Lawmakers Fume Over Unanswered Questions to CFPB

WASHINGTON — Lawmakers blasted the Consumer Financial Protection Bureau on Thursday, claiming it had failed to respond to their questions about its data gathering activities.

During the CFPB's semi-annual report to the House Financial Services Committee, lawmakers demanded to know why the agency's director, Richard Cordray, and his staff have not yet answered roughly 200 questions sent to the agency over the past two months.

"I know that the agency, and you yourself, pride, take great pride in the commitment to transparency and accountability, and frequently speak about the number of appearances that you and your staff have had before our committee but ... it's not really a question of quantity, it is a question of quality," Chairman Jeb Hensarling told Cordray. "And frequently we have found, Mr. Director, that members of your staff can be uniquely unresponsive to our inquiries."

Hensarling opened the hearing by playing a clip from a July 9 hearing when Steve Antonakes, the agency's No. 2, deferred numerous questions, saying the CFPB would follow up with lawmakers later (Cordray was banned by the panel from testifying at the time because he had not yet been confirmed by the Senate). A month later, the committee sent another round of 100 questions to the CFPB that have yet to be answered.

That angered several lawmakers who accused the agency of purposely dragging its feet.

"Why don't you just level with us? We've asked you these questions over and over again. And you come in and you stonewall," said Rep. Sean Duffy, R-Wisc. "You try to explain. But never do we get answers. Never does America get answers."

But Cordray said that the data is needed to write regulations such as the Qualified Mortgage rule and to oversee markets like payday lending.

"If we don't have the data or information that we need to make those judgments, we're going to be very ill-informed in our policy judgments. We're going to be pretty wild in targeting what, exactly, are the major concerns," Cordray said. "The better data and information we have about what's going on in these markets, the more precisely we can pinpoint what's an appropriate action and what's not, which is something you will all, I think, should want and do want."

He ultimately vowed to respond to the questions within five days but argued that the committee took a month to write up the questions and likewise, it will take some time for the agency to write up its responses.

"We have been working in the ensuing, now month, to prepare responses to the questions for the record, and also to gather contract documents and other information," Cordray said. "You will have that any day now."

Even Democrats warned Cordray that the CFPB was beginning to appear unresponsive, particularly on sensitive issues like data gathering and how it bids contracts with third parties.

"While your accomplishments are significant, issues such as data collection practices continue to need your attention," said Rep. Maxine Waters, the panel's top Democrat. "I believe all federal agencies regulators credit report bureaus, financial service providers, and others must proceed with caution on this front affording the highest respect to the protection of consumer privacy.

"The Dodd-Frank Act specifically prohibits CFPB from gathering or analyzing any information that is personally identifiable. I trust you are carefully adhering to the letter of the law and carefully balancing your bureau's duty to monitor the market with your responsibility to protecting consumer privacy."

Cordray said the agency has only recently begun collecting personally identifiable financial information from firms as permitted through a certain section of the Dodd-Frank Act when used to monitor markets. When pressed repeatedly by Duffy, Cordray began ticking off companies that the CFPB is collecting credit card data from, including JPMorgan Chase, Bank of America, Capital One, Discover and American Express.

Separately, the CFPB "just now send out an order to a number of companies to provide us with template consumer credit agreements as part of our efforts on the arbitration study," he said. "But there are other areas where we are permitted to collect information, and it's obviously necessary."

One of those areas is the largely unregulated and difficult to track non-bank payday lending space, particularly with online lenders.

"Internet practices can be very difficult for law enforcement authorities at the state level because they're borderless, they go beyond jurisdictions. They go beyond the national jurisdiction as well," Cordray said. "I think at the moment, it's an issue that we see as a potential issue for enforcement and supervision" and "we've indicated that in our unified regulatory agenda."

But Cordray also took caution when asked whether he agreed with what some see as a hard-lined approach the Justice Department and the Federal Deposit Insurance Corp. are taking against banks clearing payments for online lenders, thereby "choking off" online payday lenders entirely.

"My stance on online lending, as with all lending, it should be done legally; it should be done by folks who are licensed and qualified to do it," Cordray said. "It should be done in compliance with federal and state law."

The Qualified Mortgage rule was also a sore topic as lawmakers continued to express concerns that their local banks would not meet the Jan. 10 implementation date.

"It is unreasonable to expect the small community lender with one compliance officer to . . . absorb the challenges of 3,500 pages of new regulations proposed and the additional amendments that have been issued throughout the year," said Rep. Shelley Moore Capito, R-W.V., who supports pushing implementation out a year. "Community lenders need to ensure their systems are compliant in order to properly extend credit to their consumers."

Cordray did not promise a delay. Instead, he reiterated similar points made a day earlier at a North Carolina Bankers Association conference that the agency would remain flexible with smaller banks and open to adjustments to the rule.

"if you're a smaller creditor of under $2 billion in assets, and you make mortgages that you keep in portfolio, those also are qualified mortgages, regardless of the [43% debt-to-income ratio requirement], so it is not a one-size-fits-all," he said. "It's not a procrustean bed fitting everybody into one metric. It's an attempt to respond to different considerations we've heard around the country."

Still, Cordray alluded that not every institution may be in full compliance by the deadline.

"They've been nervous about it. They've been looking for questions to be answered and certain relief to be given on operational issues. I think that for the most part, they have said they will be in substantial compliance by January 10," he said. "With the smaller institutions, we did include special provisions" but "sometimes the smaller banks and credit unions don't seem to be yet aware of and so it's incumbent on use and happy to work with all of you to get that message out."