Richard Cordray, the recess-appointed director of the Consumer Financial Protection Bureau, defended his agency’s collection of data on Americans’ credit card and mortgage payments against Republican critics’ suggestion that Americans see it as a “creepy” threat to privacy.
At a Tuesday hearing at the Senate Banking, Housing and Urban Affairs Committee, Cordray said the collection of so-called big data has become the “cutting edge of analysis in every field over the past two years. From IBM to the big banks, it’s the way of the world,” he said, stressing that the data are scrubbed of personal information to maintain individuals’ anonymity. “The notion that regulators shouldn’t keep up with this is misguided.”
Cordray also said he welcomed congressional oversight of his new but embattled agency and announced plans to push more Americans to learn to make better financial decisions. “We’re going to be much more aggressive in the coming year using the bully pulpit on financial literacy,” he said. “It’s not a partisan issue. It used to be called home economics.” Nor, he added, “is it the nanny state telling you what to do with your mortgage.”
The CFPB director, whom President Obama named in a recess appointment in January 2012 that Republicans have challenged as unconstitutional, testified about the bureau’s semi-annual report to Congress. But Republicans quickly renewed familiar attacks, saying the bureau burdens small businesses and community banks, should be restructured with a bipartisan board rather than a director, should receive an appropriation from Congress rather than a budget set by the Federal Reserve, and should defer more to other financial regulators.
Ranking member Mike Crapo, R-Idaho, said the fact that CFPB staff have testified to Congress 30 times “still does not facilitate the in-depth discussion we need.” He cited a Bloomberg News article reporting that the bureau has gathered credit card data from 10 million Americans. “The power of the government is being put behind this data collection effort, and no one has the power of the federal government,” Crapo said. “Can consumers opt out? Is it possible for CFPB to dig into it? Do we just have to take the agency’s word that it’s anonymous?”
Sen. Mike Johanns, R-Neb., demanded to know the source of the data CFPB gathers. “It sounds downright creepy, and people are going to be bothered,” he said. “It’s a very uncomfortable situation for your agency.”
Cordray replied that the credit card and mortgage payment data are widely available and are bought from companies such as Argus and from credit records, which the CFPB is using to work with the Federal Housing Finance Agency to construct a national mortgage database. “The information is not personal but is anonymized,” he said. “If people want to misunderstand and think that it’s invading privacy based on speculation, I’d simply say, that’s not what it is.”
The bureau must gather such data if it is to prepare cost-benefit analysis of the structure of markets and to deliver reports required by Congress, he added. “If we didn’t, you’d be disappointed with us and rightly so.”
Similarly, the CFPB’s consumer complaint database, which has accumulated nearly 100,000 complaints about lenders, does not risk disclosing personal data, Cordray said. The complaints are “scrubbed” of personal identifiers after confirming that the complainer has a commercial relationship with the company. “We use it to communicate to companies on how to improve, and to the public too,” he said. “We need more of this, not less.” He did promise Crapo a visit from his staff to clarify the bureau’s privacy safeguards.
Another key function of his agency, Cordray said, is to simplify and translate complex regulations for consumers. “I don’t think people enjoy reading the Federal Register--I’m a lawyer and I don’t,” he said.”
Democrats sought to defend Cordray. “Never in our history has a qualified candidate been held hostage because a significant minority doesn’t like the structure of his agency,” said Sen. Sherrod Brown, D-Ohio.
Sen. Elizabeth Warren, D-Mass., a key designer of the bureau who successfully ran for Senate after her bid to become its director died amid Republican resistance, praised Cordray, who served as her enforcement chief. She said he had “put together a tough-as-nails office that will protect consumers from predatory lenders. You’ve already proven the consumer agency is independent and effective,” she said.
“It’s been more than a year since the minority tried to block your nomination, reopening a debate that ended three years ago,” Warren added. “They lost fight that fight, then sought to weaken the agency and still don’t have votes to undercut it.”
Cordray said he welcomed Congress’ oversight, noting that his work is also monitored by the Government Accountability Office, an inspector general, courts and a private auditor, which is true of no other agency. His budget is capped, he added. “You senators shouldn’t underestimate yourselves,” he said. “This is meaningful oversight that we take seriously. I sleep well at night.”
Both the present and the future, Cordray told the lawmakers, “are for us is to pursue the agenda Congress has given us. The tasks Congress gives us take priority over those we give ourselves.”