On May 24, 2017, the US Court of Appeals for the D.C. Circuit (D.C. Circuit) held oral argument in the PHH case, which we have blogged about extensively. The constitutionality of the CFPB’s structure was the central issue at the oral argument, occupying the vast majority of the time and the judges’ questions. It appears that the court intends to decide whether the CFPB’s single-director-removable-only-for-cause structure violates the Constitution’s separation of powers doctrine, even if the court rules in PHH’s favor on the RESPA issues.

The judges’ questioning signaled that, in their minds, the resolution turns on three questions: First, how does the CFPB structure diminish Presidential power more than a multi-member commission structure, which the Supreme Court has approved? Second, doesn’t the CFPB’s structure make it more accountable and transparent than a multi-member commission? Third, what are the consequences of approving the CFPB structure? Judges that appeared not to be concerned with the CFPB’s structure generally focused on the first two questions. Judges that appeared to be concerned with the CFPB’s structure focused on the third question. Another key theme addressed at various points throughout the oral argument is whether the CFPB’s structure is sufficiently close to the structures validated in prior Supreme Court cases, such that the court must uphold the CFPB’s structure.

At the oral argument, PHH’s counsel urged the court to recognize the serious affront that the various features of the CFPB’s structure, taken together, present to Presidential power, including: (i) the single director, (ii) the for cause removal provision, (iii) the funding outside the Congressional appropriations process, (iii) the director’s ability to appoint all inferior officers with no outside input, (iv) the director’s five-year term, (v) the deferential standard of review given to the director’s decisions, (vi) the director’s ability to promulgate regulations unilaterally, and (vii) the director’s sole ability to interpret and enforce regulations.

Before PHH’s counsel could even fully articulate his argument, however, judges started questioning him on how these features diminished Presidential power more than the multi-member commissions running other agencies, which the Supreme Court approved in Humphrey’s Executor. The DOJ, which was given time at the oral argument, forcefully responded to the judges’ questions. The “quintessential” character of the executive is the ability to act “with energy and dispatch,” counsel argued. Multi-member panels, as deliberative bodies, lack that quality and are thus more legislative and judicial than executive. Thus, they encroach on Presidential power to a much lesser degree.

DOJ’s counsel also pointed out that the rationale justifying the for cause removal provision that that the Supreme Court approved in Humphrey’s Executor was not present in agencies endowed with the CFPB’s structural features. The DOJ’s counsel pointed to language in Humphrey’s Executor approving the for-cause removal provisions only as to “officers of the kind here under consideration,” namely FTC commissioners. The Humphrey’s Executor court extensively described the FTC and the officers “here under consideration” in a way that precluded any applicability of the case to the CFPB. In Humphrey’s Executor, the FTC was described as a “non-partisan,” non-political body of experts that exercised quasi-judicial and quasi-legislative powers. The CFPB does not fit that mold, the DOJ ‘s counsel argued.

Counsel for both PHH and the DOJ also stressed that the CFPB did not fit the mold of the inferior officer at issue in Morrison v Olson, in which the Supreme Court approved a for-cause removal provision applicable to a special prosecutor. A few judges asked counsel questions apparently aimed at establishing that the existence of special prosecutors was as great an affront to Presidential power as is the CFPB’s structure.

During these lines of questioning, one judge suggested that the CFPB’s structure makes it more accountable to the President. She pointed out that, with a single director, there is one person to blame for problems and that, unlike multi-member commissions, the President has the power to appoint leadership with complete control over the agency. Counsel for PHH and the DOJ responded to this by reminding the court that the President can only appoint a director after the last director’s five-year term expires or the for-cause removal provision is triggered. Interestingly, no one raised the point that the for cause removal provision and five-year term also limit the ability of a President to remove a director that he or she appointed, even if the appointee did not act in a manner satisfactory to the President. Thus, the argument that the CFPB director is somehow more accountable than a multi-member commission does not hold water.

Some judges’ questions presented the issue that “if” the CFPB director is the same as a special prosecutor or FTC commissioner, then the D.C. Circuit is bound by Humphrey’s Executor and Morrison v. Olson. Without missing a beat, however, the DOJ picked up on that “if” and argued the point that the CFPB director is nothing like either position. DOJ’s counsel asserted that the director is not an inferior officer, as was the special prosecutor in Morrison v. Olson, nor is the director part of a non-partisan body of experts, as was the FTC commissioner in Humphrey’s Executor.

During the argument, Judge Brown and Judge Kavanaugh, who wrote the panel’s majority opinion, attempted to draw the rest of the court’s attention to the consequences of extending Humphrey’s Executor to a single-director agency and Morrison v. Olson to principal, as opposed to inferior, officers. Judge Brown suggested that, if the CFPB’s structure is constitutional, nothing would prevent Congress from slapping lengthy terms and for-cause removal restrictions on cabinet-level officials. That, she argued, would reduce the presidency to a “nominal” office with no real executive power. Judge Kavanaugh addressed the same issue making an apparent reference to the speculation that Elizabeth Warren may run for President after Trump leaves office. How would it be, he questioned, if she ran on a consumer protection platform, got elected, and was stuck with a Trump-appointed CFPB director, who would presumably take a much different position on issues central to her platform?

The CFPB’s counsel defended the Bureau’s structure at the hearing using the same technical arguments that the CFPB has been making all along. The CFPB’s counsel asserted that the CFPB’s structure was constitutional because each of the features taken individually has support in Supreme Court jurisprudence, principally Humphrey’s Executor and Morrison v. Olson.

In discussing the CFPB’s problematic structural features, CFPB counsel argued that, because each feature is a “zero” in terms of a problematic Congressional encroachment on Presidential power, that adding them together resulted in zero constitutional problems. “Zero plus zero plus zero, is zero,” he said. In rebuttal, PHH’s counsel pointed out that, as catchy as the argument may be rhetorically, it completely ignores the fact that even Supreme Court jurisprudence supportive of the individual features recognizes them as departures from the norm, acceptable only under certain circumstances. PHH’s counsel observed that the features at issue are not “zeros.”

The RESPA and statute of limitations issues did not occupy much time at the oral argument. Counsel for PHH urged the D.C. Circuit to reinstate the panel’s RESPA and statute of limitations rulings, all of which were in favor of PHH, and to rule on one issue not addressed by the panel.  While the panel decided, contrary to the CFPB’s views, that the CFPB is subject to statutes of limitations in administrative proceedings, the panel left for the CFPB on remand to decide if, as argued by the CFPB, each reinsurance premium payment triggered a new three-year statute of limitations, or whether, as argued by PHH, the three year statute of limitations is measured from the time of loan closing.  The judges did not raise any questions in response to counsel’s arguments on the RESPA and statutes of limitation issues.

Even though Lucia v. SEC was argued that same day, no questions surfaced during the PHH oral argument about the impact that Lucia may have on the PHH case.

* * *

It is likely that the earliest the D.C. Circuit’s decision will be issued is toward year-end. We will continue to monitor developments in this case.


The DOJ submitted its amicus brief in the PHH case on Friday, March 17.  We have blogged extensively about this case since its inception. Unsurprisingly, the Trump DOJ supports striking from Dodd-Frank the removal-only-for-cause protection currently applicable to the director of the CFPB.  In its “view, the panel correctly applied severability principles and therefore properly struck down only the for-cause removal restrictions.”  If the DOJ gets its way, the CFPB would remain intact with a director that President Trump can replace at any time.

While PHH likely appreciates the DOJ’s support, the DOJ is advocating a more limited remedial measure than PHH is seeking.  As we’ve noted before, PHH is arguing in the case that the CFPB should be dismantled in its entirety because its “unprecedented independence from the elected branches of government violates the separation of powers” and because the CFPB’s “constitutional infirmities extend far beyond limiting the President’s removal power…the proper remedy is to strike down the agency in its entirety.”  In sharp contrast, the Trump DOJ supports keeping the CFPB intact with a director removable at the will of the President.

Though the brief does not highlight the fact, the Trump DOJ has departed substantially from the position that the DOJ took under President Obama.  The departure is most obvious in brief’s first footnote, where the DOJ notes that “[i]n one case filed against several federal agencies and departments . . ., [t]he [DOJ’s] district court briefs . . . argued that, based on the Supreme Court’s decision in Humphrey’s Executor, the CFPB’s for-cause removal provision is consistent with the Constitution.”  However, the footnote goes on, “[a]fter reviewing the panel’s opinion here and further considering the issue, the [DOJ] has concluded that the better view is that the provision is unconstitutional.”  The obviously political nature of the change makes it difficult to predict how the judges on the court will react to the DOJ’s brief.

Of course, the change at the DOJ is not reflected in the CFPB’s view, which is diametrically opposed to the DOJ’s.  It’s rare that two executive agencies disagree so starkly and so publicly on an issue of such importance.  This contrast only highlights the problems created by a federal agency headed by a single person that is not accountable to the president.

The CFPB has issued a final rule postponing the effective date for all provisions of the TILA-RESPA Final Rule and Amendments to October 3, 2015.  The final rule also includes certain technical amendments to reflect the new effective date.  The provisions of the final rule related to the delay in the effective date, are effective immediately upon publication in the Federal Register in order to move the effective date for TILA-RESPA Final Rule and Amendments from Saturday, August 1, 2015 to Saturday, October 3, 2015.  The Federal Register that contains the finalized rule is scheduled to be published on July 24, 2015.

The final rule also makes two technical changes to the TILA-RESPA Final Rule that were not in the proposed rule.  Specifically, the final rule amends § 1026.38(i)(8)(ii) and (iii)(A) to include, in the amount disclosed as “Final” for Adjustments and Other Credits, the amount disclosed under § 1026.38(j)(1)(iii) for certain personal property sales in order to conform the calculation of Adjustments and Other Credits on the Closing Disclosure and Loan Estimate.  The final rule also attempts to conform the disclosure of the borrower’s cash to close in the Calculating Cash to Close and the Summaries of Transactions tables on the Closing Disclosure by amending § 1026.38(j)(1)(iv) to include, in the amount disclosed as Closing Costs Paid at Closing, lender credits disclosed under § 1026.38(h)(3).  According to the preamble, these “technical corrections are in line with existing industry expectations and informal Bureau guidance.”

As we previously reported, due to an administrative error the CFPB committed under the Congressional Review Act, the TILA-RESPA Final Rule would have been delayed by two weeks until August 15, 2015.  According to Director Cordray, the CFPB believes that the additional time provided by the new October 3, 2015 effective date will “better accommodate the interests of the many consumers and providers whose families will be busy with the transition to the new school year.”  In addition, the preamble also notes that the CFPB noticed “delays in the delivery of system had left some creditors with limited time to fully test all of their systems and system components to ensure that each system works with the others in an effective manner.”

Finally, the preamble to the final rule repeats the CFPB’s vow that it will not institute either a formal grace period or a dual compliance period as requested by many in the industry and Congress. However, the preamble states that, as expressed in Director Cordray’s letter to members of Congress on June 3, 2015, the CFPB’s “oversight of the implementation of the Rule will be sensitive to the progress made by those entities that have squarely focused on making good-faith efforts to come into compliance with the rule on time.”

On Tuesday, March 3, CFPB Director Richard Cordray appeared before the House Financial Services Committee to answer questions regarding the Bureau’s Semi-Annual Report to Congress and the President, which it published on December 4 of last year.  As we anticipated shortly before Director Cordray’s testimony, the report merely provided a backdrop for the hearing, which, in reality, served as a forum for committee members to question the Director on a range of issues significant to their respective constituents.  Much like the report itself, Director Cordray’s testimony largely rehearsed information with which we were already familiar, much of which we have covered on this blog.  Among the talking points we expected, however, a few newsworthy points emerged:

  • The Bureau plans to use its five-year review of the ability-to-repay (ATR) rule, mandated by section 1022(d) of the Dodd-Frank Act, to assess whether to extend, modify, or make permanent the temporary provisions that currently exempt loans backed by Fannie Mae and Freddie Mac from critical portions of the rule’s rigorous underwriting requirements. In response to questions from the committee’s chairman, Rep. Jeb Hensarling, Director Cordray indicated that the Bureau installed the sunset provision at least in part to give Congress time to undertake substantial reform of Fannie and Freddie.  Cordray acknowledged, however, that in light of Congress’s inaction on GSE reform, industry uncertainty tied to the pending sunset of the exemption constitutes a “legitimate concern.”
  • The Bureau plans in short order to convene a Small Business Review Panel (SBRP) to analyze proposals under consideration for a rulemaking governing payday loans and payday lenders. Payday loans and deposit advance products first appeared on the CFPB’s unified agenda in the Spring of 2013, and Bureau staff have since published two whitepapers on the matter—one in April 2013 and another in March 2014.  Hence, the Bureau’s decision to engage the SBRP process, which is a necessary precursor to release of a notice of proposed rulemaking (NPR), comes as no surprise.  That said, it tees up circulation of a document that will offer useful insight into the likely substance and consequence of the forthcoming NPR—the SBRP’s final report.  With respect to timing of the SBRP process for a payday loan rulemaking, Cordray told Rep. Maxine Waters, the committee’s ranking member, to “check back soon.”
  • Director Cordray indicated that the Bureau continues to be interested in learning more about, and potentially crafting responses to, unintended consequences of its various mortgage rules, particularly consequences tied to specific products tailored to, and offered in, limited geographical areas. Rep. Michael Capuano, who represents a large swath of the Boston metro area, raised concern that loans for the purchase of so-called “triple-deckers” (i.e., the three-floor, three-unit dwellings that line many of Boston’s streets) cannot feasibly satisfy the definition of a single-family property under the ATR rule.  Likewise, Rep. David Schweikert, who represents much of Phoenix, expressed concern over the rules’ implications for seller financing arrangements and contracts for land sales, which are popular, relationship-based transaction mechanisms in deed-of-trust states.  Director Cordray invited both members to engage in further discussions at the staff level in an effort to better understand the issues.
  • The Bureau has no plans to push forward the August 1, 2015, effective date for the TILA/RESPA integrated disclosures rule. Director Cordray indicated that CFPB examiners had no intention of “bringing the hammer down on the first day,” but he repeatedly emphasized that institutions will have had 21 months from the date of the rule’s publication to prepare.
  • For better or worse, the Bureau’s much-discussed “Rate Checker” tool appears here to stay. The tool, which allows consumers to view mortgage rates being offered to borrowers in their area, has been the subject of sharp criticism.  Citing concerns over the tool’s accuracy, among other things, the American Banker’s Association called for the CFPB to remove the tool from its website altogether.  Facing questions from the committee about the tool’s accuracy, Director Cordray said only that the tool is “quite accurate,” and he encouraged committee members to direct their constituents to the tool for help in shopping for their next mortgage.

The hearing failed to provide any news of note on other significant issues, including the evolution, if any, of the Bureau’s rulemakings on prepaid cards and home mortgage disclosure, or the progress of pre-rulemaking activities on debt collection.  Director Cordray did indicate in passing that action on overdrafts would likely follow planned rulemakings on payday loans and debt collection, both of which are slated for later this year.  Presumably, then, movement on overdrafts appears relegated to late 2015 at the earliest.

The Director has yet to appear before the Senate Banking Committee, as he typically does following circulation of the Semi-Annual Report.  To date, Senate Banking has not published any schedule for a pending appearance by Director Cordray.

Last week, Director Cordray spoke at a National Credit Union Administration town hall webinar. While his prepared remarks were not particularly revealing, the American Banker reported that Director Cordray was unusually candid during the Q&A part of the program.

In discussing the CFPB’s work on a proposed rule for overdraft products, Director Cordray indicated that the CFPB is not planning on banning overdraft products, but is “reviewing the size of fees, frequency of fees, occasion for fees, [and] the ordering of transactions.” He indicated that rules relating to prepaid cards, payday loans and the Home Mortgage Disclosure Act are a higher priority for the CFPB than rules for overdraft and debt collection. Finally, during the Q&A session, Director Cordray emphasized that the CFPB is not going to ease up on using the disparate impact theory to hold indirect auto finance companies liable for unintentional discrimination. Under this highly controversial theory—currently before the Supreme Court—a lender can be found to have violated the law without any evidence of intentional discrimination but based on statistical differences between groups that cannot be ascribed to legitimate business considerations.

The majority of Director Cordray’s prepared remarks did not include new information. The remarks focused on the CFPB’s actions in the mortgage space including the proposed changes to the definitions of “rural” and “small creditor” in Regulation Z. Additionally, Director Cordray promoted that the “Rate Checker” tool on the CFPB’s website, which allows consumers to check various mortgage rates in a specific area, as a critical feature that helps consumer make informed mortgage decisions. This comment suggests the CFPB is unlikely to be receptive to recent industry comments, including those from the American Bankers Association (“ABA”), urging the CFPB to remove the mortgage rate calculator from its website. (The ABA believes that the Rate Checker is an inadequate tool for consumer to use to compare financing because it lacks the ability to review all relevant information.)

Finally, we find it interesting that in his remarks, Director Cordray profusely praises the work of small lenders. We hope that Director Cordray continues to recognize the importance of small lenders as the CFPB prepares future proposed rules.

Director Cordray’s remarks to the Clearing House yesterday should unsettle bankers and payday lenders alike. In his talk, Director Cordray challenged bankers to bow to the inevitable. He suggested that sooner, rather than later, the industry should invest the billions of dollars required to build a payment system with “faster and even real-time payments” where “the interests of consumers remain at the top of [bankers’] minds.” The system envisioned by Director Cordray would be guided by four principles:

First, faster payments should bring with them faster access to the funds that a consumer deposits…. Second, a faster payment system should include real-time access to information about the status of an account as well as protections from hair-trigger assessments of fees…. [Director Cordray does not favor a “model based on ‘bounced check’ fees.” Get ready for a tough overdraft fee rule.] Third, faster payments must be accompanied by robust consumer protections with respect to fraudulent or otherwise unauthorized transactions and erroneous debits…. Fourth, and finally, a faster payment system should be accessible to all consumers and not just to the most privileged.

Director Cordray admonished banks that accept as customers for payment services “unscrupulous lenders and their payment processors.” Also, he criticized banks on the other side of payment transactions, observing that “consumers expect their own bank or credit union to be on their side.” All too often, he said, these institutions fail to honor stop payment orders, revocation orders and requests to close accounts to halt the abuse.

So who are the “unscrupulous lenders” of concern to Director Cordray? First, of course, are out-and-out fraudsters. Citing a case of a consumer who was cheated by an online payday lender that bilked consumers for over $100 million, Director Cordray noted that electronic payment systems “can be misused to victimize consumers unless banks and the system administrators work to police and enforce safeguards.”

But non-fraudulent payday lenders also came in for criticism. Director Cordray pointedly contrasted ACH return rates for credit cards, mortgage loans, and auto loans, pegged by JP Morgan Chase at less than 1 percent on average, to a “staggering” 25 percent return rate on payments for payday loans. He went on to criticize “fishing expeditions” to collect payments and the “particularly common and troublesome … practice of some online lenders [of] repeatedly sending automatic debits to collect payments.” Citing a few egregious examples, he added that, surely, “the financial institutions that accept these unscrupulous lenders and their payment processors as clients need to do a better job of ensuring that they are honoring the protections afforded consumers under the Electronic Fund Transfer Act.”

Director Cordray noted that the EFTA, TILA and NACHA rules are designed to protect consumers and merchants alike. “But even if these rules were all that they should be, merely having rules and safeguards is not enough – they need to be policed and enforced aggressively if they are to have their intended effect of actually protecting consumers.” Payday lenders should take heed of the continuing pressure on their banks: Steps need to be taken to taken to reduce return rates, potentially including new limits on repeat submissions of rejected payments. Director Cordray does not sound like a regulator who thinks Operation Choke Point has gone too far.

In an interesting coincidence, the comment period for the CFPB’s Request for Information (“RFI”) on mobile financial services closed the same day, September 10th, that Apple announced “Apple Pay”—a new mobile wallet included with the iPhone 6 that could shake up the mobile payments landscape.  The RFI, which we reported on earlier, speaks optimistically of potential cost savings for underbanked consumers while expressing concern about ensuring that consumers remain adequately protected.  Director Cordray repeated these twin messages in his prepared remarks to the Consumer Advisory Board on September 11th.  Director Cordray stated that “mobile devices . . . can make some transactions cheaper or faster or both.  But we need to make sure that the legal and regulatory framework can keep up effectively . . .”

The RFI and Director Cordray’s comments may be a trial balloon to test whether additional guidance, or even new regulation, is needed to specifically address mobile financial services.  Thus far, in addition to the RFI, the CFPB has only publicly addressed mobile financial services in the context of Project Catalyst and trial disclosures.

The American Bankers Association’s response to the RFI supported the goal of engaging the underbanked through the mobile channel, but questioned both whether mobile financial services will provide greater access to the underbanked and whether those services can be provided at a substantial discount.  The ABA pointed out that the top two reasons why people do not have bank accounts is that they “don’t have enough money” or “don’t need or want an account.”  The ABA also cited with approval the FDIC’s findings in an April 2014 whitepaper that providing access to mobile financial services alone may have limited success in getting the underbanked to use bank products.

On cost savings, the ABA stated that any savings to consumers from using mobile financial services would be “marginal.”  There are two reasons for this.  First, mobile banking, for example, is a channel that is an added service on top of all the other channels provided to consumers.  Second, there are unique compliance challenges with providing mobile financial services, which could cause banks to either not provide a product through a mobile channel or to charge more for the product.

We will be discussing these unique compliance challenges in greater detail in our webinar tomorrow.  Our webinar will also provide an overview of the mobile payments landscape, including a summary of the implications of Apple Pay.  The number of merchants, issuers, and consumers Apple will bring to the table through Apple Pay means that the new iPhone 6 has the potential to further accelerate the move toward mobile payments.  This in in turn could cause the CFPB and other regulators to move beyond RFIs and whitepapers in their efforts to ensure that consumers using mobile financial services are adequately protected.

The House Committee on Financial Services will hold a hearing tomorrow to receive the Semi-Annual Report of the CFPB and Director Cordray’s testimony on the report. CFPB Director Cordray is scheduled to be the only witness.

Director Cordray testified before the Senate Committee on Banking, Housing and Urban Affairs last week on the CFPB’s semi-annual report, and we expect the House Committee’s hearing to cover similar topics, including the CFPB’s data collection practices, the CFPB’s proposed rule for prepaid cards, and the CFPB’s headquarters renovation budget. The Committee may also discuss with Director Cordray recent legislation that was the subject of a Committee markup.

Yesterday, the Senate Committee on Banking, Housing and Urban Affairs heard testimony from Director Cordray at its hearing titled “The Consumer Financial Bureau’s Semi-Annual Report to Congress.” Noteworthy aspects of Director Cordray’s testimony included the following:

  • As they did at the Committee’s hearing on the CFPB’s Fourth Semi-Annual Report, Committee members  questioned Director Cordray about the CFPB’s data collection practices, especially in light of the FHFA’s recent announcement that the categories of information to be collected for the National Mortgage Database would be vastly expanded. Director Cordray attempted to reassure the Committee that the Database would not include personally identifiable information such as names, addresses, or social security numbers, and that the CFPB would not collect information on religion. However, consistent with his prior statements, he indicated that the CFPB needed the data to effectively oversee the markets and prevent another market crash.
  • Director Cordray informed the Committee that the CFPB’s proposed rule for prepaid cards would likely not be introduced until the end of the summer. He indicated that the delay was not because the CFPB was experiencing difficulties, but due to the difficulty of the issues involved.
  • Senator Menendez raised issues about the practice of automatically putting a student loan into default if a cosigner dies or becomes incapacitated, even if the loan is current. He asked whether the CFPB could do anything using its existing authority to curtail this practice through rulemaking, or whether legislation was needed to grant the CFPB authority to address this practice. Director Cordray responded that public shaming of loan servicers who engage in this practice is important, and that his staff would reach out to Senator Menendez’s staff to discuss what further authority the CFPB may need. Senator Brown expressed concern that the problems in the mortgage servicing market are being repeated in the student loan servicing market. Director Cordray agreed, saying that the CFPB has seen an “eerie consistency” in the issues plaguing both markets: poor customer service, problems with transfers, lack of information, and harm to customers.
  • With respect to rulemaking in the small dollar loan market, Director Cordray testified that this market was of “extreme importance to the Bureau.” Senator Brown cited examples where payday lenders were able to continue to operate in Ohio after laws restricting payday loans were passed, by shifting to alternative products like installment loans, online loans, and title loans. Director Cordray cited the Military Lending Act as another example of problems that can arise when the initial rules are not strong enough to prevent lenders from finding workarounds. Director Cordray indicated that it was taking the CFPB longer to address small dollar loans in order to make sure that its proposed rule won’t be “made a mockery of” by companies circumventing the rules creatively, as many payday lenders have done.
  • Director Cordray also addressed concerns regarding the CFPB’s headquarters renovation budget, and asserted that the idea that the budget has tripled was a “fiction” promulgated by the Washington Examiner. He explained that it was never contemplated that the renovation could be completed for under $100 million, and that this amount as set forth in in the original budget represented an initial payment. Senator Johanns questioned a cascading water fountain that is part of the renovation, and expressed his frustration that the Committee had so little oversight over the budget. Director Cordray said he would “absolutely” be willing to give the Committee a thorough accounting of what is being spent on the renovation.
  • Senator Warren discussed the CFPB’s arbitration study, saying that forced arbitration clauses “stacks the decks” against consumers in favor of large companies. The preliminary results of the CFPB’s study were released late last year. Director Cordray testified that the final study will be ready sometime this year, and that the CFPB would then be in a position to make policy judgments based on the findings in the final report. He declined to “prejudge” the issue, but stated that any rulemaking would take into account how arbitration actually works (i.e., does it provide a meaningful avenue for resolution of consumer issues? Why does it or does it not? How does arbitration compare to alternatives in court?)
  • Ranking Member Crapo expressed concern about Operation Choke Point, and asked whether there was a conscious effort on the part of regulators to force legally operating lenders to stop their business. Director Cordray did not agree with that characterization, reiterating that the CFPB’s focus is on ferretting out illegal activity, calling that task “hard enough to do.”

The Senate Banking Committee announced that it would be holding a hearing on June 10, 2014 on the CFPB’s fifth Semi-Annual Report to Congress. CFPB Director Richard Cordray is the only witness scheduled to testify.

The hearing is expected to cover a range of topics, including the CFPB’s recent issues regarding discrimination in employee reviews, and the Senate’s recent hearings on student loans. We will report back on Director Cordray’s testimony before the Committee.