Consumer Financial Protection Bureau head Richard Cordray defended his agency's plan to collect financial data on 10 million consumers as necessary and appropriate in testimony today before the U.S. Senate Committee on Banking, Housing and Urban Affairs.
The data, which include information on consumers' credit card use, mortgage payments and other financial transactions, "is widely available, widely used" and anonymous, Cordray said. "The notion that we are tracking individual consumers or somehow invading their privacy is quite wrong." He stressed that the agency needs the information to understand market trends and write reports to Congress.
The testimony - the 32nd time an official from the new agency has appeared on the Hill - was to present the CFPB’s semi-annual report to the Senate. However, Cordray won’t be making an equivalent appearance before the House. In an April 22 letter, Financial Services Committee Chairman Jeb Hensarling (R-Texas.) told Cordray he won’t be invited because his recess appointment is invalid - therefore he’s not really the director of the agency.
Republican members of the Senate banking committee focused many of their questions on data collection. Senator Mike Johanns (R – Neb.) called it “downright creepy” and a “very uncomfortable situation for your agency.”
Senator Mike Crapo (R – Idaho) added that the “bureau was founded to watch out for American consumers, not to watch them….Although I understand the need to collect data, I’m very concerned about the heavy hand of the government.”
“We have no interest in, how did you put it, watching consumers,” Cordray protested. “We’re not really interested in personally identifiable information….For us, it’s a hassle. What’s insightful to us is anonymous information that tells us about consumer behavior, consumer harm. We don’t want to know about you personally.” He told lawmakers that the CFPB bought credit card data from Argus Information & Advisory Services. “We’re following very well-plowed ground,” he said.
Bloomberg News on April 17 first reported the CFPB’s data collection efforts.
Crapo also pressed Cordray regarding whether a government contractor could reverse-engineer the data to extract personally identifiable information. “It’s certainly not what we’re doing or going to be doing,” Cordray said, but later added that these were “fair issues you’re raising” and that his staff would meet with Crapo’s. “We want to dispel any concerns on this front,” he said.
Crapo also questioned whether it was legal under the Dodd-Frank Act that created the CFPB for the agency to collect personal information about consumers.
Cordray pointed out that when consumers file complaints with the agency, they provide personal information like their names and addresses. “That’s voluntary,” Crapo said, and asked for a legal analysis of the data collection.
During the hearing, Cordray also offered up that his appearance before the committee is “not fun and games for me.”
If so, maybe he didn’t mind Hensarling’s letter informing him that he won’t be appearing before the House committee.
Hensarling cited the January ruling by the U.S. Court of Appeals for the D.C. Circuit that recess appointments to the National Labor Relations Board made the same day as Cordray’s recess appointment were unconstitutional. Although Cordray was not named in the suit, Hensarling said the court’s decision meant that Cordray’s appointment “was also unconstitutional. Absent contrary guidance from the United States Supreme Court, you do not meet the statutory requirements of a validly-serving Director of the CFPB and cannot be recognized as such.”
“The Committee on Financial Services stands ready to accept the testimony of the Director of the CFPB…as soon as an individual validly holds this position,” Hensarling wrote. In the meantime, he said that the committee expects the agency to make other employees available to testify and respond “fully to Committee requests for documents and information.”
A CFPB spokeswoman did not immediately respond to a request for comment about the letter.