tv CFPB Director Testifies on Agencys Semi- Annual Report CSPAN October 29, 2021 4:22pm-6:09pm EDT
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sen. brown: senate committee on banking, housing, and urban affairs will come to order. we are pursuing a hybrid format as in the past. witnesses are in person but members can appear in person or virtually. as mr. chopra knows, many members will be here most of them in person. a couple of reminders when you start speaking. there will be a delay before the display on the screen. every senator knows how this works. the speaking order will be as usual bison yorty, the members who have checked in before the devil came down -- gavel came down, alternating between democrats and republicans. the newly confirmed director is stepping into a vital role for the american people. it is your job as director for the consumer financial
protection bureau to stand up for the hundreds of millions of americans that are really who do not have a corporate lobbyist or a super pac. you work for all the people who do not have a high-priced attorney fighting for them. if a company opens a faint -- fake account or overcharges them on their credit card or there are mistakes in credit history, you step into this role at a time when many people feel they do not have a voice in our economy or anyone on their side and government. you are that. person for so many. . your job is to prove them wrong and be on the side of anybody prayed on and looked down on by corporate america, to empower them to get their hard-earned money back. your history, the history of this agency, will both tell mate you are up to the challenge. millions of families still deal with the pandemic effects over the past year and a half. scammers pray on people in a crisis. people masquerading as government workers can't families out of money, promising
early access to a covid vaccine or student loan debt relief, even funeral expense benefits. it is why after the 2000 a crisis, we created the cfpb to stand up for companies that will use a crisis to cheat every cent they can after --out of people. the cfpb for four years was held back by an administration that tried to tear down the bureau from within. after an election where americans decisively rejected that corporate kowtowing, the biden administration ushered in a new era of consumer protection. under the leadership of the acting director and your leadership, the cfpb has gone back to work getting people their money back. this year, the bureau has worked so protect the rights of renters and homeowners and is connected with resources to get rental assistance. he created new requirements for organ servicers to make sure homeowners can keep their homes
and get back on track with their payments. cfpb helps those with student loans as moratoria and. i applaud your decision to join doj and the officer --office of the comptroller of the currency to work on fair leasing laws to get rid of their legacy from jim crowl -- crow and redlining. as tech companies encroached into the housing markets, new threats emerge every day. look at what is happening to the tenant screening industry. i have asked the bureau to review the tenant screening industry to protect renters and look forward to hearing how we can crackdown. bias and algorithms and other predatory targeting risks reinstating jim crow in a new
high-tech form. new revelation about facebook's promotion of extreme and divisive content including vaccine lies is the latest reminder we cannot trust these big tech algorithms. the last thing we need is there moving into the payment system and other financial markets critical to family's financial futures. the efforts to investigate big tech in their abusive data privacy practices are important. we must. continue them no matter the industry, the cfpb is about empowering people and giving people a tool to stand up to the big banks and corporations and tech companies that have far too much power. i know those corporate interests and their allies in this building simply do not like that. director chopra, you were confirmed unanimously by voice vote to be an ftc commissioner. no dissension from that, yet not one of my republican colleagues,
not one in this committee, of the 50 on the senate floor, even those who had occasionally stood up, not one of them wanted you to take this job. they don't want it to exist. it is not about you. you should not take it personally. anyone who goes after corporate interests you all attack. every time we have a hearing, we hear the same made complaints about accountability. you know how accountable the agency is and how many times one of his predecessors, my ohio friend rich cordray, how many times he came before this committee and to your colleagues in the house. this agency has returned billions of dollars to consumers. what you do not like is that they go after your contributors in the big banks. if you want to attack the consumer protection bureau, say what this is about and do not make up stuff about accountability. i do not expect you --i expect
vigorous enforcement and consistent monitoring of companies and crackdowns on big corporations which routinely and repeatedly violate orders. i look forward to hearing about the agenda you are i look forward to the new era you are setting in this important agency. >> welcome, director. we will talk about accountability. rather than impugning the motives of my democratic colleagues, we will stick with the facts in the case. during the obama administration, the cfpb was routinely an unaccountable agency for restrictive policies. it limited consumer choice, drove up the cost of credit, and needlessly harassed employers. it appears the biden administration is returning the cfpb to its bad old ways. the biden cfpb has disregarded
its jurisdictional limits, rescinded policies that provided regulatory clarity, returned to regulating by enforcement actions rather than by rules, reportedly pushed out career civil servants for political reasons and certainly refused to comply with legitimate congressional oversight request. this is a completely unfair practice that occurs when agencies failed to set clear rules of the road before bringing enforcement actions for violation of these undefined rules. a classic example is with the dodd frank act. dodd frank prohibited consumers of financial products to engage in "abusive" acts or practices. but the law's definition of this new term is so vague. during the cfpb's entire existence, it has never bothered to issue a rule to clarify this definition. that did not stop the obama cfpb
from bringing enforcement actions, accusing businesses of abusive conduct. the trump cfpb issued a sensible policy to curb this practice. the biden cfpb however quickly rescinded this policy and took no steps to provide regulatory clarity. instead, in just his second week on the job, the director brought and settled an enforcement action against the company for abusive contact, even though the cfpb did not define the term. cfpb alleged "an abusive market dominance," which is a foreign concept taken from european antitrust legal theories, not american consumer laws. the biden cfpb exceeded the bounds of its statutory authority by acting outside of its jurisdiction. take the cfpb's overreach into landlord-tenant law to advance the biden administration's
unlawful cdc eviction moratorium. in may, the cfpb and ftc jointly sent threatening letters to large landlords about the moratorium. the problem is housing rentals and landlord-tenant law are completely outside of cfpb's jurisdiction. by statute, theb's jurisdiction is limited to overseeing "consumer financial products and services" which do not include housing, rentals, and enforcing certain enumerated consumer laws, none of which govern landlord-tenant relationship. the cfpb even seemed to begrudgingly acknowledge its lack of jurisdiction, but that did not stop the cfpb from threatening that with potential legal action. the letter stated "neither the ftc or cfpb has determined your company is violating the law. they may still take action based on law violations."
it is deeply troubling that the cfpb made these threats when it had no legal authority to follow through on them because housing rentals and landlord-tenant law are outside his jurisdiction. the biden cfpb refused to comply with legitimate congressional oversight request. according to reports, the biden cfpb has taken unusual and possibly unlawful actions to push out career civil servants in order to replace them with political loyalists. in june, i sent the cfpb a lette' about these allegations. for five months the cfpb has solved to evade this request. -- sought to evade this request. in july, the cfpb claimed the privacy act prevented it from introducing any of the requested records. after my staff challenged that claim, the cfpb provided heavily redacted records just this month. despite the heavy reductions, at
least one document referred to "voluntary separation compensation agreement," which sounds like reports that cfpb civil servants were offered some kind of extraordinary separation incentives to leave the post. from the reductions to -- redac tions to delay tactics, it makes you wonder, what does the cfpb have to hide? i can ask the same question of you, director. while your nomination was still pending, i send you a letter about reports of troubling actions at the cfpb. my letter asked simple questions about whether you were involved in or aware of these actions. you refused to answer these questions or to respond at all. as a result, in july, every republican member of this committee, half the members of this committee, sent you a letter calling on you to answer the simple questions, and still you refused to provide any
answer whatsoever. that is simply unacceptable. let me close by saying you have been the cfpb director for less than a month. there is still time for you to reverse course. a couple good places to start would be to end the cfpb's unfair practice of regulation by enforcement. you could restrict the cfpb's limits and stop stonewalling legitimate congressional oversight request. i hope you make these changes, but i am not holding my breath. >> i will introduce today's witness. rohit chopra previously served as an ftc commissioner. he joined cfpb and was appointed the cfpb student loan alms bondsman -- omsbudsman. >> members of the committee,
thank you for holding this hearing today. 2021 is far different than 2020. the economy is reopening and growing again. labor demand is strong and employers have added millions of new jobs. household spending rapidly increased and demand for housing is robust. while these macro indicators are promising, the recovery has been uneven. in many individual communities, conditions remain fragile. many families continue to struggle with mortgage and rent payments. many small businesses are facing severe challenges to make ends meet. and many neighborhoods, especially those historically disadvantaged, have not felt much of a recovery. american families now owe $15 trillion as of the end of the second quarter of this year, roughly $800 billion more than at the end of 2019 before the
pandemic. over a year, mortgage origination hit historic highs at $4.6 trillion. the cares act has kept rates on mortgages and student loans at low levels, however many of the borrower forbearance programs have expired, so we lack a complete picture about distress. many family farmers continue to confront very severe challenges. medical debt and collections continues to grow as a concern for many households. congress has tasked the cfpb with monitoring market conditions to spot risks and meet other statutory objectives. the cfpb is carefully monitoring the mortgage market, including foreclosures. it is critical families do not experience unnecessary hardship or illegal foreclosures or other disruptions that could impede the recovery. we are keen on understanding how homeowners from different
segments of the population are faring, including military connected families, older americans, committees of color and family farmers. technological progress holds the potential for real benefits to households and the economy, particularly with respect to real-time consumer payments. in recent years, big tech companies have sought to gain greater control over the flow of money in our economy. last week, the cfpb issued orders to firms such as facebook and amazon to shed light on their payment system practices. the orders seek information on how firms monetize data about our spending habits. we are also seeking to understand the specific criteria that firms use to approve or kick off participants. we will be studying some of the practices of chinese tech giants. this effort will also inform
other initiatives to ensure our evolving payments landscape is in alignment with our national interest. more broadly, the cfpb intends to use its tools to promote an equitable and inclusive recovery . given the existing economic conditions in these tools, i expect to have a few areas of focus. first, we must find ways to create more competition in these markets. this is a key objective of the dodd frank act. i am concerned many americans could be paying lower rates on their mortgages and earning higher rates on their savings. we plan to listen carefully to local financial institutions and nascent competitors on the obstacles they face when seeking to challenge incumbents, including at big tech. the cfpb will sharpen its focus on repeat offenders that violate agency and court orders, harm families and law-abiding businesses. third, we must work to restore a
relationship banking in this era of big data. too many households and businesses have no place to turn when they need help, especially when they face problems in their financial lives. the inability to cut through red tape and get help in one's financial life can be a major obstacle when seeking a job or applying for credit. preserving relationship banking is critical to our nation's resilience and recovery, particularly in these times of stress. thank you again for the opportunity to appear before you. i look forward to your questions. >> last week i requested the cfpb review the tenant screening industry. our committees found a significant number of these tenant screening reports contain inaccurate information. in some cases, eviction filings that did not lead to an eviction.
companies people never heard of that may not even have accurate data, or stopping people from renting all over the country. these reports put low income renters at a distinct disadvantage and black and brown renters and female renters often times. what risks do inaccurate screening reports pose to consumers? what steps are you considering? dir. chopra: tenant and employment background screening have proliferated throughout our country. false matching and false information can severely impede someone's ability to get an apartment, a job. in a time of economic dislocation, we need people to apply for jobs, to move where those jobs are available. when inaccurate screening companies block those people from opportunities, that may in many cases violate the fair
credit reporting act, where the cfpb has enforcement and rulemaking jurisdiction. it is an area i want to work on with you and other agencies who share jurisdiction. we need to make sure people are not being locked out of housing because of illegal practices. sen. brown: since our colleague senator romney's father was secretary of hud under president nixon, we are not really closing the gap between homeownership with white families and black and brown families. what are you doing to prevent further loss of ownership -- of home ownership among families of color? dir. chopra: the most immediate priority is to pay attention to mortgage servicing and foreclosures. i think we saw a decade ago what it was like when so many of those servicers engaged in practices that led to wrongful servicing or wrongful foreclosures. that led to trillions of dollars
of wealth disappearing in the broader crisis. that widened many of the gaps. we have to make sure those servicing practices do not appear again. we need to look broadly at our markets to make sure we are stamping out illegal discrimination, that we are looking for places to broaden participation rather than foreclose based on the color of their skin. sen. brown: too big to fail banks are a threat to our entire economy. wells fargo, for example, is a too big to manage institution. they have been in front of this commission. wells fargo with $1.9 trillion in assets has been prohibited by financial watchdogs from growing any larger. how has this asset cap prevented wells fargo from hurting more
consumers? what other tools might you use to protect americans in the financial system from repeat offenders? dir. chopra: with respect to the asset cap, i don't have the best answers for you now. one of the places that will be a priority is order violations and repeat offenders. we see a two-tiered system where federal agencies go hard on small businesses. when they violate an order, they get totally shut down. larger firms, they sometimes violate those orders or engage in repeat offenses, and there is a complete lack of parody in how justice -- parity in how justice is administered. we need to make sure we are evenhanded across the board, that we are focusing on repeat violations and using the full panoply of remedies to make sure
there are real consequences for repeatedly violating the law. sen. brown: thank you for what you said about the big offenders versus the smaller guys. it is important that you emphasize that. as whistleblowers and reporters have shown, tech companies like facebook and amazon clearly don't care about anything or anyone other than their own profits. last week i raised concerns about facebook's efforts to get their hands on american's hard-earned paychecks with their digital wallets and a facebook controlled stable going. we know -- stable coin. we know facebook clearly can't be trusted with america's paychecks. director, we expect you in this committee to share the results of the cfpb's investigation. we expect you will work to
prevent big tech companies from wreaking havoc on the financial system the way they have on every other industry they get involved in. i hope that is your commitment. dir. chopra: with respect to the orders we issued, the law provides us some ability to make summaries of those results available to the public and you. we will keep you updated. sen. toomey: as i mentioned in my opening statement, the biden cfpb has reportedly taken on possibly unlawful actions to push out career civil servants in order to replace them with political loyalists. june 17, i sent you a letter asking civil questions about whether you were involved in or aware of this. you did not reply. on july 13, a month later, every republican on this committee sent you another letter, calling
upon you to answer these questions. this is that letter. you never responded to us at all. why didn't you answer these questions? dir. chopra: senator, thanks for the question. i observed all the protocols that are customary with respect to the confirmation process. i appeared before a hearing. i answered a large number of questions for the record, then i also agree to appear before any duly constituted committee of the senate. at the time, i was not cfpb director, i was an ftc commissioner. where committees oversaw me in that capacity asked me questions, and did so in public, i -- in public, i answered. sen. toomey: you did not answer the question as to whether you were involved. you did not answer anything
about these questions. you were a nominee for a post that is under the first action of this committee. you have been in this job for three weeks or so and you still have not answer the question. is it your view that you just decide which questions from oversight committees of congress you are going to answer and which ones you are not? dir. chopra: i observed all of the protocols that have been involved in confirmation hearings. sen. toomey: you didn't answer a written question from the committee of jurisdiction over your nomination. i'm not aware of any protocol that says don't answer the questions when half the members of the committee ask you a question. i don't believe that is the protocol. should republicans generally expect we will get answers to questions in the future, or will you decide there is a protocol that says i will not answer them? dir. chopra: i have appeared before congress many, many times, answered hundreds, maybe
even thousands of questions from members. i take congressional oversight extremely seriously. i previously came from an agency that completely ignored congress all the time. you have my commitment that we will work with the committee to respond and be transparent on requests from the committee wherever we can. sen. toomey: wherever we can, no. if members of the committee ask you a question, you have an obligation to provide a response. senator brown alluded to a letter he sent you. will you respond to that or ignore that too? dir. chopra: we will be responsive to requests from this committee in observing all the customary protocols, including with respect to senator brown's letter. sen. toomey: this hedge you keep introducing about observing protocols sounds like you are looking for a way out, as you apparently were, since you never
responded to a straight forward question when it was posed twic e. by the way, the cfpb was extremely reticent to provide any answers when we asked for the documents that would back up their contention that there is nothing untoward here. they sent us redacted information such that the entire body of the communications, which according to the subject line had to do with voluntary conversation agreements, the entire body is missing, which makes it look as though there is some thing to hide. your refusal to answer the question raises the question of what it is you have to hide. dir. chopra: i have nothing to hide. sen. toomey: then why didn't you put it in writing? dir. chopra: i have been briefed on those issues. they involve personal issues. in the executive branch, we are required to adhere to a number of laws and regulations. sen. toomey: i'm going to let
you hide behind that -- not going to let you hide behind that. you can redact the name and identity. i'm not asking about confidential information. we are looking for the substance of the practice. what we got from the cfpb is the opposite. the names are all there. it is the content of the message that was left out. if there is nothing untoward happening, i don't understand why you couldn't have submitted a single letter. dir. chopra: with respect to the separation incentives policy, this policy was put into place by a previous director. i am trying to find out what happened. we will work with any inquiry from the inspector general. i directed staff to be responsive to that. we cannot diebold things that are -- divulge things that are protected by law. sen. toomey: that is not what we are asking you.
you could have provided that in a written answer. this raises serious questions about the transparency we can expect from this agency. sen. brown: thank you. the director does not need me to defend him, but he has been in the job three weeks. the former acting director wrote back and said they don't push out career employees. my understanding is the i.g. is looking into this. senator menendez is recognized. sen. menendez: i hope the agency will be more responsive. i certainly hope under your leadership there will be greater responses. two of the largest services that manage student federal loans announced they would be exiting their contracts. one of the firms that will exit
servicing is also in charge of managing the public service loan forgiveness program. did the last student loan servicing transfer on the scale student loan -- scale harm student loan borrowers? dir. chopra: transfers can be problematic when records have errors and systems are not appropriately tested. i am worried about transfers. we have seen it in mortgage too. we will work with the education department, with other regu lators to make sure that large transfers are done with fidelity. the last thing we need is for millions of borrowers to have incorrect bills. sen. menendez: let me bring to your attention why i raise this. the last time there was a student loan servicing transfer on this scale, it both caused and revealed millions of errors that continue to harm student
loan borrowers, including promising relief to the public service loan forgiveness. a recent investigation uncovered 5 million new errors related to the transfer from acs, including instances of missing borrower payment histories, and correct payment counts, and -- incorrect payment counts and other errors. the difference is now they have a watchdog on their side. what is the bureau doing to prepare for this transfer? dir. chopra: we have a rule that allows us to supervise large student loan servicers. i intend to make sure we are engaging in adequate oversight of those entities, that we are supervising them for our laws and their preparedness. it will require us to have close
cooperation with the education department. i am examining whether to refresh that. sen. menendez: i hope that you do in order to make sure we don't have millions of errors in this transfer. it is consequences to the consumer. as the economy continues to recover from the covid-19 pandemic, businesses are still seeking financial lifelines. stepping up to fill these needs are alternative financing companies promising easy approvals with little to no documentation requirements. however, some of these financing companies are not transparent in their loan terms and small businesses can end up taking on debt they cannot afford. without cost transparency, businesses cannot distinguish financial lifelines from landmin es. the current small business financing disclosures provide owners with the information they
need to understand the cost of the credit product and make an informed decision. dir. chopra: certainly not always. it is not covered by the same protections that exist for household borrowers. as you know, many small business owners use a mix of personal credit and small business credit. they can't even make fair comparisons. california and new york have begun to introduce it, but it is a problem for many entrepreneurs. sen. menendez: it is clear that small business owners do not have the information they need to make informed decisions. providing small business owners with uniform term disclosures, will that allow them to make informed decisions? dir. chopra: yes. having the ability to compare and see costs clearly generally is beneficial. there are a number of practices in the small business lending
arena that are banned when it comes to consumer lending, so-called confessions of judgment, where a borrower automatically pleads guilty when they are sued. there are other practices where small business owners are not protected currently. sen. menendez: this is why the chair of the small business committee and i are working on a bill to extend small business loans. it is time to bring some light to small business credit. i will follow-up for the record about what the bureau is doing to prevent borrowers from ensuring there is ample provision for the student loan companies. there is a history that needs some significant oversight. we look forward to hearing your response. sen. brown: senator tester is
recognized for five minutes. sen. tester: if the accusations about replacing career folks with politicos is correct, i don't think that is responsible. i need to say replacing people with politicos after what we went through with the last four years is ridiculous. i watched the president go after the head of the fed. i don't know if i heard one person say that is inappropriate on the republican side of the aisle. quite frankly, everything the last administration did was about politics all the time. i speak to that as being someone who is perceived as a moderate, who the president politicized everything that came down the pi pe. director chopra, before i get to
my questions, congratulations. i was proud to vote for your confirmation. i was a little sad to see you leave the ftc, because i thought you did a great job for american consumers. an issue that has been long important to me is accurate labeling of products made in the usa. there is a lot of work to do in this space, but i have a few folks that understand this more than you do. we have even fewer now. i have no doubt that you will take this commitment to transparency to the cfpb and continue to do great work. i am not sure i can ask you a question about the importance of labeling beef with country of origin. i have no doubt you could answer that question. i do look forward to working with you on your new role.
in a state where we have seven reservations, and they do play in the financial world, i would hope you would open up dialogue with our native american tribes to make sure what you are doing is fair and appropriate for them in the consumer. -- and the consumer. i would say the same for our banks. the cfpb in the past has taken a number of actions on companies that have harmed service members or veterans, particularly in the mortgage market. i appreciate the work the bureau has done to protect those who have protected us. there is always more to be done. the cfpb has a number of efforts in place to look after veterans. will you walk us through what that will look like under your leadership? dir. chopra: we will refresh that quite a bit.
i want to make sure our servicemember, veteran, and military family work is part of how we enforce the law. i had a chance to discuss this with the attorney general. we need to make sure we are cooperating on the military lending act enforcement. we need to continue our work on the civil service member relief act with them. we need to make sure when the dod is doing its own analysis
that we are understanding where there are issues when it comes to credit reporting. many of those inaccurate issues lead to the loss of a security clearance. all of this costs taxpayers and families more. sen. tester: i have long been a supporter of public student loan forgiveness programs. i think we need to keep our commitment to those folks. i made it clear to the previous director that their administration of this program was unacceptable. the department of education was blocking the cfpb's access to the information to adequately examine services and the program. how is it working or not working currently? dir. chopra: to be truthful, this program has been botched over multiple administrations. i understand the education department is taking steps to
remedy those past failures. to the extent that companies have lied or broken the law with respect to borrowers, they need to be held accountable. sen. tester: sounds good. thank you. sen. brown: senator cortez masto from nevada is recognized. >> director chopra, welcome. i am glad you are at the helm of the consumer financial protection bureau. it is truly important having your leadership in protecting people from unfair abuses and practices in financial products. it is a concern of mine that never got results.
under the previous nominee, firms were fined only one dollar with no redress to those who lost money. how will you work with your enforcement staff to make sure victims of any type of unfair practice are compensated for their loss? dir. chopra: the statute authorizes the bureau to seek redress, damages, civil penalties. there are factors in which those civil penalties are assessed. that is reviewable by a court. with respect to redress, we want to make sure where a defendant is judgment proof or has already spent the money, it is important we assess a civil penalty. only those matters where a civil penalty is assessed can victims access a relief fund.
we make sure we are applying the penalties. there may be cases where we have to assess a one dollar penalty to make sure a judgment proof defendant can get redress. i think the penalties need to be a strong deterrent. for wealthy firms, a one dollar penalty would be inappropriate. sen. cortez masto: let me talk about data privacy. last week the cfpb issued orders to collect information on the business practices of technology companies operating payment systems in the u.s.. what date are they collecting and -- data are they collecting and how is it being shared?
[indiscernible] dir. chopra: i think it has been over 20 years since senator shelby on this committee talked about surveillance and spying. we have laws in place to protect against invasions of financial privacy. an act which the cfpb administers, there are some real open questions about how the tech companies are harvesting this data, how are they monetizing it? we need to figure out what is going on. this is not something most financial institutions do. they observe the protocols under the act. we asked a number of questions
to ascertain what is happening with this data, how are they using it, and we look forward to share with the public what we learned. sen. cortez masto: wonderful. thank you for working with me to curb the unfair practices that affect some franchises. will the cfpb consider the role -- [indiscernible] dir. chopra: the rulemaking requires the bureau to collect certain data about small business loans for a host of purposes. we want to make sure we are hearing from the public. there is a notice of proposed rulemaking to implement that statutory directive. i am very interested in the franchise market to the extent we need to learn more to
understand how loans are being originated to franchisees. i welcome your feedback to make sure we understand how that is working. franchisees in this country have been beat up on for too long. we need to make sure they have the ingredients for success. a small business program that is nondiscriminatory is important to make that model successful. sen. cortez masto: i could not agree more. thank you so much. sen. brown: senator tillis from north carolina is recognized from his office. sen. tillis: thank you for being here. i would like for you to look around the room to members in the chamber and based on their appearance and names, can you provide me the person's ethnicity and race? dir. chopra: i understand that
may be a reference to the section 10-71 notice of proposed rulemaking. i understand there are some guidelines there where a borrower has not filled out the form appropriately or completely, that i believe it allows the lender to comply by making an ascertain. -- an ascertain should -- an ascertation. this is to strike a balance of finding ways for lenders to comply. i have heard these concerns. we need to take these concerns into account when crafting any final rule. sen. tillis: it sums like you may be forcing a lender to guess ethnicity and race based on appearance? you are forcing people to make assumptions about ethnicity and race.
it just doesn't seem like -- if the goal is to end discrimination, it does not seem like a good way to do it. dir. chopra: i appreciate that. i hope everyone submits feedback to our open comment period. there is always a struggle to figure out how to make sure to give lenders the ability to understand their obligations and what to do in the circumstances where someone may not be filling out a form. i understand and have already heard this concern in my first two weeks of the job. sen. tillis: to me, it seems fundamentally flawed. we will be interested how the comments come back. another subject about the bureau's past experience with midnight embargoes. it seemed like a biased process to minimize the chance of outside groups to rebut it
before cfpb could control the narrative. do you know why the practice of the midnight embargo garnered mistrust of the cfpb? dir. chopra: candidly, i don't, but i am happy to learn from it. sen. tillis: why do you think it is an acceptable practice? dir. chopra: i don't know. i am saying i need to learn more about it. as i understand, many times, for especially complicated policies or detailed rules, it is sometimes released so that the news media have the ability to identify experts, find all points of view. sen. tillis: it appears to be a pattern of behavior that appears to me to be an embargoing of
outlets that may be more willing to take the talking points versus a critical assessment for all takers in the media. maybe you can demonstrate patterns of behavior that are contrary to the perception of the midnight embargo practice. speaking of news, we had several news reports from outlets indicating a purge in the cfpb of career staff earlier this year with the transition to the biden administration. can you confirm early retirements were never offered or launched for political reasons? dir. chopra: as far as i know, they were absolutely not. i am getting briefed on it. we will comply with any inspector general inquiry. i have no evidence at all to suggest that there was any political purge.
i'm not even aware of any terminations. sen. tillis: do you intend to respond to ranking member to me -- member toomey's request? dir. chopra: we will work with the committee to be responsive, but again, it involves personnel matters. in the executive branch, when it comes to per specific personnel, particularly with allegations of misconduct, there are certain protocols that must be followed. sen. tillis: it seems to me that you you committed to transparency. i think it can begin with proper responses to committee members, particularly the committee member. sen. brown: senator holland of maryland is recognized for five minutes. >> i wanted to cover a couple topics with you this morning, beginning with the foreclosure issue and what i worry could
become a foreclosure crisis. congress put in place important protections against mortgage foreclosure during the pandemic. yet, cfpb documented in june a series of violations against that emergency protection rule. i am especially worried, now that those protections have expired, that we could see a wave of foreclosures. i know you put in place a new rule in august. what is your experience today, now that the protections have lapsed? what will you do to enforce that rule? dir. chopra: i have already started getting updates on what is happening in the mortgage market with respect to delinquency and foreclosure.
right now we are still seeing foreclosure at very low levels, but i need to understand about whether there are certain loan servicers or certain population segments where there may be problems. i do not want to act too late on this. the rule the past acting director put into place is an interim rule that seeks to have an orderly transition back to repayment. servicers as i understand have embraced this and are already starting the process of evaluating homeowners for alternatives to foreclosure, including loan modification. the thing that is best for homeowners, for investors, is to prevent avoidable foreclosures. it is a win-win-win when servicers are able to successfully get a borrower into successful repayment. sen. van hollen: i appreciate
that. we have issues we are seeing in the state of maryland. i want to endorse some of the statements my colleagues and others have made regarding the public service loan forgiveness program. i agree with your characterization that this has been botched over a series of administrations. i am pleased at the department of education for waiving some of the excess of administrative hurdles. as you indicated, you've got the primary servicer of these loans going out of business. i am very nervous that it's going to be a challenge to implement those waivers and at the same time transfer these loans to another borrower. do you see cfpb as playing a significant role there now that
you signed the mou? dir. chopra: student loan services are covered under consumer financial law. we have a role in supervising them. i think you're right, there is this issue, particularly when it comes to surfacing. when one of them fails or one of them exits, the verb reparation -- the reverberation is challenging to manage. we need a resilient ecosystem and making sure we are anticipating those risks. so yes, the transition back to repayment will be high on my list to make sure we don't have a cascade of borrowers across the country getting wrong bills. sen. van hollen: i appreciate that. to give you the maryland figure, 90% of maryland applicants for
the public loan were denied. it is outrageous. i have spoken to a lot of these folks. they clearly qualify, but because of a lot of bureaucratic issues and other things, they were denied. my last issue has to do with bank overdraft fees. in my view, we've got to do a lot more to protect consumers. under current law, the bank consumer, on a one-time basis, says it is ok to overdraw my account and be charged penalties. but what we see is after that first signature, no other communications or notice. it leads to what i call the $35 cup of coffee. you provide your credit card, whatever it may be, no notice that you are over drawing, then huge penalties, especially for
lower income people this is a real slug in the wallet. i don't know if you are doing anything in this area, but we look forward to working with you on this consumer protection issue. sen. brown: senator ossof from georgia is recognized from his office. sen. ossoff: i want to ask you a few questions about fintech data privacy and tech platforms that are exploring entry into the fin tech or payments markets. with respect to privacy, we have seen over the past decade new entrants in financial technology, providing services that have typically been the domain of more traditional financial services companies.
offering those companies a significant opportunity to collect data about their users, about their patterns and habits of consumption, about their location, other personally identifying information that may have value for marketing purposes by the fin tech companies themselves. can you comment on what your agency may have to protect data privacy as more customers are using these novel financial products? dir. chopra: thanks for the question. our country is turning into a bit of a surveillance state when it comes to some of these tech companies. the ability to combine browsing information, geo location information, health information, and the list goes on and on.
and to add to it the ability to combine that potentially with not just our transaction data, but skew level data. not just how much you spend at a place, but specifically what you bought. this is a major issue when it comes to how can small entrants, entrepreneurs, small businesses who want to enter this arena -- how can they meaningfully compete with that, especially when these firms have gatekeeper power? we need to make sure we have fair, transparent, competitive payment systems that is protecting privacy. i don't think we have that now. we need to make sure we get to that place. part of the reason we issue those orders is to understand those issues. i think the act's privacy provisions are so outdated and almost useless to this point. we will continue to enforce
them, but it is a problem. the bureau has many authorities. for me, the first step is to study the market so we can shine a light on it. sen. ossoff: i am currently working on draft privacy legislation. let's sit down in the coming days and discuss. can you approach that from the perspective of looking at companies that may not currently be under cfpb jurisdiction, but entering the financial services space may become under cfpb jurisdiction? we heard proposals from facebook to develop their own proprietary pseudo-currency, or cryptocurrency. other big tech firms that may be pursuing entry into the fin tech space already having access to vast swaths of data.
would that open up firms to your agency's jurisdiction? dir. chopra: oh, yes. of course they would be under the jurisdiction. we have to make sure we are thinking about how we will make determinations as to whether they are even complying with the law if we don't even know what data is being used, or if it is hiding behind some black box algorithm. secretary carson issued a complaint against facebook for violations of the fair housing act partially because of its algorithmic targeting. that is likely the future of where financial services is going. to the extent that big tech companies are using the treasure troves of data, there needs to at least be some parity with local banks and other financial institutions who are following the law. we simply cannot let them
off the hook. sen. ossoff: with my remaining time, do you consider cryptocurrency wallets consumer financial products subject to your agency's jurisdiction? dir. chopra: it is a broad question. a -- is a broad question. in many cases we need to look at the facts of the business model, look at the law. it is a place where financial regulators are actively looking. i am happy to circle back to give you more detail. sen. ossoff: i yield. sen. brown: the senator from tennessee is recognized for five minutes. >> thank you for holding this hearing today. director chopra, thank you for being here as well. this hearing is a key part of congress's oversight responsibilities. i feel much more oversight is required for the regulatory
agency you run. last month, i introduced legislation that would subject the cfpb to the regular appropriations process and return civil penalties that don't go to direct victims back to the treasury general account. this morning we saw the third quarter gdp economic growth has slowed down. now is not the time for the biden administration to double down on an antibusiness agenda, one which imposes excessive regulatory costs on small businesses, limits financial services to those most in need of them. as i mentioned last month, i introduced legislation that would subject the cfpb to the regular appropriations process so that the cfpb is accountable to the american people's elected representative. i want to understand whether you are opposed to making the cfpb accountable to the american people through the
appropriations process. dir. chopra: that is really a decision for congress. to say what the facts are, the way in which the banking regulators are funded, the cfpb has two components. there is a base level of funding that is guaranteed by a statute, then separately, inasmuch as the bureau makes requests for supplemental funding, that is subject to the normal appropriations process. to date, the cfpb has not made a supplemental request above that amount. the fdic and much larger agencies have a fee charging arrangement. they charge fees to the regulated institutions. that was not practical to be implemented in this context because we do not just oversee chartered banks, we oversee nonbanks that may not be subject to the same licensing. i am happy to work with anyone
to provide technical advice. as a factual matter, there are two components, the baselevel budget and the budget subject to appropriations. sen. hagerty: i would like to see more accountability in this case. the bounty system used by taxing people through fees is quite concerning. it creates a set of incentives that is discomforting to me and many. dir. chopra: we do not have that system. that is what the fidc and a component of the federal reserve board's budget is. we do not assess fees. with respect to civil penalties, the civil penalties under the law go into a victim's relief fund. for any entity that is subject to a civil penalty, where the victims have not been fully redressed, the civil penalty is
used for that purpose. congress authorizes it to be used for certain literacy programs. my priority for the civil penalty fund would be for victim redressed, because -- redress, because there are many entities where we cannot recover redress, and those victims should be made whole from that fund. sen. hagerty: i agree, it should take top priority. i think a bounty system would incentivize your agency to impose these. dir. chopra: i take the feedback take the feedback seriously. i know there were concerns raised in the past about how the financial literacy programs are used. we will make sure we look into that. i want to know what disbursements are currently going on to make sure that everything is in accordance with the law. sen. haggerty: thank you. i want to turn to cryptocurrency for a moment. my office received numerous complaints every month from constituents about
cryptocurrency being fraudulent or hacked. digital ledger technology offers a tremendous amount of promise in terms of financial innovation, inclusion. it is an industry where i think united states is leading and has that and i would like to see us continue to lead there, especially when we look at other countries like china and the chinese communist party that has moved to ban private sector activity in that arena. would you mind describing to the committee what the cfpb is doing in the cryptocurrency arena? dir. chopra: our focus is really on consumer payments and the payment system. we administered the electronic funds transfer act, and last week i issued a series of orders to facebook, google, amazon, apple, and others to understand some other business practices when it comes to their payment platforms. i'm concerned that they may have the incentive to at their whim kick off for dispense based on their own business incentives or something else we don't know.
i want to know how they are protecting against fraud. the electronic funds transfer act has requirement but we don't have transparency when with the specter these big tech platforms. cryptocurrency right now is generally used for speculative purposes, but we don't know how that will scale. my sense is that it would scale rapidly if big tech platforms are taking it. sen. hagerty: i do want to make sure that as you exercise your oversight responsibly these that we don't stifle innovation. dir. chopra: i agree, and one of the things that will be a priority for me is making sure that regulation and enforcement is not just empowering the incumbents even more. we need more entry, we need more dynamism, we need more innovation, and the way to do that is to not pick winners and losers.
sen. brown: senator warner from virginia is recognized from his office. sen. warner: thank you, mr. chairman. first question i've got, and i'm going to jump around a little bit he re, so i apologize on the front end, is on the qm rule. i know you are a former acting director, and so i believe october of 2022, the role was drafted using a data-driven approach, and a lot of support from civil rights and consumer advocacy groups. i supported the final rule and in a bipartisan way and we put up -- we put a letter together on this and i would be happy to share that. i worry that in delaying the implementation, we might be drifting a little bit off course, and i'm very concerned coming out of the coronavirus that we may be pushing families
of color out of access to capital. do you have any thoughts on when we might get this final rule out? i hope the delay will not weaken the strong apr underwriting regulations put in place. again, i note you are very concerned about access to credit. how do we make sure this final rule doesn't undermine where we landed, which was a pretty good spot? dir. chopra: just to clarify, the rule was not delayed in terms of effective date. it was delayed in terms of the mandatory compliance date. as i understand and as i read the federal register notice and have been briefed, the change -- sen. warner: i'm sorry, compliance, you are right. dir. chopra: it gave lenders more flex ability in determining
which path they would get the status four. as i understand, most of the market has moved to pricing, and a lot of it has already been implemented, so the last thing i want to do is create disruptions in the mortgage market. that being said, senator, i do think there is some places i'm particularly interested and where there may be opportunities to find more loans that may be subject to divide -- qm protections. that is in the refinance space. i think there is a lot of places where homeowners with lower-value homes or with lower-balance mortgages are not necessarily getting the benefits of refinancing. i'm obviously following closely the changes to the agreement between treasury and fhfa about what the enterprises are eligible to buy. we will take that all into account. just to be clear, that rule has taken effect and lenders can use
the pricing regime now and they can continue to do so, given the existing rule that has been put in place, even with the delayed mandatory compliance date. sen. warner: again, on the compliance part, we want to make sure we don't wander off some of the projections. i know senator cortez masto raised similar questions around big tech getting into the payment space. i have some real concerns there. with senator hagerty, we got to maintain the innovation from fintech, but when facebook and google and others potentially get into the payment space, it raises concern beyond privacy issues, frankly, from antitrust, money-laundering, a whole host of issues, and i appreciate the fact that you asked the big tech companies for information and scope of where they are headed.
why don't you share with me what your concerns and what you think cfpb's role in addressing some of these safety implications, as the big tech gets into payments, as well as the question around facebook getting into digital currency? dir. chopra: again, as i mentioned, if big tech companies can scale this globally and rapidly come it opens up a whole host of questions. there is a whole host of concerns about fair competition. i think we have discussed before, in sometimes when the large, dominant tech companies enter space, it freezes up capital formation and venture capital and other investors are less willing to put money on the table for new entrants, because they think to themselves, what if one of the big firms just shuts it off? that is something we want to make sure our payment system is resilient, that we have a fast,
fair, and competitive system. i'm not sure that this body should want our payment system to look more like we chat pay. we have to take an american approach to it, not a chinese approach -- sen. warner: may i just interject for one second? we have to think about that in the context of what china is doing. the chinese platforms committees getting very active in the space -- dir. chopra: no, of course, senator, that is part of the reason our inquiry is going to study the chinese giants' practices, because we need to understand the interplay and make sure that our consumers are protected, but also that our national interest is protected as well. sen. warner: i look forward to working with you on that. sen. brown: senator daines from montana is recognized. sen. daines: thank you, mr. chairman.
i want to express concern with my colleague's about the cfpb. we saw the same thing under the obama adventures and. under the obama cfpb, they pursued regulation by enforcement, choosing to go after countries without giving clarity on how to avoid engaging abusive behavior. the behavior of the cfpb has had a detrimental effect on businesses and has limited consumer choice and increased cost of credit across america and my home state of montana. i'm concerned and i fear that the cfpb is already reverting back to some of those practices of the obama era. the cfpb re-imposing some burdensome rules. director chopra, you said during your confirmation hearing that you would not prejudge a business based on an industry it is in. will you reaffirm that commitment to this committee today? dir. chopra: yes, we should
never prejudge a law-abiding business, and i am happy to answer whatever you want. yes. sen. daines: ok, thank you. you also said you intend on focusing your oversight on large businesses. will you commit to leaving small businesses alone? dir. chopra: let me share some detail on that. my experience with many federal agencies, including the federal trade commission, is that rather than actually going through the process of appropriate enforcement that is subject to court review, what they do is they strong-arm small businesses into settlements, no litigated decisions, to create a sort of hidden con law. i think that is very inappropriate. i think we have to focus on the biggest players with national harm, and that we are doing so because they also have the
know-how, ability, and resources to defend us. most of these large firms have compliance departments way bigger than the cfpb. it is much more fair when we are focusing on widespread harm rather than doing what the ftc does come which is beat up on small businesses without -- sen. daines: a lot of small businesses don't have a compliance department. dir. chopra: exactly. that being said, in some cases, senator, when we are given a large number of complaints about a small entity, i'm not saying that small businesses have a free pass from the law, but that is not going to be my focus. sen. daines: i know senator tillis touched on this as well, but i'm troubled by the proposed rule in section 1071 on dodd frank. montana is made up of a very small financial institutions, many of them come in this
proposed rule would apply to those that originate 25 or more loans per year. i think that is punitive by design and small financial institutions are the visa group to deal with it, as-- least equipped to deal with it, as we talked about. are you concerned about imposing undue regulatory burdens on small financial institutions? 25 or more loans per year? dir. chopra: i don't know the specific detail of what the compliance costs are, but i will answer your question with yes, because here's how i see a lot of rulemaking that occurs in washington. it is extreme the complicated, hundreds of pages so that the large players who have a lot of ability to influence it can cover every single scenario they want rather than having clear bright lines that are easy to
follow, easy to enforce, and that is something i want to move toward. in some cases it is challenging to do simple bright-line rules, but i'm sensitive to what focal financial institutions are facing. in my testimony, i discussed the importance of restoring relationship banking. we have lost so much of that in our country, and it is a harm to our economy and national resilience. sen. daines: relationship banking is a big part of how we do it in montana. i urge you to look at the 25 or more loans special. that is going after the small financial institutions and it is chilling for institutions back home. dir. chopra: and i want to understand what costs are involved in reporting. the law is asking us to collect data on a wide swath of the small business lending market. i encourage your financial
institutions and others to submit comments in the record so we are required to look and consider them, i will look at that carefully. sen. brown: senator smith from minnesota is recognize from her office for five minutes. sen. smith: thank you very much, mr. joe and thank you, director-- mr. chair, and thank you, director chopra. i would like to focus my questions on abuses by structured settlement buyers. over the last few weeks, the "minneapolis start-tribune" has run a series of really alarming stories based on what structured settlement buyers are doing. as you no doubt know, director chopra, there are 750,000 americans who receive some sort of structured settlement, which are periodic payments can usually monthly or yearly, to compensate people for injuries that they or their family members have suffered. these payments are critical for helping families pay for medical care or sometimes just being able to survive after a tragic and that in.
--tragic incident. we are talking about stories of people who have experienced a catastrophic injury and in some cases it makes it impossible for them to live independently. then what happens is these businesses come in, realizing that they can make money off of these cap tester fees -- catastrophes, and they take advantage of these victims when they are the most vulnerable. the firms offer one-time upfront cash payments and exchange for the families agreeing to sign over all future -- not always all, but sign over future payments. on average these firms are taking 60% of the value of the settlements. that means that the individual who was harmed, or their family, are getting less value from those structured payments than the business that brought them. and what is especially concerning is the high-pressure sales taxes that are being used by these settlement buyers,
targeting people when they are in a deep crisis. one former employee of one of these structured settlement businesses was quoted as saying, "you have to not have a conscience to be involved in this industry." director chopra, i want to ask you about this. i know that you are working on responding to the letter i sent to you on this issue, but could you tell me today whether you will be looking into this very troubling and abusive practice? dir. chopra: so, i totally appreciate this question, senator. i also read of those "star- tribune" write ups. structured settlements often target those who are getting recurring payments in exchange for a lump-sum, and under my predecessor, there was an enforcement action done with i believe several states including the state of south carolina. we will obviously want to make sure we are getting the right type of consumer complaints,
understand what is happening in the market, and take appropriate action. i would hate to see that those who have been subject to a horrible accident or some other tragedy essentially lose financial stability for themselves and their family because of unlawful practices. sen. smith: thank you for that. i think this is the worst type of predatory behavior we have seen by businesses taking advantage of people, i appreciate you paying attention to this. let me ask you as a quick follow-up, and then mr. chair, i will wrap up after this -- do you think, director chopra, that the cfpb's existing roles are efficient to stop these abuses, or do you think new rules are needed? dir. chopra: you know, i'm not sure. i'm happy to take a question on
the record. specific practices involved in a structured settlement exchange, i want to understand a little bit more about how they contractually deal with that so that we can understand whether our laws are adequately protecting people. but i hear you very loud and clear that in some ways, this is a loan against -- has the equivalent of a loan in some ways, and we want to make sure we are protecting people in that way. sen. smith: as i was reading your stories, in some cases you will have an individual who was considering selling their future benefits come and then they are provided with an advisor, and in some cases that advisor is provided by the company that is going to be taking advantage of this individual, and by some reports they are being compensated. you clearly have a conflict of interest that is part of the predatory behavior. i appreciate you looking into this, and i think that it is a great example of how we needed to be protecting people from this kind of just really
editorial activity. thank you very much -- really predatory activity. thank you very much. sen. brown: senator warnock from georgia is recognized and he will be followed by senator warren from massachusetts and then senator reed will close the hearing. sen. warnock: director chopra, i look forward to working with you as chair of the protection subcommittee. i'm proud of the significant number of military families living in the great state of georgia. we have 60,000, more than 60,000, active-duty military personnel, and nearly 700,000 veteransa. all calling georgia home. a cfpb survey estimated that at least 20% of service members separating from the military
will have their credit scores dropped a tier after just six months. this concerns me, it should concern all of us. we know what happens when that happens. we know that predatory lenders chart get -- target members of our military, particularly young members of the military. service member complaints to the cfpb reached a high of 40,800 last year. director chopra, how is the cfpb addressing these complaints and protecting our servicemen and servicewomen from predatory lenders? dir. chopra: so, reverend, or senator -- sen. warnock: both apply. [laughter] dir. chopra: i want to make sure we are refreshing both of our work in the service area. there is a lot of problems when it comes to identity theft of military families, because they move very frequently, they often
-- it is not just a target for a scammer, it is also a target for state and nonstate actors. we also have to understand they have unique housing issues that they face, often when needing to move, particularly when it comes to their mortgage. i expect that we will be working with the judge advocate general corps, we will be working with the dod, with the v.a. i will tell you that i am going to be robustly increasing the analytical capabilities to complement what the dod is doing with their own status of the force collections so that we understand specifically, including by geography, and you may know, senator, that our service members are very diverse group of people. we also have to make sure they are not being unfairly harmed due to their identity or to their service members status. sen. warnock: well, it is a complicated issue, as you pointed out, and there are many
contributing factors, some of which you have listed, and it leads to a kind of cascading issues for these members of the military. it seems to me that when the service members fall behind on their predatory loans, manipulative debt collectors are ready to swoop in, and they take advantage of people who don't know their rights. what is the cfpb doing to protect members of the military from manipulative debt collectors to ensure that they know their rights and that they have resources to help when they are facing harassment? dir. chopra: we need to make sure that we are actively enforcing the military lending act. i'm quite concerned about when debt collectors inform a commanding officer about a debt. in some cases this feels like coercion, that someone may not even owe the debt, but they
feel they have to pay up because the chain of command is hearing about it. we have to make sure we are understanding those debt collection issues. dod made it very clear that financial readiness is part of force readiness, and i take that very seriously. sen. warnock: if i might switch topics, unfair, deceptive, and abusive acts and practices in housing and mortgage market was a big reason for the creation of cfpb. the national housing act of 1934 was supposed to make housing accessible for all americans. however, this was not the case, and we saw a long history of americans of color especially being redlined out of opportunities. today many describe our official and -- artificial intelligence and machine learning as equalizers that are supposed to correct unfair actresses of the past.
--practices of the past. in 2019 the department of housing and urban development, hud, sued facebook for its targeting advertising platforms violating the fair housing act and encouraging discrimination. how is the cfpb addressing the effects of algorithmic bias on consumers? dir. chopra: this past friday the attorney general and i announced as part of a broader redlining initiative that we are going to be looking -- i specifically stated that we need to hold accountable those who use discriminatory algorithms. there is a myth out there that algorithms can take the bias out of a transaction. in reality, they can make it go on steroids. we cannot have a two-tier system where financial institutions have to play by the rules, where facebook and other tech companies, usin mysteriousg algorithms, get to skate off
with no accountability. secretary carson's complaint is one we should closely analyze because there are many core areas of conduct where it applies throughout our economy, including with respect to financial services. sen. warnock: thank you very much. i look forward to working with you on all of these issues. >> on behalf of chairman brown, let me recognize senator warren. sen. warren: director chopra, it is good to see you here for the first time as confirmed director of the cfpb. i know you are going to make our consumer financial markets both fairer and more transparent, and that is going to help millions of american families. today i want to ask you about an emerging trend in consumer finance, the rapid growth of big tech companies in our payment system. big tech platforms like venmo
and square and facebook pay have multiplied in recent years. director chopra, a giant company like amazon owns an online marketplace, a cloud computing platform, a chain of grocery stores, and a payment platform. is that combination a risk for consumers? dir. chopra: yes, and it is a risk to small businesses, too, senator. that is part of the reason why we issued the series of orders, including through amazon, apple, facebook, and google, to understand what they are doing with this data, how i they going to decide who gets admitted and who they are going to kick off, and is it going to be distorted by their own financial incentives. sen. warren: and their own financial incentives meeting when they have got that kind of information, what is it that they can do? dir. chopra: well, they can do a lot, and i don't think a lot of it is very good.
look at what apple did in its app store context. there are allegations that as soon as there is an app that competes with one of apple's, they go in for the kill and charge higher payments and fees. if the payment system and flow of currency is distorted by this, that is a real harm to consumers, and not just to their privacy, but to the options they have. sen. warren: good. not good, it is a terrible thing, but i appreciate you making this point. the risks are real, and i'm glad to see the cfpb is requiring companies to provide data on how they operate their payment system. it is long past time for transparency in the space. use on these committees up close and personal w-0-- you saw these committees up close and personal when you were a commissioner. do you think we can trust these companies on their own to put in place the safeguards that are necessary to make sure that consumers and small businesses that use these payment
platforms don't get ripped off, or do you think you need a cop on the beat like the cfpb? dir. chopra: one of the problems is that when i arrived to the ftc, there was a clear bias in favor of these firms. taken that no -- venmo. under republican and democrats, the ftc left them off the hook with a settlement that did nothing to fix things. facebook violated its order over and over again, and the ftc's response? an immunity clause for mark zuckerberg and sheryl sandberg. we need to make sure it is not just the ftc, not just the cfpb. every single government agency is being impacted by how big tech companies are infiltrating sectors of the economy. it's not just going to be one of us. we have to work altogether to protect consumers, protect businesses, and frankly, to protect our country. sen. warren: that is a powerful
point. you have already seen big tech use their size and scope to greek marketplaces, and there is no reason to believe they will be any different as they infiltrate payment systems here. as you indicated earlier, we are not powerless here. i know that you took these companies on while you were at ftc and that the work continues under the ftc chair. but to the extent that financial products like payment platforms are part of the equation, the cfpb has an important role to play. can you talk about just a few of the ways in which the bureau can actually help level the playing field? dir. chopra: we have a whole host of tools, including with respect to our partnerships with the prudential banking regulators. but of course, we administer laws like the electronic fund transfer act, privacy provisions . there may be places we need to bring enforcement actions or
issue guidance or rules to make sure that there is not a roll over and play dead entelechy when it comes to public -- mentality when it comes to pleasing these powerful firms. sen. warren: i very much appreciate your focus on the importance of protecting personal data. i think my -- i made my position clear. i think these companies have far too much power and they should be broken up. but in the meantime, we need our regulators, all of our regulators, using every tool available to them to make sure they protect marketplaces, that they protect small businesses, and that they protect american families. thank you very much for your work. good luck to you. >> on behalf of chairman brown, let me recognize senator moran. sen. >> thank you very much. nice to see you again, i want to
-- a, you made in regard to relationship banking, which is a phrase i use. i'm very interested in what i call relationship banking at home, and i have been an avid ticket for a different -- advocate of different kind of treatment for those banks. i want to emphasize again the importance that has to be placed on preserving their capability of making loans to farmers, small businessmen and women, a significant part of the community for as long as i have been in the congress. i have reminded my colleagues that economic development where i come from is dependent on whether or not there is a grocery store in town. and is determined on whether there is a lender to make that loan, because they know the people. it is in the best interest of the community. this ever increasing regulatory burden our relationship bankers
are facing means we have fewer relationship bankers and they get the banking industry -- the banking industry gets bigger and bigger. the bureau of implementation -- implication of section 1071 is ongoing. i would love to hear from you what assurances you can provide me. the rule would be narrowed to limit the compliance burdens on our smallest community banks and credit unions. >> i appreciate the question. one of the things we have seen through the history of our country, particularly in all of the financial panics that really impacted rural areas, was the community bank that served locally and the ability to tie the farmer over or rancher over when there was times of distress. farm bankruptcies are very disconcerting right now. i am with you that we have lost that in our country in a way to
be resilient and more equitable across areas, whether it is urban neighborhoods or rural areas. the relationship banking is a key element of that. specific to your question, there is an open content period. they have to implement what congress has said to collect on small business loans. there are some places we need to put in some parameters in what will be reported. i shared with senator daines that we want to take a close look at what is the impact on a financial institution to report that. you have my commitment -- and i'm happy to meet with you further, to talk through what those impacts would be. at the same time, we want to make sure congress made clear in the law, we need a picture of what is happening at small business lending in america. our country was at a disadvantage, particularly when constructing the ppp program to
not have this robust data set. i hear you loud and clear that we want to be more attuned to making relationship banking and local banking successful rather than having them all emerge and consolidate into the big guys. >> i would be happy to meet with you and have further conversation. i appreciate the suggestion. i know that senator daines raised this topic with you. i don't want you to miss the opportunity to hear the importance. a lot of places across the country. the farm bill the committee on agriculture will deal with for the next couple of years, a farm bill over the next couple of years, often described as the safety bent -- safety net. there is an additional safety net, the farmer-rancher and their bank lenders. the safety net comes into play, it is often a relationship between a bank owned by family
generationally, with a farmer that has had the farm and generation from ray grandparents to today. there is a relationship that matters, understanding and trust, and a knowledge that is different than any regulations can ever demonstrate. it has more value than that relationship, as far as safety and soundness. in the 25 seconds i have left, i will raise a complaint i have in hope that you have a different leadership plan. under his leadership, the authority was often used as an extension of rulemaking. it was expected at financial institutions to read between the lines and go based on -- for example, the press release announcing the action. circumventing any transparent rulemaking process. i hope you commit to avoid rulemaking by enforcement. >> i have said repeatedly i want
to make sure we move toward a system where the law and the rules are easy to understand, easy to follow, easy to enforce. i know we are out of time, but i'm happy to have a discussion with you about how i plan to do that. of course the cfpb cannot override or veto legislation. we have to enforce the laws written. but there are ways we can work with you and others to develop the law so expectations can be made more clear in any way -- in as much that we can do, given the constraints of the statute. >> the indices you regulate ought to have an input into the process. it can be eliminated by a way of rulemaking that is not rulemaking. thank you. >> thank you for being here today. because of -- i will submit mine
to the record. on behalf of chairman brown, thank you for your very thoughtful and compelling testimony. and for my colleagues, and those who submitted questions, they are due one week from today, thursday, november 4. two the witness, submit your responses 45 days from the day you received them. thank you. i have great confidence in you. very pleased with what you are doing. honorable worked to protect consumers around the country. with that, the hearing is adjourned. thank you.
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