforcement should be on stopping the entity from engaging
▶ 0:32:31in the prohibited conduct and the prompt and folsome Remediation and redress of all consumer harm civil penalties unquestionably play a role in a reasoned enforcement regime but ey popping fines just for the sake of grabbing headlines should have no place moreover enforcement should be undertaken only when the entity's actions violate clearly articulated statutory or regulatory requirements when Congress has given the cfpp broader less specific Authority such as the prohibitions against unfair deceptive
▶ 0:33:01or abusive Acts or practices its enforcement activity should be stayed in advance of development of a procedurally valid regulatory requirement or proceed in an incremental manner that provides Clarity for regul regulated entities through the careful development of the law the cfp May must rigorously abide by its statutory obligations to coordinate with federal and state credential Banking and Financial Services the cfpb should respect their expertise and not discharge
▶ 0:33:31its obligation to coordinate by merely listening to the appropriate fellow regulator and then opening its own new duplicative examination or investigation I make no quarrel with the cfpb nor the fine people that work there but because that their work occurs within an agency whose very structure seems designed to subvert constitutional principles it will in its current form likely never be able to fulfill its Mission so my ideas on what to do in the wake of recent multi-year blizzard of guidances
▶ 0:34:02blog posts interpretations manual amendments and speeches the cfbb ought to rescind or appeal those that fail to comply with the APA or that exceed its lawful Authority pending enforcement action should be similarly reviewed the cfpb should balance its resources to effectively deploy each of its four tools Ru making supervision enforcement and often overlooked consumer educ education the cfpb's current funding mechanism while constitutional
▶ 0:34:32is troublingly inconsistent with fundamental principles of separation of powers and ordered Liberty while serving the government of the state of Illinois I had to request Appropriations for our operations from the Illinois General Assembly despite some occasional messiness Illinois legislators consistently discharged their duties and provided our agency with the necessary resources to do its work in a manner consistent with the authority they gave the same can be expected from Congress and should be demanded Congress
▶ 0:35:02should consider the need for the establishment and strengthening of limitations periods concerning both the issuance of civil investigative demands and underlying conduct and Congress should evaluate the need to cabin the cfpb's use of its udap authority to situations where the entity has acted in good has not acted in good faith with respect to its compliance obligations thank you for the chance to testify I look forward to your questions thank you
▶ 0:35:33and Mr pomeran is now recognized for five minutes thank you chairman bar ranking member Foster and members of the subcommittee the consumer Banker Bankers Association greatly appreciates the opportunity to testify today on the cfbb recent activities in the agency's future my name is David pomeran I am General Council for the CBA the only National trade Association focused exclusively on Retail Bank to start I want to make it clear that CBA supports a credible and durable consumer
▶ 0:36:03regulator however the political shifts over the past few years have created instability and uncertainty and we've now directly seen the need for reform at the agency the reform should be focused on ensuring that the bureau is following the law while protecting consumers in the past we have worked closely with the bureau to ensure rulle makings do not have adverse effects however under lead under the leadership of the former director the bureau has failed to follow the law and exceeded its statutory
▶ 0:36:34Authority this has resulted in an unprecedented number of lawsuits against the agency by the entities it regulates CBA believes that facts matter and that Regulators must represent facts accurately under its previous leadership in an attempt to justify its rulemakings the bureau misrepresented its own data about the state of the Consumer Financial Services Market the prior administration's politicalization of the bureau eroded public confidence damaged
▶ 0:37:04the bureau's long-term credibility and led to policy outcomes that were optimized for shortterm shortterm political gains at the cost of consumers longterm Financial Health there are a number of positive administrative changes that could easily be implemented by the new leadership at the bureau however have we seen have we we have seen with the with the increasingly drastic political swings any of these ch changes can just as easily be undone by the next Administration to create long-term stability and credibility for the bureau
▶ 0:37:34legislative reforms are needed CBA supports enacting legislation that would ensure the bureau operates within its Authority and creates greater stability transparency and credibility CBA has long prioritized the need for reform at the Bureau of the bureau's udap authority and we strongly support chairman Bar's rectifying udap act treating customers barely and closely following consumer protection laws or are core to Banks business models however the bureau's udap
▶ 0:38:05authority has been largely undefined and closed to input from stakeholders a clear and defined process will provide guard rails which are needed to ensure regulated entities know what is or is not permitted and how they can comply the bureau has put all companies that regulates at risk of inadvertent non-compliance because it is unclear how and when the ab abusive standard will be applied in particular CBA supports requiring the bureau to refrain from using its unfair and abusive
▶ 0:38:35authorities to seek monetary relief unless it has previously articulated a specific harm in other words the bureau should not be able to move the target without letting the market know first there are additional pieces of legislation that would directly impact the bureau's oversight for example the tabs act would place the bureau's funding structure under the Appropriations process this would allow for greater congressional oversight and hold the be more accountable to Congress CBA also supports the Consumer Financial Protection commission
▶ 0:39:05act which would update the bureau's leadership structure to a five-person bipartisan commission instead of a sole director we believe this would help reduce the radical pendulum shifts between administrations and bring long-term stability to the bureau is also necessary for the bureau to conduct more robust cost benefit analysis in its rulemakings which is provided for in the transparency and cfbb cost benefit analysis act we believe it is also important for the bureau to have an independent
▶ 0:39:35Inspector General which is provided for in the cfpb IG Reform Act these legislative proposals would ensure the rulemaking processes and the law are being properly followed other ways Congress could improve the bureau's regulation and supervision would be to create independent look backs to review major rules that would require a rule to Sunset or be reposed if that Rule's cost outweigh its benefits we also believe the bureau should commit to considering self-reporting and remuneration of compliance issues
▶ 0:40:06when weighing whether it brings an enforcement action or Saddles a supervised institution with a matter requiring attention thank you chairman bar thank you ranking member Foster and the subcommittee for the opportunity to testify here today we we appreciate you convening this very important hearing and we stand ready to work with you and the subcommittee to achieve thoughtful and effective policies to ensure the bureau is a durable and strong consumer protection regulator thank you thank you miss fona you are now recognized
▶ 0:40:36for five minutes good morning chairman bar ranking member Foster and members of the subcommittee my name is Anna fona and I'm testifying today on behalf of America's Credit Union credit unions I currently serve as the president and CEO of logic's Federal Credit Union a 9.8 billion institution headquartered in Valen California thank you for the opportunity to share our thoughts and perspectives on the cfpb and Consumer Financial Protection at Logix we pride ourselves
▶ 0:41:07on our programs to serve our members Logix was founded during the Great Depression as locked aircraft Employees Federal Credit Union what started as a small Financial Cooperative on lockheed's Burbank campus has grown into a trusted financial institution serving 253,000 members and managing 9.8 billion in assets as we have grown we remain true to our founding principles Logix is a member owned and not for-profit institution prioritizing affordable
▶ 0:41:37consumer-friendly Financial Services over profit this is just part of the credit union difference our member-owned Cooperative structure makes Credit Unions the original Consumer Financial protectors still Credit Unions find themselves subject to the rules burdens and costs associated with being regulated by the with cfpb for an institution like logixs our expected crossing of the arbitrary $10 billion threshold that subjects us to Greater cfpb
▶ 0:42:07scrutiny has a cost our own internal estimates are that those burdens that come with Crossing that threshold will average about four million a year and that doesn't count to the roughly 10 million year that we expect to lose in debit interchange income due to the Durban Amendment and that's just in the first year with such a significant decrease in Revenue combined with a substantial increase in cfbb compliance related expenses our ability to deliver
▶ 0:42:38the superior value our members have come to expect over the past 88 years will be severely impacted credit unions are different than other entities that are regulated by the cfpb in that there are a number of statutory consumer protection Provisions included in the Federal Credit Union act that other types of financial institutions do not have credit unions also do not have the armies of lawyers that large Wall Street banks have to keep up with the pace and scope of regulations
▶ 0:43:08coming out of the cfpb yet we are still subject to them either directly or indirectly this has led to significant consolidation in the industry since the passage of the Dodd Frank Act and the creation of the cfpb recent years have also seen the cfpb focus Less on its statutory Mission and become more focused on changing the marketplace in a politicized fashion my colleagues in the credit union industry feel as though they are dying a death
▶ 0:43:38of a Thousand Cuts their revenue on all fronts is under attack and their costs to comply with ever increasing regulation continue to mount change needs to come to cfpb and we believe the time for Congress to act is now we support and would recommend commend a series of legislative changes that include uh first moving the leadership to a bipartisan commission a single director makes the bureau more political and does not allow for open
▶ 0:44:08robust discussion like a five-person commission would second increasing congressional oversight of the cfpb through subjecting the bureau to Congressional Appropriations and creating its own Inspector General third providing greater Clarity on udap fourth expanding and clarifying exemptions for credit unions from the cfpb fifth increasing cfpb usage of cost benefit analysis and subria panels
▶ 0:44:39and finally reforming the Civil investigative demand process these statutory changes and clarifications should be combined with the renewed focus and commitment from the bureau to be data driven to be a data driven organization that focuses on its specific statutory obligations to protect consumers from unregulated entities and Bad actors operating in the financial system any new cfpb rulle making should follow the principles outlined in my written testimony that will help
▶ 0:45:09ensure this approach in conclusion consumer protection in financial services is important making these changes now will help ensure that we have an apolitical focus on consumer protection moving forward we applaud the subcommittee for beginning this difficult discussion on how to reform and improve the cfpb I thank you for the opportunity to appearer before you today and welcome any questions you may have Miss Kean you are now recognized for five minutes for your oral remarks good
▶ 0:45:39morning chairman bar ranking member Foster and members of the sub committee thank you for the opportunity Miss Keane if you could uh start over and turn on your microphone push the button yes thank you thank you um good morning chairman bar ranking member Foster and members of the subcommittee thank you for the opportunity to appear before you my name is Rebecca Kean and I'm a partner at the law firm Hudson cook which focuses on Consumer Financial Services law earlier in my career I worked for the Federal
▶ 0:46:09Trade Commission as an assistant director in the division of privacy and identity protection I am appearing today in my own capacity and my remarks are my own and not those of my firm or any particular uh client of the firm the cfpb is a comparatively Young agency by federal agency standards but its approach to Consumer Protection particularly its use of enforcement actions to define the activities that the cfpb violates believes violates the law has
▶ 0:46:39raised significant concerns about regulatory overreach and has created uncertainty in the financial services Market my testimony today will be focused on two areas that are in need of Reform the cfb's exercise of its enforcement authority over alleged of the dodf Frank act prohibition against unfair deceptive or abusive Acts or practices or udap and the cfpb's use of its investigatory Authority in particular its use of Cs
▶ 0:47:10or civil demands the dodf Frank act grants the cfbb the authority to take action against companies to prevent unfair deceptive or abusive Acts or practices in connection with a consumer financial product or service the concepts of deception and unfairness have a long history in case law largely from the work of the federal tradeit commission but the concept of abusive does not and the Contours of The Bu The bureau's abusiveness Authority particularly
▶ 0:47:41how it differs from unfairness and deception remain unclear to this day the bureau has primarily used its enforcement authority to declare what it believes is abusive but the cases themselves have not shown how that's different from unfairness or deception and they've been inconsistent in applying the ab abusiveness prongs to similar facts and circumstances the result is that the enforcement looks arbitrary or results oriented and as some have said it it's regulation
▶ 0:48:11by enforcement this approach has real due process and fairness concerns the cfpb can simply declare an existing practice abusive and penalize financially companies without giving them a chance to adjust their policy IES to provide regulatory certainty the cfbb should be required to clearly Define the standard for finding an act or practice abusive through a notice and comment rulemaking and the cfbb should only seek monetary relief where
▶ 0:48:41it has defined a specific practice is abusive through formal rulemaking or it has obtained a prior order against a company this would provide more regulatory certainty while allowing the cfpb the ability to address new and emerging issues the cfpb's investigative process similarly needs reform civil investigative demands or cids are one of the primary tools used by the cfpb to compel companies to produce documents answer questions and even provide
▶ 0:49:11oral testimony to the cfbb before any formal enforcement proceedings commence the CF cids impose enormous costs on companies and result in business disruptions that last months often years the demands involved a substantial electronic Discovery costs not to mention attorney's fees and there is a real human cost on the employees of the companies who are subjected to these demand the law allows the cfbb to issue a CID when it has reason to believe that there is
▶ 0:49:41a violation but where there's no reason to believe there is a violation no CID should issue but that's not our experience the cfbb has not limited its use of the cids to that rather they use it to gather information about a particular segment of the market or to conduct top to bottom reviews of businesses that have been disfavored by the cfbb even where they do not have examination authority over those entities the law gives companies the right to file a petition to modify
▶ 0:50:11or limit a CID but if you do that then your investigation is made public this has the effect of making a confidential investigation open to public View and it dissuades companies from exercising their rights to object to what are otherwise overbroad or unduly burdensome consumer uh investigation demands the bill before us HR 100036 would reform the CID process by creating a process to address concerns
▶ 0:50:41early in the investigation to adjust the scope of it to an appropriate size and it would require the cfbb to treat petitions to modify as confidential this would make the process more fair thank you for the opportunity to testify before you today I happy to answer any questions thank you and Mr frotman you are now recognized for five minutes chairman bar ranking member Foster my name is Seth frotman until about a month ago I was General Counsel at the Consumer Financial Protection Bureau but today
▶ 0:51:12I am speaking for myself about the profound disconnect between a hearing that purports to be about quote consumer protection and the devastation that this administration's actions and legislative agenda will unleash for working people over the last four years the cfpb cracked down on junk fees tackled the crushing impact of medical debt protected military families from fraud and widowed spouses from scams and took on big Tech's Relentless Stampede into Consumer Finance we stood up
▶ 0:51:42to unscrupulous corporations and billionaires on behalf of Working Families the people that this Administration promised to fight for the cfpb has gotten back more than 20 billion doar for working people on a budget that is the fraction of that size all that came to a screeching halt when President Trump Elon Musk and Russell vote took over the cfpb they have taken wall Street's cops off the beat granting Shameless pardon after Shameless pardon to companies
▶ 0:52:12that ripped off their own customers this administration's attack on the cfpb drips with disdain for everyday Americans the actions of this Administration to take money from working people and give it to the rich speaks louder Than Words especially any empty rhetoric about re prioritizing consumer protection that will be said at this hearing so I'll repeat what I told this committee almost six years ago about the vital role of the cfpb it is important to recall
▶ 0:52:42what people's lives look like what this nation looked like as the cfpb opened its doors in 2011 it had been three years since the peak of the financial crisis but for Millions across the country the crisis was still families were losing their homes service members were falling victim to financial Predators who viewed them as dollar signs and uniforms everyday Americans were targeted with bogus add-ons and hidden fees leading to financial ruin by a Thousand Cuts
▶ 0:53:13the combined forces of these ripples of Deceit and Devastation left millions of shattered families and Shattered Dreams that is where the cfbb stepped in six years later we are on the verge of returning to that Bleak and dangerous past and while this is going on we are now subjected to the same old tired industry talking points the same push for deregulation that makes too big to fail Bankers big Tech and billionaires Rich while leaving working people and their communities bankrupt
▶ 0:53:44When the Music Stops a lot of people in this town the K Street lobbyists the revolving do door lawyers try to make straightforward things complicated the battle over the future of the cfpb is not it comes down to a handful of simple questions are you on the side of military families or the Predators who lurk outside the base are you on the side of parents struggling with error-ridden medical bills or the debt collectors trying to make a quick Buck on their backs are you on the side
▶ 0:54:14of people who get debanked or the financial institutions that fight like hell to keep doing it when you look past the rhetoric the deceptively labeled bills touting Through the Looking Glass reform what is going on in the executive branch alongside what is being pushed here in Congress really boils down to one time test tested proposition which side are you on if you're going to stand idly by while the nation's consumer Watchdog is decimated if you push a legislative agenda of more junk fees
▶ 0:54:45abusive medical debt collection practices big Tech domination and predatory lending then the answer is pretty clear I want to close with this you your family your neighbors and your community are at risk today because president Trump and Elon Musk have corruptly handed over the keys of our nation's consumer Watchdog to the largest banks and tech companies in the world to be clear the Rogue efforts to shut down an agency that was created in the wake of the
▶ 0:55:15worst financial crisis in memory are blatantly illegal right now there is an $18 trillion ticking Time Bomb of Consumer Debt a real and imminent threat to your family's future we have seen this movie before and the sequel may be much worse than the original it is time to end this debacle The cfpb must get back to work a hearing that reports to be about consumer protection that focuses on anything else is an
▶ 0:55:45insult to the hard to the many hardworking Americans who just want a fair Shake in today's economy thank you uh thank you Mr frotman um and uh let's let's examine who the real Predator is the orwellian Predator the Consumer Financial Protection Bureau uh since president Trump took office we have heard multiple complaints from my Democrat colleagues about executive power and Doge and Elon Musk controlling funding for example ranking member Waters
▶ 0:56:15referred to Elon Musk as quote an unelected billionaire co-president end quote multiple times in front of this committee and that quote they attempted to illegally kill the cfpb end quot andot unelected billionaire Elon Musk seizes control of American people's money end quote my friend representative Caston brought up how Elon Musk is violating congress's power of the purse so my question really should be geared toward my friends across the aisle if you are so concerned about unelected officials in the executive
▶ 0:56:45branch controlling funding in the future of the bureau why aren't you supporting reforms to the bureau structure to bring oversight back to Congress if you were so worried about violations to the power the purse why aren't you supporting my tabs act and bringing Appropriations powers back to Congress Miss Kean during your tenure at the Federal Trade Commission did you find a commission structure or being funded through the normal Congressional Appropriations process somehow prevented you from consumers no I did not
▶ 0:57:16um the commission structure at the FTC allowed business to continue even through changes of administration as it is now um and it allowed the work to to be have the Insight of both sides of the aisle so issues were fairly considered in front of the commission well under director Chopra the bureau engaged in fishing Expeditions through its CID process burdening institutions with requests for documentation time resources other demands without any foreseeable and inight Miss Keen you uh I think in your written
▶ 0:57:46and oral testimony really laid out the abuses uh from uh the uh the the bureau uh and this is why I introduced the CID Reform Act Miss Keane you've represented clients who've been victimized by these fishing Expeditions can you describe what what these these uh small business owners these American citizens have to endure with these cids yes sir um I think it's really telling because I think the focus of Mr Fatman's open remarks we're talking about large Banks but the clients
▶ 0:58:16I represent are not large Banks they are small businesses in your local community trying to serve a variety of BU of needs of consumers and when they receive a CID it's exhausting it's a lot of documents under short time frames the usual return date for a CID is 30 days and there can be 30 or 40 requests in a particular CID that's a lot of time and effort on the part of the company to try to gather that
▶ 0:58:46information and there are very limited abilities of the company to bring objections in a meaningful way that doesn't expose the investigation I I think you're testimony brings to light who the real Predator is here Mr Schneider how do these demands discourage Financial providers from offering Financial products and services Consumers well if you don't know what the rules of the road are it's very difficult to innovate it's very difficult to know what you can bring to the market that isn't going to be immediately attacked
▶ 0:59:16so you you just end up spending a lot of money trying to figure out hiring lawyers hiring to figure out what you need to do just to keep going with your current products and you're Innovation is lost and that's never seen quite frankly what doesn't happen is never seen well you know we we want Cops on the beat but we want due process and cids at the from the bureau lack due process can you speak to that well I would uh echo my colleague statements these are extraordinarily broad requests
▶ 0:59:47um they often are seeking uh information about conduct that could never be the subject of an enforcement action uh there's extra extraordinarily tight deadlines if you have any objection to the scope of the C you have to go back and hope to get relief from The Entity that's delivered it to you um and I might add when you do that if you dare to petition to modify or set the C aside that becomes part of the public record so you're tainted with an as being an
▶ 1:00:17entity under investigation um merely by uh the action of seeking to make it more reasonable for you to respond yeah I think it's also reasonable just to to require the capap CB to tell the target why they're actually doing this investigation uh Mr poman last question to you in fulfilling uh the American first agenda the president has begun removing government waste and overreach and ending the disastrous Dei cancer uh that has spread throughout our financial system in the finalized section 1071
▶ 1:00:47small business data collection rulemaking this rule requires small business lenders to collect 81 data fields from small businesses including the whether the applicant is minority owned or lgbtq the sex ethnicity race of the principal owners Etc increasing compliance costs and reducing loan availability can you discuss some of the cost of this Ru making and elaborate why it must be rescinded to protect small business access to credit well the 1071 rule making has lots of different Avenues right now of course it's it's subject to litigation um
▶ 1:01:18the original statutory language only required 13 data fields I believe the endend the end result was 81 data fields which is why the bureau was suit in the first place our concern with the 1071 data fields beyond the 13 is that it will complicate the process banks have spent a lot of time going in and out of compliance and preparing for compliance with this rule my time has expired so we'll I'm sure there'll be more questions about this uh later um the chair now recognizes the ranking member of the subcommittee Dr Foster for
▶ 1:01:48five minutes um thank you chair bar um and as a threshold manner do do any of uh our Witnesses believe that five men in a telephone will provide adequate consumer protection in our country any just ra okay let the record say I saw no hands here um what about uh protecting Financial um Financial businesses who are good actors against new unregulated online competition do we believe that five men in
▶ 1:02:18a telephone will provide adquate protection for those good actors again no hands um I I think that's really what's you know at the heart of this hearing um so Mr uh fman can you sort of give us the lay of the land you know what is actually currently happening at the cfpb thank you Congressman um so what is happening at the cfpb now is devastating for working people it is a boondoggle for the billionaires calling the shot in this
▶ 1:02:48Administration and it is nothing more than sheer corruption since the beginning of February this Administration has been hellbent on destroying the nation's consumer Watchdog the financial inspectors that were spread across the country making sure that businesses were following the law making sure there was a Level Playing Field for honest businesses were sent home they are still not back on the job there hasn't been exams of financial institutions to make
▶ 1:03:18sure they are following the Consumer Financial Protection laws by the cfpb in over a month they have dropped now nearly a dozen enforcement actions just to give you a few examples they dropped the cfpb's enforcement action against zel and the nation's largest banks the nation's largest banks for allowing hundreds of millions of dollars of fraud to Fester on their payment system they dropped the bureau's
▶ 1:03:48case against cap one where they tricked and deceived people with savings accounts getting the interest rate that they were entitled to money that could have been used to help them pay for groceries they dropped a case against solo funds an outfit that was ripping off working people with junk fees and uh tip scheme and dark patterns that numerous other state attorney generals and Regulators from coast to
▶ 1:04:18coast had already taken to account the current CFB director tried to take credit for this and was shamed so so much in a community note on X we haven't heard from him since and this is what is happening across the board they shut down the bureau's office that this Congress created to protect service members to protect students to protect older Americans I do not see who this benefits it does not benefit the honest businesses that we have heard so much today from our panelists
▶ 1:04:49it doesn't protect American consumers who desperately need help the only people this helps are are too big to fail bankers and Silicon Valley billionaires so right now if a service member an elder gets ripped off who do they go to where do they actually get help from today it's entirely unclear we've had sworn testimony in a federal court talking about how this Administration broke the Consumer complaint system this the system where if service members call in or
▶ 1:05:19write a complaint four more than 400,000 military families have done this that that system isn't up and running it's not getting them the information they need the examiners on the ground making sure that Banks and non-banks are complying with key military consumer protections like the military Lending Act the service member civil Relief act those inspectors aren't on the ground making sure that on that these companies are following the law I spent years of my life at the bureau
▶ 1:05:49trying to protect military families and the idea that we would just shut off this incredibly important tool that is not only important for individual families financial future but imperative for our military Readiness is appalling thank you and one of the key promises from the Trump from president Trump on the campaign Trail was to drive down prices and make America affordable again starting on day one a key element of that was his promise to uh cap CR credit card interest
▶ 1:06:20rates at 10% um which I don't think we see legislation on this or or any action on that front um could you say whether overall um the shutting down the cfbb and the rest of the actions are actually going to lower costs for Americans they'll do nothing to lower cost I I had a chance to look through the agenda and it's hard to believe that this is on track with a president who on The Campaign Trail talked a big game about taking on Banks and driving down credit card interest rates
▶ 1:06:50nothing in the agenda you see here the fight to make sure that people pay more fees when it comes to their bank account or their credit card or on medical debt will do nothing to make working people's lives better thank you yield back gentleman yields the gentleman from Michigan Mr heisinger the sponsor of the Consumer Financial Protection commission act has recognized for five minutes well thank you Mr chairman and uh Mr chairman I see uh Mr troper surrounded himself with like-minded uh uh activists
▶ 1:07:21uh and I quite honestly never thought I would Pine for the days of Richard cordr uh to have some reasonableness uh injected into the cfpb but um the cfpb's unique structure prevents congress from conducting meaningful oversight I know this because last session I was chairman of the oversight and investigation subcommittee and I know too well uh the roadblocks and uh speed bumps and frankly brick walls we ran into
▶ 1:07:51uh with the cfpb uh a single director who has no accountability No Boundaries Limitless funding and will go uh and push the accepted and legal bounds of their organization is a recipe for disaster and I think that's why we've seen this one agency be challenged so much over its own existence and its actions and unlike other agencies such as the FDC the the FED uh
▶ 1:08:22alphabet soup of all the Regulators uh who cused their rul making after president Trump was elected director Chopra made the very conscious decision to continue to push forward on rules that he knew would be unlawful and overturned and you saw it with the overdraft you saw it with medical debt he was the one regulator that decided to not put his pen down and allow someone else to make some of those decisions so uh uh Mr
▶ 1:08:52palmerin in your written testimony you called The Bureau quote a political lightning rod uh that can have quote radical pendulum shifts depending on who occupies the White House and it just seems I my observation would be seems most of the time when it's the Republicans that they come in and say hold on we've gone too far too fast let's just stop in place while the Democrats just continue to blow through these uh these legal bounds um anyway the the idea of converting them into a commission structure
▶ 1:09:23isn't A New Concept I been here for now this is my year 15 and uh and I think for 15 years this has been a a discussion because there's a recognition of the dangers of this structure so what what advantages do you see with changing that that structure well I mean we're at a critical point in time right there's an inflection point here where we can make the bureau more credible more durable going forward we believe that a five-person commission a bipartisan commission would allow for the
▶ 1:09:53afford mentioned descent and baate that was required to actually form the policies taking some of the political IDE which is the structure that virtually every other regulator SEC others they they all have internal checks and balances not not cfpb cfpb does not um is it important to have industry experience when you're leading this we believe so I mean it's it's good to have the background of industry and how products and services actually work um often times are misunderstood
▶ 1:10:23okay well so this is a stru structure that Mr bar and I uh have talked about do you believe that the cfpb can and will actually still protect consumers if with this new structure I believe so the cfpb has a statutory required duties that it has to carry out I don't think having a commission structure is going to so wait wait a minute just because we've changed president doesn't mean we've automatically thrown out consumer protection that's what we hear from the other side that's correct
▶ 1:10:54okay just I just wanted to clarify that that that doesn't seem to be the narrative um okay well basically essentially uh enforcement has become arbitrary uh the the current Bureau sends a signal to Industry that the bureau will let you know when uh when you've violated the law or harmed consumers uh because they've given themselves that broad Authority not that not that Congress has not that anybody else has but they now suddenly are through enforcement letters and other things they are
▶ 1:11:24bending the will of the law to what they view as uh as what is proper and by the way cfpb uh can't actually give a clear consistent definitive uh definition to the term abusive uh regarding unfair deceptive or uh abusive acts of practice so uh is there anything that is considered abusive that is not considered unfair or or deceptive that is unclear at this point it would seem like a Layman would actually be able to discern
▶ 1:11:55that but we're talking about legal ease right without the guidance from the former Administration under director Craner we do not have a definitive definition of abusive yeah all right um and I've got few seconds uh Miss fona I'm sorry I'm running out of town but time but Community financial institutions are often caught in crosshairs um and we've know about the cost of compliance if the cfpb has its way and I'd like to take that your answer and writing if I could but cfpb has its way what would the cost of eliminating and reducing overdraft product
▶ 1:12:25have on consumers that you serve and I look forward to having that answer in writing so thank you okay thank you gentleman's time has expired the gentleman from Georgia Mr Scott is now recognized Mr Fran how are you great thank you sir please excuse my call I think it would be very helpful if you explain this phrase that is being used in these exchanges they say
▶ 1:12:58prejudice explain to us what that means in terms of a relationship to the cfpb making any charges great thank you and if I could just have one minute I would just like to respond to some of the the questions before that referenced our agenda um we're talking a lot about boards and funding um I think that people need to look around they are firing FTC Commissioners
▶ 1:13:29one of the FTC Commissioners who was fired is in the room down the hall they're impounding funds to be lectured about separation of powers at this moment of time is something else we are so Through the Looking Glass that I think people need to go back to the drawing board in terms of what we are talking about and update the talking points that are now a decade old because if we want to talk about executive overreach if we want to
▶ 1:13:59talk about separation of powers we should be talking about how this committee and this Congress created an office to look after military families that was shut down we should be talking about how this committee and this Congress created an office to look after people with student loans that was shut down these are the issues that are actually happening around us but we keep going back to these same old tired talking points and bills and it is just Ever Clear what they were always about they were always about
▶ 1:14:29hamstringing the bureau making it easier for big Banks to rip people off making it easier for Silicon Valley to steal people's data when they make a transaction and we should just be honest this if if you care about separation of powers if you care about executive overreach we could talk about that because that's what's happening right now at 1700 G Street I think uh Congressman Scott I think to to your question if I understand correctly what we have seen now is the current leadership of the
▶ 1:14:59cfpb has dropped nearly a dozen cases uh where the bureau brought forward uh credible evidence that companies were ripping off their own customers to the tune of billions and billions of dollars and in each of those instances uh the current leadership chose to dismiss with prejudice those cases meaning that the bureau can never again try to get money back on behalf
▶ 1:15:29of those people whether they were ripped off because of company lied to them when they were trying to buy manufactured housing when they were just trying to take out a loan to make it through the week student loan borrowers who were ripped off by an enormous student loan company who was collecting on discharged debt that's this administration's priority now dropping those cases and making sure the bureau can never again help those borrowers your constituents yeah I think that's very important for uh
▶ 1:16:00people to understand that uh the cfpp once they use that uh with prejudice it means that that case goes byby and how damaging is that it's tremendously damaging I mean it's damaging for the bureau but it's damaging for the people on the grounds I think you know one of the things that we heard on the campaign that we heard from the administration is they want to help people
▶ 1:16:30with costs you know what have help what have helped people paid for groceries and paid for eggs if they had a little more interest on their savings account at cap 1 but that company chose to deceive their own customers into not getting billions of dollars of interests that would have helped real people and that case was dismissed with prejudice had it been dismissed without the cfp first uh trying to provide help to him no I I
▶ 1:17:00I think this is like one of the most frustrating things to see which is you know each of these cases involved thousands of hours of people's times you know these are cases before a federal judge um and all of that work all of the work to try to make working people's lives a little better basically lit on fire for what well I hope uh chairman that we can find a way to really address the impact this is
▶ 1:17:30having on the lower income and the people who need the help the most gentleman's time's expired the gentleman from Texas the chairman of the small business committee Mr Williams is now recognized thank you Mr chairman thank you all for being here and I must say listening to all this that under a Administration my business my family my friends
▶ 1:18:01and my bank are much better off today with the cfpb and the cfpb's 1071 small business lending rule requires financial institutions to report 81 unnecessary data points on the loan for smaller institutions this rule creates a mountain of compliance burdens and will harm their relationship with consumers which may uh many are Community Banks and credit unions and who they rely on this also leads to reduction in the amount of small business loans and the cost of a loan will Skyrocket and decrease
▶ 1:18:32access to Capital now my bill the 1071 repeal protect small business Lending Act will repeal this burdens and Rule and give relief to the financial institutions who serve small businesses every single day so uh Miss fona how will complying with these burdens some 1071 data requirements impact your ability to provide affordable access to credit for your small business members and could you expand on the benefits of repealing this burdensome regulation yeah uh complying with this burdensome
▶ 1:19:02um requirement is going to limit our ability to lend to small businesses question regulations keep you from loaning basically absolutely okay uh when I when I talk to friends of mine that are Bankers accountants back home in Texas one of the biggest concerns with CB's regulatory agenda and the compliance burdens that accompany that agenda under former President Biden and former director Chopra the cfpb was left unaccountable and regulated through blog posts speeches
▶ 1:19:32and other illegitimate means this left the financial service industry in a constant state of worry never knowing what regulations or enforcement was coming next and how would affect them and their customers we must prevent this approach to regulation the uncertainty it brings to smaller entities and other institution and hold the cpb accountable to Congress that's a new word to them by the way so Mr Schnider can you explain to the compliance can you explain to the compliance difficulties that financial institutions face when dealing with the cpb that is
▶ 1:20:03always expanding and often opaque regulatory regime well during the past preceding four years uh it was certainly an exciting time to pick up uh the trade press in the morning because there was going to be a new blog or a post or something uh that your clients would be calling you about because it seemed to speak with the force of law uh that there is some new requirement that you have to deal with uh but there was you know absolutely no formal process that surrounded that so not only are you questioning the legitimacy
▶ 1:20:33of the rule itself because of the manner in which it was announced but you have no real way to understand what is required so you're uh you're you're searching in the dark you're spending a lot of money uh seeking advice from councel but I guess that's great for lawyers but I'm not sure it's good for institutions that could be devoting those resources to lowering cost of credit and uh providing more Innovative products uh Mr pommer in in your testimony you mentioned that CB had misrepresented data to justify
▶ 1:21:04their policy decisions I agree with you when you said facts matter and Regulators must represent facts accurately so it's deeply Troublesome that CB misrepresented data to support their highly politicized actions and Industry participants should be able to trust that Regulators are not falsifying information to achieve a political Victory this kind of beh avor could have detrial effects on our financial system so uh Mr preran could you elaborate on the most serious examples
▶ 1:21:34of the CB misrepresenting data and explaining the harm caused by these practices sure um I'll take the credit card late fee rule um this this is a rule that would exponentially lower the the the late fee from $32 down to eight and the bureau's justification for this was that there was lack of competition in the marketplace and that the four largest issuers actually kind of dominated that market when actually their data shows that those four issuers actually lost four% of the market in the previous year so
▶ 1:22:05we it's important for them to be intellectually honest with the data when they're presenting it to the public otherwise we're being led down roads based on intellectual dishonesty and that and and that will possibly affect the access to credit especially for subprime borrowers if we're not actually looking at the data correctly well thank you and I I just would close by saying you know the Trump Administration I said earlier is right on the right path of the cfpb and as a business owner myself for over 50 years car business in
▶ 1:22:35Texas uh a uh an economy with a lesser cfpb is much better than one that is under steroids like we've seen in the past so thank all of you for being here yield my time back gentleman yields the gentleman from California Mr Sherman is recognized uh Miss F sea I want to thank you and the other Southern California Credit Unions for helping us after the Palisades fire I represent the Pacific Palisades Mr chair uh I couldn't agree
▶ 1:23:05with you more that we need oversight a hearing like this we don't have any government Witnesses in fact this committee and its subcommittees has not had a government witness except from the FED but no none that are part of the administration you can't have meaningful over s it if by Congress if we don't have uh government Witnesses and I look forward to us bringing Russell a vote and others before this committee
▶ 1:23:35um Mr hazinga um tells us that uh Chopra shouldn't have taken action that might be overturned by the court boy I wish we had a current Administration that not only adhered to court rulings but even was reluctant to take action that they thought might face a credible um attack in the court um I've been here for a long time and today is a throwback to the committee that I've understood for so
▶ 1:24:06long we're talking about the structure of the cfpb and the regulation process and we have business uh telling us that there's a high compliance costs and the Republicans are making some good uh uh some good points about the CID system and we're being told by the regulations are too tough and Democrats are God this feels like nine mon 90 days ago today is different
▶ 1:24:37today isn't a hearing about whether the cfpb has a good or bad regulation today is a day when Elon Musk says cfpb rip and we have thousands of people sitting at home subscribing to Netflix and being paid by the US government and the question that's really before us is how do the generals react how would the generals react when they're instructed by the president to arrest all the leaders
▶ 1:25:07of the democratic party um we're acting like this is normal times it makes me feel better to to spend these this last hour in a normal Committee hearing where Democrats and Republicans are saying the normal things they always say but that is uh is not the real situation here and it's not a matter of do we get rid of this or that regulation um the cfpb has
▶ 1:25:37returned $21 billion to Americans since 2011 when it was founded collected 5 billion in penalties we have to not defund the police if we're going to deal with crime in the suits and not only do we have the enforcement action with the dollar amounts I indicated but think of all the crimes and all the abuses that aren't occurring that never even get past the thinking stage because we've had a
▶ 1:26:07cfpb and of course the cfpb has protected veterans and secured $363 million in monetary relief for them uh the structure was of the CFB was approved in a decision by Justice Clarence Thomas not a member of my political party um so uh we also have a major conflict of interest in that we see that Elon Musk is moving to make the
▶ 1:26:38xplatform a payment system uh Mr frontman could that payment system be more profitable if there was cfpb thank you for the question congressman and I think that this is one of the central issues I think before the committee if we're going to talk about oversight if we're going to talk about separation of powers is there is no secret that Elon Musk wants to turn Twitter into a payment system I found this this tweet on the platform from him speaking in
▶ 1:27:082003 that says Elon mus says if Done Right X would become half of the Global Financial system that should be petrifying to now he now this payment system we've got Bank Regulators that regulate most of the folks represent here and Credit Union Regulators musk wouldn't have any of that regulation and he wouldn't have any cfpb regulation correct me if I'm wrong I mean the uh they sent out the mo most recent
▶ 1:27:38email saying oh we didn't tell you not to do any work we just told you to do no work except the statutorily required work is anybody the CFB doing any consumer protection today well they're certainly not overseeing the non-bank payment system in this country which is the direct uh Ambitions of Elon Musk and most of Silicon Valley thank you gentlemen's time has expired and before we move on to the next um the next question uh I ask unanimous consent to insert into the record a bill I have sponsored in the
▶ 1:28:08past the financial protection for our military families act the bill helps correct the record from the testimony of Mr frotman former cfpb director kraninger alerted us that she did not have the statutory authority to supervise for military Lending Act violations and asked that Congress Grant the bureau this Authority my bill would have done that but we were never never able to get Democratic support to move it the gentleman now from Tennessee Mr Rose is recognized for five minutes thank you chairman
▶ 1:28:39bar and and ranking member Foster for holding this hearing and thank you to our Witnesses for taking time to be with us I'll Dive Right In um Mr Keane can you talk about why many financial institutions would prefer to settle with the cfpb versus is having their name dragged through the mud by an activist cfpb in litigation I'm Sorry Miss Keane thank you for that question uh a lot of companies are pressured to settle because cfbb has enormous penalty Authority
▶ 1:29:09it has a lot of tools in its um ability to issue expansive demands on companies and so rather than drag this out they seek the certainty of a settlement rather than the uncertainty of Link litigation thank you and and from your experience of watching this do those settlements uh would you say that the decision to settle has anything to do with the the settling Pary belief that they've done
▶ 1:29:40that they've acted inappropriately if you look at the language of settlements um the companies don't admit that they've done anything wrong A lot of times there's uncertainty particularly where new or um Innovative I'll put a nice word on it theories are brought by the cfpb rather than risk uncertainty in going to litigation and fighting over it they'll resolve it even if they don't agree with it and that includes whether or not they think the cfpb has authority to bring the enforcement
▶ 1:30:10action there have been several Enforcement cases settled with companies who don't appear to be under the cfpb's jurisdiction but they' rather settle than have to deal with that uncertainty which impacts their businesses thank you for that father insight and that's my my experience and observation as well uh Mr poman uh can you discuss how government price controls like those that the cfpb instituted on credit card late fees and overdraft service limits uh Services
▶ 1:30:40limit the limit the ability of financial institutions to offer products and services to Consumers yes thank you for the question um so placing artificially low fee caps on uh service will ultimately result in those services not being available or that credit not being available to Consumers so um who is that going to hit the hardest that's probably going to hit the subprime borrowers the hardest because they are harder to underwrite and they're more risk there's more risk
▶ 1:31:10involved so when you place these uh in overdraft is a whole another thing because of this issue around whether or not it's actually credit or not and whether or not the Alternatives given in the overdraft rule are actually real alternatives most banks will have to get rid of those products and the customers that utilize them and depend on them will no longer have access to short-term liquidity and for my experience and and you might just give me whether you agree with this or not from my experience the Alternatives then that consumers face are far
▶ 1:31:41less desirable than perhaps a modestly higher fee is that a is that a fair assessment of what the alternatives are then I think that's a fair assessment and we believe that consumers ultimately Fair better in the depository I appreciate that uh Miss Keane what is the purpose of the administrative procedures act and how does it hearing to its requirements benefit consumers the purpose of the administrative procedures Act is to allow a a
▶ 1:32:11regulator a full opportunity to develop a record in support of whatever it wants to do um it basically you take in evidence you take in comments you look at cost benefit analysis in Connect with a regulation that you're looking to promulgate um the administrative procedures act allows for Sunshine on the process full notice and comment so that all participants of folks who can be affected by a particular regulation will have an opportunity to provide
▶ 1:32:41information to the agency to consider in the development of its role thank you unfortunately many banks have withdrawn from small dollar consumer lending due to this significant uncertainty regarding regulatory treatment of these products Mr Schnider during your tenure at the cfpb you oversaw small dollar lending can you discuss the importance of the CFB cfpb issuing clear well Justified rules
▶ 1:33:11with robust cost benefit cost benefit analysis for the small dollar lending industry and you got 20 seconds well uh small dollar uh many companies that provide small dollar products are are smaller companies so the compliance costs are going to hit them even harder quite frankly on a proportionate basis uh if they don't know what they're supposed to do uh if they don't know how they're to do it um they have no choice but to raise costs on everybody or withdraw from the market thank you my time is expired I appreciate
▶ 1:33:42those answers and I yield back gentleman yields back the gentleman from Illinois Mr Caston is recognized uh thank you um quick question first Miss fona Mr pomeran um would you both agree that banks non-banks that engage in bank-like activities um should abide by the same consumer protection rules that are required of banks just yes or no yeah yes yes yes okay um I thought you'd say that um I raise that because I want to respond to something that Mr bar said in his opening testimony he said that we have entered a new era
▶ 1:34:12um where businesses are not attacked by tweet well of course they're not because the owner of Twitter put a couple hundred million do into president's election campaign in an exchange got himself a job in the white house where he is hoping to ear a return on that investment um if the president were to attack Twitter or if the president sycophantic enablers and the Republican Party were to attack him on Twitter I mean I don't know that would require a level of patriotism courage and public- mindedness that they have never shown of course they're not don't make it right but of course they're not attacking by tweet
▶ 1:34:43so let's talk instead about how Elon Musk plans to get a return on his $200 million because if we give a damn about consumer protection if we give a damn about compettition and functioning markets we should be petrified by what mus is doing Mr frotman you had uh you had mentioned briefly with Mr Sherman that Elon Musk is talking about this new payment system X money that is expected to launch later this year I believe you had referred to his quote when he said he hopes uh I'm going to misquote it he said he hopes to uh have users conduct their
▶ 1:35:13entire Financial World on X um the the former cfp Chief technologist said that he has been given God tier access to the cfpb system I guess my first question for you Mr frotman is have you ever seen a CEO of a bank a non-bank or anybody being given God tier access to the cfp data system before uh absolutely not and can you describe exactly what that means and what what data musk is now getting that nobody else in the private sector has access
▶ 1:35:44to sure so this is tremendously concerning I think for consumers and competition is that here is a person who has billion ions of dollars on the line when it comes to the dream of turning Twitter not only into a payments company but into a super app like we see happening in China and other places and you have the person who stands to benefit from this seemingly in charge and making decisions
▶ 1:36:14over what is basically their only Federal regulator and I think there are significant questions if we want to talk about oversight by this committee if we want to talk about investigations by the Inspector General about what happened when Doge employees were in the cfpb on February 7th and then that same day Elon Musk is tweeting cfpb rip so can you can you can you just clarify though because he's getting information that zel
▶ 1:36:44venmo cash app they don't have that information about specific consumers right well I think he's not only getting information about consumers he's getting information about his competitors part of the job of the cfpb as tasked by Congress is to make sure we understand markets and where there's risk and there's a ton of risk when it comes to non-bank payments well I want to say something very partisan I think the richest man in the world is Rich enough but apparently that's not a widely held opinion Justice brandise um famously back in
▶ 1:37:15the 30s said that when you have great concentrations of wealth in society you only have three options you can either allow the wealth to take over the government which is to Embrace fascism you can allow the government to take over the wealth which is to embrace communism or you can break up the wealth and embrace competition what is clear and the fact that it is so partisan to attack the fact that the richest man in the world is now taking over our system is that it is partisan to attack fascism to say anything else in this committee at this hearing In This Moment
▶ 1:37:46naive now we are shortly going to move to marking up stable coin legislation it is my understanding that Mr musk is saying he would also like to use a stable coin rule in order some stable coin legislation in order to facilitate his what he's doing on the cfpb which would unless we put really strict guard rails is going to make it even harder so I guess the last with the last 40 seconds Mr frotman let's assume that he has all that data let's assume that he has a a very permissive
▶ 1:38:16stable coin environment um it sounds to me like we have a non-bank that is going to compete the hell out of all of the banks and all the systems that we have right now in a way that is deeply anti-competitive please tell me I'm wrong you are 100% correct we going to defend capitalism around here we're going to defend competition or we're going to put in a ball gag climb down in the dungeon and just do whatever Trump tells us to do I
▶ 1:38:48back the gentleman yields back the gentleman from South Carolina Mr Norman the sponsor of the uh the CRA disapproving uh the bureau's prohibition on creditors and consumer reporting agencies concerning medical information is recognized for five minutes thank you Mr chairman you know I think it's it's and thank all of you for taking the time to come um I'm a businessman I'm a real estate developer um Mr frotman your your comments are outrageous to be honest with you
▶ 1:39:18um you're you're talking the Democrat points I'm glad you're bringing up Elon Musk the American people owe a debt of gratitude to a man that's showing where tax money is going and they don't agree with it 77 million people do not agree with the former president and in your you resigned twice um when under Trump you resigned re most recently in February of 2025 uh I kind of wish you'd stay because you'd be the first one to get fired and let me just say
▶ 1:39:48this the fact that um Congressman can I the fact that you're on the student loan you formed the student protection Bor a protection Center uh you took part in the Biden administration's forgiveness of loans the people that you you talk about the the veterans and the poor families their tax dollars meant to pay student loans that they were for to pay Congress and I think what is what ising the richest man in America telling dedicated public serving my time who want to protect
▶ 1:40:18service members and students not have any decency do you not have any this is isn't your this isn't your uh platform I've got three minutes left I'm going to ask it to some sane people over here so uh but the fact that you took money took part in paying off loans that the taxpayers had no say so in is is unbelievable Miss uh one of Dr scher's midnight rulle making moves before he left was to remove medical debt information
▶ 1:40:49from the consumer report and prohibits lenders uh uh from examining uh the credit history of a borrower uh we've got a bill up that we're trying to get out of committee but do you do you think the CFB even has the authority under the Fair Credit Reporting Act to require the removal of a debt that they owe and the payment of it uh I think is an important
▶ 1:41:19part of a credit report why is it being removed and do does CFB have that have that right to do I do not believe they have that right the Fair Credit Reporting Act actually addresses medical debt and it protects consumers privacy with respect to their medical information it allows financial institutions to use the financial aspect does a consumer have significant medical debt and
▶ 1:41:49and consider that in connection with making a loan or a larger work mortgage transaction for example um the rule ignores the restrictions and requirements of the Fair Credit Reporting Act it ignores data that had been supplied it relies on 10-year-old studies that really have no bearing on what today's market looks like from the time those studies were conducted by the cfpb to the issuance of
▶ 1:42:19the rule the market had changed it had already made sign ific changes and so it's based on faulty premise so it's got a terribly weak record associated with it and even the small business administration filed comments raising concerns about the process that led to the rule so I I agree that I do not believe they have the authority and even under the administration strative procedures act they don't have the record that supports the steps that they took
▶ 1:42:50and that's Audacity Of uh Mr Chopra and his disdain for the American people and if you going to exclude medical debt what about uh paying your paying your uh credit card off what about paying your loan on your house off why not exclude that why not just exclude everything so you really uh and and student loan repayments what's left that was so much advocated by Mr frotman to give away
▶ 1:43:20from or to force the American people to pay for what about ex excluding that and that's one of the concerns about the approach that the cfbb took in the medical debt rule the what's the next thing that's not popular that they want to take out of the financial system to hide or mask information um the legal theory that they use to support the actions they took in the rule would support them you know basically anything they're not happy with small dollar or student loans or things
▶ 1:43:50like that it's it's my view that that's the role of Congress to make those decisions the Fair Credit Reporting Act has a whole section where Congress has decided what's fair to include and what's not and they ignore that entirely in the rule okay thank you so much gentleman's time has expired the gentleman from Pennsyvania Mr Muer the author of The cfpb IG Reform Act is now recognized thank you Mr chairman thank you to our our Witnesses and Mr chairman we're Maybe
▶ 1:44:20Maybe Please Mr fratman is here uh his testimony outlines precisely why the cfpb needs to be completely overhauled uh Mr chairman I mean the level of arrogance that we saw when the cfpb was in in existence the seemingly superiority complex uh the dogmatic ideology the narrow-mindedness uh the unwillingness to listen to even the testimony that's here the uncheck power Mr chairman is dangerous to our government
▶ 1:44:51and clearly absolutely power corrupts absolutely um and and listening to what's been cited by the other Witnesses failed to follow the law that's a pretty serious uh comment from a uh objective uh stakeholder dying a death of a Thousand Cuts meaningless to the previous cfpb and to uh one of the witnesses up here uh weaponizing the bureau to use $700 million uh to carry
▶ 1:45:21out its unauthorized Mission uh while while being asked simply for a credible and durable Consumer Protection Bureau is what's being asked Mr chairman so uh I've never heard anything from stakeholders that was positive about the cfpb under Mr Chopra and and apparently under this Mr frotman except from uh Democrats who uh on this P committee are protecting a bureaucratic power uh while they could control it
▶ 1:45:52so to get questions Miss FCO FCA uh the um in many institutions cap you cap their growth quite deliberately to avoid Crossing the1 billion dollar triggering the cfpb uh activities uh however and and I know this from speaking of those in the field and throughout the industry 10 billion under 10 billion still feels the pressure to build out compliance teams just in case can you give us an example of what sort of fear uh
▶ 1:46:22existed and forced you to slow down or scale back uh services to your members yeah we uh we have not scaled back Services however we have spent the last four now going on the fifth year of preparing for cfpb oversight as I mentioned in my testimony that's going to cost us about $4 million a year we've spent at least half a million dollars so far and that's an addition to the uh 10 million plus that we're going to incur in Lost interchange Revenue
▶ 1:46:53from uh debit cards thank you Mr cun uh over the last four years CB stretched its Authority ignored the law has been pointed out can you provide some examples where the CFB was intrusive not helpful even damaging the cfpb has taken upon itself in the last several years to look at companies that are on the edge and often outside of their Authority using their CID Authority um they have the ability to look at a company to see if they're covered
▶ 1:47:24um they haven't thought about that first and so they have issued expansive demands on companies um in areas that have nothing to do with Consumer Financial Services um and it inquired those companies to expend a lot of money just to prove a negative to say hey no we're not covered by you we haven't violated a law there's nothing here and what did that look like in terms of business laws operations disrupted reputations damaged for many of these companies um they have a relative small compliance group
▶ 1:47:54you know these are small to midsize businesses requires everyone to put work on hold to comply with these demands it required a lot of expenses from electronic Discovery demands there's a a several page list of specifications that the cfpb will send and say we want your data but you have to synthesize it and make it fit in exactly the way we want to look at it that's very expensive for small midsize businesses many irrational disclosure requirements sure um do you all agree the cfbb
▶ 1:48:24should become more focused or maybe even solely focused on addressing Consumer Fraud I'll I'll I'll start with you Mr Schneider that's certainly an important part of their mission and would be uh resources well spent okay to the other Witnesses I would agree that they're important part of the equation there are many parts of the government that should be playing that in that space as well I agree as well fraud has grown significantly and many consumers are being impacted by fraud great what what do you think as well about the cfbb being
▶ 1:48:54structured in a b with a bipartisan commission like the FTC um uh with a three member uh board would certainly facilitate discussion uh staff would have to appeal to a broader set of interests uh as it makes its presentations I would agree uh I would say a five person a bipartisan board would work best here um for the reasons mentioned we we certainly have to have debate and descent it's important in the policy uh thank you my time has expired I yield back
▶ 1:49:25gentleman yields back the gentleman from Wisconsin Mr Fitzgerald is now recognized and he is the author of The making the cfpb accountable to small business act thank you chairman bar thank you for holding this hearing thank thank the witnesses for being here today um seems to be a little bit of revisionist History going on here this morning uh kind of in line with everything else I've seen in my other Judiciary uh it uh for years I mean the cfpb
▶ 1:49:55has operated kind of with significant regulatory power and director choer said it before us many times with that grin on his face uh be think because I think that certainly he enjoyed the Havoc that he was uh creating and raising throughout the private sector he thought that was part of his mission I'm convinced of it but while uh consumer protection is critical uh the regulations are overly burdensome and are poorly analyzed uh
▶ 1:50:25they can reduce access to financial products and that's been the the issue since the cfpb came into uh came into play on these issues so the bill that the Chairman's referring to I think um the cfpb being accountable to small business act it kind of addresses some of the concerns that we've been discussing here this morning and I think strengthening the agency's obligation to do the cost benefit analysis I mean that's fine if you're going to come up with ideas of how you're going to have a
▶ 1:50:55direct effect on financial institutions but if you don't have any cost Ben analysis it it flies in the face of financial services right I mean that's we kind of live and die by the idea that the numbers tell the truth so uh Mr poman can you discuss how kind of failing to tailor the regulations for small business institution has a direct effect on their ability to serve small business and consumers because this has been the problem for us
▶ 1:51:25is that you can't come in here and listen to director Chopra tear apart the banks and the credit unions of this nation and then on Tuesday bring in the same committee and have a discussion about well you know it just doesn't seem like the banks or the credit unions are really helping the average consumer at this point so I mean there was this discussion that continued over the last two years that really made no sense but there were ever any numbers to back it up and I was wondering if you could comment on
▶ 1:51:56that well I mean we are certainly in favor of a more robust cost benefit analysis when the euro is considering policy considerations that are going to affect either the consumer or small businesses um and often times the bureau it's would will ignore uh its own data that shows that there will be detrimental effects to actual small businesses or consumers but proceeds with those rulemaking because of IDE ideological uh
▶ 1:52:26guidance U we believe that the cost benefit analysis needs to be paid attention to we need to understand how it's going to affect the economy how it's going to affect consumers and not just throw out pejorative terms to prove a point Thank you so under former director Chopra the cfpb saw a significant shift in its approach to Consumer Protection right I mean it was characterized by overextension of its power uh a I think the director was proud of the idea that he could
▶ 1:52:56continue to kind of stir the pot on many of these different fronts but miss Keane how how would greater statutory Clarity and limits on the bureau's authority to improve regulatory certainty just bring more of a competitive and consumer friendly Marketplace when companies know what the rules are then they're better able to compete if if it's more of a gotcha game right where you've already innovated and and created new products
▶ 1:53:26and then to find out that someone in Washington has decided they don't like that that's unfair to companies and it it really does stifle Innovation and the creation of new products and services to serve consumers I don't want to put you on the spot but is there something is there an example of that that really comes to mind where everyone whether you were in banking or credit union environment knew that it was absolute Ely an overextension of the cfpb's authority
▶ 1:53:56well I think the most recent example is a is a rule that is still out for comment which is the revisions to the Fair Credit Reporting Act rule um there are a lot of proposed new interpretations that are well outside the statute companies have built their businesses with an understanding of the law and if what the cfbb has proposed were to go forward as a rule it would require a complete um overhaul of the consumer data industry of financial services
▶ 1:54:27uses of consumer reports that's a significant change and will result in a significant cost it also will drive many companies out of business because in the proposed rule the cfbb says we want to now declare these companies who've not been viewed as a consumer reporting agency to be ones and then they will have to comply thank you chairman I back thank you I now recognize myself five minutes of questioning and um I know we have a subcommittee chairman Andy
▶ 1:54:57Bar just left but I want to thank him for holding this hearing and I want to thank all the witnesses for joining us today this is an important hearing uh as we discussed the future of uh Consumer Finance Protection Bureau the cfpb was created to as the namesake says to look out for the American consumers and at times it has lived up to that mantle however in most cases it has become a political tool with little to no oversight that is
▶ 1:55:27why the Senate must confirm director mckernan so that the important process of refocusing the agency back on consumer protection can finally begin Miss uh fona I want to ask your question thank you for making the trip um from all the way from Southern California where I'm from to testify before us today about how the cfpb has heard your ability to better serve uh your or in our
▶ 1:55:57communities uh as an institution that is approaching the1 billion threshold for greater cfpb scrutiny have you examined the impact and cost that will be uh you know Crossing this arbitrary uh threshold yes thank you very much for uh that question congresswoman and nice to see you again nice to see you um yes it's uh as I mentioned in my testimony we have spent um the last four years going on our fifth year preparing for regulatory
▶ 1:56:28oversight by the cfbb and that we've already spent over half a million dollars and uh we will be spending about $4 million a year go forward that includes the addition of at least 30 staff members to oversee compliance related to cfpb regulation would I mean would you say your focus on how you serve your members be any different as a 10.1 billion uh institution or if you're a 9.9 billion uh dollar institution
▶ 1:56:58yeah it doesn't even make sense that it would have to change at all but um having to focus on cfpb oversight takes that Focus away from our ability to serve our members and that is why we're here sure F unions are here to serve our members thank you Miss Ken uh as you know cfpb is required to maintain a uh Consumer complaint system and publish an annual report to Congress that report should summarize complaints received in the previous year and this system
▶ 1:57:29is used by the cfpb to sometimes even Support Agency actions or including the major rulle making um but I have heard that the system has been overrun by large volumes of fraudulent disputes by Bad actors that have districted from their legitimate wrongful conduct uh complaints so this is not only unfair uh but it skews the complaints and also uh undermines the Integrity of the uh compliant
▶ 1:57:59data so do you share my concerns regarding this Integrity of the data I do the the cfpb's consumer portal was stood up to collect complaints for consumers but what it has become for a lot of companies is an Avenue for credit repair and that's affecting not only consumer reporting agencies but also financial institutions who want to hear from their consumers if they have an issue and instead these thirdparty companies are flooding the system with disputes about
▶ 1:58:29credit reporting that have nothing to do with a complaint about a financial product or service so as uh director mccaran comes in do you have any advice for him to um improve the customer compliance system how would he do a better job yes I think that um he could direct his office that runs the complaint system to meet with industry to look at these complaints and to talk through ways in which we can identify when it's being abused by Third
▶ 1:58:59parties and not for the benefit of a consumer thank you Mr fona let me come back to you again you are part of an institution that is regulated by bipartisan board the National Credit Union uh Administration we all know that regulated entities don't always agree with everything that comes from the regulator but would you say that the overall the regulat environment is more stable and transparent uh when you are uh regulated by the ncua board absolutely
▶ 1:59:30there's transparency we're able to have insights into their board meeting discussions and there aren't there's not a lot of volatility but you're right we don't always agree with them but it works and it works very well and uh given its long train record I think uh you would agree that ncua has been able to Be an Effective Financial regulator with the bipartisan board absolutely thank you thank you I think the ncua is a great example of how we could reform the cfpb uh to be more bipartisan and accountable
▶ 2:00:00so thank you for being here now um I yeld back my time and I want to recognize gentleman from California uh representative Vargas for five minutes of questioning thank you very much Madam chair appreciate it apologize I had to slip out for a second that's what happens when they double book here around here but I'm back i' heard most of the testimony earlier I represent the San Diego region is San Diego region is blessed by having the Navy there and many many military personnel and
▶ 2:00:30we're very blessed because many of them stay there they retire there but unfortunately they become victims often times of financial scams Mr frontman in San Diego in the San Diego region we have 96% more cfpb consumer complaints filed by filed by service members you know that I'm sure could you talk a little bit about what is happening right now now and how we've helped them before how we're not helping them right now because I'm getting these complaints right now from people and they're saying they're calling there's
▶ 2:01:00there thank you so much for the question Congressman I've actually visited the Marine Corps Depot training facility um with Holly Petraeus so this is critically important you know one of the central tasks that Congress directed The cfpb to do was look after military families and the track record of the bureau across administrations uh before the most recent change I think was Stellar we got back more than $200 million for military families through enforcement actions we helped
▶ 2:01:30with 400,000 complaints and what you see now is just devastating to military families they told the people who staff the office that the Congress required the office of service member Affairs to stop working they broke the complaint system so we've heard a ton today about overreach we've heard these amorphous vague comments about cfpb overreach is it overreach when the bureau took enforcement actions against a bunch of scammers who ripped off military families who
▶ 2:02:00ripped off veterans who ripped off retirees we've heard a lot in the abstract about the bureau and the prior leadership but we haven't heard specifics because I think that is what ex this is one example of exactly what the bureau was tasked to do and they're not doing right now the other thing that I think is very important also is to talk about elderly you know again San Diego is a young town but it's not that young I mean number of us are retired not me I'm not reti for the record but a number of people
▶ 2:02:30are and there's a lot of scams again against elderly and you could before I got all these positive um comments about how the cfpb was doing their job now I'm getting all these complaints because nobody's there could you comment about that that's correct uh the acting director vote told the office of older Americans to stop working the people people who submit complaints about themselves or an elderly parent or grandparent saw that system broken so you know there's been
▶ 2:03:00a lot of uh charges leveled but I think one of the things that I think we all agree on is that the cfpb needs to work the cfpb needs to work on behalf of consumers and service members and older Americans it needs to work on behalf of honest businesses and it's not now the the the inspectors that are supposed to take care of service members and all Americans are sitting at home instead of doing their job Mr Froman I want this on the record because I think that I've been around long enough now that you see cycles
▶ 2:03:31and the unfortunate Cycles are this we've talked about predators and we've seen this often times my colleagues on the other side ultimately control government and then you do see an overreach all right but by the Banks and others and we get into a financial slide and then we get into recession then we get into real trouble and then consumers we saw 2008 get ripped off so we heard today that the cfpb is the Predator that you guys are the Predator that you are the Predator could you straighten the
▶ 2:04:01record out on that and I want this on the record because I think it's going to happen again and I want to make sure that you tell the truth go ahead sir thank you so much so you know we've we've heard a lot of attacks on cfpb leadership but these are really attacks on dedicated public servants who wake up every single day just trying to make their neighborhood safe so many of us who work at the CF PB lived through the financial crisis and watched Community after Community decimated while a bunch of billionaire Bankers got off scot-free and what we do every day at
▶ 2:04:31the bureau or what we did every day at the bureau was to try to make sure that doesn't happen again what is happening now at the bureau where there is no oversight over massive non-banks in this country is bad for businesses it is bad for consumers and they are setting up the situation that we will be another financial crisis in this country and you all or the people in sitting in the chairs after you will be forced to deal with it once again I agree I do want to lastly with
▶ 2:05:0110 seconds just thank the people the dedicated Servants of the cfpb for all their hard work thank you I yield back thank you I now recognize the gentoman from Texas representative Del Cruz for five minutes thank you chairwoman and thank you Witnesses for being here today my district lies in deep South Texas um on the border of Mexico and Texas encompassing ialo County uh which is over 80% Hispanic
▶ 2:05:32that being said in speaking with my Community Banks in my district um we're a rural area Community Banks Regional Banks play a important role in our community and helping firsttime entrepreneurs which I once was as a female-owned um um business and it's hard it was it was hard to be a firsttime entrepreneur and not
▶ 2:06:02have a wealthy family that could help uh subsidize my desire to one day be a business owner so I leaned into my regional banks that provided me the American dream as a Hispanic uh female in a rural community that being said the work that the regional Banks and the Community Banks do in our community is very very important unfortunately under the Biden Administration
▶ 2:06:33the cfpb became a political organ uh for the administration it pushed partisan rule making like the 1071 rule which everyone disliked including minority dis depository institutions as I said that are in my district I am a proud original co-sponsor of my fellow Financial Services Committee Member and chair of the small business committee committee
▶ 2:07:04Roger Williams to repeal section 1071 and we have to use our control in Congress to set the cfpb straight and transparency and establish guard rails as a freshman in the last Congress it baffled me that in a house that had a very slim majority where Republicans and Democrats could hardly
▶ 2:07:34agree on anything there was one thing that we agreed on in both the house and the Senate and that is that 1071 was bad for minority communities like mine it was bad for entrepreneur ERS like I once was it was bad all the way around and I want to remind everybody in this room that the house agreed that 1071 was bad
▶ 2:08:05the Senate agreed that 1071 was bad and when it went to the White House the Biden Administration President Biden vetoed the repeal of 1071 thus saying that the people's voice in the house the people's voice in the Senate did not matter and that they were going to put this burdensome regulation on Community Banks Regional banks that make a
▶ 2:08:35real difference in his Hispanic districts and minority districts like mine that they were going to forge forward in having 1071 hurt communities like mine it is Despicable it was great gross that the Biden Administration moved forward and vetoed what the House and Senate wanted to move forward in repealing this that being said I'm going to ask Mr P can you share the
▶ 2:09:05benefits of passing chair Williams Bill to repeal 1071 and why it is necessary to ensure small businesses are able to access the critical capital and continue to serve communities well a repeal of the rule would serve certainly reduce compliance cost for lenders to lend a small business that would increase the number of small businesses out there and of course that's good for the economy um absent of repeal the rule should be looked at
▶ 2:09:36and possibly repr proposed to lessen that burden going forward so what I'm hearing is the repeal of T 1071 is going to be good for minority communities like mine it's going to be good for entrepreneurs who have the American dream of owning their small business and that it's going to be good for the economy is that correct that's correct Congress then I see no reason why it shouldn't be repealed with that I yield back
▶ 2:10:07very well thank you very much I now recognize gentleman from Nebraska representative flood for five minutes thank you madam chairman there's a fundamental problem that I think is going to continue to come up in this committee related to the cfpb the Bureau has been at work extending its Authority for as long as possible when led by Democrat appointed directors a good example of this is cfpb's larger participant rule making targeting consumer payment applications the rul making lumps several different types
▶ 2:10:37of payment actors under the same umbrella the bureau even hinted via an employees speech that Merchants might be implicated as large payment players in the future last year I asked director Chopra about about the merchant exclusion and whether payments alone continued constituted Commerce in a response via question for the record the director made the case that a merchant quote that incorporates payment capabilities directly into a website end quote
▶ 2:11:07could potentially blur the lines between Banking and commerce and therefore be subject to cfpb oversight in the future to be clear Dodd Frank Mr frontman Dodd Frank explicitly calls for an exclusion for merchants from the cfpb's regulatory purview the idea that a merchant engaged in Consumer Financial activity due to payments activities in the Merchant's own store or website is ridiculous and using that logic could lead the cfpb to have
▶ 2:11:37examination authority over every midsize to large retailer in the country this part of a larger pattern from the bureau it extends its this is part of a larger pattern by extending its reach and Authority as far as possible over time with liit checks and that's why it's so incredibly important that Congress worked to reign in the bureau's authority and lack of accountability Mr Schneider given your experience working at the cfpb do you have any thoughts on how Congress and the new director should aim to keep the bureau from expanding its own authority
▶ 2:12:08in the future well put them under Appropriations then they have to explain to you what they want to use resources for and you can decide if you wish to approve that uh I think putting meaningful restrictions on uh their use of their udap Authority it's it's too broad uh they should have to articulate a principle before they bring an enforcement action there's a case that they brought that would upend the entirety of indirect Auto lending and it's brought on a udap theory that I might add
▶ 2:12:38stands in contravention of their own interpretations of an actual regulation so I think that's rip for uh that's certainly ripe for reform uh continuing with you Mr Sher one of the interesting things about your test ony is that you had you made the observation that enforcement staff shouldn't be involved with directly planning or executing the exams can you speak to why it might be problematic to have enforcement staff directly involved with planning routine examinations
▶ 2:13:08well supervision is a is a confidential uh Prudential process it's quite powerful in my experience it requires cooperation between the bureau and the entity and it can result in very action to stop unlawful activity and to redress consumers but if the entity feels that this is really just a fishing Expedition that's going to get handed off to the enforcement team um they're going to treat it like it's a it's a law enforcement matter they're not going to cooperate
▶ 2:13:38and the entire thing is just going to become an enforcement action which is going to delay uh redress to Consumers so there has to be a divide and having any involvement of enforcement Personnel in supervisory activities I think is troubling um as a member of Congress very interested in our housing supply issues and getting uh first-time homeowners into homes uh I think it's interesting that the cost to originate a mortgage has gone up nearly 50% over the last four years it's nearly triple what it
▶ 2:14:08was before 2010 Mr Schneider to what degree do you think this increase in the cost of mortgage origination is a result of regulatory burden including from the cfbb well what intuitively seems uh a lot can be attributed there there are State Regulators that have always uh regulated Mortgage Services they're they're quite well equipped they have extraordinary broad extraordinarily broad powers that are extended to them by their state governments uh they've been working very uh dutifully in the
▶ 2:14:38past several years to coordinate their activity on a nationwide basis um simply layering on another level of uh Federal oversight um to some extent as adding addition cost that could very easily be handled by uh the state system well thank you very much you know at the end of the day we do need to protect consumers we need to think about fraud we need to think about deep fakes uh fraud is monopolizing the time of a lot of folks in this in this Lane
▶ 2:15:09and I want to see the consumer protection uh of the federal government focus more on fraud and less on gotcha tactics and with that I yield back thank you before I go to the next member I would like to recognize ranking member Foster uh thank you I'd like to ask uh unanimous consent to enter uh three statements into the hearing record from groups strongly opposing the Republican bills that we're considering today that would undermine the cfpb and weaken consumer protections including one from Americans for financial reform a second one from consumer action
▶ 2:15:39and a third from the National Association of consumer Advocates without objection thank you and now I recognize gentleman from North Carolina representative Moore for five minutes thank you madam chair uh a little bit about I'm the uh I guess I'm the newest member on the committee which is why I get to speak last uh but before becoming a member of Congress for 30 years I was an attorney and I actually represented consumers during that time represented businesses represented a number of folks and had the opportunity
▶ 2:16:10to deal with with with fraud cases over time so when I came as a new member of Congress I wanted to see well what does the cfpb do and I I actually had somewhat uh High Hopes which I guess proved my naivity on that subject because as I as I dealt with this becoming a member of this committee realized that that the comments made by members like Miss D La Cruz to my left and others of the abusive practices Madam chair of this agency just just
▶ 2:16:40shocked my conscience uh and this this is as an American as an attorney seeing this happened and the fact that financial institutions could not even rely with any certainty on what was legal and what was not uh it was completely a game of gotcha an agency that is not funded by the normal Appropriations process but is incentivized to to get money by levying fees and fines
▶ 2:17:10it's almost like if you had a police officer out there paid more to write more tickets or something or I mean it it's it's it's antithetical it's completely antithetical to any notion of due process and equal protection in any way and so I think what you have with the way cfpb under the under the prior Administration governed was actually was actually the predator in this case uh by praying on businesses paying on companies to exert fines
▶ 2:17:40forfeitures and fees and and with all due respect to Mr frotman I I read your comments heard your comments I mean I'm I've been an attorney for 30 years to to to to approach something like this when it comes to a significant part of of regulatory law affecting so many this country with with a clear political agenda uh just shocks my conscience and I would ask that uh I'm glad the new agency isn't doing that and I would just ask those that ever want to serve in these positions certainly don't
▶ 2:18:10do this this is um you have millions of Americans who count on having access to Capital you have individuals you have companies businesses that are built on providing that capital and the one thing that folks need to know is what are the rules what are the rules of the road and follow those rules and don't change them Midstream and don't do them in such a punitive way uh simply to either exercise or abuse power or to try to you obtain more money uh from these entities uh so the
▶ 2:18:40the the more I have studied this Madam chair and I hope that it comes to the attention of the American people uh who see this absolute abuse in government and and it's it's exhibit a of of what's wrong or what has been wrong in so many things U but I did I did think about something under the former under the former director it it seems that the cfpb made a habit of like bypassing the administrative procedures acts notice in comment requirements just enacting things I think there was a whole host of
▶ 2:19:11these what midnight uh entries I don't know if they were done with an auto pin I don't know how they were done but they were done but but I would have a question for uh for Mr Snider and uh you have extensive experience with experience with enforcement the cfpb as well as the as the uh APA and I'm just curious does first off would you agree that the APA applies to the cfpb of course yes sir and would is agency guidance is that a rule it it should not have the binding eff
▶ 2:19:41of law if it hasn't gone through the appropriate approval process what what about a press release uh no no question there all right how about it just a statement by the director is that a rule no um and so should a press release or a statement by the director be the basis of an enforcement action it certainly shouldn't be but my understanding is that that did happen under this prior Administration is that correct well certainly the prior Administration uh
▶ 2:20:11uh took enforcement actions that did not seem to be well grounded on any properly promulgated Rule and in some cases stood in contrast to properly promulgated rule that is like 100% not correct over and over again the directoral hack I didn't ask you a question I didn't if you wanted the truth we could have I didn't ask you a question sir uh I would just simply say that comments by Mr frotman disregarding the rules of this committee his disregard of rules there simply shows the problems with this agency with that Madam chair I yield back
▶ 2:20:41thank you I now recognize the gentleman from Florida representative doners for five minutes uh thank you madam chair in this committee is goes without question question my views on the cfpb I've been very clear that this agency is a rogue agency that was created with on a partisan basis at a time period when um frankly the Democrats were choosing to solely blame Bank activity for the financial collapse as opposed to looking at the regulatory environment that had been set
▶ 2:21:11up um which based upon faulty uh underwriting which cascaded through the financial economy so there were many people who bear the burden of what happened in the economy in uh 08 and 09 and just setting up this regulatory Behemoth with no oversight and no accountability to the American people except to the whims of democrat politicians has always been wrong and my view is still un unconstitutional and his agency should be repealed never
▶ 2:21:41to be seen again and I think that the miss the argument of this is the only way to have consumer protections at the federal level is a complete Folly and it is wrong and it is shortsighted uh consumer protections have existed in every Federal agency long before the cfpb was ever uh contemplated or created and those are the facts that being said if the least we could do is actually reform the cfpb
▶ 2:22:11and actually have be an agency that is responsive to Congress and responsible as it ex responsible as it executes rulemaking in the marketplace that could have some positive benefits but my position remains that this agency just needs to be completely removed um and then we move forward on a on a real uh a real and responsible regulatory environment that allows our economy to grow in a responsible manner going into the future that being said uh Miss Miss uh Miss
▶ 2:22:42fona as the head of a company right on the cusp of being subject to cfpb overreach can you describe how the cfpb stifles growth growth and Innovation um as I thank you for the question as I mentioned previously we've been uh very focused on prepar preparing for CFB oversight and also concerned about you know classification of junk fees for programs that our members want um so we're spending way too much time on that and not enough time on
▶ 2:23:12innovating new products and services for our members thank you uh Mr Schneider what's the actual cost of compliance imposed on the private sector by former director Chopra over the last four years I'll be perfectly honest Congressman I I don't know that figure I know uh just to respond to an initial civil investigative demand given the short scope of time involved and the massive amount of data could be tens if not hundreds of thousands of dollars um much less just thinking about
▶ 2:23:42you know what a particular uh proposed uh Speech idea might have uh the cost the cost your compliance Department Department would be enormous tens of thousands uh tens of thousands or hundreds of thousands of dollars just for one company for one company for one investigation okay um Miss Keane what is what was the consumer protection regulatory landscape before the creation of the cfpb before the creation of the cfpb
▶ 2:24:12you had the credential Regulators who had authority to look at the companies that they examine for Consumer Protection in addition you had the Federal Trade Commission I did want to take exception that there's never been a a cop on the beat as as someone who ran a division at the Federal Trade Commission we investigated companies for violations of Consumer Financial Protection laws and brought cases against those companies okay thank you so much and uh and Mr
▶ 2:24:43pommerin how would financial institutions businesses consumers and the economy as a whole benefit from the abolition of the cfpb well first and foremost we need a strong consumer regulator we need one that is going to be fair and reasonable I think that to the points made earlier when we have rules and guidance and even we're acting to blogs and you know different circulars things of that nature it is hard to comply to comply
▶ 2:25:13with what is actually needed to be complied with it's unclear to be to comply with the uncertainty that's created by an agency that doesn't go through an APA process with notice and comment and the like I think consumer protection needs to be needs to be had we need a durable credible consumer regulator that's going to be fair to all of the policy the stakeholders going forward and to add on to your comment and I think people will hear me say get rid of the cfpb and trust me I mean it get rid of it
▶ 2:25:44but to that point yes there are consumer protections that should be durable that follow the administration procedures act and not have an agency which is Rogue in my view depending on the presidential Administration and just moving through our economy with no accountability whatsoever with that I yeld thank you well please join me in thanking all of our Witnesses for joining today and answering the questions from the members without objection all members will
▶ 2:26:14have five legislative days to submit additional written questions for the witnesses to the chair and the questions will be forwarded to the witnesses for your responses and the witnesses you will have uh until April 30th to provide written responses if um you receive that question so thank you very much for being with us today with that the hearing is now
▶ 2:26:49adjourned for