Transcripts For CSPAN Consumer 20240705 : vimarsana.com

Against adam shift for conduct that misleads the american people. Watch live coverage of the house at noon eastern here on cspan. We take you live to testimony from Consumer Financial Protection Bureau director khoep a. Hes testifying today on the Digital Economy a Consumer Protection before the House Financial Services committee. We join this in progress. Mr. Sherman credit repair scams are not just annoying television commercials. They charge you a lot of money. They just blanketly contest everything on your Credit Report. Your credit score goes up for a little while until they realize that most of those entries were accurate and it goes back down. What are you doing to deal with the scheme where you get your Credit Report improved for a little while . We are looking hard at all the ways in which consumer Credit Report issues can spawn scams. We have brought a number of Enforcement Actions here. We do work with the federal trade commission, state a. G. s to bring action. We dont want to play whackamole. We want to figure out whats the way that consumers themselves can know how they can dispute inaccurate information. We want to make sure that fraudsters are not parking for placing debt on Credit Reports that are not even owed. So there is a lot to work. And i know many on the committe mr. Sherman when they start advertising about percentage of the customers they improve the score for, they tphud should not be claiming temporary improvements. Lets see under section 1031 you are dealing with privacy, data aggregators, fin text are not fintechs are not subject to a lot of the supervision banks are. What steps are you taking to protect americans from these folks. Mr. Chopra we have started to put more familicies on nonbank supervision, especially these firms that touch sometimes millions and millions of consumers who have not been subject to similar supervision. We want to make sure that that abuse that you mentioned, or that its not a collected for one purpose but monetized for a completely different one. Its going to be a challenge. But we are starting by making sure we are targeting our supervisory resources properly. Mr. Sherman finally, i hope you would look at these forprofit debt relief agencies that keep you from talking to your bank first. The gentlemans time has expired. The gentleman from missouri, mr. Mr. Luetkemeyer thank you, mr. Chairman. Mr. Chopra, welcome. Last time you were here we discussed your schedule. The fact you dont meet with people from the industry. We showed your schedule to you. Made some comments about t we said we sent you a letter and asked to you fill in the blanks and tell us that you did meet with people in industry. You didnt respond. You responded in a letter but you didnt respond and explain the lack of data in that schedule. From that i can assume two or three things here. Number one, the letter was to myself, mr. Huizenga, and mr. Barr. You are not worthy of a response. Or else you are correct in that you are not meeting with industry people as they tell us, or both. Which i think thats probably the case. Very disappointing. Mr. Chopra there are many Industry Associations mr. Luetkemeyer we have been down this before. The problem is you dont meet personally. Mr. Chopra i meet personally. Mr. Luetkemeyer your schedule doesnt back that up. I want to move on to another subject here. One is regulation by legislation by regulation. Director, you have chosen to wreck late by press release guidance instead of rule making. As you know the a. P. A. Allows for Public Comment on proposed rules which gives regulated agencies the opportunity to provide feedback and ensure their concerns are incorporated. Since public statements are not rule makings or official actions and the guidance you issue is not legally binding, are Financial Institutions and firms within their rights if they dont not ahere to them . Mr. Chopra i could not hear. Mr. Luetkemeyer since pub limb statements are not rule phaeugss or official actions, are Financial Institutions and firms within their rights if they do not adhere to your advice. Mr. Chopra they dont create new obligations. One of the pieces of feedback this committee has given is concerns about using enforcement only. I have continued a practice from my predecessor, to issue more informal guidance mr. Luetkemeyer so you mr. Chopra to help give transparency to the approach the agency is taking. Mr. Luetkemeyer that doesnt answer my question. My question is are the firms within their rights to not adhere to your proclamations or guidance . Mr. Chopra they have to follow statute and regulation. Mr. Luetkemeyer they are within their rights to not adhere to your proclamations and guidance. Mr. Chopra yes. They only have to look to statute and regulation. These other forms we got input from the Consumer Bankers Association a few years ago they wanted to see more mr. Luetkemeyer its clarification you are using these guidance and official actions. Mr. Chopra what we are trying to do, the market is so dynamic and changes. We have entities saying do i need to hire a lawyer mr. Luetkemeyer i know what youre trying to do. But its not enforceable. Mr. Chopra its trying to reinstate existing law. Mr. Luetkemeyer guidance is not enforceable. Mr. Chopra it does not mr. Luetkemeyer that is not enforceable, correct . Mr. Chopra that does not provide any obligation mr. Luetkemeyer its not enforceable. You agree. Mr. Chopra yes. Mr. Luetkemeyer i think there are 12 compliance bulletins and opinions. Great. Gives clarification. This is not enforceable. This is concerning to me because you turn around and you threaten different entities all the time. You become the greatest extortionist in the history of this country by what youre doing with the actions. Issue press releases and make up new words. I have checked with attorneys, looked at the people who design and work to legal financial legal dictionaries, this is unenforceable term, you made it up yourself. More authority to have more impact on things. Extort more money from people. Mr. Chopra i completely and respectfully disagree. Every action we have taken is based on laws that this body has acted. Mr. Luetkemeyer director, junk fees is not a legal term, enforceable term. Period. Just like guidance is not enforceable. Yet you try to impose that on people. Extrapolate from the u tkap party using the determine junk fees to be able to have new authority. You cant create authorities out of thin air. Only congress can give you that authority. I yield back. The gentleman from new york, mr. Meeks, is recognized. Mr. Meeks thank you, mr. Chairman. Ranking member waters. Thank you directl chopra, for being here and listening to some of this debate. I cant help but say thank god we created the cfbp who is singular focus. I hear the interest of other groups who have been there advocate on their behalf. Most of the industry, did anyone else have someone to advocate on their behalf . What i dont understand is why it is so bad to have an agency of which you represent to advocate on behalf of the American Consumer. Throughout history we have seen the consumer be ripped off, taken advantage of. Thats why we have to have labor unions. Because we know we have seen that folks on their own dont see a move and benefit of everyday people. So there has to be someone to advocate on their behalf. To look at it, make sure the flying field is level. The level of playing field. So that the consumer has a voice and someone there to say dont rip us off. This is a bad product. I lived it. In the financial crises of 2008. Thats why you are here. We can never allow that to happen again. And one of the proudest moments of my career here is working with Ranking Member waters and others to create the Consumer Financial Protection Bureau. I thank you for doing your job. Your job is to advocate on behalf of consumers. No one else. Thats your job. Thanks to all these folks. Helping the american people. Helping the american people. And you helped all, not just democrats, you are helping the American Consumer who is a democrat, republican, independent. No matter where they are. Rural or urban. Thank you for doing that. Now, the recent Bank Failures dominated the media and the Media Attention and this committee, particularly, this spring. We had an opportunity to speak with the prudential regulators responsible for oversight of the institutions and continue to look at what could have been done to prevent the failures. But yet, weve not had the opportunity to speak with you in the aftermath, the voice and the advocate for the consumer. So from your perspective, how do the recent Bank Failures highlight the need for a strong cfpb now more than ever . Mr. Chopra well, as you referenced, in your own community and almost everyones, the financial crisis was absolutely devastating. And the victims of financial crises, the first ones are often those who can least afford the shock, and so we had to take extraordinary steps to mitigate some of that damage but also people are now learning about deposits and safety and insurance and there are places where people may be holding their money that arent insured and were going to obviously want to make sure that any instability in the financial world in Financial Markets does not impact the consumer, as you say. The failure of credit swooes was a big concern at the cfpb to say how will it affect our Mortgage Markets and auto markets so it absolutely goes hand in hand. Mr. Meeks so one of the issues i am also focused on and we heard that the cfpb teamed up with the federal redefsh, fdic reserve, fdic, to propose a rule designed to make the automated home valuation process fair. So i believe that its taken the right direction, but im curious, when we talk about a. I. , would this rule promote auto appraisals over human appraisers . Mr. Chopra no. A. I. When used to automatically commute homes does not bake in any sort of discrimination and i think everyone deserves a fair and Accurate Appraisal and thats what the proposal, which implements federal law, seeks to provide. Mr. Meeks thank you. The gentlemans time has expired. The gentleman from michigan, mr. Huizenga, is now recognized. Mr. Huizenga thank you, mr. Chairman. And director chopra, welcome back. I have a number of things to hit here but i was curious when my colleague, french hill, was asking you about the breach. It struck me it seemed like you were downplaying it. You said Insider Threat that you mentioned but that person, quote, sent some emails. Later, to another question, you indicated it was a, quote, set of emails. Would you classify the incident that happened as a minor incident, a sort of mediumsize or mr. Chopra its an extremely serious and Major Incident, theres no question about that. Mr. Huizenga ok. Great. Glad to hear you backing that up. I was bash mr. Chopra and i apologize. I dont want to underplay in any way. We have done and looked hard to make sure were following all the steps. We have begun notification. Sorry. Mr. Huizenga yep. I understand that. I was back conferring with our attorneys as to exactly how much we could talk about publicly because we dont want to get in the way of an investigation. I know you dont. I dont. But i do have some concerns. You were notified in march. Let the committee know in may about what you now call a Major Incident. We asked for a briefing on that. A briefing was granted at the staff level. But however, when our attorneys asked your briefers, i dont know who they were. Maybe they were attorneys. Maybe they werent. But when they were asked basic questions like, quote, did anyone at cfpb speak to the individual . Staff were your agency could not answer the question. And referred Committee Staff to speak to the inspector general. Your staff explained the only reason why cfpb knew about the breach from a different employee. You talked about that. Committee staff asked about the identity of the other employee and about the circumstances surrounded the employee raising concerns. Your staff could not or would not give a single answer to any of these basic questions. Cfpb staff emphasized there is no reason to suspect the information was dissimilar mated, which i disseminated which i am glad to hear. What we were briefed on, which i dont think was Public Information as of yet, this was a Major Incident with significant consequences potentially. However, when they were pressed, they confirmed that the only evidence to sustain the claim was that so far there had been no suspicious activity. For a little perspective i wont go into all of that. We all have seen what has happened with equifax and others that had that you have been part of punishing others that have had serious data breaches. And glad to hear you say it is serious and im glad to hear that you are cooperating with Law Enforcement but we also expect you fully cooperate with this committee and congress writ large and our subcommittees that are called oversight and investigation for a reason. And these basic these are basic questions that we are asking and we expect full and complete answers and your staff couldnt give basic answers. Hell, sometimes there wasnt any answer. No answer at all. And it makes me wonder im sorry to be suspicious here. I know how d. C. Works. It makes me wonder, once again, youre sort of dismissive attitude congress that has come across in previous hearings and previous interactions that, did you send someone that intentionally didnt know what was going on so they wouldnt pass that information on to us . Were they were they were they somehow opaque in their answers for some reason . So im not expecting you to answer that because im not looking for specifically a response but i am making sure once again you are put on notice that we will be following up and we expect our answers to be our questions to be answered. One last thing im going to pivot to. The bureaus website provides a Fund Transfer request letter that you made to the fed before every quarter of the Financial Year and the feds response. Did the fed deny your agencys request . Mr. Chopra not that i know. Mr. Huizenga has the fed ever told you that a request was too high or too low . Mr. Chopra i believe the feds feedback is usually about when we should request it because they manage for liquidity purposes. Mr. Huizenga ok. Last time the shared fed and the did a funding process in july, 2020, it was done at the request of chairman mchenry and it was almost three years ago. Are you aware of any audit requested by the cfpb mr. Chopra yes. Mr. Huizenga sorry. My time is up. I have a letter to be submitted, mr. Chairman. That was a letter that i sent along with for a signature. And we wanted to make sure that was regarding without objection. Mr. Huizenga i yield back. The gentleman from georgia, mr. Scott, is recognized. Senator scott thank you, director chopra. There are a lot of problems with this cryptoasset fraud business. In november of last year, you all published a complaint bulletin filled with these complaints, fraud, theft, scams, all of them were significant problems. And your analysis is that the bad actors are leveraging Crypto Assets to specifically perpetuate fraud on American Consumers. Excuse me. From 2018 to 2022, you all received 8,300 complaints. Director chopra, has the cfpb determined whether certain vulnerable groups are at particular risk for these scams . Mr. Chopra yes. So i believe we specifically mentioned that older adults. It used to be more common, for example, for a scammer to ask someone, go buy me some gift cards or but were now seeing it shift to a more digital and often using Crypto Assets. Weve also identified a place where it has some interaction with Identity Theft where its not always cryptospecific, but Service Members can be targeted for i. D. Theft in ways that can really expose them to certain harms. Mr. Scott let me ask you this, because we got to find some answers to this. The problems are overwhelming. You all have some great people over there at the cfpb, and we establish this for a purpose. We got to find some answers here. Let me ask you. Will financial literacy, Financial Education help . This is being put on people that are having difficulty. Mr. Chopra yes. I think its actually really important that Financial Education and literacy, we shift it so its really adapted to the digital world. Theres lots of different ways in which Digital Technologies and with genre tiff a. I. , we could have voice cloning in ways it can sound like a Family Member is calling you. We could have different ways in which digital images can look like reality. And we want to make sure we can arm people how they can spot some of this. Mr. Scott well, thats very good. What you said in mind, director chopra, can i get can this committee get because were concerned about this. Can this committee get a clear commitment from you food that the cfpb will use a portion of the more than 600 million in unallocated civil penalty funds to support financial literacy, Financial Education for our consumers in the program this can get to . We have to arm our people with the weapons. Theyre the ones that are being targeted. We got to put some arms on them. Soldier them with the full armer to armor to protect them. Use this money. Thats what its there for. Will you commit to doing that today . Mr. Chopra we will commit to using funds for Financial Education purposes. We may use other statutory funds to do that. The fund you referenced is also to be used for victims relief who are the victims of scams. And we want to make sure they can receive payouts. We do have other funds, and we can share with you what some of our spending will be on Financial Education. But we may want to use our general funds. Mr. Scott but the priority ought to be to stop them from them mr. Chopra i totally agree. I totally agree. But there are so many people whose lives are changed when theyre able to get mr. Scott i want can this committee get this commitment from you . Im not asking you how much to use. Im saying, will you use this money . Mr. Chopra well, we will certainly use funds that we have access to for Financial Education, but id love to ask further with you about the tradeoffs about using the fund. The gentlemans time has expired. The gentlewoman from missouri, mrs. Wagner, is recognized. Mrs. Wagner thank you, mr. Chairman. And welcome, director chopra. Id like to follow up on a line of questioning that my colleague, mr. Luetkemeyer, began discussing the cfpbs industry outreach and specifically your public calendar. On february 7, 2023, my colleagues, mr. Luetkemeyer, mr. Barr and huizenga sent you a letter requesting specific information regarding your calendar and industry outreach. In your response to their letter dated february 21, 2023, you stated, and i quote, like my predecessors, i have continued the agencys commitment to transparency through our long standing policy of publicly posting the calendars of senior leaders. Director chopra, it appears that your commitment to following this long standing policy has been absent, completely absent this year. The cfpbs website states that each months calendar will appear at least a few weeks after each month has concluded. But its been almost six months, 22 weeks since your calendar has been publicly disclosed. Theres nothing here. Can you please tell me why your calendar has not been publicly disclosed for half the year . Mr. Chopra im not actually aware that thats the case, but if it is the case, we will look to make sure that it happens in a faster way. Mrs. Wagner it is absolutely the case, and im reading you directly from a letter to congress in response dated february 21. So there are the quotes. Its concerning. Mr. Chopra i will share with respect to industry outreach, we are mrs. Wagner i am not asking about that. Mr. Chopra sorry. Ale po the gentleman is recognized. Apologize. Mrs. Wagner would you say a sixmonth hiatus is your commitment to showing transparency, sir . Mr. Chopra well, we would want to do that in a fashion that is responsive. And i will take a look directly. Mrs. Wagner your own website says, due to the time intensive preparation process, each months calendar will appear on this page at least a few weeks after that month has concluded and its just clearly not true. Moving on, the Comment Period to the cfpbs proposal to adjust the safe harbor dollar amount for credit card late fees was just 36 days. And you received more than 55,000 comments and they were submitted. Many were weeks prior to the deadline which was may 3. The majority of which came from consumers, real real consumers and retail investors, but they werent posted in the comment file until a full month after the deadline closed. What was the reason for the delay in posting these comments, sir . Was the bureau overwhelmed by volume or did you intentionally delay the posting of these comments . Mr. Chopra no, definitely not. When we receive large amounts of comments, one of the things we do have to do manually often is to make sure it does not include account information. Sometimes people might be trying to file a complaint. We do not want it to be a vector of Identity Theft. And i will also just share, 36 days from the time we published the proposal, there was more than 36 days and im happy to get you mrs. Wagner well, i will tell you this. Then you should have more than ample time to begin to post some of those over 55,000 comments out there in real time, sir. Because you dont wait until after it ends. Delay it further. I consider that intentionally. Frankly, director chopra mr. Chopra no, absolutely not. We are trying to do our best to mrs. Wagner im seeing an extremely troublesome theme here. You claim to be for transparency. Im for transparency. But the blatant lack of timely Public Disclosure says otherwise. I dont care if its your calendar or your publishing comments so id like to take a serious look at that. Mr. Chopra i do believe we are in line or better than all our peer agencies. Mrs. Wagner im concerned about your responsibility. The cfpbs credit card late fee proposal ignores the Important Role that late fees play in deterring consumers from paying their bills. If late fees are capped at such a low amount and a deterrent effect is nonexistent, more consumers will pay their bill late leading to a higher share of delinquent accounts which will be reported to Credit Bureaus and result in lower Credit Scores. Director chopra, id like it in writing. Why is the bureau proceeding with a rulemaking that has no consumer benefit and would actually result in tremendous harm to consumers . The director can answer for the record. Mrs. Wagner i thank you and yield back. I now recognize the gentleman from massachusetts, mr. Lynch. Mr. Lynch thank you, mr. Chairman. Welcome, director chopra. Good to see you again. I do want to push back on the suggestion that you are not amenable to meet with industry representatives and Business Concerns as well as consumer groups as well. I think youve been exceedingly accommodating on each and every instance. At least to my knowledge. I do want to put one quick issue before you. The Peterson Institute for International Economics defines junk fees as surprise charges that customers do not discover until they nearly complete a transaction, such as booking an airline flight, renting a car, checking out of a resort or paying by credit card. Is that basically your understanding of what a junk fee would be . Mr. Chopra i think its a colloquial term that i also hear a lot about what are the fees that are not subject to real competition and competitive pricing. So ones that may not be subject to the normal forces of shopping. Mr. Lynch right. And as more and more retail happens online, is the incidents of those junk fees on the growing . Mr. Chopra well, each industry is different. I think we see, based on the empurecal research about where can firms be able to use sometimes drift pricing where they can advertise one but really the full costs or lifetime costs come later in the process when the consumer has less ability to negotiate. Mr. Lynch right. I know the president President Biden identified that in his state of the union and he called upon congress to eliminate those hidden junk fees from consumers transactions. I want to talk about something else. So theres been a real shift among Financial Services firms to use chat bots. I know youve done some work on this. I know you issued a memorandum and just an executive summary on chat bots in consumer finance. What are we seeing out there . I know im just receiving i guess its antidotal but my constituents are claiming about the fact when they call the bank they get hooked with these chat bots and sometimes their problems are not resolved which leads them to call me. Im just wondering, are we are we meeting our obligations to consumers when we allow allow banks to put a chat bot in an interface between them and the consumer that doesnt adequately resolve their problems . Mr. Chopra i think this is one use of generative Artificial Intelligence that well see more and more. And one of the things we identified, when a consumer has a very straightforward question, where is the closest branch, something that has a defined answer like in an f. A. Q. , they might be able to get it. There are places where consumers have to provide a lot of account information, personal information. It is important that that information, if its used to train a. I. , how is it being protected . When the consumer has to invoke a right to dispute, you know, under the fair credit billing act, can the chat bot actually handle it . So were just reminding institutions if theyre moving everyone to this, they still have to adhere to these important Legal Protections and make sure that theyre not violating privacy and more. And it can really undermine relationship banking if not tailored appropriately. Mr. Lynch right. I understand the more basic questions could be could be dealt with by a chat bot. And im sure that there are personnel savings there and efficiency issues that are certainly favorable. But as you mentioned, when matters become more complex, it doesnt seem at this point that the a. I. Chat bots are capable of resolving those complex issues. Is there any is there any thought of providing an optout where when the issue becomes so complicated that the consumer would have an ability to go to a default which would provide a human being on the other side of that . Mr. Chopra yeah, i think thats a place where institutions, Financial Institutions need to be careful about denying access to a human in some form. Because it can lead to real frustration and a doom loop. Mr. Lynch ok. Thank you, mr. Chairman. I yield back. The gentleman yields. The gentleman from texas, mr. Williams, is recognized. Ms. Williams thank you, mr. Chairman. Thank you for being here. Im sitting here thinking, im thinking the Consumer Needs to be protected from the federal government and all the things were talking about. Another thing weve been talking about these Bank Failures. Im from texas, as you know, and i dont like texas banks. I want to go on record. I dont like texas banks. Good run texas banks bailing out bad run california banks. I think its really bad policy. Now, director chopra, the first time you came here before this committee, you said you would protect the interests of Small Business. And i proudly serve as chairman of the Small Business committee and i can tell you, we dont feel too protected. And ever since you joined the cfpb, your agency continues to add requirements that dont have any consideration of the impact on Small Businesses and small lenders. When talking to Community Bankers back in my district in texas and quite frankly all over the country, every Single Person tells me how miserable and terrified they are about the cfpbs 1071 Small Business Data Collection rulemaking. They are concerned that the complicated reporting requirements will tie up Loan Officers and the increased Compliance Costs which will be passed down to the consumers, guys like me that borrow every day, we pay for all this. And theyre concerned this will push the industry towards a standardized Small Business loan product and kill banking which Free Enterprise and capitalism is based on. And everybodys concerned, too, its going to push the industry towards standardized Small Business loans and kill relationship banking, as i said, and theyre concerned this will force their employees to treat privacy an afterthought and collect more data than necessary on Small Business loan applications which is what we dont want to have happen. Right now Small Businesses are struggling. The rises costs due to inflation, ongoing labor shortages and this outoftouch rule will only build on these issues. This is a hard time for Small Business. And the 1071 rule is an attack on main street america. Its the only way you can look at it. I introduced a Congressional Review Act with congressman barr and ogles to halt the implementation of the cfpbs final 1071 rule. And senator kennedy is leading the Senate Companion to this resolution and it has the support of over 45, 45 state and National Financial associations, further proving the urgent need to block this Regulatory Overreach and ensure it does not take effect. It is bad business. It is bad for main street. It is bad for consumers. Now, doctor director chopra, how have you been working with Small Businesses and helping them to ensure your regulations are not causing any undo burden on our countrys Small Business owners . How are you doing that . Because theres real concern they are not hearing from you. Mr. Chopra one of the things we have done, we focused a lot of our engagement on institutions we dont supervise. I met with, i believe, 28 now state Bankers Association that each of them have dozens of members to talk directly to me. Weve done the same thing with credit union leagues. I believe weve hit 20 states and the district of columbia. We want i just want to say, i take your points very, very seriously. And we try to adjust the rule in ways that would reduce some of those costs. Ms. Williams so let me get my time back. You dont think it creates a burden for these financialings toos . You think it eases Financial Institutions . You think it eases it . Mr. Chopra we publish what we think will be some of the costs. We tried to figure out best, what are the ways which we can limit it . And we also created and made significant changes that the smallest banks, 2,000 of them. I hear you completely. We dont want standardized Small Business ms. Williams and it does trickle down to the consumer like me, the borrower. The cfpbs funding mechanism, we talked very little congressional oversight of the budget and your budget is given to you by the fed. There are many more Court Challenges out there regarding your funding mechanisms and the actions of the bureau do not comply for regular order creating uncertainty in markets as everyone waits for the courts to decide. In order to ensure your accountability and transparency to congress, it is imperative that your operation be subject to congressional appropriations. So director, if the Supreme Court strikes down your funding mechanism, will you be accepting of being subject to congressional appropriations . Mr. Chopra well, we will comply with any Supreme Court decision to make sure were following the law and doing so accordingly. We dont agree. The solicitor general has filed a petition seeking reversal. Theres conflicting opinions in the Circuit Court. Ms. Williams lastly, cfpb fined equifax for a date breach. Did you find yourself . Mr. Chopra well, i was not part of that. Ms. Williams did you find yourself fine yourself . Mr. Chopra this is an Insider Threat, a different situation. But its a very the gentlemans time has expired. The gentleman from illinois, dr. Foster, is recognized. Mr. Foster thank you. Id like to thank my colleague for his admiration of the texas banking system. However, we in illinois have not forgotten the tens of billions of dollars that we spent bailing out corrupt and mismanaged banks in texas and california during the savings and loan crisis. Ok. Director chopra, some have argued that innovation in the Financial Services space, such as open banking, have the potential to facilitate Consumer Choice and access to credit for underserved americans in ways that our broken reporting system cannot. For example, open banking could provide access to a much wider range of consumer data than the Credit Bureaus currently access which could give a more accurate picture of an individuals financial history but it also provides a possibility of all kinds of bias to creep in. Now, the last time you appeared before our committee, you shared an update on the cfpbs Small Business review panel to advance proposals under section 1033 of the doddfrank act. Can you give us an update on that rulemaking . Mr. Chopra yes. So we will be proposing it. It is scheduled for october. We released more on this including Industry Standard settings will play. We want to make sure that standards are giving the ability for consumers and all Market Participants the ability to switch. I will tell you, its not just more access to credit, lower Interest Rates for borrowers, higher Interest Rates for savers. I think its also going to have an impact on Customer Service quality, too, when a consumer has the power to vote with their feet, youll see our system will give them Better Service as well. Mr. Foster well, thank you. And thank you, also, for going on the alert early over the threat of generativ a. I. For being used for identity fraud. It is coming like a tsunami. There are two possible government interventions that could help consumers. One of them is the means of proving they are who they say they are online. A secured digital identity. Sometimes referred to as a mobile i. D. Or a digital drivers license. These are things that allow you to present you and your cell phone and your real i. D. Compliant drivers license to present digital proof in an online or offline environment that you are in fact who you say you are. The other one of these socalled blade runner laws that any electronic communication coming from a machine must start by identifying itself as being machine generated. Do you have any comments on either of those two . Mr. Chopra so i completely agree. Identity verification issue, i think if we can solve that as a core part of infrastructure in our country, we can actually reduce a lot of fraud how we actually do it is actually the question but you see jurisdictions that have solved that Identity Verification layer get a lot of benefits of it. In terms of stating who it is, its very interesting. Youve seen a lot of a. I. , including chat bots and others give themselves human names. This is in some ways to make it appear that they are an actual person and with voice cloning, it really can simulate a human interaction. I do agree that there may be places where across the economy some of this generative a. I. , people need to know if they are talking to a human or not. Mr. Foster and the regional accents or ethnic accent is matched to what the consumer will trust. So this is a huge problem. First, i want to thank you for the work you did on the early versions of a. I. , trying to deal with the fairness versus accuracy. The problem were facing with generative a. I. Is much more complicated. Its analogous you raise your child perfectly and they get exposed to new things when they grow up that make them do evil things that you never would have suspected. And so how do you anticipate youre going to be looking at a. I. That evolves and learns . Mr. Chopra yeah. So Machine Learning and other ways in which a. I. Evolves, one of the things were trying to do at a base level is be able to give information about how existing law applies. So for example, that a. I. Needs to be able to determine if you get an adverse credit decision, what the reasons are. If its constantly changing and it cant do that, its not able to comply with existing law. There is not a generative a. I. Exemption under or Consumer Protection laws. Mr. Barr the gentlemans time has expired. The gentleman from georgia, mr. Loudermilk, is recognized. Mr. Loudermilk thank you, mr. Chairman. Director chopra, thank you for being here. Chairman barr mentioned something in his Opening Statement id like to start out with. And thats according to your own data, 74 of americans pay their credit cards on time. That is to say they never pay the late fees. According to your own proposed rule, however, cardholders who do not pay late fees will be paying higher fees, higher interest on accounts and will receive lower rewards because of the crosssubsidy. Under section 2 of doddfrank youre supposed to consider all rulemaking. Cant see how this rule that rewards irresponsible cardholders at the expensive responsible ones is a net benefit. With that said, how did this rule survive this rigor costbenefit analysis . Mr. Chopra i appreciate the question, congressman. What you mentioned, those were not predictive. That was potential scenarios we looked at. And the core of what were doing mr. Loudermilk what was not predictive . Mr. Chopra the idea theres potential ways in which the market could shift. So what im trying to explain is, the core of what that rule review is doing is reviewing a congressional prohibition on unreasonable penalty fees. What were trying to accomplish is making sure, yes, if institutions have costs, how can they make sure that it is a reasonable cost . And were specifically looking at the feds rule they put into place they inherited which did not have much data backing it in order to make sure its modern realities. There are still going to be late fees. Its how they make sure theyre in line with the congressional prohibition. Mr. Loudermilk reclaiming my time now. You said that the fees are reasonable. I mean, thats very subjective. Now, these are fees that the user agreed to when they took the credit card because the fees, as you mentioned, do recoup costs. But theyre also designed to be slightly punitive to stop bad behavior from happening again. What youre proposing is, basically taking that away and then giving the punitive charge to those who are obeying the contract or the agreement they made with the credit card company. Mr. Chopra no, thats not right. I just want to make sure something is clear. Reasonable is not the cfpbs words. Thats actually what is in statute. So the statute says the penalties must be reasonable and proportional to the omission mr. Loudermilk did they not agree to whatever Fee Structure it was when they agreed to take the credit card . Mr. Chopra that is true but the reasonable and proportional is a separate prohibition. So again, one of the things that is in there is institutions can certainly be able to show why theres reasonable and we proposed a framework. Mr. Loudermilk but why are you even going in this direction . Mr. Chopra the reason why because what we found across Consumer Credit markets, not a fair and competitive market when an institution has an incentive for someone default or be rate. Late. Even if the borrower defaults most credit card companies, especially small ones, dont have that Business Model and our review is they dont actually build a Business Model or profit more when someone is late. In some cases, a borrower, they might just be a day late or a sfu few dollars off and get a very large fee. Thats what congress was seeking to prohibit and we want a market where a creditor really wants the person to mr. Loudermilk really what i see is were intruding what should be the responsibility of the consumer because they agreed to go into this agreement. But earlier this year, fhfa finalized changes to the loan level price adjustment tables that resulted in borrowers with good Credit Scores paying higher rates for their home. This is obviously unpopular with consumers. Arent you concerned that youre sending the same message to consumers with this rule . Mr. Chopra no. Mr. Loudermilk with 75 pay theirs on time. Mr. Chopra in fact, i think what this will do is actually help those compete on upfront pricing. So consumers are really smart in the credit card market. As soon as an issuer starts raising annual fees, they know how they look to switch. Its easier for them to know the full price that way. So what were hoping to do is adhere to the congressional prohibition on unreasonable fees, which is the word reasonable is in the statute. While creating that ability for more competition upfront. Mr. Loudermilk well, thank you. My time is expiring, but i would think Consumer Education would be more effective. Mr. Barr the time of the gentleman has expired. The gentlewoman from ohio, mrs. Beatty, is recognized. Mrs. Beatty thank you. Director, thank you for being here. And id like to start by thanking you for your work, your integrity, and your leadership at the cfpb to protect consumers. Weve heard about the billions of dollars in consumer relief to the hundreds of thousands of americans. And those americans, what you say are in all districts, democrat and republican districts. Mr. Chopra all across the country. Mrs. Beatty thank you. That means it ensures fairness, transparency, and competition in our Financial System. So let me state for the record, mr. Chairman, there is no doubt in my mind that Consumer Protection problems are rampant in our Financial System and i want to go on the record saying, americans would be much worse off if the cfpb was no longer able to continue its work. I have two questions id like to get through but first, theres been a lot of attention to your schedule and your time. It seems like we alternate terms or congresses when we decide to pick on the individual or cfpb. Mind you, since ive been here, and many of my colleagues on this committee, i remember when former congressman, member of this committee, mulvaney said some of the most disparaging things about the cfpb and about the director at that time, cordray, who he was replacing, operative words. He went here. Yet, he took a job to be in the same position youre in. If we want to talk about integrity, if we want to talk about putting politics over people or maybe even money, but to his calendar in the committee he said he worked three days a week. Now, people are questioning you on accountability. Do you work more than three days a week . Mr. Chopra yes. Mrs. Beatty and he said when he wasnt working he loved watching baseball and he put a tv in one of his offices so he can watch baseball and protect our people. So if you want to say youre an extortionist, i want to put in hypocrisy, to those who say you work more than three days. Now i want to get to my questions. We sent you a letter on the section 1033 rule including other benefit accounts in that rule. First of all, let me say thank you for responding to the letter acknowledging that it was an issue and that you would continue to look into it. So i dont know if you have anything youd like to add for the committee about these types of benefits being considered within the scope of the final rule. Mr. Chopra so one of the things were going to do is a bunch of these rules, mortgage products and others were raised before. With e. B. T. And other government benefits, part of what were doing, were wanting to talk to the department of agriculture and others that administer these because we really want to understand any technical issues that go along. I completely share your view that mrs. Beatty ok. Mr. Chopra all transaction accounts, we want that data to be able to used. To be used. Mrs. Beatty our chairman mchenry said we were going to put diversity in every committee. Im a ranking on a sub. We havent had a diversity hearing yet. But i had achely to but id like to commend you 53 of the executives being women. 40 identifying themselves as minorities. Would you be willing to work with us or respond in writing where you are with contracting out to diverse groups, whether thats in legal services, contracting, etc. , and thats a yes or no for my time . Mr. Chopra yes. Mrs. Beatty in fairness, Ranking Member and the chairman, i am giving equal opportunities the director prior to you, republicanappointed, did hold meetings with democrats and republicans. Did talk about diversity. So i wanted to thank her for the work that she did to and i also think she worked more than three days a week. I dont know what her calendar was. But i want to commend you for the work that youre doing. And also, one of my colleagues said not much has changed. For the record, let me say you could not receive 10,000 scomplants weekly that you respond to. You could not do what youve done with a. I. You could not do what youve done with algorithms. You could not do what youve done with Bank Failures. So again, thank you. And my time is up. Mr. Barr the gentlelady yields. The gentleman from tennessee, mr. Rose, is recognized. Mr. Rose i want to thank chairman mchenry and the Ranking Member for holding the hearing and director chopra, thank you for being with us today. I want to begin by responding to mrs. Beatty in saying, i actually prefer the way that director mulvaney ran the agency. Director chopra, in cfpb vs. Brown, the 11th Circuit Court of appeals found the cfpbs assertion of work product objections to avoid identifying witnesses or factsupporting claims against the defendants to be egregious. The court held that the cfpb clearly violated rule 37b of and severe sanctions were warranted. Director chopra, do you believe that the federal rules of civil procedure apply to the cfpb and its attorneys . Mr. Chopra well, absolutely mr. Rose thank you. Of course they do. Director chopra, would you remind your staff and counsel that they are not exempt from the civil rules of discovery and that they must abide by them like the rest of us . Mr. Chopra yes. Can i just address that real quick . Mr. Rose ill give you just a second. Mr. Chopra litigation can often be very, very heated. That was brought many years ago. There was this decision. Of course, in overwhelming number of matters we have completely been respected by the courts for our mr. Rose thank you. I appreciate that commitment to make sure your staff understands that the basic rules of civil procedure follow with your agency. Following the passage of the doddfrank act, Elizabeth Warren testified that the bureau would be accountable to congress. I have heard testimony right here in front of me and first, then special advisor warren said the cfpb is a is subject to the requirements and limitations of the administrative procedures act. But director chopra, isnt it true that you have routinely acted unilaterally and arbitrarily without engaging rule makings in compliance with the a. P. A. , like you did with the update to udap examination section of the manual or by using the paperwork reduction act to seek approval for a junk fee timing study, just to name a couple . Second, then special advisor warren stated that the cfpb, quote, is the only banking regulator that is required to conduct Small Business impact panels, closed quote, to, quote, gather input from Small Businesses about the potential impact of proposed rules. Director chopra, isnt it true that you have routinely bypassed the Small Business regulatory enforcement fairness act process like you did in your notice of proposed rule makings for nonbank registries for repeat offenders and terms and conditions of foreign contracts . Mr. Chopra no. We completely comply with all of it. In fact, we published the analysis. We have solicited comment on the analysis. You also mentioned administrative procedure act. All of our work is reviewable under that law to suggest and i heard the suggestion now a number of times that we dont comply with that. Its absolutely false. We seek to actually do and provide more information than based on feedback from this committee about how to make sure entities know what is mr. Rose so specifically, though, i would actively discourage you from using the paperwork reduction act when i think the a. P. A. Would be a more fair and responsible way for proposing new rulemaking and criticize the bureau for not doing that. Mr. Chopra so the paperwork mr. Rose then special advisor Elizabeth Warren said the checks on the cfpb rulemaking are nor stringent than other banking regulators because fsoc can veto any rule issued by the cfpb. Director chopra, has the fsoc ever, ever overruled a cfpb rulemaking . And dont you serve on fsoc . Mr. Chopra well, i believe the fsoc did begin some reviewing some rules that was set aside. We have not had a voe luminous. They may have the power. Mr. Rose they may have the power but the truth is the threshold that has to be met is effectively impossible to meet. Mr. Chopra it is unique among banking agencies. There is no other agency that is subject to fsoc. Mr. Rose but those agencies have other checks and balances. Finally and fourthly. Special advisor warren said the funding structure is a significant source of accountability because it faces certain constraints by having to request funding from the federal reserve. Has the fed ever denied or scrutinized the directors budgetary response . Id let you respond for the record. I yield back. Mr. Barr the director can answer for the record. Id remind members to direct their comments to the chair. With that, the gentleman from california, mr. Vargas, is recognized. Mr. Vargas thank you very much, mr. Chair. I direct my comments to the chair. You look great up there, sir. And of course, the Ranking Member always does. I would prefer her to be in the other seat. Its a pleasure to be here. Director, i think youve done a great job. I really do. And i think we owe you a great debt of gratitude. The hyperbole today has been actually remark remarkable. I have been here for quite sometime. Sometimes people say rather ridiculous things. But today was particularly fun. Said you were the greatest extortionist in the country of alltime. The greatest extortionist. Is that true . Are you the greatest extortionist . Mr. Chopra i obviously its i will i want to just say we and our staff try to discharge our Public Service obligations faithfully and to the best of our ability, as we swear an oath to our constitution and our country. Mr. Vargas i wanted to give you an opportunity to react to that. Now, are you beating the stuffing out of the Free Enterprise system . Mr. Chopra no. In fact, we have made an emphasis about the importance of new entry, naysant entry, the ability for new players not to have to stumble through and hire so many highpriced lawyers. Our country benefits when consumers have more choices and when honest businesses are protected from those who violate the law. Mr. Vargas of course. Here comes the tougher question. You were accused of mccarthyism. Is it kevin mccarthyism or joseph mccarthyism and whats the difference . Mr. Chopra ill withhold responding, mr. Chairman. Mr. Vargas ok. Well leave that for another time. Mr. Barr the gentleman will suspend. The speaker is protected and so the gentleman will refrain from disparaging and using personalities. Ms. Waters i hope that will include mr. Barr certainly will. The accusation was mccarthyism. You heard it. I heard it. And it wasnt defined. So i wanted the definition but ill be happy to move on. I do not mr. Vargas i dont want to disparage the speaker. Weve been friends for 23 years and i respect him greatly. I do want to ask you about this. Most of the questions today on the other side have been about the industry. They seem to think that the industry is not pleased with you. You dont meet with them enough. That they dont like you because some of your policies. Is it your job to please the industry . Mr. Chopra my job is to execute the objectives of the law to enforce the law and supervise for it fairly. We go overboard and i think ive exceeded the types of engagement that some of my predecessors have engaged in. But yes, there are certain times, particularly, when there are law violations that there will be disagreements. Mr. Vargas of course there will. What is your duty to the consumers . Mr. Chopra our duty is to ensure, as the statute says, a fair transparency and competitive market. Mr. Vargas and i think youre doing a great job. How much money has you your bureau redirected back, gotten back to coon sumers consumers . Mr. Chopra over 17 billion. Mr. Vargas how many people has that affected . Mr. Chopra hundreds of millions. Mr. Vargas of course. I dont get complaints from consumers. Just the opposite that you guys are doing a great job. So i appreciate the job youre doing. Now remittances. I want to talk about remittances. Remittances i think are a problem. The reason is hardworking americans and other u. S. Residents send money overseas. And when they do that they dont know the full cost of those remittances. Theyre not easily understandable. And i think its something important for your agency to work on. Mr. Chopra one of the things when you go get a disclosure, sometimes these remittances can be charged sorry advertised as no fee. But in reality they exchange the Exchange Rate might be adjusted so it doesnt look like there is a fee but there really is a cost to it. I also want to say, congressman, that other nations, developed countries have started thinking about, through their Central Banks ways in which consumers can transfer money more easily. There is some work between i believe the fed has an arrangement with the central bank of mexico. We should look at more partnerships like that to have lower costs. Mr. Vargas and lastly, we did talk about diversity. I did look at the numbers, however. And it looks like when it comes to i think this is your semi annual report. When it comes to latinos, the percentage is actually quite low. And i hope that youre taking a look at that. Mr. Chopra yes. Mr. Vargas ill let you answer if i have enough time. I do want to make this comment. It is interesting. Every time i come here i hear the accusations that are placed against you or others on the other side. Theres never protestation from the chair. I never hear it. And then when youre defended, there seems to be protestations. I dont think thats fair. I think youre doing a great job. And i hope that were a little more careful with our language around here when we accuse people of mccarthyism. Extortionism. And all these other things to respected people like yourself. I yield back. Mr. Chopra i appreciate the mr. Barr the gentlemans time has expired. The gentleman from pennsylvania, mr. Meuser, is recognized. Mr. Meuser thank you, mr. Chairman. Thank you, mr. Chopra. So you know, i talk to a lot of banks, small banks under 1 billion, 5 billion, regional, super regionals throughout pennsylvania. Big guys on wall street. And theyre really not happy with your agency. Lets just start there. I mean, across the board. I mean, the largest banks down to the smallest have many concerns. So the add that the cfpb is doing a great job is foreign to me. Ok. Because every single bank i talk to im not talking about three out of five. Its like 19 out of 20. So i assume you got some sort of reviews taking place, taking information in on your final rules and be responsive to the clientele that youre supposed to be helping. Mr. Chopra just to be clear. The clientele of the cfpb is not banks. The clientele is the public. And often it is true. There will be differences with entities that we mr. Meuser who serves the public . Do the banks serve the public . Mr. Chopra ok. Mr. Meuser so theyre a link in the chain. Mr. Chopra ok. And we want those who follow the law be able to not get disadvantaged by those who dont. And i hear your concerns. But at the end of the day, we have to make sure that our Consumer Protection objective mr. Meuser you go too far. Lets talk about the 1071 that keeps coming up. Ok. How somehow thats wonderful. Ok. I had a Small Business Committee Hearing the other day and we had four republican and democrat witnesses and they all thought it was terrible. That the type of questions that needs to be answered. I know in the final rule you retracted some of the insane information that you wanted to derive. Not making it required. But youre asking like banks to ask really personal information. Peoples race, on their sexual preferences. I mean, how where does that fit into into looking out for the public good . Mr. Chopra thats a statutory directive. So we were under a court order to implement section 1071 of the doddfrank act. It requires collection of information on race and other categories. Again, i appreciate that those are types of questions that sometimes are difficult. We try to work with the industry to figure out whats the best way to limit some of that. Mr. Meuser you actually will do that if you actually do that, work with the industry to provide guidance and oversight so they can handle and serve their customers best, but honestly, it doesnt sound as if youre doing that. I was in the business world. Ok. The more you talk to your customers, the better the better of a company you become. Now, you know, so thats on 1071. Also 13 data points. Statute requires the 13 data points. The rule requires 81. So theres a lot of concern from banks, small banks, primarily community. Mr. Chopra let me just make clear there is not 81 data points. Theres theres a difference between data fields. So what were trying to do is create mr. Meuser i am going to reclaim my time. If its not 81, is it 50 . Mr. Chopra no. I believe its like 19, 20. Mr. Meuser perhaps i stand corrected. Thats the information i have. Let me ask you about screen scraping. All right. Should be addressed in 1033 rulemaking, fraud is a serious problem, as we all know. Is this something that can you update the cfpbs approach to screen scraping and content through rulemaking to address this practice . Mr. Chopra yeah. I actually think we can. We can set the stage for making sure that screen scraping is not going to be we are going to leave this program here to keep our over 40year commitment to live coverage of congress. You can continue watching if you go to our website cspan. Org. We take you live to the floor of the u. S. House here on cspan. [captions Copyright National cable satellite corp. 2023] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. Visit ncicap. Org] the speaker the house will be in order