'You Just Don't Have Credibility': Andy Barr Grills CFPB Director To His Face

3 months ago

During a House Financial Services Committee hearing Thursday, Rep. Andy Barr (R-KY) spoke about CFPB regulations.

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00:00Kentucky. Mr. Barr for five minutes. Director, I'm looking at a survey right now. Seven out of 10

00:06consumers rank good fraud protection as their top consideration when choosing a financial

00:12service provider. And it stands to reason, because in 2023, total global fraud costs

00:18reached almost a half a trillion dollars, including payments, check and credit card

00:22fraud. This is clearly a major risk to our financial system institutions and American

00:28consumers. Unfortunately, your regulatory efforts will actually decrease financial

00:33institutions' ability to provide meaningful fraud protection by making it more costly

00:37to provide these services. For example, your flawed credit card late fee overdraft and the

00:42credit card reporting rules or guidance on remittance transfers. Impeding a financial

00:47institution's ability to charge consumers for a service they provide is your attempt

00:52to make financial institutions public utilities and not free market businesses.

00:57Do you recognize, Director Chopra, that fraud detection and prevention is very,

01:03very important, number one? And number two, do you — and I know you care about consumers.

01:08Do you recognize that the junk fee, the quote-unquote junk fee agenda will actually

01:14hurt consumers by reducing fraud prevention? So let me be very clear. What you're saying

01:21is not accurate, in my view, respectfully. We have done so much to make sure that we

01:25can do more to detect and deter fraud. I think fraud, when it comes to identity theft,

01:31when it comes to the use of generative AI, is going to be an increasing issue, and even

01:36old-school check fraud is increasing. I agree, but have you actually —

01:40But I do not — Director, reclaiming my time, I agree that AI and all these other

01:45technological innovations can help with fraud prevention, but do you actually talk to the

01:50financial service providers that you oversee about the junk fee agenda and how that's going

01:54to reduce their ability to invest in fraud protection? Do you actually talk to them about

02:00this, the regulated entities that you oversee? Because they tell us —

02:05Very, very frequent. Well, they tell us that you don't listen,

02:08because what they're telling us is that your junk fee agenda is going to limit their ability

02:13to prevent fraud. And I want you to take a look at that. I think you need to take a look at that,

02:18because if you don't, it's all junk economics. Well, we are doing a lot more —

02:22Second question, let me move on, because I want to talk about data that undergirds,

02:26that's supposed to undergird your administrative decision-making. Under your leadership,

02:30the data collection efforts and cost-benefit analysis have simply lost credibility. The Bureau

02:36has played fast and loose with the data you rely on, ultimately leading to harmful rule-makings

02:40that rely on junk economics. For example, the Bureau's so-called analysis of the deterrence

02:44effects of late fees is largely unjustified speculation that favors political results you

02:49seek. The overdraft rule ignores market trends and innovation and instead cites data that's more

02:55than decades old. In the credit card late fee rule, your calculation of the impact to annual

03:01percentage rates changed significantly between the release of the proposed and final rules,

03:05relying on a mere assumption from a previous academic paper rather than any credible

03:10quantitative analysis. The mortgage closing costs RFI cites only two data points, shockingly,

03:17for the credit header provision of the FCRA rule-making outline. You aren't even appealing

03:21to data at all. So, Mr. Chopra, with so many examples of misuse or complete avoidance of data

03:29and increasing use of unjustified conclusions from what can only be loosely called analysis,

03:35how can the public or Congress trust the rule-makings or the administrative decisions

03:40that you promulgate? Well, some of it is really a balance. We try and make sure that we're using

03:45existing data that's already there because we often get feedback, including from you, about

03:51doing too much collections. So, we will rely and look at old studies as well as new studies to see

03:58changes in the market. I would say empiricism is a foundational part of the CFPB's work because

04:04that is a lens in how we can make the best possible decisions. I agree, sometimes we won't

04:10always have the newest and freshest and fast-moving markets, but it's also a balance

04:14about, you know, making sure we're not engaging in too much burden as well. You've got to do a lot

04:19better job because you just don't have credibility. The data is not there to support any of what

04:24you're doing. I would respectfully disagree. I know you disagree with that. I disagree with you

04:28about that. The Bureau should want rigorous cost-benefit analysis to defend the Bureau's

04:36decisions. This is in the interest of the Director's Office. It's in the interest of the

04:40Bureau to have defensible data, and you don't have it. Final question, Director Chopra, who decides

04:48if a civil investigative demand appeal is approved or denied? So, with CIDs, sometimes they go to a

04:56district court. Sometimes they can go to appeal to the Director. Oftentimes, it's negotiated.

05:02So, my time has expired, but this is the problem. You are the judge, jury, and executioner,

05:07and that's why people don't see the process as due process. I yield.

'You Just Don't Have Credibility': Andy Barr Grills CFPB Director To His Face

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