THANKS, MICHAEL. I'M ONE OF THE PEOPLE THAT WE SPENT A COUPLE HOURS EVERY FIVE MINUTES DURING THE DODD-FRANK PROCESS, AND IT'S GREAT TO BE HERE IN ANN ARBOR. THE ARCHITECTS OF DODD-FRANK CAN ADDRESS THE GLARING WEAKNESSES IN FINANCIAL INSTITUTIONS TO PROTECT CONSUMERS EXPOSED BY THE FINANCIAL CRISIS IN WHICH ALMOST SUNK THE WORLD ECONOMY. THE ROUTE OF THE CRISIS WAS A CONSUMER PROTECTION FAILURE OF MASSIVE PROPORTIONS, WHERE MILLIONS OF BORROWERS RECEIVED MORTGAGES THAT WERE DESIGNED IN WAYS TO MAKE FAILURE MORE LIKELY TO NOT AND THEY'RE ENTIRELY UNABLE TO REPAY. AS A RESULT, MILLIONS OF FAMILIES UNNECESSARILY LOST THEIR HOUSES CAUSING LOSS OF WEALTH TO FAMILIES AND COMMUNITIES. THESE FORECLOSURES HAD RIPPLE EFFECTS THROUGH THE FINANCIAL SYSTEM BECAUSE OF LITTLE KNOWN LEVERAGE BETS FINANCIAL INSTITUTIONS PLACED ON THEM. THESE FINANCIAL INSTITUTION FAILURES CAUSED LARGE UNEMPLOYMENT, MORE DE FAULTS, MORE MISERY WE'RE YET TO RECOVER FROM. HOW WERE ALL OF THESE BAD MORTGAGE LOANS POSSIBLE? SEVERAL REASONS. FIRST, THERE WAS NO MARKET INTELLIGENCE OR EARLY WARNING SYSTEM TO RECOGNIZE THE PROBLEM UNTIL IT WAS TOO LATE. SECOND, THERE WAS NO ONE ENTITY RESPONSIBLE FOR ATTRACTING OR ADDRESSING PROBLEMS IN THE FINANCIAL ARENA. IN FACT, SEVERAL AGENCIES, AS MICHAEL MENTIONED, SEVERAL AGENCIES HAD CONSUMER PROTECTION RESPONSIBILITIES FOR BANKS AND THE FTC HAD LIMITED ENFORCEMENT FOR NON-BANKS. THE FEDERAL RESERVE HAD WRITING AUTHORITY UNDER A NUMBER OF STATUTES, BUT CONSUMER PROTECTION WAS NOT THEIR TYPE PRIORITY AND COULDN'T REALLY HAVE BEEN EXPECTED TO BE. THEY HAD TO DEAL WITH SAFETY AND SOUNDNESS OF BAINKS AND BANK HOLDING AND PROMOTE FULL EMPLOYMENT, PAYMENT SYSTEMS, ALL THIS STUFF CAME BEFORE CONSUMER PROTECTION. THIRD, PREEMPTION OF STATE MORTGAGE LENDING FROM NORTH CAROLINA WHERE I'M FROM BY FEDERAL BANKING REGULATORS LIMITED THE ABILITY TO FILL THE BREACH WAS ANOTHER PROBLEM. FOURTH, THERE WAS NO RULES PROTECTING BORROWERS IN MORTGAGE LENDING. THE CLASSIC ABUSIVE MORTGAGE DURING THE BOOM TIME WAS THE OVER HALF OF THE LOANS THAT MINORITY FAMILIES RECEIVED DURING THE BOOM WERE THESE SUB-PRIME, VERY BAD MORTGAGES. THEY'RE OFTEN ORIGINATED BY MORTGAGE BROKERS UNDER A COMPENSATION STRUCTURE THAT EXEMPTED TO PUT BORROWERS IN THESE MORTGAGES EVEN IF THEY QUALIFIED FOR A CONVENTIONAL MIDDLE CLASS MORTGAGE. THEY WERE OFTEN ORIGINATED ON BEHALF OF LARGE, UNREGULATED LARGE BANKS, LIKE COUNTRY WIDE, NEW CENTURY, AND SOLD TO PRIVATE SECURITY INVESTORS THROUGH WALL STREET. THEY OFTEN DID NOT DOCUMENT INCOME OR ASSETS, PROMOTING FRAUD IN WHAT BROKERS REPORTED. THE LOANS OFTEN DID NOT AMORTIZE. THEY HAD TEASER PAYMENTS OR IN THE CASE OF 228, TEASER RATES, BOTH LEADING TO HUGE UNSUSTAINABLE SHOCK THAT FAMILIES SIMPLY COULD NOT ABSORB. TO TOP IT OFF, THERE WAS OFTEN A VERY LARGE PREPAYMENT PENALTY WHICH TOOK THE FAMILY'S EQUITY AS A QUID PRO QUO OF BEING ABLE TO GET OUT OF A BAD LOAN AND INTO A GOOD ONE. THE AMAZING THING WAS THAT ALL THESE MORTGAGE FEATURES, OTHER THAN THE OUT RIGHT FRAUD THAT THE SYSTEM PROMOTED AND IGNORED, WERE LEGAL AT THE TIME. IT IS KIND OF AMAZING TO CONTEMPLATE. AND, FINALLY, A FIFTH PROBLEM WAS THAT THERE'S NO FEDERAL ENTITY TO SUPERVISE NON-BANK LENDERS, AS WELL AS ENTITIES LIKE THE CREDIT BUREAUS. THAT'S QUITE A LIST OF FAILURES THAT HELP LEAD TO THE FINANCIAL CRISIS. AND, OF COURSE, MORTGAGES WEREN'T THE ONLY TYPE OF PRODUCT WHERE THESE PROBLEMS EXISTED. IT WAS JUST THE LARGEST ONE. A FEW ADDITIONAL EXAMPLES, MICHAEL MENTIONED MANY OF THEM, PAY DAY LOANS, STUDENT LOANS, OVERDRAFT CHARGES BY BANKS, TRICKS AND TRAPS WITH CREDIT CARDS AND PREPAID CARDS. THE DODD-FRANK SOLUTION, I THINK, STILL WAS A WISE ONE. CREATE ONE FEDERAL AGENCY WITH THE MANDATE TO PROTECT CONSUMERS OF FINANCIAL PRODUCTS AND ARM IT WITH A TOOL KIT SUFFICIENT TO THE TASK, CAPABLE OF ADDRESSING THE FAILURES I JUST DISCUSSED. FIRST, ESTABLISH ONE AGENCY WITH INDEPENDENCE FROM POLITICAL PRESSURES BY CONGRESS OR THE ADMINISTRATION. THIS INDEPENDENCE IS THE CASE WITH ALL OTHER FEDERAL SAFETY AND SOUNDNESS REGULATORS AND IS PROBABLY EVEN MORE IMPORTANT FOR AN AGENCY TO PROTECT CONSUMERS. SECOND, THE AGENCY WOULD SERVE A MARKET MONITORING FUNCTION AND BE INFORMED BY A COMPLAINT DATA BASE WHERE CONSUMERS ACROSS THE COUNTRY COULD RETAIN REDRESS. SO PROBLEMS IN MORTGAGE LENDING WOULDN'T HAVE COME AS SUCH A SURPRISE. THIRD, RECOGNIZING THAT CFMB MAY NOT HAVE ALL OF THE ANSWERS OR THERE MAY BE TIMES WHEN CFMB IS NOT SUFFICIENTLY RIGOROUS IN PROTECTING CONSUMERS. THE AGENCY'S RULES WOULD SERVE AS A FLOOR AND NOT A CEILING. AS A RESULT, STATES COULD ENFORCE THEIR OWN LAWS THAT ARE MORE PROTECTIVE OF CONSUMERERS. ALSO STATE ATTORNEY GENERALS COULD ENFORCE THE RULES IF CFMB DECIDED NOT TO. FOURTH, PROVIDE THE AGENCY WITH THE RULE WRITING AUTHORITY SHARED WITH DIFFERENT FEDERAL AGENCIES. THESE RULES WOULD ESTABLISH A LEVEL PLAYING FIELD FOR BANKS AND NON-BANKS. THEY WOULD ALSO PREVENT RESPONSIBLE LENDERS AND PROVIDERS FROM HAVING TO RELAX THEIR STANDARDS TO KEEP WITH OTHERS WHO DON'T HAVE THOSE VIEWS. FIFTH, THE AGENCY WOULD SUPERVISE LARGE BANKS AND LARGE NON-BANKS AND ALL MORTGAGE LENDERS. SIXTH, IT WOULD ALSO HAVE ENFORCEMENT AUTHORITY IN CASE SUPERVISION IS NOT ENOUGH AND IT'S REGULATED ENTITIES DON'T FOLLOW ITS RULES. THAT WAS THE VISION THAT THE DODD-FRANK ARCHITECTS HAD TO ADDRESS THE PROBLEMS THAT LED TO THE CRISIS. I THINK WHAT -- I THINK WHAT OUR PANEL IS GOING TO DO IS TALK ABOUT THOSE DIFFERENT TOOLS AND HOW THEY'VE BEEN APPLIED, HOW THEY MIGHT BE APPLIED IN THE FUTURE. SO AFTER THAT LEAD IN, I THINK I'LL INTRODUCE THE -- EACH PANEL EST ONCE THEY'RE ABOUT TO -- PANELIST ONCE THEY'RE ABOUT TO TALK. I THINK PEGGY IS GOING TO GO FIRST. THE ASSISTANT DIRECTOR OF SUPERVISION POLICY AT THE FINANCIAL BUREAU. THANK YOU, ERIK. GOOD MORNING, EVERYONE. THANK YOU, MICHAEL, FOR INVITING ME HERE. AND THANK YOU FOR ASKING ME TO COME TO TREASURY BACK IN 2009. IT'S BEEN EVER SINCE THEN IT'S BEEN INTERESTING, CHALLENGING TO BE INVOLVED AS THE CFBP STORY CONTINUES TO UNFOLD. AS ERIK SAID, I'M HEAD OF SUPERVISION POLICY, WHICH AT CFPB WHICH HAS THE RESPONSIBILITY OF SETTING STRATEGY FOR BOTH THE BANK AND NON-BANK SUPERVISION PROGRAM, AS WELL AS ENSURING THAT AS WE SUPERVISE THE CALLS WE MAKE ON LEGAL VIOLATIONS AND HOW WE APPLY OUR EXPECTATIONS ARE CONSISTENT ACROSS THE BANK AND NON-BANK MARKETS. I WANT TO SAY A LITTLE BIT ABOUT MY BACKGROUND. BEFORE MICHAEL ASKED ME TO COME OVER TO TREASURY AND BEFORE I GOT STARTED WITH CFMB, BECAUSE THAT INFORMS MY REMARKS AND MY PERSPECTIVE THAT YOU'LL HEAR TODAY. AND BEFORE THAT, I WAS AT THE FEDERAL TRADE COMMISSION. SO I SPENT MOST OF MY CAREER IN THE PUBLIC SECTOR. AND I WAS AT THE FEDERAL TRADE COMMISSION IN THE DIVISION OF FINANCIAL PRACTICES, WHICH AS ERIK MENTIONED ONLY HAS JURISDICTION OVER NON-BANKS AND PRIMARILY ENFORCEMENT AUTHORITY AS A TOOL. SO WITH THAT BACKGROUND IN MIND, I WANT TO TALK ABOUT THREE DIFFERENT THINGS. ONE IS FROM MY VIEWPOINT GIVEN THAT BACKGROUND, HOW I THINK THE OVERSIGHT OF COMPLIANCE WITH FEDERAL CONSUMER FINANCIAL LAW HAS IMPROVED WITH THE CREATION OF THE BUREAU AND WHAT DIFFERENCE THE SUPERVISION PROGRAM OF THE BUREAU HAS MADE. AND IN PARTICULAR, I WANT TO MENTION THE SUPERVISION OF THE CREDIT BUREAUS OF THE LARGEST CONSUMER REPORTING AGENCIES, AS WELL AS THE FURNITURES TO THOSE SYSTEMS AND TALK ABOUT WHY I THINK THAT WAS A SIGNIFICANT ADDITION TO THE FEDERAL OVERSIGHT LANDSCAPE FOR CONSUMERS. AND THEN, THIRD, I WAS GOING TO TALK ABOUT ALSO I SAW SOMETHING IN THE MATERIALS ABOUT TECHNOLOGY. WE'RE SUPPOSED TO BE TALKING ABOUT TECHNOLOGY. SO I WANT TO TALK ABOUT SOME OF THE BENEFITS AND PIT FALLS THAT THE BUREAU HAS FOUND AS INSTITUTIONS RELY AND PERHAPS INCREASINGLY RELY ON TECHNOLOGY TO FACILITATE COMPLIANCE. SO THAT'S PART AND PARCEL OF JUST THE WAY THINGS ARE DONE THESE DAYS AS YOU ALL KNOW. SO AS WAS MENTIONED BY MICHAEL AND ERIK BEFORE THE CRISIS, THERE WAS NO AGENCY WITH SUPERVISORY AND ENFORCEMENT AUTHORITY OVER BOTH THE BANKS AND NON-BANKS TO OVERSEE COMPLIANCE WITH FEDERAL CONSUMER LAW. THE FTC HAD ENFORCEMENT AUTHORITY ONLY. AND, THEREFORE, THAT MEANT THERE WAS LIMITED ABILITY TO REALLY PREVENT VIOLATIONS FROM OCCURRING. WHEN THERE WAS SMOKE COMING OUT, HOPEFULLY NOT AT THE HOTEL WHERE WE'RE STAYING IN, SMOKE COMING OUT. YOU KNOW, THE LAW ENFORCERS SEE THAT SMOKE GOES IN. TRIES TO STOP THE FIRE AND GET ANY REMEDIES BACK TO CONSUMERS THAT WERE INJURED. AS OPPOSED TO GOING IN AND MAKING SURE THAT THOSE ALARMS ARE WORKING. THEY ARE WORKING. THEY'RE WORKING. SO THAT THE FIRE CAN BE STOPPED AT THE EARLIEST POINT OR PREVENTED. BETTER YET PREVENTED IN THE FIRST PLACE. SO NOW EIGHT YEARS LATER, IT'S A COMPLETELY DIFFERENT CONSUMER PROTECTION REGULATORY LANDSCAPE. THE BUREAU NOT ONLY HAS ENFORCEMENT AUTHORITY, BUT SUPERVISORY AUTHORITY AS WELL. AND THAT EXTENDS ACROSS THE LARGEST BANKS AND MANY OF THE NON-BANKS THAT ARE BASICALLY SOME OF THEM IN THE EXACT SAME MARKETS DOING VERY SIMILAR THINGS. SO WE CAN SEE ACROSS THAT LANDSCAPE AS WE DO THAT SUPERVISORY WORK. SO WE BUILT OUR SUPERVISOR PROGRAM. I GUESS WE SHOULD MENTION I'M USING THAT WORD AS IF EVERYBODY KNOWS WHAT THAT MEANS. THAT'S WHERE BASICALLY EXAMINERS CAN GO INTO THE INSTITUTION. IT CAN BE ON-SITE OR OFF SITE. SO WE HAVE THE AUTHORITY TO ASK FOR INFORMATION FROM THE BANK OR THE NON-BANK ABOUT HOW THEY'RE COM COMPLYING WITH THE LAW. WE HAVE THE ABILITY TO ASK FOR INFORMATION TO HELP THE EXAMINERS ASSESS COMPLIANCE WITH THE LAW. AND WE CAN LOOK FOR RISK TO CONSUMER. SO IT'S ALL VERY ONGOING, REAL TIME INFORMATION GATHERING AND ASSESSMENT AS OPPOSED TO A LONGER STRETCHED OUT INVEST TORI PROFICIENCY. SO IT'S BASICALLY THE PRIMARY TOOL IS SETTING EXAM TEAMS TO BE ON-SITE TO ENGAGE WITH THE COMPANY OFFICIALS. ASK THEM ABOUT WHAT THEY'RE DOING, WHAT THEIR COMPLIANCE SYSTEM ARE AND TO EVALUATE WHETHER THEY'RE COMPLYING WITH THE LAW. SO WE'VE BUILT THIS PROGRAM -- AND THE FOUNDATION IS TO ENSURE THAT ENTITIES HAVE COMPLIANCE MANAGEMENT SYSTEMS IN PLACE AND THAT THEY ARE ENGAGING AT ONGOING SELF MONITORING AND CORRECTION AND INCLUDING WHERE THEY EVALUATE THE ROOT CAUSE OF ANY PROBLEMS AND THEY PUT INTO PLACE ANY THAT'S NEEDED TO TRY TO ADDRESS THOSE ROOT CAUSE. SO THAT'S THE BASIC GOAL IS TO AIM AT PREVENTION OF LAW VIOLATIONS IN THE FIRST PLACE. IT'S MORE COMPREHENSIVE THAN SOLELY LOOKING AFTER THE FACT WHETHER THEY VIOLATED THE LAW. IT'S TRYING TO MAKE SURE THEY HAVE SYSTEMS IN PLACE TO ENSURE THAT DOESN'T HAPPEN IN THE FIRST PLACE. THAT'S THE PRIMARY GOAL. AND BECAUSE WE PRIORITIZE OUR SUPERVISORY WORK BASED ON RISK, IT ALSO PROVIDES AN INCENTIVE TO MEET THOSE EXPECTATIONS IN THAT IF WE GO IN AND SEE A BANK OR NON-BANK WITH A VERY ROBUST COMPLIANCE MANAGE SYSTEM, THEN WE ARE ASSURED THAT THEY ARE DOING THE SELF MONITORING, SELF CORRECTION, AND WE, THE CFPB, DON'T HAVE TO SPEND AS MANY OF OUR RESOURCES GOING BACK AS EARLY AND OFTEN TO LOOK AT WHAT THEY'RE DOING. CONV CONVERSELY, IF WE'RE TROUBLED BY WHAT WE SEE, THEIR RISK MATRIX AND SCHEDULED FOR EXAMINATION REVIEWS MORE FREAKILY. WHAT WE FOUND IS MANY -- FREQUENTLY. WHAT WE FOUND IS MANY BANKS HAVE IMPROVED WITH THIS KIND OF OVERSIGHT BECAUSE OUR OVERSIGHT AS COMPARED TO THE PAST FIRST AND FOREMOST IS SOLELY FOCUSED ON CONSUMER COMPLIANCE. THAT'S THE ONLY FOCUS. NOT AS THE OTHER REGULATORS HAD A COMBINED FOCUS THAT WAS CONCERNED WITH SAFETY AND SOUNDNESS AND OTHER COMPLIANCE ISSUES. SO WE HAVE SEEN IMPROVEMENT, ESPECIALLY BUT NOT ONLY IN THE NON-BANK MARKETPLACE WHERE THEY NOW HAVE COMPLIANCE MANAGE SYSTEMS IN PLACE THAT THEY NEVER HAD BEFORE. ONE EXAMPLE OF THAT IS THE BIGGEST CONSUMER REPORTING AGENCIES. THE CONSUMER REPORTING MARKET, AS MANY OF YOU KNOW, PLAYS A CRITICAL ROLE IN OUR ECONOMY, IN CONSUMER'S LIVES. IT HAS SUCH AN ENORMOUS REACH AND IMPACT. OVER 200 MILLION AMERICANS HAVE CREDIT FILES WITH THE BIGGEST CREDIT BUREAUS AND TRADE LINES ARE FURNISHED BY OVER 10,000 PROVIDERS. IT'S PROBABLY A GIVEN HOW IMPORTANT THESE CREDIT REPORTS CAN BE IN SO MANY ASPECTS OF CONSUMER ER'S LIVES. IT'S ALSO IMPORTANT TO THE BUSINESSES THAT USE IT THAT IT BE ACCURATE. BUT IT'S INTERESTING TO ME DESPITE THE CRITICAL IMPORTANCE OF THE INFRASTRUCTURE, UNTIL THE CFPB, THERE WAS NO FEDERAL OR STATE AGENCY THAT HAD OVERSITE AUTHORITY TO GO IN AND MONITOR COMPLIANCE. HAD SUPERVISORY AUTHORITY. NOT THE STATE, THE FEDERAL AUTHORITIES. IT WAS THIS AFTER THE FACT LAW ENFORCEMENT AUTHORITY. AND SO THE CFPB ONE OF THE FIRST THINGS WE DID WHEN WE NEEDED TO ESTABLISH A RULE TO BE ABLE TO SUPERVISE SOME OF THE NON-BANKS, OUR FIRST PRIORITY WAS ESTABLISHING A RULE THAT WOULD LET THE CFBP OVERLOOK THE RULE. SO NOW WE HAVE A SUPERVISION PROGRAM WITH RESPECT TO THE LARGEST CONSUMER REPORTING AGENCIES. AND, INDEED, WE HAVE FOUND AND WE DID A SPECIAL REPORT ON THIS. A SUPERVISORY HIGHLIGHTS REPORT IN MARCH 2017 AND I PROBABLY WON'T GO INTO THE DETAILS HERE. BUT INDEED WE HAVE FOUND THAT THAT KIND OF OVERSIGHT AND THAT KIND OF ONGOING LOOK BY A REGULATOR TO SEE WHAT THEY WERE DOING TO PROACTIVELY TRY TO COMPLY WITH THE LAW HAS RESULTED IN THEM INCREASING THEIR QUALITY MANAGEMENT IN VARIOUS RESPECTS. AND SO THAT KIND OF OVERSIGHT, THAT KIND OF ASKING THE QUESTIONS AND EXPECTATION AND EVALUATION OF COMPLIANCE MANAGEMENT HAS MADE A DIFFERENCE. IT'S NOT THE COMPLETE OR TOTAL ANSWER, BUT WE THINK THAT HAS MADE A DIFFERENCE AND BEEN A GOOD START. IN ADDITION, IT'S NOT JUST THE CONSUMER REPORTING AGENCIES. THE BUREAU HAS BEEN ABLE TO LOOK HOLISTICALLY AT THE WHOLE SYSTEM. SO MANY OF THE INPUTS ARE AT ISSUE FOR THE CREDIT REPORTING ISSUE. THE BANKS AND NON-BANKS THAT FURNISH THE DATA TO THE CREDIT BUR ROWS. WE CAN LOOK AT THE LARGEST BANKS AND THEIR FURNISHING PRACTICES AND WHETHER THEY WERE COMPLYING, AS WELL AS THE KEY NON-BANKS. THAT WOULD BE MORTGAGE COMPANIES, CREDIT CARD ISSUE ERS, DEBT COLLECTERS. SO WE WERE ABLE TO LOOK AT DIFFERENT ASPECTS OF IT TO MAKE SURE WE'RE COVERING IT ALL. AND, INDEED, WE FOUND WITH MANY OF THE DEPOSITORY INSTITUTIONS, THEY HAD NOT REALLY PRIOR TIDES LOOKING AT COMPLIANCE WITH THEIR FURNISHING ACTIVITIES. THEY HADN'T REALLY BEEN OVERSEEN FOR THAT. THAT WAS A LITTLE COMPLIANCE BACK WATER AND WE PUT A SPOTLIGHT ON IT. WE FOUND VIOLATIONS. WE CITED THOSE VIOLATIONS. AND HAVE DIRECTED THEM TO IMPROVE THEIR COMPLIANCE. SO THAT'S JUST ONE EXAMPLE OF THE KINDS OF OBSERVATIONS WE'VE HAD AND THE DIFFERENCE THIS ONGOING OVERSIGHT MAKES IN MY VIEW AND IN MY EXPERIENCE. SO JUST A LITTLE BIT ABOUT THE TECHNOLOGY PICTURE TURNING TO THAT. SO AS I MENTIONED, MANY FINANCIAL INSTITUTIONS, MANY ENTITIES OF ALL TYPES INCREASINGLY USE TECHNOLOGY TO FACILITATE THEIR PROCESSES AND PROCEDURES AND IN THIS CASE COMPLIANCE. AND SO WE FOUND THAT SOME OF THAT IS REALLY FACILITATED BY SERVICE PROVIDERS. THAT SETUP COMPLIANCE SYSTEMS FOR ALL KINDS OF DIFFERENT ENTITIES. AND ONE KEY PROVISION THAT I THINK IS LITTLE KNOWN AND LITTLE UNDERSTOOD IN DODD-FRANK THAT WAS IN THERE IS THAT THE BUREAU HAS THE ABILITY TO GO LOOK AND DIRECTLY AT THE SERVICE WRITERS. AND THAT HAS BEEN, I THINK, VERY IMPORTANT IN THIS TECHNOLOGY AREA WHERE WE CAN GO KIND OF TO THE HEART OF WHO IS PROVIDING TECHNOLOGY TO MAYBE A NUMBER OF ENTITIES. AND IF THERE'S A ROOT CAUSE ISSUE, WE CAN DETECT IT AND ASSESS IT. AND, AGAIN, DIRECT THEM TO FIX IT. WE CAN ALSO JUST HAVE THE SAME EXPECTATIONS OVER THEM THAT I TALKED ABOUT WITH THE OTHER ENTITIES TO TRY TO ENSURE THAT THEY PROACTIVELY PAY ATTENTION TO ALL OF THE TECHNICAL DETAILS THAT MAY COME INTO PLAY. LET'S SAY REGULATION CHANGES. THERE NEEDS TO BE CHANGE MANAGEMENT PROPERLY EXECUTED AND TESTED. AND SO THAT'S BEEN AN IMPORTANT PART OF WHAT WE'VE DONE IN LOOKING AT THOSE TECHNOLOGY ISSUES. SO I THINK I'LL STOP THERE. ERIK. THANK YOU. NEXT WE'LL HEAR FROM NICK SMITH. HE'S THE SENIOR DEPUTY ATTORNEY GENERAL AND ASSISTANT DIRECTOR OF THE BUREAU OF CONSUMER PROTECTION OF THE PENNSYLVANIA OFFICE OF THE ATTORNEY GENERAL. THANKS, ERIK. THAT'S A MOUTHFUL, NICK. [ LAUGHING ] IT'S TOO LONG. AND THANK YOU, MICHAEL, FOR HAVING US HERE TODAY. THANK YOU FOR LETTING ME COME WORK FOR YOU AT TREASURY IN [ LAUGHING ] AND, PEGGY AND ERIK, THANK YOU FOR GIVING ME MY FIRST JOB. [ LAUGHING ] SO I STARTED AT TREASURY AND WORKED THERE WITH THESE GOOD FOLKS. AND THEN I WENT TO THE CFPB AND I WAS AN ENFORCEMENT ATTORNEY THERE. I WANTED TO MOVE BACK TO PITTSBURGH AND DID PRIVATE PRACTICE. FOR THE PAST YEAR AND A HALF, I'VE BEEN WITH ATTORNEY GENERAL RUNNING THE CONSUMER PROTECTION FINANCIAL UNIT. SOME REFER TO US AS A MINI CFPB. THAT WOULD BE LESS OF A MOUTHFUL THAN MY OFFICIAL TITLE. BUT I REALLY ENJOY THE WORK AT THE STATE LEVEL. AND TODAY I'M GOING TO TALK ABOUT TWO THINGS. ONE IS SORT OF WHAT STATE AGENCIES ARE DOING TO FILL THE GAP WITH THE FEDERAL AGENCIES PERHAPS DOING LESS IN TERMS OF CONSUMER PROTECTION. AND THEN, SECOND, I WANT TO TALK ABOUT WHAT WE DID WHEN I WAS AT THE BUREAU THAT INVOLVED TECHNOLOGY AND CHANGING TECHNOLOGY. SO I GUESS I'LL START WITH THE FIRST THING, WHICH IS THE U.S. BANK CASE AT THE CFPB. THIS TIES IN NICELY WITH WHAT PEGGY JUST TOLD YOU ABOUT EXAMS. BECAUSE BACK IN THE EARLY DAYS OF THE CFPB IN RICH'S TENURE, WE ACTUALLY ASSIGNED ATTORNEYS TO GO OUT ON EXAMS AND PROVIDE EXAM SUPPORT. AND THE OFFICIAL PURPOSE OF THAT WAS TO GIVE ENFORCEMENT ATTORNEYS EXPERIENCE LEARNING ABOUT THE EXAM PROCESS. AND I THINK IT WAS A REALLY, REALLY GREAT THING. THE ENTITIES HATED IT. AND THE INDUSTRY REBELLED AND RICH PROBABLY DIDN'T HEAR ABOUT ANYTHING MORE THAN THAT FOR ABOUT SIX MONTHS. AND SO FINALLY THE BUREAU DECIDED NOT TO SET ENFORCEMENT ATTORNEYS OUT ON EXAMS ANYMORE. BUT I HAD THE GOOD FORTUNE OF BEING ASSIGNED TO AN EXAM OF U.S. BANK, WHICH IS A SPECIAL REVIEW TO LOOK AT THIS PROGRAM CALLED THE U.S. MILD PROGRAM. AND IT ENDED UP BECOMING AN ENFORCEMENT ACTION, WHICH IS WHY I CAN TALK ABOUT IT WITH YOU TODAY. OTHERWISE EXAMS ARE TOTALLY CONFIDENTIAL. BUT IT WAS A PROGRAM THAT WAS DESIGNED FOR ENLISTED SERVICE MEMBERS. IT WAS CALLED MILES. AND TO THE BANK'S CREDIT, I DON'T WANT TO GIVE THEM TOO BAD OF A NAME, IT WAS ACTUALLY A PROGRAM SET UP BY ANOTHER BANK WHICH THEY HAD ACQUIRED. AND IT WAS ONE OF THOSE EXAMPLES OF A SITUATION WHERE THESE BIG BANKS WERE GOBBLING UP LOTS OF BIG BANKS AND NOT NECESSARILY PAYING ATTENTION TO WHAT WAS GOING ON. SO THIS PROGRAM WAS A SUB-PRIME AUTO LOAN. VERY HIGH INTEREST RATES. THEY HAD ABOUT 50,000 CUSTOMERS OVER THE COURSE OF ABOUT A DECADE. AND WE LOOKED AT IT BECAUSE WE GOT A COMPLAINT. AND THERE'S A VIDEO PROBABLY ON THE CFPB'S WEBSITE FROM A FATHER OF A SOLDIER. AND HIS FATHER WROTE INTO THE CFPB AND SAID, YOU KNOW, MY SON IS SPENDING BASICALLY ALL OF HIS AFTER TAX INCOME ON THIS CAR LOAN. HE HAD A $500 PAYMENT, I THINK, MONTHLY AND IT WAS LIKE, YOU KNOW, BRAND NEW PICKUP TRUCK, OF COURSE. AND THEN HE WAS SPENDING 2 OR $ $300 ON INSURANCE. THE REST ON GAS. THE WHOLE TAKE ON PAY WAS 1100 CLARS. HE DIDN'T REALLY HAVE MUCH MONEY TO SPEND OTHER THAN THE TRUCK. SO WE'VE LOOKED INTO THE PROGRAM AND THE ISSUE THAT WE FOUND ACTUALLY HAD TO DO WITH AN ALLOTMENT PROGRAM. AND ALLOTMENTS ARE A MEANS OF PAYMENT THAT THE MILITARY SET UP BASICALLY BEFORE THE TIME OF ONLINE BANKING, CONSUMERS NEEDED TO BE ABLE TO -- WHEN THEY WERE DEPLOYED AT WAR, THEY NEEDED TO BE ABLE TO MAKE SURE THEIR BILLS GOT PAID. AND SO SERVICE MEMBERS COULD DIRECT THE DOD OFFICE TO PAY THEIR MORTGAGE. YOU KNOW, THEIR FINANCING FOR THEIR HORSE AND BUGGY. [ LAUGHING ] YOU KNOW, THEIR MOTHER -- LIKE WHOEVER THEY WANTED TO SEND PAYMENTS TO. AND THIS SYSTEM EXISTED FOR A LONG TIME AND WORKED FINE. BUT FLASH FORWARD TO THE 2000s WHERE EVERYONE IS REQUIRED TO HAVE A BANK ACCOUNT. THIS ALLOTMENT SYSTEM WAS OBSOLETE AND REALLY NOT NECESSARY ANYMORE. BUT THERE WAS A WHOLE INDUSTRY AROUND MILITARY BASES THAT HAD CROPPED UP THAT FIGURED OUT THAT IF THEY REQUIRED SERVICE MEMBERS TO PAY VIA ALLOTMENT, THEY WOULD BASICALLY ELIMINATE ANY RISK THAT THEY WOULD NOT GET PAID. BECAUSE THEY WOULD GET PAID STRAIGHT OUT OF THE PAYCHECK. AND EVEN THOUGH A SERVICE MEMBER COULD TURN OFF THE ALLOTMENT, THERE'S A REAL EMPHASIS FOR JUNIOR ENLISTED ON PAYING YOUR BILLS AND NOT FALLING BEHIND. AND YOU CAN LOSE YOUR SECURITY CLEARANCE IF YOU GET A BAG THING ON YOUR CREDIT REPORT. SO THERE ARE STILL TODAY A LOT OF SHADY LENDERS AND CREDITORS OUTSIDE MILITARY BASES. BUT BEFORE OUR CASE, THEY ALL REQUIRED PAYMENT BY ALLOTMENT. AND IT MADE IT MUCH EASIER FOR THEM TO PREY ON SERVICE MEMBERS. U.S. BANKS MILES PROGRAM DID THE SAME THING. YOU WERE EXPECTED AND REQUIRED TO PAY WITH AN ALLOTMENT. AND THE PROBLEM THAT WE FOUND THAT U.S. BANK WAS DOING WAS THEY HAD A THIRD PARTY SERVICE PROVIDER THAT WAS PROCESSING AND SETTING UP THE ALLOTMENTS AND CHARGING SERVICE MEMBERS $3.50 MONTHLY FEE FOR THAT SERVICE. THEY WERE NOT DISCLOSING THAT FEE AS PART OF THE TRUTH AND LENDING ACT DISCLOSURE. WITHOUT GETTING INTO TOO MUCH TECHNICAL DETAIL, BASICALLY THIS WAS AN EXTRA $200 OVER THE COURSE OF THE AUTO LOAN THAT SERVICE MEMBERS WERE NOT BEING TOLD ABOUT UP FRONT AS PART OF THE COST OF THE LOAN. AND THAT WAS A VIOLATION OF TELA. SO THAT WAS ONE OF THE FINDINGS. WE ALSO HAD SOME DECEPTIVE MARKETING OF ADD-ON PRODUCTS. THEY HAD EXTENDED WARRANTY BASICALLY THEY WERE SELLING AND ALSO GAP INSURANCE. AND THEIR CALL CENTER IN KENTUCKY WAS CALLING PEOPLE AND TELLING THEM IT'S JUST PENNIES A DAY TO HAVE THIS EXTRA PRODUCT AND YOU MIGHT AS WELL BUY IT. IN FACT, IT WAS LESS THAN PENNIES A DAY. $0.40 A DAY WHICH IS SIGNIFICANTLY MORE THAN PENNIES. SO WE FOUND THAT WAS A DECEPTIVE PRACTICE. AND WE ENDED UPTAKING TWO CONSENT ORDERS. ONE WITH THE U.S. BANK. I THINK THEY PAID ABOUT $3.5 MILLION BACK TO SERVICE MEMBERS. AND THEN ANOTHER ONE WITH DEALERS FINANCIAL SERVICES, WHICH IS THE NON-BANK MARKETING PARTNER THAT HAD THE CALL CENTER IN KENTUCKY. AND WE REQUIRED THEM TO GIVE, YOU KNOW, $7 MILLION IN TOTAL BACK TO SERVICE MEMBERS, INCLUDING THE ONE WHOSE FATHER HAD COMPLAINED TO US IN THE EARLY DAYS. IS THAT ON THE COMPLAINT DATA BASE? IT IS, YES. IT'S PROBABLY IN THE COMPLAINT DATABASE. SERVED A PURPOSE. LIKE I SAID, THERE'S A GREAT VIDEO. I THINK HIS NAME IS RE. THERE'S A VIDEO OF THE FATHER AND THE SON THAT THE CFPB MADE AND I THINK ELIZABETH WARREN MADE A VIDEO TOO. BUT ANYWAY, THE REASON I MENTION THIS CASE IS BECAUSE WE DIDN'T JUST STOP THERE WITH THE SETTLEMENT AND REQUIRING THEM TO GIVE THE MONEY BACK. I WORKED WITH HOLLY IN THE EARLY DAYS OF THE BUREAU AND SHE LED THE OFFICE OF SERVICE AFFAIRS. OF COURSE, SHE WAS VERY INTERESTED IN THIS CASE, AND WE KEPT HER TEAM APPRISED AS IT WAS MOVING ALONG. AND AFTERWARDS WHEN WE ANNOUNCED THE SETTLEMENTS, SHE USED THAT TO GO TO THE PENTAGON AND SAY, HEY, LOOK AT THIS ALLOTMENT PROGRAM. THIS SERVICE MEMBER WAS -- HAD TO PAY AN EXTRA $200 BECAUSE OF THIS ALLOTMENT PROGRAM. AND YOU'VE GOT ALL OF THESE SHADY LENDERS AROUND BASES THAT ARE TAKING ADVANTAGE OF THE ALLOTMENT PROGRAM. YOU SHOULD REALLY TAKE A HARD LOOK AT ALLOTMENTS AND THINK ABOUT IF IT'S STILL WORTH HAVING. AND SO THE PENTAGON SET UP A WORKING GROUP. I WAS THE POLICY LEAD FOR THE CFPB AND WE HAD HOLLY AND SETH ON HER TEAM. AND ALONG -- TO MAKE A LONG STORY SHORT, IT TOOK MANY MEETINGS, WE WE CONVINCED THE PENTAGON TO BAN THESE FOR CONSUMER CREDIT. THEY STILL EXIST FOR PAYING RENT. I THINK YOU CAN STILL PAY YOUR MORTGAGE THROUGH AN ALLOTMENT. BUT YOU CAN'T MAKE -- PAY A CAR LOAN OR PURCHASE ANY JEWELRY OR OTHER PRODUCT OUTSIDE OF A MILITARY BASE AND REPAY ALLOTMENT. SO THAT WAS, I THINK, A GOOD EXAMPLE OF THE CFPB EMBRACING INNOVATION BACK UNDER CORDRAY. I KNOW NOW THE CFPB IS MAKING A NEW PUSH WITH A SAND BOX AND OTHER THINGS THAT THEY CLAIM WILL HELP CONSUMER FRIENDLY INNOVATION. MAYBE WE'LL TALK ABOUT THEM LATER. BUT I THINK IT'S IMPORTANT TO POINT OUT THAT THE CFPB HAS ALWAYS BEEN IN FAVOR OF INNOVATION IN FAVOR OF THE CONSUMER. AND IN THIS CASE WE SAID HERE'S THIS OLD SYSTEM NOT GOOD FOR CONSUMERS. LET'S DO AWAY WITH IT AND ENCOURAGE PEOPLE TO USE THE FREE BILL PAY AND ONLINE BANKING THAT IS MUCH BETTER FOR THEM THAN THE OLD SYSTEM. SO I WANT TO SHIFT TO STATE AGENCIES FILLING THE GAP. A LOT OF PEOPLE ARE WRITING ARTICLES ABOUT HOW STATE AGENCIES ARE BEEFING UP CONSUMER FINANCIAL PROTECTION EFFORTS. AND IT'S TRUE. WE ARE. I THINK THE CFPB IS IRREPLACEABLE AND STILL DOING INCREDIBLY IMPORTANT WORK AND I WAS HAPPY TO HEAR FROM PEGGY THIS MORNING THAT MUCH OF THE EXAM WORK IS STILL GOING ON AND STRONG. AND, I MEAN, THE AGs CANNOT REPLACE THE CFPB. BUT WHAT WE CAN DO IS WE CAN BE ON THE CUTTING EDGE, I THINK, TAKE ON THE CASES THAT MAY BE ONES THAT THE NEW DIRECTOR IS NOT WILLING TO TAKE ON AND NOT WILLING TO BRING. AND WE HAVE SEEN THAT A NUMBER OF UNFORTUNATE ACCIDENTS HAVE DROPPED DRAMATICALLY SINCE ACTING DIRECTOR MULVANE TOOK OVER. SO A COUPLE THINGS WE'RE WORKING ON. ONE IS THE LAWSUIT. THAT IS ONE WHERE THE CFPB HAS AN OUTSTANDING CASE AGAINST NAVIANT THEY FILED IN 2017. THERE ARE ALSO FIVE STATE AG LAWSUITS AGAINST NAVIANT. I THINK THAT'S A GOOD EXAMPLE THAT THE CFPB IS DOING GOOD WORK. THEIR CASE IS STILL MOVING IT. THEY'RE LITIGATING IT REALLY HARD AGAINST THE LAWYERS ON THE OTHER SIDE. THEY'RE DOING GREAT WORK ON DISCOVERY. AND THEY'RE A GOOD PARTNER TO THE STATES. AND I WANT TO RECOGNIZE THAT. AT THE SAME TIME, THE STATES ARE WORKING VERY HARD AS WELL ON OUR OWN LAWSUITS BECAUSE WE RECOGNIZE THAT THE CFPB LAWSUIT, SOMETHING COULD HAPPEN TO IT. I MEAN, THERE HAS BEEN PUBLISHING SPECULATION IN THE -- PUBLIC SPECULATION IN THE MEDIA ABOUT THE MEETINGS WITH NAVIATN. SO WE ARE HOPEFUL THAT THE CFPB WILL KEEP UP GOOD WORK ON THAT CASE, BUT WE'RE NOT COUNTING OUR CHICKENS. AND WE'RE PURSUING OUR LAWSUITS AS THOUGH THEY'RE THE ONLY ONES OUT THERE AND WE NEED TO DO THAT. SO THAT'S AN EXCITING CASE. I'M HAPPY TO TALK MORE ABOUT THE SUBSTANTIVE ALLEGATIONS THERE. THERE'S ALSO EQUI FAX. EVERYONE KNOWS THERE'S A BREACH THAT THEY'RE WORKING ON. THAT'S AN EXCITING ONE. AND I THINK I'LL JUST EXPLAIN WHAT A MULTI-STATE IS, BECAUSE SOME PEOPLE MAY NOT KNOW. BACK IN THE 90s, STATE AGs STARTED WORKING TOGETHER IN A VERY FORMAL WAY TO INVESTIGATE THE TOBACCO COMPANIES. AND THEY INSTITUTIONALIZED THIS PROCESS OF ACTUALLY BANNING TOGETHER AND SHARING RESOURCES AND SIGNING COMMON INTEREST AGREEMENTS. AND IT'S BECOME A REALLY POWERFUL WAY FOR AGs TO DO WORK AGAINST THESE BIG NATIONAL ENTITIES. AND IT'S PARTICULARLY HELPFUL FOR SMALLER AG OFFICES WHERE THEY MAY ONLY HAVE FIVE PEOPLE IN CONSUMER PROTECTION FOR THE WHOLE STATE. SO EQUI FAX IS AN EXAMPLE OF THAT WHERE, OF COURSE, IS STATE IS INTERESTED IN THAT CASE. ANOTHER GOOD EXAMPLE OF THAT WAS WELLS FARGO. WE ANNOUNCED THE SETTLEMENT IN DECEMBER OF 2018. $550 MILLION WAS PAID TO THE STATES. AND THIS STEMMED FROM THE CASES OF THE ACCOUNTS -- THE UNNECESSARY ACCOUNTS THAT PEOPLE CREATED AND ALSO THE FORCED-PLACE AUTO INSURANCE. THAT WAS A CASE WHERE THE CFPB HAD DONE ITS OWN ACTIONS. THEY SETTLED ONE IN APRIL OF AND WE TOOK A LOOK AT THAT AND WE THOUGHT WE NEED TO DO OUR OWN. THERE'S MORE TO BE DONE THERE. AND THE PUBLIC SETTLEMENT INCLUDES SOME FINDINGS THAT WENT BEYOND WHAT THE CFPB FOUND. AND IT WAS A GOOD EXAMPLE, I THINK, OF WELLS FARGO REALIZING LIKE, OKAY, THE AGs, THEY'RE GOING TO HOLD OUR FEET TO THE FIRE. AND THERE'S A LOT I CAN'T TALK ABOUT THAT'S CONFIDENTIAL THERE. BUT SUFFICE IT TO SAY THAT I THINK THE AG'S INVOLVEMENT WAS VERY HELPFUL IN THAT MATTER. ANOTHER CASE THAT I WANT TO MENTION THAT'S JUST A SMALLER ONE BUT WHICH IS A FUN ONE IS THE DOMINION CASH POINT CASE. SO THIS IS AN EXAMPLE OF WHERE STATE AGs TRIED TO STOP SOME OF THE CROSS BORDER STUFF THAT GOES ON. IN PENNSYLVANIA, WE HAVE A USE RE LIMIT, LIKE MANY STATES. SO PAY DAY LENDING IS ILLEGAL IN PENNSYLVANIA. THERE'S A COMPANY CALLED DOMINION CASH POINT BASED IN DELAWARE AND MAKING TITLE LOANS TO CONSUMERS FROM PENNSYLVANIA. THEY WERE ADVERTISING IN PENNSYLVANIA. THEY HAD A WEBSITE DIRECTED TOWARDS PENNSYLVANIA BORROWERS WITH PA IN THE URL. [ LAUGHING ] AND THEY ENCOURAGED PENNSYLVANIIANS TO DRIVE ACROSS THE BORDER TO DELAWARE AND TAKE OUT A TITLE LOAN. THE COMPANY HAS GONE OUT OF BUSINESS. BUT WE SUED THEM BECAUSE THEY TOOK $5 MILLION FROM PENNSYLVANIA BORROWERS. AND WE WANT THEM TO PAY BACK THE LEGAL INTEREST PORTION OF THAT, WHICH IS ABOUT $3 MILLION. SO THIS WAS MY FIRST STATE COURT CASE. I ONLY GOT TO WORK ON FEDERAL CASES AT THE BUREAU. AND NAVIANT IS ALSO FILED IN FEDERAL COURT. I GOT TO LEARN ABOUT THE PROCEDURES OF THE PHILADELPHIA COURT SYSTEM. AND FORTUNATELY I HAVE GOOD LAWYERS IN OUR PHILLY OFFICE TO TUTOR ME ALONG THE WAY. I'M CONSTANTLY BUGGING THEM ABOUT HOW THAT WORKS. BUT, YOU KNOW, THIS IS A CASE WHERE THE OWNERS TOOK ALL THIS MONEY FROM CONSUMERS. THEY'VE NOW SCROLLED IT AWAY IN TRUSTS. AND THEY'RE TRYING TO KEEP IT AWAY FROM OUR HANDS. AND WE REALIZED THAT THEY JUST WEREN'T GOING TO GIVE US THE MONEY UNLESS WE SUED THEM. AND SO NOW WE'RE IN DISCOVERY IN THAT CASE. IT'S A VERY FAST TIMELINE. I THINK SCHEDULED FOR TRIAL LIKE LATER THIS YEAR. SO THAT'S AN EXAMPLE OF THE KIND OF THINGS AGs CAN DO AND HAVE TO DO. WHERE YOU MIGHT NOT SEE THE CFPB SUING SUCH A SMALL COMPANY, ALTHOUGH SOME OF THE RESPITE ACTIONS WERE AGAINST PRETTY SMALL COMPANIES. BUT THE AGs, WE HAVE TO TAKE ON PEOPLE AT ALL DIFFERENT LEVELS. FROM THE BIGGEST WELLS FARGO TO THE REALLY SMALLER ONES. AND DOMINION IS NOT EVEN THE SMALLEST. WE DO HOME IMPROVEMENT CONTRACTOR CASES WHERE THERE'S TEN PEOPLE THAT GOT BAD PLUMBING LINES PUT IN THEIR BASEMENT. I DON'T WORK ON THOSE CASES. I ONLY DO CONSUMER FINANCE. BUT THAT'S WHAT THE AG CONSUMER PROTECTION OFFICES HAVE TO DO. SO I GUESS I JUST WANT TO -- I JUST WANT TO CLOSE BY EMPHASIZING WHAT I SAID BEFORE, WHICH IS WE CAN'T REPLACE THE CFPB. BUT WE'RE DOING OUR BEST. WE'RE SHIFTING RESOURCES AWAY FROM THE PLUMBERS AND TOWARDS THE WELLS FARGOS. [ LAUGHING ] AND WE'RE GOING TO CONTINUE TO DO THAT. I KNOW OTHER STATES ARE DOING THE SAME THING. I'M GOING OUT TO NEW JERSEY TO HELP TALK TO THEM ABOUT WHAT THEY CAN DO, WHAT THEY'VE GOT SOME NEW FOLKS THERE AND THEY'RE REALLY EXCITED TO DO MORE IN CONSUMER FINANCE. I'M GOING TO VISIT WITH THE MICHIGAN AG'S OFFICE IN THE COMING MONTHS. THE NEW AG HERE. SO, YOU KNOW, I THINK THERE'S INTEREST ALL OVER THE COUNTRY IN TERMS OF DOING MORE IN CONSUMER FINANCIAL PROTECTION. AND AS LONG AS WE KEEP WORKING HARD, I THINK WE CAN SURVIVE THE NEXT TWO TO FOUR YEARS UNTIL WE HAVE A NEW DIRECTOR OF THE CFPB. THANKS, NICK. LISA DONNER IS NEXT. SHE'S THE EXECUTIVE DIRECTOR OF THE AMERICANS FOR FINANCIAL REFORM. THANKS, ERIK. I SHOULD TURN THIS ON. AND THANKS, MICHAEL, FOR INVITING ME. MAYBE I SHOULD START BY SAYING IT'S -- THERE ARE A LOT OF PEOPLE IN THIS ROOM WHO PLAYED A HUGE ROLE FROM THE INSIDE IN BUILDING THE CONSUMER BUREAU AT DIFFERENT STAGES OF ITS LIFE. I FEEL LIKE WE AT OUR PARTNERS PLAYED A ROLE FROM THE OUTSIDE. BUT MAYBE THAT MAKES IT EASIER FOR ME TO SAY AS A FRAMING DEVICE THAT THOUGH WE CLEARLY ARE FACING A BUNCH OF CHALLENGES RIGHT NOW WITH THE CHANGE IN LEADER SHIP OF THE BUREAU, I DO THINK IT'S REALLY IMPORTANT TO TAKE A MOMENT AND CELEBRATE ACTUALLY WHAT A HUGE SUCCESS THE BUREAU HAS BEEN. AND WHAT A DIFFERENCE IT HAS MADE IN CONSUMER PROTECTION. WHAT A DIFFERENCE IT HAS MADE IN CHANGING THE RULES AND CHANGING THE EXTENT TO WHICH INSTITUTIONS FEEL LIKE THEY HAVE TO FOLLOW THE RULES. AND WHAT A DIFFERENCE IS MADE IN ACTUALLY LEADING US DESPITE THE CHALLENGES OF THIS MOMENT IN A STRONGER POSITION, I THINK, TO KEEP DOING BETTER THAN THAT. BOTH ON CONSUMER REGULATION AND FRANKLY ON FINANCIAL REGULATION BEYOND THAT. SO I DO -- I DO THINK THAT'S WORTH CELEBRATING AND IMPORTANT TO CELEBRATE. AND I DON'T SAY THAT AT ALL TO SAY, YOU KNOW, OUR WORK IS DONE. I THINK EVEN APART FROM THE CHALLENGES OF THE MOMENT, FIRST I THINK ONE OF THE REALLY IMPORTANT LESSONS OF THE HISTORY OF THE BUREAU AND THE FIGHTS AROUND IT, WE NEED TO SET THE BAR HIGHER IN TERMS OF WHAT WE EXPECT AND DEMAND ON CONSUMER FINANCIAL REGULATION AND OUTCOMES FOR PEOPLE AND ON FINANCIAL REGULATION GENERALLY. AND SO WE SHOULD BE SATISFIED FOR THAT REASON. AND THEN ALSO WE TALKED A LITTLE ABOUT WEALTH HERE. BUT THINKING ABOUT AN INSTITUTION LIKE THAT WHERE ON THE ONE HAND THERE'S BEEN SOME GOOD REGULATORY WORK AND SOME GOOD KIND OF SPEAKING OUT FROM BELOW ON THE PART OF THE WORKERS. AND SOME CHANGES HAVE BEEN FORCED. AND YET WE HAVE THIS GIANT INSTITUTION WHERE EVERY TIME YOU LOOK, THERE IS ANOTHER ROUND OF REALLY TROUBLING ABUSES IN A DIFFERENT PART OF THE BUSINESS. AND SO CLEARLY WE HAVEN'T SOLVED THE PROBLEM OF MAKING FUNDAMENTAL CHANGE AT AN INSTITUTION LIKE THAT THAT TOUCHES SO MANY LIVES. ALL RIGHT. SO FIRST A COUPLE COMMENTS ON WHAT WORKS. AND THEN -- OR SOME CONTRIBUTIONS TO THE DISCUSSION OF WHAT WORKED. THEN ON SOME OF THE FRIGHTENING THINGS HAPPENING AT THE MOMENT. AND THEN A LITTLE ON WHAT NEXT. YOU KNOW, SAVING THE OBVIOUS TO AN AUDIENCE THAT KNOWS THIS WELL, BUT THE BUREAU IN THE FIRST PHASE OF ITS LIFE DID WHAT IT WAS SUPPOSED TO DO, RIGHT? IT USED THE SET OF TOOLS THAT IT WAS GIVEN AND THE SORT OF STRUCTURAL FEATURES BAKED INTO IT TO PURSUE ITS MISSION. AND THAT ADDED UP TO A SIGNIFICANT IMPACT, INCLUDING THE $12 BILLION IN CONSUMER WE LEAF TALK ABOUT ALL OF THE TIME. IT GOT CHANGED BY THE ENFORCEMENT ACTION. IT WASN'T JUST THE $12 MILLION TO THOSE PEOPLE. AND INCLUDE SIGNIFICANT RULE MAKINGS THAT STOPPED MAJOR HARM THAT WAS AT THE LENDING CRISIS AND SET GUARD RAILS FOR SORT OF MORE EMERGING PRODUCTS AND MARKETS LIKE IN THE PREPAID SPACE. INCREDIBLY IMPORTANT. AND I THINK, YOU KNOW, ERIK TALKED A LITTLE BIT ABOUT THE SORT OF STRUCTURAL FEATURES AND THE DESIGN OF THE BUREAU, AND MIKE IS GOING TO TALK A LITTLE BIT MORE ABOUT SOME PARTICULAR RULES AND MARKET CHANGES AS EXAMPLES OF THIS. SO I WANTED TO TALK A SECOND ABOUT MORE OF SORT OF THE CHOICES, PROCESS AND STRUCTURAL CHOICES THAT THE BUREAU MADE THAT HELPED ENABLE THE -- SOME OF THOSE SUCCESSES. AND I THINK ARE USEFUL LESSONS FOR EFFECTIVE REGULATION. AND I THINK WE SHOULD SPEND THE TIME TO TALK MORE TO THE PEOPLE WHO KNOW THIS STUFF MUCH BETTER THAN ME. THE PEOPLE ON THE INSIDE TO THINK THROUGH SOME OF THESE LESSONS AS WELL. I THINK THE FOCUS ON BEING CONSUMER FACING AND TREATING CONSUMERS AS THE AGENCIES CONSTITUENCY AND BUILDING STRUCTURES AND PROCESSES TO MAINTAIN THAT MISSION FOCUS ARE INCREDIBLY IMPORTANT. YOU KNOW, SO FAILURES AND ERIK TALKED ABOUT THIS IN THE BANK REGULATORY WORLD. WE'RE PARTIALLY ABOUT MISSION. NOT HAVING A CONSUMER PROTECTION MISSION UNIQUELY. BUT NOT ONLY THE SEC HAS A VERY SUBSTANTIAL CONSUMER PROTECTION MISSION THAT IT HAS OFTEN FAILED TO PAY ATTENTION. AND MINDING SAFETY AND SOUNDNESS OUGHT TO BE NOT JUST ABOUT MINDING IT FROM THE PERSPECTIVE OF EACH INDIVIDUAL INSTITUTION, BUT FROM THE PERSPECTIVE OF THE SYSTEM AND THE PUBLIC WHICH IS DIFFERENT -- A DIFFERENT PERSPECTIVE ON SAFETY AND SOUNDNESS. AND THERE ARE A BUNCH OF STRUCTURAL FORCES THAT MOVE FINANCIAL REGULATORS AWAY FROM A PUBLIC INTEREST FORCES, INCLUDING JUST THE POWER AND THE MONEY OF THE BANKS. AND THEN ALL OF THE LITTLE WAYS THAT THAT'S MANIFEST. EVEN WHEN WE, SORT OF THE CONSUMER ADVOCACY COMMUNITY, ARE ACTIVE AND ENGAGED. THERE'S NOT AS MANY OF US. WE'RE NOT GOING TO HAVE A FRACTION OF THE MEETINGS WITH A FRIENDLY REGULATOR THAT INDUSTRY DOES. THERE'S ALL KINDS OF DATA THAT THEY HAVE THAT WE DON'T HAVE. SO THERE'S NO WAY TO UNDERSTAND THOSE THINGS UNLESS A REGULATOR IS TAKING THAT RESPONSIBILITY AND SERVING THE PUBLIC AND DOING IT. SO I THINK, FOR EXAMPLE, THE CHOICE TO NOT JUST -- THE COMPLAINT DATABASE WAS A STATUTORY REQUIREMENT. BUT MAKING IT PUBLIC WAS A CHOICE. AND THEN TAKING THE NEXT STEP TO MAKE THE NARRATIVES PUBLIC WAS A CHOICE. AND ALL THOSE THINGS, I THINK, KIND OF LOCK IN A VIRTUOUS CYCLE THAT DATABASE IS MORE ATTRACTIVE TO PEOPLE IF THEY CAN LEARN SOMETHING FROM IT, AS WELL AS USE IT, AND IT'S CERTAINLY MORE EFFECTIVE IN SHAPING BANK ACTIONS IF PEOPLE KNOW THEY'RE GOING TO SEE WHAT THEY DID OR DIDN'T DO. AND YOU HEAR FROM ALL KINDS OF PEOPLE, INCLUDING PEOPLE WHO TALK TO INDUSTRY ABOUT WHAT THEIR RESPONSE HAS BEEN. OR ATTORNEYS WHO IT'S SORT OF FUNNY FOR A LAWYER WHO HAS ALL OF THOSE TOOLS TO, YOU KNOW, SAY, YEAH, BUT ACTUALLY WE GET BETTER RESULTS SOMETIMES. WHEN MY CLIENT FILES A COMPLAINT BECAUSE THEY KNOW IT'S GOING TO BE SEEN. THEN THROUGH MONTHS OF LITIGATION. DOING THINGS LIKE HOLDING PUBLIC HEARINGS AROUND THE COUNTRY TO TALK ABOUT SUBSTANTIVE ISSUES AND HEAR FROM PEOPLE. DOING THINGS LIKE PUBLISHING SUPERVISORY HIGHLIGHTS. BECAUSE EACH INDIVIDUAL SUPERVISORY PROCESS IS PRIVATE. BUT TELLING THE PUBLIC WHAT IS HAPPENING IN THOSE EXAMS I THINK IS INCREDIBLY IMPORTANT AND GIVES YOU A SENSE OF WHAT THE AGENCY IS DOING AND HOW YOU MIGHT AFFECT CHANGE. YOU KNOW, CERTAINLY WE SAID TO LOTS OF OTHER AGENCIES LIKE YOU COULD DO SOMETHING LIKE THAT. YOU COULD TELL US WHAT YOU'RE SEEING AND IT WOULD MAKE A DIFFERENCE. I THINK USING ENFORCEMENT ACTIONS TO BOTH MAKE SURE YOU'RE GETTING MONEY BACK FOR PEOPLE IN MEANINGFUL WAYS AND TO CHANGE CONDUCT AND EDUCATE BOTH THE PUBLIC AND INSTITUTIONS ABOUT WHAT THE LAW IS AND THE EXPECTATION THAT IT WILL BE FOLLOWED. WILLINGNESS TO GO AFTER BIG AND SOMETIMES SMALL ACTORS WHEN THEY'RE DOING EXOTIC THINGS. JUST BECAUSE THE PRACTICE WAS WIDESPREAD. NOT THAT MEANS YOU HAVE TO LET IT GO. AND USING RESEARCH AND REPORTS REALLY EFFECTIVELY. BOTH TO INFORM RULE WRITING AND TO SHAPE THE CONVERSATION AND EXPOSE PROBLEMS AS FOR AN EXAMPLE WAS DONE ON A STUDENT LOAN. SO THAT'S SORT OF A PIECE OF THE GOOD NEWS. IN TERMS OF WHERE WE ARE NOW, FIRST I THINK IT'S TRUE AT THE SAME TIME THAT THOUGH THE FOLKS IN CHARGE I THINK ESSENTIALLY DON'T BELIEVE THE BUREAU SHOULD EXIST AND DON'T AGREE WITH THE MISSION, THEY CAN'T JUST WISH IT AWAY. RIGHT. THERE'S INSTITUTION THERE AND THEY CAN'T MAKE IT GO AWAY. THAT'S A GOOD THING. THAT DOESN'T MEAN THEY CAN'T DO A BUNCH OF HARM. SO I'M GOING TO TALK ABOUT A COUPLE OF THE PIECES OF WHAT WE ARE MOST WORRIED ABOUT THAT IS HAPPENING RIGHT NOW. ONE PIECE IS A REAL CHANGE IN THE APPROACH TO ENFORCEMENT. AND OBVIOUSLY WE CAN'T SEE A BUNCH OF THAT BECAUSE YOU CAN'T SEE WHAT DOESN'T HAPPEN. OR YOU CAN'T SEE THE DETAILS OF WHAT DOESN'T HAPPEN. BUT YOU CAN SEE SOME NUMBERS ABOUT WHAT DOESN'T HAPPEN. AND OUR COLLEAGUE CHRIS PETERSON DID AN EXHAUSTIVE ACCOUNTING IN THE LAST COUPLE OF WEEKS OF ENFORCEMENT ACTIONS BEFORE AND AFTER THE CHANGE IN LEADERSHIP. AND IN THE PEAK ENFORCEMENT YEAR, WHICH WAS 2015, THERE WERE LAST YEAR THERE WERE 11. THE AVERAGE RECOVERY OR MONEY BACK FOR CONSUMERS IN THOSE CASES WAS CLOSE TO 57 MILLION PER CASE. THIS IS NOT QUITE A FAIR NUMBER. BUT 2.4 MILLION FOR THOSE CASES. SO ABOUT 43 MILLION IN RESTITUTION FOR EACH WEEK OF THE TENURE. THERE WAS A BUNCH OF LEGACY CASES. BUT 925,000 A WEEK UNDER THE PRESENT DIRECTOR. NONE. DISCRIMINATION OF ONE KIND OR ANOTHER VERSUS NONE. SO THAT'S A BIG CHANGE. THE UNDERMINING OF THE OFFICE OF FAIR LENDING AND EQUAL OPPORTUNITY BY STRIPPING OF IT AND REPURPOSING IT TO ADVOCACY COORDINATION AND EDUCATION RATHER THAN DEMANDING COMPLIANCE WITH THE LAW. CLOSING THE OFFICE FOR STUDENTS AND YOUNG CONSUMERS AND SORT OF REASSIGNING THAT STAFF TO SERVE WITHIN THE OFFICE OF FINANCIAL EDUCATION. AND THEN TURNING AROUND THE RULE MAKING AGENDA SO THAT INSTEAD OF A FOCUS ON CONSUMER PROTECTION RULES, A LOT OF THE RULE MAKING ENERGY HAS BEEN FOCUSED ON SORT OF REVERSING CONSUMER PROTECTION, INCLUDING NOTABLY OBVIOUSLY IN THE THINGS NOT DONE, TAKING AN OVERDRAFT RULE OFF THE AGENDA OF THINGS TO DO. TAKING THE SMALL BUSINESS DATA COLLECTION RULE OFF THE AGENDA OF THINGS TO DO. ROLLING BACK -- PROPOSING TO ROLL BACK THE PAY DAY RULE. AND PUTTING OUT FOR PROPOSAL THIS SAND BOX PROPOSAL THAT NICK REFERRED TO, WHICH WE THINK IS AN INCREDIBLY DANGEROUS PROPOSAL THAT IF IT GOES FORWARD AS IT WAS WRITTEN, IT ESSENTIALLY WOULD ALLOW INDIVIDUAL EMPLOYEES WITHOUT -- IN 60 DAYS, AGENCIES GIVING THEMSELVES 60 DAYS TO RESPOND TO REQUESTS FOR SWEEPING EXEMPTIONS AND EXCEPTIONS WITH NO PUBLIC INPUT AND VERY LITTLE VISIBILITY. NO REQUIREMENT THAT THE COMPANY NOT CURRENTLY BE FACING LITIGATION OR ENFORCEMENT ACTIONS. THEY'RE WILLING TO ACCEPT APPLICATIONS FROM TRADE ASSOCIATIONS OR SERVICE PROVIDERS WHO SERVE WHOLE MARKETS. NOT JUST INDIVIDUAL PROVIDERS. SO IT'S SORT OF A -- IT'S A GIANT LOOPHOLE TO ALMOST ANYTHING OR EVERYONE WITH NO PROCESS WHICH SEEMS LIKE AN ASTOUNDINGLY DANGEROUS, AS WELL AS EXTREME CASE OF OVERREACH PROPOSAL. AND THEN EARLIER, I GUESS, THE LAST SORT OF -- IT WASN'T A RULE MAKING, BUT A LOT OF TIME AND ENERGY IT FELT LIKE DODD SPENT WHEN IT FIRST CAME TO THE BUREAU ON THIS REQUEST FOR INFORMATION PROCESS REQUESTING COMMENT ON A WHOLE BUNCH OF VERY PROCESS -- VERY IMPORTANT PROCESS ISSUES ABOUT THE BUREAU THAT FELT LIKE AN EXERCISE IN INVITING INDUSTRY TO, YOU KNOW, WRITE ITS COMPLAINTS DOWN. AND WE HAD THE OPPORTUNITY TO COMMENT AS WELL. BUT THE QUESTIONS WERE OFTEN VERY VAGUE OR VERY BROAD. THERE WAS VERY LITTLE TIME. PORTIONS VERY DIFFICULT TO RESPOND TO IF YOU DIDN'T HAVE THE PERSPECTIVE OF SOMEBODY WHO HAD BEEN INSIDE THE PROCESS AND IT'S NOT CLEAR WHAT'S HAPPENING WITH REGARD TO THOSE. SO JUST SORT OF ANOTHER EXAMPLE OF A GREAT DEAL OF ENERGY BEING EXPENDED ON DEREGULATION REALLY. AND THE SERIES OF LIKE WARNING FLAGS ON THINGS TO WATCH OUT FOR IN TERMS OF CHANGE. I MEAN, SOME OF THE CHANGE -- THE CHANGES SUGGESTED INCLUDED LIKE STOPPING SHARING INFORMATION, FOR EXAMPLE. MAKING IT -- PUTTING UP BARRIERS TO MAKE IT MORE DIFFICULT TO EFFECTIVELY USE WHAT YOU LEARN WITH ONE PIECE OF INFORMATION GATHERING TO TAKE ACTION TO CHANGE THOSE PRACTICES. SO HOW WE THINK ABOUT OUR JOB IN -- I GUESS MAYBE ONE LAST THING TO SAY HERE ON THE TO DO MY ONE SENTENCE ON THE FRONT. I WOULD SAY ONE OF THE THINGS THAT I THINK IS PARTICULARLY WORRISOME IN THIS MOMENT IS THINGS. THAT'S PARTIALLY WHAT THE SAND BOX IS BEING CHARACTERIZED AS. IT'S NOT THAT THERE CAN'T BE GOOD NEW PRODUCTS OR THAT THERE CAN'T BE GOOD REASONS TO BE INTERESTED IN INNOVATION. BUT IT DOES FEEL LIKE THE WORD IS BEING USED KIND OF AS A GENERIC FAIRY DUST THAT YOU SPRINKLE ON ANYTHING AND THAT'S A REASON TO NOT LOOK AND NOT BE REGULATED. AND IT ALSO SEEMS LIKE IT IS TRUE THAT THERE CAN BE A PARTICULAR LACK OF VISIBILITY FOR SOME PRODUCTS THAT HAPPEN SUBSTANTIALLY ONLINE. AND SO IT'S A CONTEXT IN WHICH THE PUBLIC IS EVEN MORE DEPENDENT ON AN EFFECTIVE REGULATOR TO MAKE SURE THAT WE HAVE FAIR OUTCOMES. SO IT'S PARTICULARLY WORRISOME TO NOT HAVE THAT CONFIDENCE AT A TIME WHEN NEW PRODUCTS ARE BEING DEVELOPED AND DECISIONS BEING MADE. ALL OF THAT I'M GOING TO RETURN TO MY CHEERFUL PERSPECTIVE. [ LAUGHING ] FOR A SECOND. ALL THAT SAID, IT DOES FEEL LIKE WE ARE IN A GOOD -- BECAUSE OF THE WORK OF THE BUREAU AND BECAUSE OF THE ORGANIZING WORK OUTSIDE OF IT, WE ACTUALLY ARE AT A FAIR POSITION TO RESIST ALL OF THESE CHANGES. I DON'T EXPECT THAT THE SAND BOX PROPOSAL WILL BE FINALIZED AS WRITTEN AND PREVAIL. AND I THINK WE HAVE BEEN AN INCREDIBLY POSITION ON THE HILL FOR A LONG TIME AND WE'VE HAD TWO YEARS OF HOSTILITY FROM BOTH HOUSES AND THE ADMINISTRATION AND YET MANAGED TO NOT SEE ANY FUNDAMENTAL STRUCTURAL CHANGES IN THE BUREAU. AND THAT'S BECAUSE I THINK THE SORT OF INITIAL THEORY THAT THE WAY TO PROTECT IT FROM THE LONG-TERM WAS NOT TO BE TIMID AND CAREFUL, BUT TO BE CAREFUL TO DO THE RIGHT THING AND TO HAVE AN IMPACT WAS RIGHT. AND BECAUSE HAVING AN AGENCY WHERE THE FACTS MATTER AND WHERE THE VOICES OF CONSUMERS MATTER IS USEFUL FOR MAKING POLICY CHANGE. BUT IT'S ALSO USEFUL FOR OUR ORGANIZING. BECAUSE IT GIVES US A REASON TO KEEP MAKING THOSE ARGUMENTS AND KEEP ORGANIZING THOSE VOICES. AND THAT HAS HELPED US NOT ONLY WITH REGARD TO THE BUREAU, BUT WITH REGARD TO CONGRESS AND TO THE BROADER PUBLIC. SO I THINK WE JUST ARE IN A STRONGER POSITION BECAUSE OF HAVING HAD THOSE PUBLIC CONVERSATIONS THAN WE WOULD BE HAD WE NOT DONE SO AS EVIDENCE, FOR EXAMPLE, BY NOT HAVING HAD THE PAY DAY RULE OVERTURNED BY A CRA. THAT WAS A REAL RISK AND A REAL WIN. SO I THINK WE CLEARLY HAVE PLENTY OF DEFENSIVE WORK TO DO. BUT I THINK WE ALSO HAVE AN OPPORTUNITY TO BE AMBITIOUS BOTH ABOUT SOLUTIONS AND ABOUT HOW WE DESCRIBE THE PROBLEMS AND MAKE SURE THAT WE DON'T GET STUCK IN KIND OF A NARROW VIEW OF WHAT CONSUMER PROTECTION IS. BUT THAT WE FRAME WHAT IS AT STAKE AS WHAT IT IS, WHICH IS THAT THESE ARE REALLY FUNDAMENTAL MATTERS OF PEOPLE'S ECONOMIC SECURITY, THEIR HEALTH, THEIR HAPPINESS, THEIR HOMES, AND ALSO FUNDAMENTAL -- FUNDAMENTALS OF JUSTICE AND DECENCY. IS OUR FINANCIAL SYSTEM PUNISHING PEOPLE FOR BEING POOR OR IN SOME OTHER WAY VULNERABLE. IS IT INCREASING RACIAL WEALTH GAP OR ARE WE DEMANDING IT DID SOMETHING DIFFERENT THAN THAT. AND THAT'S A CONVERSATION THAT WE CAN PREVAIL AROUND IF WE CONTINUE TO HAVE IT. SO I'LL STOP THERE. THANK YOU. MIC MIKE CALHOUN WILL BE OUR LAST PANELIST. SO THANK YOU, AGAIN, TO MICHAEL AND THE ORGANIZERS OF THIS CONFERENCE. AND I THINK JUST YOU REALLY ARE FORTUNATE HERE TO HAVE THE ARCHITECTS AND THE BUILDERS OF THE CFPB AND DODD-FRANK HERE TODAY. MICHAEL WAS THE POINT PERSON FOR THE ADMINISTRATION. AND AT THE VERY FRONT LINE, AS WELL AS THE GENERAL, IF YOU WILL, OF THE WHOLE CAMPAIGN. SO I WANTED TO START BY GIVING A LITTLE BACKGROUND ON THE CENTER FOR RESPONSIBLE LENDING. BECAUSE IT TIES INTO MY COMMENTS, WHICH WILL BE IN THREE AREAS. FIRST A LITTLE MORE DETAIL ABOUT HOW OUT OF WHACK THE SYSTEM WAS BEFORE THE CRISIS AND BEFORE CFPB. IT'S MORE ON SOME OF THE CHANGES AND SOME EXAMPLES, AS LISA MENTIONED, ABOUT VERY SUCCESSFUL TRANSFORMATIONS REALLY OF HOW AREAS AND PRODUCTS WORK. AND THEN FINALLY SOME OF THE FUTURE ISSUES, INCLUDING SOME FUTURE CAUTIONS. SO THE CENTER FOR RESPONSIBLE LENDING IS A POLICY ARM OF SELF HELP CREDIT UNIONS WHICH WAS STARTED IN 1980. THE COMMUNITY AND FINANCIAL DEVELOPMENT INSTITUTION. WE WERE FOUNDED TO ADDRESS THE RACIAL WEALTH GAP, WHICH IN 1980 WAS 10 TIMES ON AVERAGE FOR WHITE BLACK HOLDS AND TODAY IT STANDS THERE AND IS HEADED IN THE RIGHT DIRECTION STILL. OUR INITIAL FOCUS WAS ON SMALL BUSINESS LENDING AND MORTGAGE LENDING. SO WE DID A LOT OF MORTGAGE LENDING. TODAY WE OPERATE ABOUT 60 BRANCHES. HAVE ABOUT 150,000 RETAIL CUSTOMERS AROUND THE COUNTRY. WE PROVIDE THE FULL RANGE OF CONSUMER FINANCES. EVERYTHING FROM BAKE ACCOUNTS, CREDIT CARDS, HOME MORTGAGES, AND THEN AS WELL AS CONSUMER MORTGAGES. AND HOW WE GOT INTO THE POLICY BRANCH WAS OUR -- IT WAS IN THE LATE 1990s. AND WE HAD EXPERIENCE OF BORROWERS THAT WE HAD PUT INTO HOME LOANS COME BACK TO US ON THE BRINK OF FORECLOSURE. AND WE LOOKED AT THESE AND THEY WERE TRULY UNBELIEVABLE. THEY WOULD HAVE DOUBLE DIGIT INTEREST RATES. TEN POINTS OR MORE OF UP FRONT FEES. CREDIT INSURANCE THROWN IN AT OUTRAGEOUS TERMS. AND AS ERIK MENTIONED, THEY WERE TOTALLY LEGAL AT THE TIME. AND SO WE TEND TO BE A WALKING GROUP. SOME PEOPLE TEND TO SAY A WELL DESIGNED SPREAD SHEET IS OUR VISION OF BEAUTY IN SELF HELP. [ LAUGHING ] SO WE SET OUT AS WE TEND TO DO AND SET OUT IN TERMS OF LAWYERS AND RESEARCHED THE OFFICES AROUND THE STATE TO SEE HOW WIDESPREAD. IS THIS JUST A HANDFUL OF FOLKS AND DID SOME OTHER RESEARCH. AND THE RESULTS WERE PRETTY ASTOUNDING. SO AT THE MACRO LEVEL, WE FOUND THAT IN NORTH CAROLINA, THE LEADING SUB PRIME MEMBER AT THE TIME, THE ASSOCIATES, HAD 88 OFFICES IN NORTH CAROLINA ALONE. WE'RE A DECENT SIZE STATE, BUT THAT'S A BUNCH OF OFFICES. ANOTHER THING WE LEARNED IS THE COMPANY WAS AN AFFILIATE, A DIVISION AT THE TIME AND TIED TO WHERE WE ARE TODAY, A FORD MOTOR COMPANY. AND IT WAS SO WILDLY PROFITABLE, THIS DIVISION WAS MAKING MORE MONEY THAN THE ENTIRE REST OF THE COMPANY, INCLUDING ALL OF THE CAR BUILDING AND SELLING AT THE TIME. SO THIS IS -- YOU KNOW, THEY WRAP THIS UP. THIS IS ABOUT ACCESS. THIS WAS ALL ABOUT THE MONEY AND EXTRAORDINARY SUMS OF IT. AND THEN FINALLY, AND I'LL TIE THIS INTO ANOTHER POINT, WE FOUND LOOKING AT THE DEEDS THAT IN THE COURSE OF ABOUT THREE YEARS, THESE FOLKS HAD REFINANCED ONE IN FIVE OF THE HABITAT FOR HUMANITY HOMEOWNERS OUT OF -- ZERO INTEREST MORTGAGES INTO THESE UNBELIEVABLY ABUSIVE MORTGAGES. AND YOU WOULD ASK WHY WOULD ANYBODY EVER GIVE UP THEIR ZERO INTEREST MORTGAGE. IT TURNED OUT THESE WERE THEIR PERFECT TARGET. BECAUSE THESE WERE OVERWHELMINGLY RE FINANCED LOANS TO PEOPLE WHO WERE STRUGGLING TO MAKE IT MONTH TO MONTH. AND THE HABITAT FOR HUMANITY OWNERS WERE HOUSE POOR. THEY HAD HOME EQUITY, VERY SMALL INCOME. THEY HAD OTHER CREDIT. CREDIT CARDS INSTALLMENT LOANS. AT THAT TIME PAY DAY LOANS WERE LEGAL IN NORTH CAROLINA. THANKFULLY NO MORE. AND THE SALES PITCH WAS REFINANCE YOUR HOME WITH US. WE'LL CATCH YOU UP ON ALL YOUR DEBTS. WE'RE GOING TO REFINANCE ALL OF THAT INTO YOUR HOME, SIGN THE PAPERS. YOU DON'T HAVE TO BRING ANY CASH TO CLOSING. BUT BURIED IN ALL OF THAT FINE PRINT IS YOU JUST LOST ALL OF YOUR HOME EQUITY. SO HABITAT WHEN THEY LEARNED OF THIS QUICKLY TOOK STEPS TO BLOCK THAT. BUT THE POINT ABOUT THE CRISIS AND TWO THINGS, JUST THE DEPTH OF THE CRISIS, AS MICHAEL AND THE OTHERS IN THE ADMINISTRATION KNEW, WE WERE WITHIN LIKE A WEEK OR TWO OF PEOPLE NOT GETTING THEIR PAYCHECKS. THAT THEY DID NOT PUBLICIZE THAT BECAUSE OF THE PANIC IT WOULD HAVE CREATED. BUT THE EXTRAORDINARY STEPS THAT WERE TAKEN WERE NOT JUST BECAUSE WE'RE GOING TO HAVE SOME BANKS FAIL. BUT IT WAS GOING TO BE A DEEP ECONOMIC WINTER WHERE PEOPLE COULDN'T BUY FOOD NEXT WEEK. I MEAN, WE WERE THAT CLOSE. AND THE CRAZY THING WAS THIS WAS NOT JUST AN AVOIDABLE CRISIS, IT WAS AN ENABLED CRISIS BY THE PEOPLE WHO WERE SUPPOSED TO STOP IT. SO LET ME GIVE YOU AN EXAMPLE. SO JUST FIRST HOW OUT OF WHACK THIS SYSTEM IS SO YOU UNDERSTAND HOW WE ENDED UP THERE. IN THE LINGO OF AGENCIES, THESE FINANCIAL REGULATORS WERE WHAT YOU WOULD CALL CAPTURED AGENCIES, MEANING THE INDUSTRIES THAT WERE SUPPOSED TO REGULATE REALLY CONTROL THEM. AND IN THIS SENSE, IT WAS LITERALLY TRUE TO AN EXTRAORDINARY EXTENT. SO AS ERIK EXPLAINED, YOU WERE -- YOU COULD SOMETIMES YOU COULD PICK WHICH AGENCY WOULD BE YOUR REGULATOR. SO IN PARTICULAR IN THE WORLD OF BANKS, YOU GOT TO PICK WHETHER THE NATIONAL -- GENERAL NATIONAL BANK REGULATOR, THE OCC, OFFICE OF COMPTROLLER CURRENCY, WAS YOUR REGULATOR. THIS WAS BIG FOR AGENCIES BECAUSE THE AGENCIES -- AND THIS WAS DESIGNED TO GIVE THEM INDEPENDENCE, BUT IT HAD THIS PERVERSE EFFECT -- THEIR BUDGETS WERE PAID 100% BY THE FEES OF THE BANKS THAT THEY REGULATE. AND SO THERE WAS THIS FAMOUS MOMENT WHERE COUNTRY WIDE, WHICH BECAME A VERY SUBSTANTIAL BANK, THOUGHT THAT THE OCC WAS DANTING TO PERHAPS CONSTRAIN SOME OF THEIR RECKLESS MORTGAGE LENDING. AND SO THEY SAID BASICALLY SO LONG. WE'RE MOVING TO THE OTFs. AND, BY THE WAY, THAT'S ONE-FOURTH OF YOUR OVERALL AGENCY BUDGET THAT'S GOING WITH US. AND THAT SENT SHOCK WAVES, SHOCK WAVES THROUGH THE AGENCIES. IT WAS WE WANT TO REMIND YOU WHO'S BOSS HERE AND DON'T FORGET IT. AND IT DID. AND LITERALLY, ALTHOUGH THIS STILL HAPPENS TODAY, IN PUBLIC SPEAKING AND WRITTEN DOCUMENTS, THE BANK AGENCIES REFERRED TO THE BANKS AS THEIR CUSTOMERS. AND THEY COMPETED BY WHO COULD BEST SERVE AND DEFEND THEIR CUSTOMERS. AND SO YOU SAW THIS HAPPEN IN A COUPLE OF WAYS. SO, FOR EXAMPLE, THE OCC AND OTHER AGENCIES DID THIS TOO. RATHER THAN, AS YOU'VE HEARD, NICK DESCRIBED WORKING WITH STATES, THEY SERVED AS DEFENDERS OF THEIR BANKS AGAINST STATE ENFORCEMENT ACTIONS. THE MOST WELL KNOWN OF THESE WERE -- WAS WITH PROVIDIAN, A SUB-PRIME CREDIT CARD COMPANY. AND CALIFORNIA AG DID AN EXTENSIVE INVESTIGATION, FOUND WIDESPREAD ABUSES. AND THE OCC CAME IN AND SAID WE'LL TAKE OVER THE INVESTIGATION AND THEN ENTERED INTO A SWEETHEART SETTLEMENT WITH HIM. THEY SAW THEMSELVES, THAT WAS A SERVICE THAT THEY PROVIDED TO THEIR CUSTOMERS. THE OCC BY STATUTE HAS A GOOD BIT OF DISCRETION ABOUT PREEMPTING STATE LAWS AND SAYING BANKS, NATIONAL BANKS, DON'T HAVE TO COMPLY WITH STATE LAWS. IN THE CASE OF THE MORTGAGES AND USE OF MORTGAGES, THE STATES WERE STARTING TO NOTICE THIS PROBLEM. AND SO WE WORKED IN 1999 NORTH CAROLINA PASSED THE FIRST STATE PREDATORY LENDING LAW AND HAD SOME TOUGH PROVISIONS. WE PASSED OTHER ONES, WORKED WITH GROUPS. LISA WAS INVOLVED IN PASSING A NUMBER OF THESE. AND ULTIMATELY CLOSE TO TWO DOZEN OF THESE LAWS WERE PASSED. SO THE RESPONSE OF THE OCC IN RESPONSE TO THEIR REQUEST FROM THEIR CUSTOMERS WAS TO ISSUE A RULE SAYING THAT NATIONAL BANKS DID NOT HAVE TO COMPLY WITH ANY OF THESE STATE LAW PROTECTIONS AGAINST ABUSIVE MORTGAGES. AND THAT NOT ONLY PROTECTED THEM, IT CREATED AN UNEVEN PLAYING FIELD. AND SO THE STATE CHARTERED BANK STARTING GOING TO STATE LEGISLATORS AND SAYING WE WANT PARITY. IF THE NATIONAL BANKS GET EXEMPTION, YOU CAN'T TREATI US, THE LOCAL BANKS. AND THEN YOU HAVE THIS RAY CE ON THE BOTTOM ON THE SCOPE OF REGULATION THERE. AND THEN GOING BACK TO OUR HABITAT EXAMPLE. THE FEDERAL RESERVE WAS IN A RESPONSIBILITY AND THE AUTHORITY TO PROTECT AGAINST ABUSIVE MORTGAGE REFINANCING BY ANY ENTITY, BANK OR NON-BANK. AND THEY DIPPED THEIR TOE IN THIS WATER ONCE. AND THIS WAS IN EARLY 2000. THEY WERE KIND OF ASHAMED ABOUT WE WERE BEATING THEM AND OTHERS PRETTY HARD ABOUT THIS TIME. THEY WERE KIND OF ASHAMED ABOUT THE HABITAT REFINANCING. BECAUSE, YOU KNOW, PEOPLE WORKED FOR HABITAT VOLUNTEER. PEOPLE WERE PRETTY OUTRAGED. SO THEY PROPOSED A RULE THAT WOULD PUT RESTRICTIONS ON REFINANCING OF ZERO INTEREST MORTGAGES FROM NON-PROFITS ARE FROM GOVERNMENTAL ENTITIES WHICH WERE WIDESPREAD. PRETTY MODEST STEP. THEY DECIDED IT WAS A LEAP TOO FAR, THOUGH, AND WITHDREW THE PROPOSED RULE. IT TOOK NO ACTION WHATSOEVER TO PROTECT THOSE BORROWERS AFTER SHOWING THE ABUSES THERE. THE OTHER THING THAT WAS DONE WAS THERE WAS BASICALLY AN UNWRITTEN BUT WIDELY RECOGNIZED RULE WITHIN THE -- WITHIN THESE REGULATORS WOULD BE THE ONLY STANDARDS THAT THEY WOULD ISSUE WERE VEAGUE ASPIRATIONAL STATEMENTS. BECAUSE THEIR FEAR WAS, FIRST OF ALL, THE BANKS WANTED TO HAVE A LOOSE STANDARD THAT THEY WOULD BE JUDGED BY BY THE SUPERVISOR. BUT ALSO UNDER THE LEGAL STANDARDS, YOU COULD USE NATIONAL BANK RULES AS AN EXAMPLE. AND STATES DID THIS IN PRIVATE LITIGANTS DID TOO COULD BE EVIDENCE THAT SOMETHING WAS AN UNFAIR TRADE PRACTICE. AND SO THE BANKS DIDN'T WANT ANY STANDARDS THERE BY THE REGULATORS THAT COULD BE USED BY STATE AGs OR PRIVATE LITIGANTS. AND SO, FOR EXAMPLE, THE OCC RESPONSE ON THESE PREDATORY LOANS IS TO SAY BANKS SHOULD NOT CHARGE UNREASONABLE FEES. THAT IS AS FAR AS THEY WENT. AND THE BANKS WERE ADAMANT THAT THEY SHOULD NOT HAVE ANYTHING CLOSE TO A BRIGHT LINE STANDARD, WHICH IS, AS WE'LL TALK ABOUT A LITTLE LATER, WHEN THEY HAD A REAL ENFORCER LIKE DIRECTOR CORDRAY, THEY SUDDENLY WANTED VERY SPECIFIC STANDARDS. [ LAUGHING ] THEY'RE LIMITED HOW FAR. AND, YOU KNOW, SO IT'S -- [ LAUGHING ] IT'S BASICALLY HOW MUCH IT CHANGED. SO ABOUT ALL OF THIS GOING ON, THE OTHER THING I'LL SAY REAL QUICKLY, CRL, THIS WAS -- THERE WAS A LOT OF EVIDENCE AND A LOT OF PEOPLE KNEW THIS WAS THE HOUSE OF CARDS THAT WAS GOING TO COLLAPSE. CRL USING INDUSTRY DATA PUBLISHED A REPORT IN 2006 WHEN WE SAID THERE WOULD BE TWO -- WELL OVER 2 MILLION FORECLOSURES OF SUB-PRIME LOANS, AND WE THOUGHT THAT WAS A VERY LOW ESTIMATE. THE RESPONSE OF INDUSTRY WAS TO REQUEST A GAO STUDY AGAINST US FOR SO DISRUPTING THIS WELL-FUNCTIONING MORTGAGE MARKET. FOR THOSE OF YOU WHO SAW THE BIG SHORT, IT REALLY IS ACCURATE. LISA HAS A CLOSE FRIEND WHO WAS THE PRIME CHARACTER IN THE BIG SHORT. AND IT REALLY WAS THAT CRAZY AT GROUND LEVEL. SO YOU WOULD THINK AFTER THE COMING GOES TO THE EDGE OF THE ABYSS THAT INDUSTRY WOULD BE ABLE TO CHASE THEM. THAT THERE WOULD BE THIS CONSENSUS THAT WE NEEDED TO CHANGE THINGS. WELCOME TO WASHINGTON DC. [ LAUGHING ] SO NOT SAID IS THE DODD-FRANK ACT PASSED. BUT INDUSTRY VILIFIED, NOT ALL OF THEM, LET ME BE CLEAR, BUT TO A VERY LARGE PERCENT, VILIFIED THE EFFORT AND MICHAEL BAR. I REMEMBER INDUSTRY MEMBERS COMING AND SAYING THAT MICHAEL BAR, THE GULL OF HIM. WE ASKED FOR CHANGES IN THE BILL AND HE SAYS, WELL, WILL YOU SUPPORT THE BILL IF I GIVE YOU THE CHANGES. AND THEN HE WON'T GIVE THEM TO US UNLESS WE'RE GOING TO SUPPORT THE BILL. [ LAUGHING ] AND THEY'RE LIKE THE GULL OF HIM. AND I HAD THAT HAPPEN ON MULTIPLE OCCASIONS. AND THE BILL ULTIMATELY PASSES BY A RAZOR-THIN MARGIN. I MEAN, IT WAS DOWN TO THE VERY LAST VOTES. SO THAT IS -- THAT IS THE STATE OF WHERE WE WERE WHEN THE CFPB WAS PASSED. AND FOR US AND WITHIN OUR SHOP, WE TALK ABOUT CREATION OF CFPB IS SIMILAR TO THE CREATION OF THE EPA AND HOW IT REALLY WAS A MILESTONE IN HOW THIS COUNTRY LOOKED AT THE ENVIRONMENTAL PROBLEMS, A RECOGNITION OF THE IMPACT OF IT AND THE NEED OF COORDINATED SCOPE. AND IT REALLY -- EVEN IN UNFRIENDLY ADMINISTRATIONS, IT REALLY HAS CHANGED HOW THE COUNTRY LOOKS AT ENVIRONMENTAL REGULATION. SO GOING QUICKLY BECAUSE I WANT TO LEAVE TIME FOR QUESTIONS FROM THIS QUITE KNOWLEDGEABLE AND EXPERT AUDIENCE, THE CHANGES REALLY WERE SEE CHANGES PARTICULARLY WHEN YOU LOOK BACK AT JUST HOW AMAZINGLY DYSFUNCTIONAL THE SYSTEM WAS. AND THEN THE OTHER PART OF IT, WHICH ABOUT THE WELCOME TO WASHINGTON, YOU ALSO HAD WHAT CONSIDER CONSIDERED CAPTURED COMMITTEES. SO THE WAY YOU DO THINGS IN WASHINGTON, IF YOU'RE A BANK, YOU GIVE ALL YOUR POLITICAL CONTRIBUTIONS TO THE BANKING COMMITTEE MEMBERS AND LEADERSHIP. AND SO THE BANKING COMMITTEE MEMBERS ARE EXPECTED TO PRIMARILY RAISE THEIR CAMPAIGN CONTRIBUTIONS FROM THE INDUSTRY THAT THEY REGULATE. IN FACT, THERE ARE EVEN SOME COMMITTEES WHERE YOU ONLY CAN GET ON ONE BECAUSE THEY'RE SO LUCRATIVE FOR FUNDRAISING. AND SO IT'S VERY HARD TO GET ANYTHING THROUGH THOSE COMMITTEES. SO, FOR EXAMPLE, THE MILITARY LENDING ACT DID NOT GO THROUGH THE NORMAL COMMITTEE STRUCTURE BECAUSE IT WOULDN'T HAVE MADE IT THROUGH. WE COULDN'T GET A HEARING THROUGH THE MATRIX COMMITTEE STRUCTURE. IT WENT THROUGH AS AN AMENDMENT TO THE DEFENSE APPROPRIATIONS ACT. SO IT WENT THROUGH ARMED SERVICES. I'LL GIVE A SHOT OUT TO NOT ONLY SENATOR SHELBY WHO SIGNED OFF ON IT AND DID NOT REQUIRE IT TO GO THROUGH HIS COMMITTEE. BECAUSE HE KNEW IT WOULDN'T GET THROUGH HIS COMMITTEE AND HE WANTED IT TO PASS. SO THE BIG CHANGES, THE NON-BANK SUPERVISION IS THE HUGE CHANGE BECAUSE SO MUCH OF THE BAD ACTIVITY WAS THERE. AND THAT IS STILL CONTINUING. THE PUBLIC COMPLAINT DATABASE, LIKEWISE, WE TALKED WITH LENDERS. AND MOST OF THE MAJOR BANKS HAVE OFFICIAL PROGRAMS DESIGNED TO PREVENT COMPLAINTS FROM CUSTOMERS FROM ESCALATING FROM A COMPLAINT BEING FILED WITH THE BUREAU. AND SO THAT'S PART OF WHAT LISA WAS DESCRIBING AND NICK THAT PEOPLE FIND THAT FILING THESE COMPLAINTS WITH THE BUREAU IS REMA REMARKABLY EFFECTIVE AND SIMPLY RAISING THE THREAT OF FILING A COMPLAINT WITH THE BUREAU IS VERY EFFECTIVE WITHIN THE INSTITUTIONS THEMSELVES. THE ENFORCEMENT, AS I SAID, THE INDUSTRY NOW WANTS TO CABIN ENFORCEMENT BY HAVING THE RULES AS SPECIFIC AS POSSIBLE. AND THEN THE AG ENFORCEMENT. I MEAN, ONE OF THE NOT WIDELY RECOGNIZED PROVISIONS OF DODD-FRANK AT THE TIME OF CFPB IS IT SPECIFICALLY AUTHORIZED AGs TO ENFORCE THE RULES AND THE UDAP AUTHORITY OF THE CFPB THAT WAS PUT IN THERE PRECISELY FOR THESE TIMES WHEN WE KNEW -- WHEN WE WERE PASSING WORKING ON DODD-FRANK AND CFPB, WE ALWAYS SAID THERE WILL BE A JAMES WATT HEAD OF THE CFPB. AND THAT'S JUST LIFE IN WASHINGTON DC FOR THOSE OF YOU WHO ALL REMEMBER HIM AS HEAD OF THE INTERIOR WHERE HE WAS PRETTY MUCH WANTED TO NULLIFY THE AGENCY AT THE TIME. AND SO THERE WERE SAFEGUARDS TO BE BUILT IN THERE TO THE EXTENT THEY COULD. AND I WANT TO -- YOU KNOW, THE ONE REFORM -- I THINK THE IDEA OF BLOWING UP THE CFPB IS UNLIKELY, AS LISA SAID. BUT I DO WANT TO REMIND PEOPLE THAT TWO YEARS AGO THERE WERE OPEN PLANS OF USING SPECIAL PROCEDURES, BUDGET RECONCILIATION TO, IN FACT, ABOLISH THE CFPB AND DISTRIBUTE ITS STAFFS BACK TO THE PREVIOUS AGENCIES THAT HAVE BEEN INEFFECTIVE. IT WAS THE GREAT WORK CFPB HAD DONE THAT MADE THAT POLITICALLY UNPOPULAR, AS WELL AS A LOT OF WORK BY GROUPS. I THINK THE ONLY -- THE TWO THREATS THAT ARE OUT THERE NOW, I THINK ONE THAT GETS LESS POPULARITY IS GOING TO A COMMISSION RATHER THAN A SINGLE DIRECTOR. MANY OF US ARE VERY STRONGLY AGAINST THE COMMISSION BECAUSE WE HAVE SEEN THAT THE COMMISSIONS ARE SORT OF THE WORST OF BOTH WORLDS. THAT IF YOU -- THE COMMISSIONS DID NOT DO SO WELL UNDER THE OBAMA ADMINISTRATION. AND THEY WOULD DO JUST AS POORLY TODAY LOADED UP WITH APPOINTMENTS FROM THE CURRENT ADMINISTRATION. AND ONE OF THE IRONIES IS THE MODEL FOR THE CFPB STRUCTURE WAS TAKEN FROM THE REGULATOR OF THE FEDERAL HOUSING FINANCE SYSTEM, INCLUDING FANNY AND FREDDIE MAC. AND THAT BILL WAS DRAFTED IN LARGE PART BY REPUBLICANS WHO SPECIFICALLY SOUGHT A SINGLE DIRECTOR BECAUSE THEY KNEW THAT'S WHAT THEY NEEDED TO HAVE EFFECTIVE ACCOUNTABILITY AND OVERSIGHT OF FANNIE MAE AND FREDDIE MAC WHO THEY WANTED REIGNED IN. SO THAT WAS CLOSELY COPIED FOR THE CFPB, AND I THINK THE SAME REASONING APPLIES THAT IF YOU WANT THE EFFECTIVENESS AND ACCOUNTABILITY. THE OTHER IS SOME THREAT THAT THEY WERE TRYING TO PUT IT UNDER APPROPRIATIONS WHICH WOULD HUGELY WEAKEN IT. BECAUSE THEN YOU GET BUDGET WRITERS. SO, FOR EXAMPLE, IN THIS WHOLE HOUSING CRISIS, LISA TALKED ABOUT IT AND NICK TALKED ABOUT THE MORTGAGE BROKERS WERE SELLING THESE LOANS AND GOT INCENTIVES. THEY GOT PAID TWICE AS MUCH TO SELL YOU ONE OF THESE RISKY LOANS. IF THEY SOLD YOU A STANDARD 30 YEAR FIXED RATE PRIME LOAN. WELL, HUD STARTED TO REGULATE THAT PRACTICE. AND SO THE BROKERS WENT AND GOT A BUDGET WRITER PUT ON HUD'S BUDGET SAYING THEY COULDN'T REGULATE THE BROKERS. AND SO THAT'S ANOTHER REASON WHY WE'RE SO CONCERNED ABOUT EVER GETTING TO APPROPRIATED FUNDING. SO LET ME QUICKLY GO THROUGH A COUPLE OF PLACES WHERE -- I MEAN, YOU'VE SEEN REAL C CHANGES. ONE IS IN MORTGAGE, BOTH ORIGINATION AND SERVICING. IT IS JUST A TOTALLY DIFFERENT WORLD. MORTGAGES ARE FUNDAMENTALLY SAFER. BORROWERS ARE TREATED FUNDAMENTALLY BETTER. AND MOST IN INDUSTRY AGREE THAT IT IS A BETTER SYSTEM. THERE ARE PLACES WHERE THEY WANT TWEAKS AROUND THE EDGES. BUT IN GENERAL THEY THINK THE CFPB WAS CERTAINLY VERY CLOSE TO THE MARK IN THE REGULATIONS THERE. ANOTHER WOULD BE WITH CREDIT CARDS WHERE, AS I THINK YOU ALL REMEMBER, IT WAS A PRETTY DYSFUNCTIONAL WILD, WILD WEST MARKET. AND A COUPLE OF THE PRACTICES WERE THINGS LIKE THE ESCALATING LATE FEES. THEY WERE MAKING A THIRD OF THEIR TOTAL REVENUES OFF OF FEES RATHER THAN THE INTEREST THEY CHARGED. THEY WOULD GIVE YOU A TEASER RATE AND THEN RAISE THE RATE ON YOUR BALANCES. IN MOST PARTICULARLY FOR BORROWERS WHO WERE LESS WEALTHY, IT WAS HARD FOR THEM TO MOVE THOSE BALANCES AT TIMES. SO THEY WERE JUST STUCK WITH THE HIGHER PAYMENT. AND THEN THE ONE THAT SORT OF BROUGHT IT TO THE HEAD WERE THESE OFFERS OF FREE FINANCING. ZERO INTEREST FINANCING FOR SIX MONTHS OR A YEAR. AND THIS IS WHERE THERE'S SOME ALIGNMENT WITH INDUSTRY THAT THE INDUSTRY WORRIES ABOUT THE RATES AT THE BOTTOM THAT THEY SAW IN THE MORTGAGE WHERE IF YOU DID NOT HAVE TEASER RATES, YOU COULD NOT COMPETE BECAUSE THEY LOOKED CHEAPER TO BORROWERS. WE ACTUALLY HAD CREDIT CARD COMPANIES COME TO US BEFORE DODD-FRANK AND ASK US TO WORK ON CREDIT CARD LEGISLATION BECAUSE THEY COULD NOT COMPETE FAIRLY WITH EACH OTHER AND JUST WERE CANNIBALIZING EACH OTHER'S BUSINESS TO MEET THE MARKETING PLOYS, THEY HAD TO MAKE THESE WILD OFFERS. BUT TO MAKE THE NUMBERS WORK, THEY HAD TO LOAD IN FINE PRINT SO THAT NOBODY WOULD ACTUALLY QUALIFY TO ACHIEVE ALL OF THOSE BENEFITS. AND THEY DIDN'T LIKE THAT. SO TO WIND UP HERE WITH SOME -- THE ISSUES GOING FORWARD, I THINK OVERDRAFT, STUDENT LENDING. WADE HENDERSON IS GOING TO TALK ABOUT STUDENT LENDING IS A THREAT ON THE MAGNITUDE OF THE SUB-PRIME MORTGAGE CRISIS FOR COMMUNITIES OF COLOR. ARBITRATION. THE CFPB DID ITS PART AND PUT OUT A RULE. WE NEED TO CONTINUE TO FIGHT AGAINST MANDATORY ARBITRATION. AND THEN TWO AREAS LISA HAS TALKED ABOUT THESE PROPOSALS TO CHANGE, IF YOU WILL, HOW THE BUREAU OPERATES AND WHAT SOME OF THE FOUNDATIONAL RULES ARE. LIKE WHAT IS THE SCOPE. THE PAY DAY RULE IS IN LARGE -- THE EFFORTS BY CFPB TO REWIND AND REPEAL THE PAY DAY RULE IS IN LARGE PART AN ATTEMPT TO REWRITE THE STANDARD AND GREATLY WEAKEN THE STANDARD OF WHAT'S AN UNFAIR, DECEPTIVE TRADE PRACTICE AND HOW DO YOU PROVE IT. AND WE THINK TOTALLY UNJUSTIFIED, ILLEGAL WAY. ANOTHER AREA THAT CUTS ACROSS AND MAYBE ONE OF OUR SPEAKERS LISA RICE WILL BE HERE TOMORROW, IS DESPERATE IMPACT. THAT HUD IS COMING OUT WITH A RULE THAT TRIES TO NOT REPEAL IT BUT TO MAKE IT TOTALLY INEFF INEFFECTIVE, WHICH WOULD BE A HUGE SETBACK ACROSS THE WHOLE BOARD FOR CIVIL RIGHTS ENFORCEMENT. SO SOMETIMES -- IN CONCLUSION, SOMETIMES CONSUMER PROTECTION IS COMPARED, AND NICK CAN RELATE TO THIS AS HACKING BACK THE JUNGLE. THERE IS A WHOLE COTTAGE INDUSTRY COMING UP WITH NEW TWISTS AND TURNS OF HOW DO YOU TAKE ADVANTAGE OF CONSUMERS. THESE ADMINISTRATIVE CHANGES I AGREE TOTALLY WITH LISA ABOUT HOW FUNDAMENTAL THEY HAVE AND I THINK HOW STICKY THEY ARE. AND ONE CAUTIONARY TALE ABOUT NOT LETTING OUR GUARD DOWN. IN THE 1970s FOR THOSE OF US DOING CONSUMER PROTECTION WORK BACK THEN, THERE WERE TWO EVENTS. ONE WAS RALPH NADER PROPOSED A CONSUMER PROTECTION AGENCY. IT PASSED ONE HOUSE IN '75. THE DECISION WAS TO NOT COMPROMISE BECAUSE THEY WERE GOING TO PASS IT AFTER CARTER GOT ELECTED. AFTER CARTER GOT ELECTED, INDUSTRY RAISED THE HUGE CAMPAIGN AND KILLED THE BILL AND IT DIED. AT THE SAME TIME, THE FTC WASN'T AS LIMITED IN RULE MAKING AUTHORITY WHEN IT WAS ORIGINALLY SET UP AS IT IS TODAY. IN FACT, IT HAD VAST RULE MAKING AUTHORITY IN THE '70s. AND UNDERTOOK A RANGE OF RULE MAKING ACROSS FUNERAL SERVICES, ILLEGALLY BUNDLED AND DECEPTIVELY PRESENTED. USED CAR SALES. THEY WERE ADDRESSING ALL OF THOSE. AND LED BY THE CHAMBER OF COMMERCE, THEY TOOK -- ESSENTIALLY TOOK AWAY THE RULE MAKING AUTHORITY. THEY LIMITED TECHNICALLY TO "JUDICIAL RULE MAKING" WHICH IS NOT THE ORDINARY RULE MAKING AND HAS NOT BEEN USED SINCE. SO THESE AUTHORITIES CAN BE TAKEN AWAY. WE NEED TO BE VIGILANT. BECAUSE THE BENEFIT OF THE CFPB FOR CONSUMERS AND OVERALL ECONOMY HAS BEEN EXTRAORDINARY AND WE NEED TO MAKE SURE IT CONTINUES. THANKS, MIKE. SHOULD WE OPEN IT UP TO QUESTIONS TO THE AUDIENCE? [ INAUDIBLE ]. WHERE IS THE MIC? J J . THANK YOU SO MUCH. I'M LISA SERVON. I HAVE A QUESTION THAT DOESN'T PROBABLY HAVE AN EASY ANSWER. I'M IN THE INCLUSION IN THE U.S. AND UK. AND ONE OF THE THINGS, THERE'S A LOT OF SIMILARITIES IN THE ENVIRONMENT AND THE AGENCIES AND POLICIES THAT HAVE BEEN CREATED TO DEAL WITH THESE ISSUES. ONE OF THE THINGS THAT REALLY SURPRISED ME THE MOST, THOUGH, WAS THE EXTENT TO WHICH THE FIRMS THAT ARE REGULATED BY THE FCA, THE FINANCIAL CONDUCT AUTHORITY THERE, APPROVE OF THE MISSION AND HAVE REALLY BOUGHT INTO IT. SO I OPENED MY LAPTOP. SO 68% OF THOSE FARMS RATE THE OVERALL EFFECTIVENESS OF THE FDA BETWEEN A 7 AND A 10. AND FOR THOSE CLAIMING A LOW EFFECTIVENESS RATING, 1 TO 3, DOING MORE TO PREVENT WRONGDOING. THAT'S WHY THEY RATED IT LOW. AND SO IT'S CLEARLY A REALLY DIFFERENT ENVIRONMENT THAN IT IS HERE. EVEN THOUGH THERE'S SO MUCH SIMILARITY IN THE CONTEXT. AND, AGAIN, I DON'T THINK THERE'S AN EASY ANSWER. BUT I WONDER IF YOU COULD JUST SPECULATE ON THAT. AND WHY THERE ISN'T MORE BUY-IN. I MEAN, THERE ARE OBVIOUS ANSWERS, BUT THERE'S OBVIOUS ANSWERS THERE TOO THAT HAVE NOT TURNED OUT TO BE THE TRUTH IN TERMS OF WHY THERE'S SUCH SUPPORT. DOES ANYBODY KNOW THINKING ABOUT THE FCA? SO I WOULD JUMP IN SOME BECAUSE PAY DAY LENDING. YES. YOU HAVE A LOT OF INTERNATIONAL -- PAY DAY LENDING IS NOT SO MUCH MA AND PA AS IT IS BIG INTERNATIONAL FINANCIAL COMPANIES. AND A NUMBER OF THOSE AND INSTALLMENT LENDERS OPERATE THE U.K. AND U.S. MARKETS. I THINK SOME OF IT IS YOU LOOK AT THE U.K. AND EUROPE MORE BROADLY IS THERE'S AN EXPECTATION OF GREATER GOVERNMENT OVERSIGHT AND REGULATION. YOU LOOK ACROSS THE BOARD, THEY DON'T TOLERATE THE INTERCHANGE FEE MONOPOLY THAT WE HAVE HERE. THEIR PRIVACY STANDARDS ARE MUCH GREATER. AND SO I THINK A LOT OF IT IS JUST A BASELINE. THERE'S AN EXPECTATION AMONG BOTH CONSUMERS AND INDUSTRY THAT THERE WILL BE RULES OF THE ROAD AND YOU'RE NOT OUT THERE TO DEFEND ON YOUR OWN OR DO WHATEVER YOU WANT. THANK YOU. I COULD ADD, IT'S NOT DIRECTLY IN RESPONSE TO YOUR QUESTION, BUT I THINK THERE'S SUPPORT FROM THE BANKING INDUSTRY FOR TO BE LOOKING ACROSS BANK AND NON-BANK MARKETS DOING SIMILAR THING WITH THE SAME LEVEL OF OVERSIGHT THROUGH SUPERVISION. SO PREVIOUS TO THE CFPB, THERE WAS OFTEN THIS TERM USED THAT THEY'RE NOT REGULATED. THE NON-BANKS ARE NOT REGULATED. THAT ALWAYS BOTHERED ME. OF COURSE, THEY'RE SUBJECT TO THE SAME LAWS AND REGULATIONS. I THINK WHAT PEOPLE MEANT BY THAT IS THEY'RE NOT OVER SEEN IN THE SAME WAY IN THE WAY YOU DESCRIBE WHERE THERE'S SOMEONE REALLY KIND OF OVERSEEING THEIR COMPLIANCE AND TRYING TO ENSURE THAT THEY HAVE COMPLIANCE MANAGED SYSTEM IN PLACE TO TRY TO PROACTIVELY COMPLY. NOT JUST WAITING TO GET CAUGHT. AND SO I THINK THERE IS SUPPORT FOR THAT CONSISTENT LOOK. AND IT'S PARTICULARLY IMPORTANT IN THE MORTGAGE MARKETS WITH THE GROWTH OF THE NON-BANK SECTOR AND MORTGAGE ORIGINATION. AND THAT HAS BEEN THE CASE FOR A WHILE IN MORTGAGE SERVICING, BUT THAT'S GETTING EVEN STRONGER, I THINK. THAT WAS GREAT. IT'S REALLY SORT OF WORRISOME TO GO DOWN HISTORY ROAD LIKE YOU ALL HAVE JUST TAKEN US. THE QUESTION I HAVE IS A COUPLE OF THEM. ONE, LISA, YOU SUGGESTED THAT THE CFPB AND THE EFFORTS BEHIND CONSUMER PROTECTION SHOULD HAVE ACTUALLY GONE FURTHER THAN THEY DID IN THE OBAMA ADMINISTRATION UNDER THE DIRECTOR. IT WOULD BE GREAT TO HEAR YOU TALK ABOUT THAT. MIKE, THE OTHER NIGHT I SAT DOWN FOR ENTERTAINMENT TO WATCH ON HBO THE UNTOLD STORY OF THE 2008 FINANCIAL CRISES. [ LAUGHING ] I DIDN'T SEE YOU IN IT, MICHAEL. [ LAUGHING ] I CAN -- AND I WAS WATCHING IT WITH SOMEBODY WHO IS NOT IN OUR FIELD. AND HE'S LIKE DIDN'T THE GOVERNMENT KNOW WHAT WAS HAPPENING? LIKE, YOU KNOW, HOW WAS THIS NOT KNOWN? AND I REMEMBER A CONFERENCE THAT BEN BURNACKE WAS ASKED ABOUT IN THESE LOW INCOME COMMUNITIES. AND THE ANSWER WASN'T QUITE FULFILLING AT THAT POINT. NOW THAT WE'RE TEN YEARS POST, WHAT WOULD YOU SAY ABOUT LIKE WHAT WAS KNOWN, WHAT WAS IGNORED, NOTWITHSTANDING ALL OF THE POINTS YOU JUST MADE ABOUT CAPTIVE. BUT LIKE WHAT HAPPENED? ALL OF YOU. RIGHT. I ACTUALLY WANT TO START WITH THAT SECOND QUESTION TOO. IS YOUR MIC ON? OOPS. CAN YOU HEAR? IS IT ON NOW. YEAH. BECAUSE I THINK LOTS OF US HAVE THINGS TO SAY ABOUT WHAT WAS KNOWN. AND I DO THINK IT'S A VERY IMPORTANT STORY. AND THERE'S A COUPLE OF PIECES OF IT THAT FEEL EVEN MORE VIVID TO ME IN RETROSPECT THAN THEY DO AT THE TIME. I THINK AS MIKE WAS SAYING, WE -- THERE WAS PLAIN AS DAY EVIDENCE OF THE FORECLOSURES THAT WERE EXPANDING IN THOSE COMMUNITIES, PRIMARILY COMMUNITIES OF COLOR AND LOW INCOME COMMUNITIES THAT WERE TARGETED WITH PREDATORY LOANS. EVEN BEFORE THOSE FORECLOSURES STARTED, THERE WAS PLAIN AS DAY EVIDENCE OF THE STRUCTURALLY ABUSIVE FEATURES OF THE MORTGAGES BEING SOLD, BOTH ON THE ABILITY TO PAY SIDE AND ON THE EQUITY EXTRACTING HIGH FEES AND PREPAYMENT PENALTIES SIDE. AND ON THE KIND OF STRUCTURAL INCENTIVES TO SCREW IT UP. COSTS CREATED, BY THE WAY, BY THE PREMIUM SYSTEM AND THE WAY THAT PEOPLE WERE PAID. SO PEOPLE KNEW IT FROM THEIR LIVED EXPERIENCE. THEY KNEW IT BECAUSE THEY SHOULD HAVE KNOWN IT BECAUSE THE EVIDENCE WAS NOT THAT HARD TO FIND. AND THEY KNEW IT BECAUSE THEY SHOULD HAVE KNOWN IT BECAUSE PEOPLE WERE BRINGING IT TO THE REGULATORS. AND THE RESPONSE FROM THE REGULATORS IN MY EXPERIENCE WAS VERY OFTEN TO SORT OF REFUSE TO LOOK AT THE EVIDENCE THAT THEY HAD AND TO SAY THAT'S JUST WHAT YOU'RE BRINGING US. THIS IS JUST ANECDOTE. BRING US DATA. WHICH WAS A PARTICULARLY TERRIBLE ANSWER WHEN THEY, IN FACT, COULD HAVE GOTTEN THE DATA, HAD THEY CHOSEN TO. AND HUD DID DO ONE -- WE TALKED ABOUT THIS LAST NIGHT A SECOND. YOU KNOW, THROUGH MUCH, MUCH, MUCH ADVOCACY, HUD DID A REPORT, PRETTY MODEST CAREFUL REPORT. THEY WERE NEVER ABLE TO MAKE IT INTO ANYTHING. AND SO THERE WAS -- IT WAS AN EXTRAORDINARILY WILLFUL FAILURE TO KNOW, BECAUSE THERE WAS SO MUCH MONEY BEING MADE ON THE OTHER SIDE. IT WAS ENORMOUSLY PROFITABLE AND PEOPLE DID NOT WANT IT TO STOP. AND SO THEY DIDN'T SPEND IT. AND NONE OF THE PEOPLE -- DID THEY SEE IT WAS GOING TO GET -- EVERYBODY THOUGHT PRICES WERE -- EVALUATIONS WERE GOING TO KEEP GOING UP. YEAH. IT'S HARD NOT TO GO BACK TO -- IT'S HARD FOR PEOPLE TO BELIEVE THINGS THAT THEY ARE PAID NOT TO BELIEVE. AND THAT PEOPLE WITH FANCY DEGREES AND FANCY SUITS TOLD THEM NOT TO BELIEVE. AND WHEN THE PEOPLE WHO WERE HURT FIRST WERE NOT THEIR NEIGHBORS. IT REALLY WAS FINANCIAL. YOU CANNOT BELIEVE THE AMOUNT OF MONEY AGAIN SO -- I MEAN, WHAT WE OFTEN USED OUR TESTIMONY WE HAD FROM LENDERS IN THE BUSINESS SAID I GET PAID TWICE AS MUCH FOR DOING A NO DOCK LONE AS I DO FOR DOING A DOCUMENTED LOAN. IT'S LESS WORK. AND THE REASON IS BECAUSE THEY DIDN'T REALIZE THIS, THE NO DOCK LOANS, THE OPTION ARM LOANS, THESE 228 LOANS ALL CARRIED HIGHER INTEREST RATES THAN A REGULAR 30 YEAR, FIXED RATE MORTGAGE. BORROWERS OFTEN DIDN'T UNDERSTAND THAT. BUT WE OFTEN FOUND BORROWERS WOULD GIVE FULL DOCUMENTATION FOR THEIR LOANS AND DIDN'T EVEN KNOW THEY GOT A NO DOCK LOAN. AND THE LENDERS HAD RULES DO NOT INCLUDE ANY OF THE DOCUMENTATION PAPERS IN THE FILE. BECAUSE THEY ALSO DIDN'T WANT TO SHOW THE MISMATCH. AND THEN EVEN AT THE REGULATOR LEVEL, THE REPORTS IN 2007, THE REGULATORS BRAGGED THAT THEY HAD SET A RECORD FOR THE LOWEST NUMBER OF BANK FAILURES. THE LONGEST STREAM OF LOW BANK FAILURES BECAUSE ALL OF THIS MONEY WAS POURING IN. THE LOSSES HADN'T HIT YET. BUT THE EXTRAORDINARY AMOUNTS OF MONEY. SO THE BROKER GETS PAID MORE, THE LENDER GETS PAID MORE, THE SECURE TIESER GETS PAID MORE. AND THE YIELD IS BETTER THAN WHAT THEY SUDDEN. AND THEY ALL WANTED VOLUME. MORE AND MORE AND MORE OF IT. SO WE HAD -- I REMEMBER THE PROBLEM -- THIS IS WHERE THEY DID NOT HAVE ENOUGH LOANS. THERE WAS SO MUCH DEMAND. SO BIG ESTABLISHED FIRMS, BERR-STERN CAME TO US AND TALKED TO US AND WE SAID STAY AWAY FROM US. THEY SET UP A MORTGAGE COMPANY AND THEY NEEDED RAW MATERIALS FOR THESE LOANS. EVEN THAT WASN'T ENOUGH. SO THEY SET UP -- THEY SET UP WHAT'S THE FINANCIAL EQUIVALENT OF FANTASY FOOTBALL FOR SUB-PRIME MORTGAGES WHERE YOU COULD BET AND BUY SECURITIES, SYNTHETIC SECURITIES, BASED ON HOW THESE MORTGAGES PERFORMED, EVEN THOUGH THEY WEREN'T DIRECTLY TIED TO THE MORTGAGES BECAUSE THERE WEREN'T ENOUGH MORTGAGES TO GO AROUND, BECAUSE EVERYBODY WANTED IN ON THIS BONANZA AND FEEDING FRENZY. AND WHEN YOU TALK TO -- WHEN YOU TALK TO DIFFERENT INSTITUTIONS, WHEN WE CONFRONTED, YOU KNOW, EVERYBODY PRETENDED THAT THEY WEREN'T RESPONSIBLE. AND THEY WERE JUST -- THEY WERE JUST ONE PART OF A SYSTEM THAT SOMEBODY ELSE CONTROLLED. SO, YOU KNOW, THE LENDERS WHO WERE USING THE WALL STREET MONEY WOULD SAY THIS IS HOW THE MONEY COMES TO US. WE HAVE NO CHOICE. THIS IS HOW WE DO IT. AND THE WALL STREET MONEY WOULD SAY WE'RE NOT MAKING THE LOANS. WE CAN'T TELL THEM WHAT TO DO. WHICH COMES DOWN TO THE QUESTION. BUT THERE IS SOME TRUTH IN THAT. I MEAN, SO WE WERE A MORTGAGE LENDER. AND WE SAW 80% OF OUR VOLUME GO AWAY. BECAUSE WE WERE TELLING PEOPLE HERE IS A GOOD, FULLY DOCUMENTED SAFE 30 YEAR FIXED-RATE MORTGAGE, AND THE BROKER WAS SAYING DON'T GIVE ME YOUR DOCUMENTATION. I'M GOING TO GIVE YOU THIS TEASER RATE MORTGAGE THAT DOESN'T ESCROW THROUGH YOUR TAXES, ET CETERA. IT LOOKS CHEAPER. AND IT IS VERY HARD IN THE INDUSTRY WHEN THERE'S A RACE TO THE BOTTOM TO SAY, NO, I'M JUST GOING TO GIVE UP ALL OF THAT MARKET SHARE AND STAY WITH MY STANDARDS. AND SO THERE HAS BEEN SOME CONVERSION WITHIN THE INDUSTRY THAT THEY RECOGNIZED IT'S ACTUALLY BETTER BUSINESS MODEL FOR THEM TO HAVE REASONABLE BASIC RULES OF THE ROAD. I DO THINK THERE HAS BEEN A CHANGE. AND, AS I SAY, THE BIG BANKS ARE NOT ASKING TO ROLE BACK THE CREDIT CARD RULES. THE BASIC OF THE MORTGAGE, ORIGINATION SERVICING RULES. AND ANOTHER QUESTION, IT WASN'T SO MUCH MEANT -- YOU KNOW, THERE WAS -- THERE WERE MORE RULES YET TO BE WRITTEN AT THE BUREAU. AND A BUNCH OF IMPORTANT STUFF THAT DIDN'T GET GOTTEN TO. AND A BUNCH OF PLACES WHERE WE THOUGHT RULES SHOULD HAVE BEEN -- PARTICULAR RULES SHOULD HAVE BEEN STRONGER THAN THEY WERE. I WAS TALKING LESS ABOUT THAT, THOUGH, AND MORE ABOUT SORT OF BEING AMBITIOUS ABOUT THE BIG PICTURE AND I THINK OF STUDENT LENDING AS MIKE SAID AS ONE PLACE WHERE WE ARE FACING A HUGE CRISIS. THAT'S CERTAINLY NOT JUST ABOUT MATTERS WITHIN THE CFPB JURISDICTION BUT IS A HUGE CRISIS THAT NEEDS TO BE TREATED. OR, YOU KNOW, I THINK OF LIKE THE CREDIT REPORTING SYSTEM, FOR EXAMPLE, WHERE THERE'S A SET OF PROBLEMS THAT PEGGY TALKED ABOUT AND THAT'S ABOUT ACCURACY AND ACTUALLY MAKING SURE THAT ERRORS ARE CORRECTED AND THE INFORMATION ISN'T -- AND THEN ABOUT BEING THOUGHTFUL ABOUT WHAT ADDITIONS OR SUBTRACTIONS TO WHAT INFORMATION IS USED HAS WHAT CORDRAY. BUT THEN ALSO THERE'S A SET OF QUESTION A DEEPER SET OF QUESTIONS ABOUT THE WAY THE CREDIT SCORING SYSTEM FUNCTIONS. LIKE WHAT ARE THE PROBLEMS WITH THE SYSTEM THATTEN IF THE TECHNICAL DETAILS ARE RIGHT IF YOU HAVE LESS WEALTH, YOU'RE MORE LIKELY TO BE LATE ON YOUR BILLS. AND IF YOU HAVE LESS FAMILIAL WEALTH YOU HAVE FEWER PLACES TO TURN. WHAT ABOUT TURNING THE EXISTING EXISTENCE OF WEALTH INTO SYSTEM THAT KEEP CHARGING YOU MORE OR DENYING ACCESS TO BETTER PRODUCTS. THAT FEELS LIKE THE KIND OF NEXT ORDER OF QUESTION THAT WE SHOULD BE ASKING ABOUT. WE WILL TAKE MAYBE ONE MORE QUESTION. FOR THE PEOPLE WATCHING ON THE VIDEO SCREEN. THEY COMPLAINED ABOUT ALL OF US NOT SPEAKING INTO THE MIC. ONE THING THEY MENTIONEDS SUBPRIME LOANS. TWO REALLY QUICK ONES. ONE IS AFTER BANKRUPTCY THE FIRST THING THAT GENERAL MOTORS WAS A SUBPRIME LENDER. AND THE SECOND THING IS ANYONE HEARD WHAT ROSHIDA HAD TO SAY AT THE HEARING ON SUBPRIME LOANS IN HER DISTRICT I WAS WONDERING IF ANYONE HAS ANY COMMENTS. ABSOLUTELY. ONE OF THE CHALLENGES WITH THIS IS IT'S HARD TO GET PEOPLE TO DO APPLE TO APPLE COMPARISON OF DEFAULT RATE WITH MORTGAGES. THEY USE THE MORTGAGE DEFAULT RATE -- WELL THAT'S A BENCHMARK. PEOPLE KNOW WHAT THAT IS. AUTOS THEY FLIP THROUGH -- YOU GO FROM LATE PAYMENT TO USING YOUR CAR IN 60 DAYS IN MOST STATES. AND SO THEY WILL ADVERTISE WE'RE ONLY 4% DELINQUENT. THOSE PEOPLE WILL CYCLE THROUGH FOR DEFAULT RATE. THE SUBPRIME AUTO IS A DISASTER. SANTANDER HAVE HAD PROBLEMS THERE. THEY WERE GOING AFTER A LOT OF THEM AS WELL AS THE OTHER REGULATORS. THAT'S ONE THING IS THE PORT CFPB HAS CHANGED THE WHOLE ENVIRONMENT. IF YOU LOOK AT THE OTHER REGULATORS. I THINK THE OTHER REGULATORS ARE DOING A BETTER JOB BECAUSE OF THE CFPB HAS DONE. FEDERAL SERVE HAS GONE AFTER WEALTH PRETTY HARD. ASSET CAP AND ALL THESE THINGS. THAT WAS NOT HOW IT WAS DONE PRE-DODD FRANK. I DO THINK IT'S CHANGE INSTEAD ONE SPECIFIC POINT TIEING THE AUTO AND THE EXPECTATIONS FOR OTHER REGULATORS. YOU KNOW, AUDIT -- CFPD GOT THEMSELVES EXEMPTED. AS CONSOLATION PRIZE THEY FTC HAS REGULAR -- IT'S TERRIBLE IMPOSSIBLE PROCESS. BUT REGULAR RULE-MAKING AUTHORITY IN THAT AREA. THEY HAVEN'T DONE ANYTHING WITH IT. AND YOU KNOW, THE KIND ON BONUSY YIELD SPREAD THAT WERE A PROBLEM IN MORTGAGE MARKET STILL EXIST IN THE AUTO FINANCE MARK AND DRIVE RACIAL DISCRIMINATION. AND YOU KNOW WE SHOULD ALL BE DEMANDING THAT THE FTV ACT ON ITS AUTHORITY TO DEAL WITH ABUSIVE AUTO LOANS. CAN WE ACKNOWLEDGE OUR PANEL. [APPLAUSE]