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welcome to the consumer financial protectionboard credit union advisory council. i'd like to turn it over to director cordrayfor a few comments. i would just like to welcome everyone. thisis the public session of the credit union advisory council. these are folks who haveapplied and been chosen, with a lot of input from around the country. they bring us considerableperspective about how the work of the cfpb potentially affects credit unions, how theyare finding issues and situations in their markets. any input that they want to giveus is always welcome. we are going to have a couple of sessionshere this afternoon where we are going to talk about some specific issues. and we welcomethe public both here and anyone who may be

following the meeting publicly.i thought we might have some congressional staff here. do we have some congressionalstaff here? so i wanted to acknowledge them. anyone? there were a couple of rsvps. maybethose didn't materialize. but, in any event, we welcome all of you tothe meeting today. thank you, director cordray.as you know, the bureau organized the group for credit unions in 2012 for a way for usto be able to provide feedback back on a very concrete basis to the bureau and the bureaustaff. it has been a great dialog session with the folks around this table and previousfolks that served on the advisory council. and we appreciate the bureau's listening ear,as we are able to help them form policy and

procedures for the industry. as you know, the bureau regulates financialinstitutions over the 10 million- 10 billion dollar mark.but today, specifically, in the public session we are going to hear on a couple of topicsfrom bureau staff. the first topic is going to be on overdrafts and the information thatis coming out on the narratives. and then, also on the consumer complaint narrative thatis on the website now. and so, we are going to be hearing from staff specifically aboutthose two topics, and, of course, welcome the council members to ask questions, comments,exactly like we have been doing all along, and feel free to interject as bureau staffis giving us that information.

okay. so, first off we have, let's see here,gary stein and jesse leary for overdrafts. thank you both. all right. thank you very much.so, my name is gary stein. i am the program manager for deposits in our markets group,which is a kind of product-structured unit that sits in our research markets and regulationsarm of the bureau. and jesse leary who is the section chief in our office of researchis here and will, hopefully, do most of the talking this afternoon.but i wanted to give you an update on our overdraft inquiry that we kicked in february2012. and then, jesse is going to give you a summary of a datapoint that we publishedin july of this year, some update of the analysis

on overdraft, as we continue to forge throughthat. so, just to recap quickly, in february of2012, we initiated an inquiry into overdrafts. it wasn't a statutory requirement, like alot of the work that was going on at the bureau at that time, but more a feeling that thiswas probably the area of greatest interest and noise in the consumer deposits space.and so, we kicked off a couple of major initiatives at that time. we had a request for informationout to all stakeholders and the general public, asking about 18 very detailed questions aboutoverdraft programs, how they worked, how the industry and consumers had adapted since thefed had made modifications to reg e in 2010 and to reg dd and the guidance that the otherprudential regulators had released prior to

that. and then, we got back about 1100 responses,many from individual consumers, but many from credit unions, community banks, large institutions,vendors, trade associations, you name it, advocates. and it gave us a pretty diverseperspective on overdraft programs, though not a scientific survey certainly of the industryor of anybody. we also initiated at that time what we callour large bank study where we worked with several large supervised entities to reallyget under the hood to understand how their programs work, not with the expectation thatevery institution is like a large bank, but more because it would permit us to talk ina very granular level about the operational

aspects of these programs and how they evolved. and most of that work culminated, the firstround at least, in a white paper that we released in june of last year. in that paper, we triedto kind of level-set for stakeholders and describe fundamentally how these programs,why we may see issues with high fees paid by consumers and what happens to their accounts,and so forth, and really drew on the research that we collected through the rfi, which ishould add included a number of industry surveys conducted by trade associations and others,as well as that large bank study, the first round from that.since that time, we have continued to analyze and collect additional information becausein that white paper, i think while we probably

explained a lot about how these programs work,every time i think we identified a specification or something, it triggered three or four morequestions. so, why is this; why is that? and so, we raised a number of public questions.we didn't feel our analysis had been completed at that time. and so, we have been hard atwork on that. one of the things that we were able to obtain,though, as part of our large bank study data request was transactional information de-identifiedwith no personal identifiable information, but on approximately, i think, 2 million accounts,so that we could really observe how the combination of these program configurations and consumertransaction patterns resulted in outcomes for consumers. and so, the datapoint we releasedin july was really the first pass at the results

of that.so, i will turn it over to jesse right now. and then, i can follow up after he is doneand give you a little bit more update on where we are on some other initiatives and wherewe are headed. great. thanks, gary.hopefully, folks will be able to see these slides as we go along here. to give a little more context, as gary wassaying, this is based on data received from a number of large supervised banks. the datapointwe put out in july, it is a summary of information about some key points relating to overdraft,but it by no means reflects the breadth or the depth of the analysis that we have beendoing with this data. and i think we expect

to put out additional analysis for the publicas we work through this as well. so, again, these are a set of initial findings that wethink are important to understanding overdraft, but not the full breadth.the focus of this discussion is going to be on the relationship between opting in to overdraftcoverage on point-of-sale debit and atm transactions and overdraft fees. the distribution acrossaccount-holders of overdraft fee costs, typical- the characteristics of typical overdraft transactions,and also, how long account-holders remain negative, how long the balances on accountsremain negative after someone does overdraft. so, let me back up. so the first point aboutopting into overdraft, just to make sure everyone is on the same page with what this means,under amendments to regulation e that the

federal reserve board put in place, startingin july 2010, for a financial institution to charge a consumer an overdraft fee on anatm withdrawal or a point-of-sale debit card transaction, the consumer had to have firstgiven consent to that. so that's called the opt-in. we have heard this as opting-in.and the disclaimer, i'm an economist, not an attorney so, if any of what i say is notprecise legally, i apologize. but because i am an economist, not an attorney, you can'thold me to it. so, these are summaries of the average monthlychecking account fees per account. i apologize for the size of the font, for some of thefolks in the back. and this shows, and again, this is based onaccount-level data from a number of large

banks where we have detailed transaction information,and so, are able to calculate average fees at the account level. what this shows, if you look at the firstcolumn, an overall average for this set of fees of just under $10 per month per account,with just a little more than half of that being overdraft and nsf fees.if you look across to accounts that are either opted-in or not opted-in to the coverage ofdebit card transactions and atm withdrawals, you see that there is a pretty dramatic differencein the overdraft and nsf fees that are paid, depending on whether an account is opted-inor is not opted-in, with the overall fee level being about four times higher for accountsthat are opted-in and a much larger share

of their overall fees being overdraft andnsf fees. i should say that this isn't simply a directeffect of being opted-in. the difference in fees is not entirely due toâ  the differencein the fees is not just the difference in fees on debit card transactions and atm transactions.what we see is that accounts that are opted-in tend to have more overdraft fees on all theirtransactions. so, that raises the question of whether this is causal, that being opted-incauses some sort of knock-on effect that leads to other overdraft fees or whether it's simplya matter of different account-holder behavior that is correlated with being opted-in ornot opted-in. and that is something that we are continuing to look at. the next slide-and i should say, all of the folks who want

to see this in detail, and either are havingtrouble seeing the slides or just want to have something to take with them, all of thisis lifted directly from the datapoint that we put out in july, and that appears on thebureau's website. this next slide shows how overdraft transactionsand overdraft fees are distributed across account-holders. what it shows is that, for70 percent of the accounts that we have data on, there are no overdraft transactions overthe time period covered by the data. or, actually, this is over a one-year period. the data coversa full 18 months. we are looking at the last year of the data, so that we can put thingson an annualized basis. it makes it a little easier to communicate.so, 70 percent of the accounts don't have

any overdrafts. an eighth, 12.5 percent, havea very small number, one to three, and they pay quite a small share of the overdraft fees.and a small share, about 8 percent, incurs 10 or more overdrafts per year. and that grouppays the majority of the fees, nearly three-quarters of the overdraft fees. something to note about this is the numberof overdrafts includes overdrafts on which a fee is not charged. and so, that is whyyou will see the average fees paid for the group with one to three fees is less thanthe average cost of overdraft, simply because there are some transactions that result inan overdraft, but for reasons related to either the type of transaction or de minimis policies,et cetera, there is no fee charged on this

transaction.the next slide shows the same analysis broken down by accounts opted-in and accounts notopted-in. and what we see is that, for accounts that are opted-in, only about half of themdon't have a fee over the course of a year. so, a considerably larger share of accountsthat are opted-in had at least one feeâ â i'm sorry had at least one overdraft transactionover the course of the year. and a larger share of those accounts have at least 10 overdrafttransactions over the course of the year. we still see, even with the breakdown, westill see that the majority of fees are paid by people who have a significant number ofoverdrafts. the next slide, we look at the median sizeof overdraft transactions. and these are transactions

on which an overdraft fee was assessed. andwhat we see is that, not surprisingly, the size of the transactions differs across thetype of transaction. but for some of these types, so debit cards, which are the mostcommon type of transaction of these different transactions, are also the smallest, withthe median transaction size of $24. so, that means, of the debit card transactions thatlead to an overdraft fee, half of them are $24 or less. and this is, for the banks thatwe are analyzing here, the median overdraft fee is $34.finally, we looked at how long accounts stay negative. so, this shows the distributionof the length of time that an account stays negative after experiencing overdrafts.

so, what we see here is that, for just under30 percent of the occasions where an account is overdrawn, the next day the balance isbrought positive. the median time is three days. so, half the time following an overdraftthe account is brought positive within three days. and i believe the statistic for a weekis 75 or 80 percent. so, within a week, the majority, the solid majority of accounts havegone positive again. the spike out at 45 days, those- a large portionof those are accounts that have gone negative with an overdraft and are not going to becomepositive again. they are going to be charged off or abandoned.so, to summarize the key points of our first publication on the account-level data, theoverdraft fees make up the majority of the

fees on consumer checking accounts. consumerswho have opted-in for overdraft coverage of their atm and debit card transactions havemuch higher overdraft frequency and pay substantially higher overdraft costs.the majority of overdraft fees are paid by a small share of account-holders. i shouldsay this is consistent with previous research, i should point out.many of the overdraft transactions are fairly small, especially debit card transactions,which tend to be small in general. the debit card transactions that lead to overdraftsare, on average, quite small. and finally, when consumers do overdraft,they typically bring their accounts positive again within a fairly short period of time.so, those are the findings of what we have

put out so far, and we would like to invitequestions or discussion or comments on this topic.i have a comment. i have a comment. so, the comment about a lot of overdraft transactionsare small, what proportion of the total transactions in an account is small? that is, if it isa random sample and you have 1,000 transactions in a month, and 80 percent of those transactionsare small, then it stands to reason that 80 percent of the transactions that cause theoverdraft would be small. do you see what i'm saying?sure, and i believe the distribution of transaction sizes that caused the overdrafts are similarto the distribution of transaction sizes within each category. so, they are not unusualâ that is not really information then. that

is not really information then. i mean, itis a random distribution. well, it'sis it random or not random? the implication that one might draw is that, one implicationthat one might draw is that it is an impulse transaction. people don't know what theirbalance is. they are getting this fee, a $34 fee for a $20 transaction, and that's a badthing. we need to do something about that. on the other hand, it might just be that ihave 100 transactions during a month. "x" percent are small. so, if i am having a problemand i overdraft, the one that triggers it, the chance of it being small is high, right?i wouldn't say it is non-information. i would say it's- in trying to understand what isgoing on in overdraft, its important to know

whether the transactions that lead to overdraftsare similar or different than transactions generally.right, but this doesn't give that to me unless i've got a distribution on what the transactionsare. yes, that's a useful suggestion. thank you.yes. jesse, i find your summary very fair. i thinkit is worth pointing out the last bullet, though, that when consumers overdraft, theyusually bring their accounts positive quickly. the other point i would make is that, hadyou pulled up that fee survey and just confined it to the credit union space, you would havefound a lot of zeroes on that. thanks, john.can you remind us how the overdraft study

got on your radar screen or why it was a study?okay. so, the concept of overdraft in general being the focus was, it is kind of multi-pronged.i think in setting up the office for deposits, i don't think it was hard to find out whereprobably there was most noise in the marketplace about, consumer anecdotes about, and complaintseven before we started collecting complaint information and the advocates. and they wouldgenerally raise would be about overdraft programs. so, in some ways it was kind of one that waswaiting for us, if you would, before we opened our doors. but, in addition to that, the timing, whetheror not the bureau was created, would be really appropriate i think for any regulator to takea look at this, in the sense that there had

been over the previous decade a lot of regulatoryactivity that had geared towards modifying overdraft programs, that most recently, asi said, culminated in the fed making a couple of regulatory changes in 2010, most notably,to require institutions to collect a consumer's affirmative consent before they charge a feeon debit card and atm transactions. and there really had been no postmortem onthat change. if you look at- and it is a little easier with banks than credit unions becauseof the details in the public call reports. but, if you look at bank service charges ondeposits, you would see a huge dropoff around the time that these regulation modificationswere made. now i don't think we would attribute all ofthat dropoff to challenges in collecting consumer

overdraft fees. there was also an economicdownturn and people started spending less and things like that. but, certainly, thereis enough noise to warrant attention. the prudential regulators and i'm sorry ifi'm droning on about this, but i can just say two quick things the prudential regulatorson the banking side at least had all issued guidance that was inconsistent to some degree.and so, there was a bit of an uneven marketplace for depository providers in terms of overdraft.so, there was an opportunity to even that out.there was research that said consumers were still confused. oh, and the last point i thinkthat also drove to this and drove to some of the regulatory changes was just the factthat consumer transactional patterns had been

changing rapidly.so, your question about debit cards was a great one because i think a lot of peoplemight have prophesized that, when overdraft first started, it was for, you know, you writeyour big check for your mortgage or something, and you want to make sure that goes throughas a courtesy, which i think is very well-founded. but when consumers started using debit cards,which are a great convenience and advancement in consumer banking, the nature of all thatchanged a little bit. and so, it has been a bit of a moving target.so, can we infer that you are going to look at potential changes in policy to treat ach,atm, and debit cards differently? i think that remains to be seen a little bit.i think one of the reasons atm and debit cards

were, and i wasn't at the fed at the time,but i would rationalize back that they were picked out is because the institution hasthe opportunity to authorize or decline those transactions at the time the consumer executesthem and could directly prevent a consumer from going into overdraft with no nsf fee,which is a little different from a check or an ach transaction, the way things generallywork right now. but i would say, to your broader question,robin, yes. i mean, the point we engaged in this was to determine whether any policy changesare required. and i think we went into this with no preconceived objectives to make aspecific change. there has been court cases on posting order, among other things, werethe regulatory changes.

and so, i think we have a responsibility tohave a perspective on all of those things and to determine whether or not- what typesof changes are required and how to execute them.gary, two things. the first is in today's environment we don't get a lot of thank you'sfrom our members because our deposit rates are low.mhmm but one of the things we do get letters onfrom our members or calls is to thank us for clearing items through overdraft. it is oneservice that we have given our members that they really like and they really want. andwe very rarely, when we do our member surveys over the year, we might get one or two sayingthe fee is too high or don't charge a fee

for it, but i usually get, "thank you. itcleared," or we get letters. the second point, you know, it has been regulatedover the years. so now, on everybody's statement every month they know exactly how much theyspend on overdraft a month and how much they spend on it on a yearly basis. if a member sees that and doesn't want tospend for overdraft, all they need to do is call and say, "i don't want it anymore." youknow, it is an option that they can use or can't use. nobody is forcing them to use this.and most people like it and know what the fee is associated with it.i mean, yes, there are issues that you have with maybe people posting different ways andtrying to grab more fees than maybe they should.

but everybody is aware of what they are spendinga month because they see it in front of them. and if they don't want it, they don't haveto have it, but most people don't opt to cut it off.so, if something is working and the members really like it, why is there a need to changeit? that's a great question. so, i would say wecertainly have enough volume of noise on the other end and that others have collected forus that suggests that not everybody feels it is working perfectly. and certainly, thereare 14,000 depository institutions. so, it would be crazy to say that there is the samelevel of understanding or everything at every single institution. certainly many of them,i am sure many of you all in this room offer

protections and things for your members thatmany other institutions may not offer. and so, it is not even across the board.one of the things that we raised in our white paper was, okay, we tried to explain how thisworks operationally. posting order, while it has been in court cases, quickly escalatesinto some complicated discussion about different types of payment systems. i mean, a checkingaccount, first of all, is a very powerful tool, and it is a great consumer convenienceand provides an opportunity for mobility. it allows, generally, consumers to transactthrough a lot of different methods, and these methods and payment systems all operate ondifferent time schedules with different rules and things like that. and so, it culminatesin the institutions that offer them to have

to figure out operationally how do we updateaccount balances for all these different transactions and in what time basis and in what order.and as a result, there is a lot of operational decisions that institutions have to make justin that area alone, plus others. and so, there's a variety of different practices.and as we go through and we see consumers, and one of the reasons we wanted to look atthis was to see how the consumer outcomes vary by all these differences in practices.and so, that is one thing that we want to understand.and would a consumer that does something at bank or credit union a experience the sameoutcome that they would at credit union b, and why is that difference? and could theyanticipate that?

we also raised questions in our white paperabout the level of consumer understanding about these things. to what degree do theyanticipate that, to your point on opt-in, i would agree with you there is certainlya requirement that says consumers have to have the ability to opt back out, althoughwe see few consumers that do that. and so, we actually initiated some qualitativeresearch earlier this year that is just getting wrapped up right now, where we set out tohave in-depth interviews with close to 100 heavy and moderate overdrafters to understandwhy they do the things they do. we can see what happens. we can see that consumers sometimesoverdraft a lot. we might be able to see what operational practices might contribute tothat.

but we can't, to your point, which i thinkis a great one, understand why a consumer would do that and what choices do they feellike they have. and so, that was one of the points of our research. i just want to give you one example of that.yes. there was a couple that were members of ourcredit union who had several thousand dollars of overdraft fees a year. and we actuallysent them letters and called them because we were concerned.they said, "it's our marriage counselor. we both write checks and we don't want to bothereach other or say where is the money. and we know that we are spending `x' amount ofdollars. but you know what? we pay it back.

it saves our marriage, and we don't have toworry about it. thank you very much." and they knew exactly what they were spending,but that is the way they financed their money. i mean, we brought it to their attention. so, there's many different ways why peopleuse it. it's their money and we let them know what they were spending. and they said, "hey,we know." i would urge you, as you go through the research,that is 100 interviews; people don't necessarily self-disclose.yes, right. because what we have found, we have a pettylending program and overdraft privilege, and members love it and all that. and what wefind, when we find what we call the abusers,

and we call them like you call them and talkto them about what's going on, you know, there's lots of behaviors that are going on and, forwant of a better word, psychological profiles. so, we have had very fluent people and say,"three thousand dollars worth of overdrafts. what's going on here? you know, you're a smartbusinessman. you have multiple businesses." "don't bother me. this is just the way i doit," essentially, was what he was saying. so, i think that research is great. i am veryencouraged that you are doing that kind of research. continue to do it, so you will understandwhat that consumer is. we live it every day. so, we know these consumers very well.one research project, 100 people, that's not a lot. and plus, the self-disclosure problemis a real one.

yes. no, i would agree on both counts. wehave had some other outside parties provide consumer research to us, and we have otherdata to draw from. but i would agree. i mean, there is a lot ofâ  there's always stonesto unturn. and your point on consumer acknowledgment,i would say we wholeheartedly agree with that. in fact, i think it is a challenge in a lotof the issues that we, the bureau, addressed. in these types of things, one, will they admitwhat they are doing? and two, when confronted with an opportunity to change, how realisticmight they be about whether they are going to do it again? and those are difficult thingsto wrap into policy considerations. two pointsyes.

if i may? the first is that the statistics,if nothing else, show that what the fed put into place in 2010 is working; certainly,the overabundance of transactions by people who have chosen to opt-in. so, i think itis fair to draw the conclusion that those who are being charged for overdraft are awareof the fact that they are being charged and that they are happy with the program. otherwise,they would not have chosen to opt-in or, otherwise, may have chosen to opt-out. i think the second thing that needs to benoted is that the world of payments is significantly changing. and to differentiate between a checkand ach and a debit, five years ago it may have made a lot of sense. but i think in 2014,bordering on 2015, we are coming to a system

where all of those things are blurring.years ago, if you went into a supermarket, you paid the transaction in either cash oryou walked in and wrote a check. mmhm.and you wrote a check for something that was a necessity for you at that moment in time.how many people write a check in a supermarket in the fourth quarter of 2014? the mechanismof choice is the debit card, at least from what i see.so, by looking at a check one way and looking at a debit card transaction another way, youare kind of discriminating against the trends of society in the ways the members are startingto use to access their money. we just urge that you be careful that we areusing 2014-2015 banking habits as opposed

to thinking that we are back 10 or 11 yearsago, because we are not. and even if a member writes a check, theyare just as likely to hand a check back to the member and treat it as an electronic check.and we used to offer a product. we deal with a lot of members who have never had a checkingaccount before and who are having difficulty managing from day-to-day, week-to-week. weused to offer a product for 25 years called courtesy call, and we would call the memberby 5:00 one day and give them until 1:00 p.m. the next day to make good on a check. but now, we can't do that. the processingtimes have changed. we don't have the discretion to turn back an ach or an electronic check.we can do it instantly, but we don't have

any wait time. so, we have had to go to othermechanisms, including the courtesy pay, instead of the courtesy call.gary, i have a question for you. do you all have any data as it relates to how many ofthese accounts that remain overdrawn for 45 days fall off and are actually charged off,and then, those members or those customers no longer have access to, say, mainline financialservices? and they become the unbanked. we do have information on whether the accountis closed with that institution. we don't have information on what happens with thatconsumer afterwards. we don't know, we don't serve we aren't able to follow the consumer.the data we are working with came from the banks.

it appeared to me that about 3 percent ofthose transactions, just looking at your graphic, possibly would end up in that plight. andso, that 3 percent could equate to quite a number of consumers. and so, from my experiencein the market, some of where the objections come from as far as overdraft programs ingeneral are concerned is that there are a group of consumers who don't really understandthat much of what is happening. they like the idea that this month their checks aregoing to be covered, but they cannot afford the overdrawn account. and when their directdeposit or their social security check hits, it fills that hole, but it gives them nothingto live on. so, it puts them in a spiral of negative activitybecause next month they are going to start

paying bills, and every one of their checksor debit cards, or whatever the transaction might be, will end up costing them.so, i think that should probably be something that would be considered in whatever ruleswould come out of this study. and i have got to thank helen for the pluglead-in there. because, actually, next wednesday the bureau is going to be hosting a forumon checking account access and screening, and looking at this ecosystem and the cyclethat happens to consumers, how institutions determine when and when not to offer a checkingaccount to an applicant, the information they use. and then, how they report back on consumeractivity. and helen has graciously agreed to serve asa panel moderator in that event. so, i appreciate

the plug and the comment there.but i think it is an excellent question and one that i think we will spend a lot of timetalking about next week. gary, as part of your research, did you getdown into the weeds as to who uses overdrafts; i.e., annual household income, any kind ofethnic, racial, social, economic background? because i know maybe the stereotype is thefolks that are being abused are poverty and below. and, in fact, you may find that itis actually higher-income individuals who are using this as a safety-net feature orpart of how, as mitch said, save their marriage, whatever the case may be.and you may not have the answer to that, which is fine. but, if you haven't asked that question,i would.

secondly, in this, was there a study on themedian merchant fee for a returned item? because that is important because that is what theconsumer is not having to face when we cover their overdraft or a financial institutioncovers that overdraft transaction. so, that is an economic benefit, also a convenienceissue, but it is also an economic benefit because they are not having now to face themerchant. you know, i struggled when my credit unionimplemented courtesy pay, which is enhanced overdraft protection, until i had a membercome to me and say, "because you offered this, and i was two days short of payday, and iwas able to get formula for my baby. so, paying the fee was not a problem for me." okay? thatopened my eyes.

but, by the same token, it opened my eyesto those who abuse it, okay, to where, like kevin and others have said, we pull thosemembers aside to find out what's wrong. and we will put them in financial counseling,free of charge to the member. we will pay for that to help them get their account straightenedout, but they have to do that voluntarily. i can't make them do that.because i have had members say, "i know what i'm paying. you don't have a problem withme. okay?" so, those are things that won't necessarilycome out of the study, but there are abuses, but it is not the evil instrument that i thinkmaybe it has been puffed up to be, so to speak. thank you, jim.i would like to talk about, and i know many

credit unions do this as well, but we havehad a practice in our credit union for many years that we do courtesy calls for deposits.so, our branches know these numbers very well. and so, every morning there is a list distributedof members that have overdrafted, and we give them a courtesy call. nowadays we send thema text as well. and they have until five o'clock that day to make a deposit, and we will notcharge them that overdraft fee. now you know that that costs the credit unionmoney to keep that negative balance, but we believe that we are providing a service. andmembers have a choice, and i think we have said it around this room. we all probablydo financial counseling. we have done that as well. we have helped members that wantto get out of that odp situation and give

them a small dollar loan to pay back overtime, so that they can opt-out. there's been very few, but we do offer that service.so, we are trying to be as proactive as possible and still giving members a choice to handletheir odp. i just want to make one point which hasn'tbeen brought up yet. it is, for most people, courtesy pay is a tertiary way of paying acharge. because we would overdraft first free from a savings account, and then, we offera line of credit, which we overdraft for free as well.so, you have two options with our credit union to overdraft without paying anything. it isonly when those two don't have anything available does courtesy pay hit in, and then, a feeis charged.

and we let people know. i mean, on everythingwe send out it will say, "remember, you can also use your savings account and a line ofcredit to cover overdrafts for no fee." so, there are alternatives to using courtesypay and having to pay a fee to pay for your overdrafts.but i would like to just ask, what is going to happen if you prohibit us or make it moredifficult for us to offer this program? you know, how are our members going to get cashthat they desperately need? have you thought about what those alternatives are going tobe and where they are going to go? my credit union is a cdfi. many of our, youknow, two days before payday overdrafts are "i'm at the gas station, i'm at qt and i needgas." we literally sometimes have people calling

us to make sure that they can get money outof their debit card. so, their ability is to do that. and some of that is because, as you may ormay not know, at a gas station, and especially qt, if you go in there, they may put a $50hold on there to make sure that that clears. so, if they are running very lean and meanin their checking account, that $50 hold plus the 24 bucks that they need for their gasis going to cause them to overdraft. so, thoughts, also, of where would our membersgo; how are they going to be serviced? and some of the alternatives that are out therearen't very pretty. so, food for thought. tagging off of that, is there any data thatsays where this money, where these debit transactions

are taking place, what percentage is for food,what percentage is for gas, things that are necessities to life?so, first of all, i like all the questions, and i like that you don't let us answer them. so, this is a great session. i'm sorry therewas a pause right there. so, i will just answer that last one first.the data that we have, because we don't have any personally-identifiable information, unfortunately,things like those merchant codes, we can't see that. we have seen analysis that othershave conducted. and as you might expect, it is generally quitedifferent if it is happening with a debit card than with a check or an ach type of payment.as jesse indicated with the research, those

transactions, whether they are causing anoverdraft or not, tend to be very different. they are used for different purposes, evenin some cases where those lines are starting to blur a little bit, but they are still quitedifferent. so, i would just say that, with regard tohow overdraft is used, the benefits of overdraft, and the consumers' alternatives, those areall things that we need to be cognizant of; we need to be thinking about as we are doingthe research and thinking about what good policy would be i this area.and so, things like transactions that are able to go through that either allow someoneto make a purchase that is a very, very high value to them in a moment or allows them toavoid having an nsf situation, certainly the

things that we are thinking about trying todo our best to understand and incorporate into the thinking.do we have any other questions? jason?yes, these are all great comments that people have made. it is all about unintended consequences. another unintended consequence from changingthe overdraft programs as they sit today is our bottom lines. as credit unions, the onlyway we can grow in our equity position is through earnings. we already naturally havea small or thinner margin. taking away a fee product is going to add a larger disparateimpact on credit unions as opposed to a larger financial institution that has a lot broaderway of making revenue.

so, that is just another one of those unintendedconsequences that we have to look at from not just credit unions. i think mutual savingsbanks are probably set up the same way. so, we need to think about all of those.i just had one sort of research question again. i apologize for that. but it gets to some of the comments we havebeen making here. one of the things i think that, from a policy perspective, is a naturaltendency is to look at a discrete product at a discrete point in time. the productswe have all been talking about are cash management products that are for usually a month periodor what the pay period is. and so, perhaps at some future time you canlook at that relationship of what is going

on over a period of time, rather than at adiscrete product or a discrete point, because, then, you may get some understanding aboutwhat is happening that will inform your policy decisions, if that makes any sense.maybe. maybe sometime in the future. the cash management go ahead.do you mean looking at what is going on over the course of the pay cycles or the courseof the monthly expense cycleâ  yes.and trying to see when overdrafts are occurring? yes. yes, that is something we are interested in.we have tried to identify pay cycles. there

are some people where you can look at theirtransaction data and see the pay cycle with otherthe issue is you refer to the difference between overdrafts with checks and overdrafts withdebit, and you see a difference. that difference may just be a function of the way the individualis monitoring their cash management strategy. and they pull it right up to the edge, andit is at the edge where overdrafts start kicking in, but they have taken care of the big, youknow, in some cases things. so, you wouldn't know what is going on unless you looked ata period, rather than just a discrete point or a discrete product, because they are usinglots of products. if you talk to a consumer, they are usinglots of products to keep their house together

when they are in the situation. and so, ithink it might mislead you in terms of a policy decision by not looking at a bigger picture.that's all. you probably don't have the resources to do that, but just if you ever do.okay. and just from my experience with my members,what my members need to help manage their cash better are better jobs with higher pay.if i could just have a little bit of a contrarian view, we never did courtesy pay. we lent probably$40 million in income before dodd-frank required it. and it did not harm our financial position.you learn not to rely on that type of income. and i applaud you for recognizing the changein the transaction set. and some of it is societal. the use of debit cards is obviouslya much higher usage.

but i ask a lot of my members, especiallyyoung members, if they had a buggy full of product at the grocery store or home depot,would they rather that the clerk turn down the transaction or that they pay $25, $29,and let the transaction go through. and i get a variety, but i will say more and moreyoung people actually would prefer that we turn down the transaction.and i think that is becauseâ  and i always underestimate the number of transactions.i always say, well, how many would use it more than 10 times, a debit transaction morethan 10 times a week? and they laugh in my face because they are using it, i think yourreport showed 17. so, some are using it 20; some are using it 30, which also means theyare not tracking their balances very well.

i mean, we used to actually enter it intoour check registers, and they laugh at that. so, i applaud the fact that you are lookingat the change in the dynamics, but they seem to have a handle on the fact that they areprepared to have us turn it down, in which case they would opt-out. they would say, "idon't want you to do that." and then, there are some that do.so, i don't know if you are headed towards an additional disclosure requirement or aprogrammatic requirement, but i do think that the dynamics of the market are changing. weare here to improve our members' lives. and so, i certainly, as one member of the council,would not oppose continued education and disclosure as the product set and the usage evolves.so, i appreciate the study.

bob, did you have a comment?one last question, an easy one. what percent of members or i'm sorry, not members respondentsto the survey opted-in and opted-out overall? oh, you mean the interviews that we conducted?you know, i don't have that figure off the top of my head.to kevin's point earlier, you know, sometimes consumers don't always you have to kind oftease some of this information out of them. we couldn't look at their account informationor anything like that. that might be intrusive. we tried to understand by asking them howthey have overdrawn and things like that. you categorized them into opted-in or opted-out?for the study, as best we could. but, again, we couldn't verify their account information.we could talk about the histories and stuff

like that. what we did find in the white paper and ithink i remember having this conversation with this council a year ago is that we sawthat these opt-in rates vary considerably by institution.and i think there was a member on this council i told this story, if it was this that hada 95-percent opt-in rate, but that only charged a $5 overdraft fee, which i thought wasâ did that make sense? perhaps. but we see these rates anywhere from the single digits to the80 to 90 percent range, and it varies quite a bit.but i think as marcus and other people here have made the comments on the transactions,you know, you have people, like you say, that

use their debit card a lot. and when theyuse it, they generally use it a lot. it is every little thing. they don't carry any cash.they don't write anything. so, every $2 purchase, every $10 purchase, you know, would be one.whereas, if you carried cash, you might have one atm transaction in a week, you know, andthen, you pay everything out of that, theoretically. and the former gives you a lot of theoreticalopportunities to overdraft. the latter would only give you one because the banks only seeone and the credit unions only see one. so, those behavioral patterns definitely comeinto play, as well as the consumer choices. just to clarify, the results i was showingtoday come from analysis of account data, where we do know the opt-in status. and ithink, for the study banks, it is in the high

teens of the account-holders are opted-in.for the consumer interview research that gary was referring to, yes, he was saying we don'tknow offhand what share of consumers there would say they are opted-in. i think one thingthat has been found in some survey work that has been done by others is that, if you askpeople, they often don't know whether they are opted-in or not. so, just to summarize some of the discussionby the way, this is typical excellent discussion from this council within an hour, you havesurfaced some of the major issues that we are grappling with, including how do theseproducts actually work; how are they evolving in tandem with payment products, evolvingover time? what are the alternatives to these

products? what are the benefits of these products,and how are they actually used by consumers as opposed to just the cost numbers and thelike? we have not settled on any particular policyjudgment yet. so, this discussion is quite timely. we try to make these discussions timely.as you can see from gary's and jesse's presentation, there is quite a bit of analysis being done,and we are trying to wrestle through that. and there were a lot of good suggestions todayabout other vantage points we might take on some of that. going back to your original question, rose,as to why we again look at this in the first place, i think gary laid that out pretty well.i mean, this is, when you look at deposit

accounts, which are one of the markets welook at, this is the biggest driver of fee income on deposit accounts. so, it is somethingworth looking at and understanding and knowing about.there is also the fact, as gary noted, that a guidance on this issue to this day, at thismoment, is inconsistent among the regulators, which is never a very happy place to land.and so, it certainly seemed that re-looking at that, now that we have one bureau thatcan cut across banks and credit unions and thrifts, and even non-banks, though that isless relevant to a product like this, we are looking at a variety of cash management products,including overdraft, small dollar loans, prepaid cards, and trying to think about this somewhatholistically.

but the other thing i would say is the experiencethat some of you have laid out in terms of your institutions today is in many ways maybeconsiderably different from some of the larger institutions.one thing we have seen as we have examined larger institutions is you see and it is notsimply in this market; it is a variety of markets where one of the dynamics that canemerge is that there are third-party vendors and others who come to the institutions withvarious plans and sales promotions. "i can get you more revenue if you do" x ory, which is always of some interest. in your for-profit business, you've got to pay attentionto those things. what we are trying to emphasize is, when thathappens, you need to think carefully about

what you are doing to consumers and are youtreating them fairly, and there may be costs that you don't see upfront that are goingto come down the road. the other indicators here for us have beena fair amount of litigation, particularly over the transaction reordering, which oneof the revenue-enhancing techniques that vendors took to certain institutions. and in someof those areas, more consumer confusion than you are indicating you are having at someof your institutions. so, these are all fair points, things forus to be thinking about, thinking about pretty carefully, all of which will lead us to decidewhat to do here, if anything. i think i have already said and i will sayit again - you know, this courtesy product,

this is not something the consumer bureauwill be looking to ban. there may be some aspects of it that are problematic, some waysin which it has been executed that are problematic. we will look at those things. but overdraft has been a product that is usefulin many ways for a lot of consumers. but, again, for us to understand how this work,and even the opt-in requirement that the fed imposed in 2010, we have been interested tosee how that may play out differently at different institutions. and it can play out very differentlyin terms of how you market around whether your consumers opt-in or opt-out. so, thatis another piece of this that we are interested in.but it is a good subject for us. it is a fair

subject. it does fairly quickly lead to alot of questions and analytical considerations. as you can see, our folks are very carefullyworking it through in what i regard as a very intelligent way, but we are not at the endof that process yet. thank you, director cordray. gary and jesse, we certainly respect the workthat you are doing, very much so. i thought it was a great dialog. we could probably goon for a long time on this subject. it's pretty passionate, as you can see. buti'm sure many of us would invite and welcome you to study our programs in credit unionsand how we get to the odp program, because you may find that there are very vast differencesbetween us and the other guys.

so, again, thank you so much for the work.we look forward to more information coming out. and if you could get into some creditunions and see how we do it, i think we would very much appreciate that. let me add, too, that some of you were reactingsort of off the top of your head to a presentation you just saw today. for all of you who areinterested or your staffs or others or your colleagues, have them go back, take a lookat the white paper, think about it. you know, give us more developed thoughts, as you havethem. some of you may have already done that, i'm aware.and anybody out there paying attention to the meeting or thinking about it and interestedin this subject, we are keen to hear from

people about different vantage points, differentperspectives, different thoughts. we want to feel that we have covered the waterfrontand thought things through in dealing with these types of issues.yes, we welcome any invitations. we would be glad to come down and visit you. all right.yes, yes. excellent. we won't let you go.well, thank you all. we appreciate it. so, to dovetail off of this discussion, weare going to now have scott pluta, who is going to talk to us about the initiative onthe consumer complaint side and the proposal that is coming forth. and i'm sure that thereis going to be a lot of discussion on this

front as well.thank you, scott. okay. okay, perfect.is the deck ready to go? can people see the deck, and do they have materials in frontof them? okay, everyone can see it. good. so, good afternoon, everyone. nice to seesome of you again. i know we had orientation yesterday and we chatted.i was on my walking up here, and a member of my staff asked me why i was dressed likea government bureaucrat. and so, i nailed it, apparently. so, thank you to my staff. so, i am here this afternoon to talk a littlebit about a proposed policy that my office and the bureau is putting forward. and itrelates to a piece of the function that my

office does.some of the folks, again, in the room heard a little bit about this yesterday. so, someof it will be rehashed, and is going to get into it in much better detailed.and then, also, at the front-end, for those who weren't in the orientation yesterday,i thought it was really important to make sure that i provide some grounding my whatmy office does and what that looks like before launching into an expansion of part of theoperation. so, the first piece, just to ground everyonein what my office does. i run the office of consumer response. we do three things. weanswer questions, we handle complaints, and we share data.

on the answering questions side, it is brokeninto two pieces. we have a call center and we have an online presence. so, the call center,we actually have two call centers. we have got one in iowa and one in new mexico. theyare open from 8:00 a.m. to 8:00 p.m. every day monday through friday, except holidays.and you can call; anyone in the u.s. can call and they can ask questions. "what is apr?""can a bank do this?" "how do overdraft fees work?" "i see that you did an enforcementaction today. how does that impact me?" so, you can go and you can pick up the phoneand you can call or you can go online. we have a product that we partner with consumereducation engagement called "ask cfpb". and the same exact content that is available throughthe phone is available online.

the second thing that we do is we handle complaints.so, we talked about this yesterday a little bit. you know, everyone in this room has creditcards, student loans, mortgages, credit lines, or credit reports. sometimes things go wrong;things go off the rails. and you call the company. the vast majorityof the folks who have issues with their financial products and services, they will call thecompany. under the survey work that we have done, weknow that 85 percent of the people that come to us have already gone to the company. iwas on a webinar about a year ago that american banker put on. there was a gentleman fromdeloitte there. he had conducted a study, and what he found was that, on average, everytime a consumer comes to the bureau, they

had already gone to the company on that specificissue, on average, three times. so, in the first instance, things happen.the people generally go to the company and try to resolve them. the vast majority ofthe time that issue gets resolved at the company level. there are, however, times when the consumergoes to the company; they feel like something is wrong. and the company decides, for whateverreason, that it is not going to get fixed. at that point, historically, the consumeris kind of stuck. there are a few avenues they can take. they can write their congressmen.they can go onto social media. potentially, they can hire a lawyer, to the extent theyhave a private right of action. but, really,

at the end of day, the vast majority of cases,the consumer basically has to just deal with that issue themselves. well, dodd-frank, one of the statutory chargesthe bureau has is to collect and monitor and respond to consumer complaints. so now, theconsumer has an additional avenue that they can go to if they truly believe that thereis something wrong with the interaction that they had with the company, and the bureau,as the regulator of these financial institutions, can get a response for them.so, the third thing we do is, you know, the answering-the-questions piece and the handling-the-complaintspiece, which leads into the analyze and share data. so, each of those things generates anawful lot of data for us.

each and every contact we have with the americanconsumer, the director often talks about this mosaic effect; that is, each and every oneof these is a pixel in that mosaic. and the more pixels we have, the more clearer picturewe have of what is going on in real-time in the consumer financial marketplace in theunited states. so, just lots of data. the picture that wehave forming is getting better and better. the sharing-data piece is, as that picturegets better, we have the ability to share our insights, share that picture with partnerswe have both inside and outside the building. so, i will get into some of the specificsa little later. but, outside the building, for the first timeever at the state or federal level, the bureau

shares individual-level complaint data. andi will show you a visualization of that later. we also share data with our government partners.so, right now, we have a tool called the government portal. on that, government agencies and agscan sign up, and we will share with them the complaint data that we have for them in theirjurisdiction. so, to the extent that we get a complaintand it may implicate some type of state law issue, they have the ability to go in andget a more fulsome picture of what is going on in their jurisdiction. we have partners inside the building thatwe share data with. so, rules, markets, and research. we have partners in sefl, supervisionenforcement/fair lending; consumer education

engagement. we share with all those parties.frankly, our principal consumer data inside the building is supervision enforcement andfair lending. so, supervision has finite resources. they can't be in all banks at all times. theyhave to make choices about who they go and examine. part of their process to prioritizewho they go talk to overlies on our complaint data. so, it is very important there.obviously, to the extent some enforcement actions, potentially their genesis is in complaintdata that we receive, that bears itself out. and then, of course, fair lending on bothfronts. so, moving on to the next slide, as you cansee from our mission statement, the three things that we do is embedded upfront. andthen, obviously, the reason that we do those

things, which is to level the playing fieldand empower consumers to take more control over their financial lives.so, a very important question: what is a complaint? i try as much as possible to get outside d.c.and meet with credit unions and meet with banks and talk to them about how they handlefeedback, how they handle complaints. one of the first questions i always ask is,"well, how do you define a complaint?" some have very narrow definitions; some have verybroad definitions. our definition is based on the occ's definition. so, to the extentfolks are familiar with that, but it is a fairly-broad definition, and folks can readit. but, in essence, it is an expression of dissatisfaction with a product or serviceover which we have jurisdiction over a financial

institution over which we have jurisdiction. the complaint process, just very quickly,it is somewhat unique. so, when i first arrived at the bureau about three and a half yearsago and we did some research to figure out, well, what would our complaint-handling processlook like, we looked at the prudential regulators, we looked at ncua, we looked at occ, the ftc,the fed, fdic. we looked at the private sector. we went andmet with ebay and a bunch of companies like that to see, okay, well, how does the privatesector do this? and then, we made some decisions about processand staffing, et cetera. so, our process is in some ways a hybrid. we always knew thatwe would have very high complaint volumes.

i know these are numbers are slightly dated. but, in 2011, the ncua, the fed, fdic, andthe occ, respectively, had 3, 6, 9, and i think 70 thousand complaints. this year weare trending towards 275 to 300 thousand complaints. last year it was in the hundreds of thousandsof complaints or 100,000 complaints, 150 i think. the year before that it was about 70.we anticipate, based on the modeling that we have done, that we will probably end somewherebetween half a million and a million complaints coming in the door every year. i expect toget there probably in the next three to five years.one of the indicators that we look at to do that modeling, our partners in ce have donea study on brand recognition. what they found

was that the cfpb's unaided brand recognitionis zero percent. it is not that it is literally zero; it just rounds down to zero, and thatis without any kind of aiding. so, we know that a lot of folks out theredon't know the services that we can provide. as the cfpb's name gets out there more andmore, it is not that we are trying to drive volume; it is that kind of one of our mantrasis that citizens in this country shouldn't have access to services simply because theydon't know about them. and so, we want people to be in a positionwhere, if they want to use our services it is not that they have to or we are tryingto get them to but they have that as an option in their toolkit, as they are navigating theirfinancial life.

so, thinking about the complaint process thatwe have, again, it is a hybrid between a high-volume, low-touch model, which is what the ftc hasthey simply collect data; they are very upfront about it, and they make it available throughftc sentinel and a kind of low-volume, higher-touch model, which the prudential regulators haveadopted. so, the front-end is fairly automated, andthen, the back-end is the kind of high-touch piece. so, it begins with complaint intake.so, consumers can submit complaints to us on a range of products, which we will getto in a second. they can do so through the mail. they can do so through the web, whichis about 50 percent of our intake. they can do fax, which i am surprised that people stilluse fax machines.

they can get it through referral. so, otherregulators get complaints for us, and they refer it over to us. it is about, i think,25 percent of our volume. and then, lastly, through phone. about 10percent of our complaints come through the phone channel. i mentioned this yesterday.as we were thinking about making the phone channel available it is a very expensive channel.folks in this room that run call centers know that every minute on the phone is our dollars. but, when we look at the fcc's broadband penetrationstudy on who has access to broadband, we saw that a lot of our wheelhouse constituencyis minorities, poor, elderly, uneducated, rural. so, they don't have access to broadbandas much as kind of others do. so, having an

open phone channel, very important to us.so, we intake the complaint. we have an intake staff. they look at it. they say, is thisa duplicate? if it is, we merge it into another record. is this something we have jurisdictionover? for example, if this is flood insurance, that is something the fdic covers. we sendit to them. and then, lastly, does this have all the elementsrequired that we need to process this as a complaint? for example, does it have a bank?does it have the person's name, contact info, things like that?if all those conditions are met, we then send it, automated as much as possible frankly,half our cases get auto-routed; we are trying to become much more efficient in that spaceover to the company.

so, we have got about 3500 companies signedup right now on our secure web channel. so, you know, the perfect scenario is someonesubmits a complaint over the web. our auto-routing picks it up, and within seconds, it gets sentto the institution. the institution, in the third box, has thecompany response piece. there are statutory obligations with respect to response. theyhave to do so in a timely manner. 1034(b) of the dodd-frank act has some requirementsfor those responses. what have you done thus far? what do you plan on doing? and what communicationshave you had thus far with the consumer? so, they do that. they have got 15 days toprovide a substantive response. they have 60 to close. so, it is all very regimented.

most of the products, they close relativelyquickly. so, for example, a credit card is usually closed within two or three days. someof the products such as mortgage, which is an international money transfer, can be muchmore drawn-out, either because of documentation or cycle times. and that can get to the 15-daymark. they ask for an extension. they get up to 60 days.when they close a complaint, they put it into one of four buckets to get some structureddata out of it, so we can share it through the public database, which we will get toin a second. was it closed with monetary relief? was it closed with non-monetary relief? wasit closed with explanation or was it just closed?the bureau doesn't pass any judgment whatsoever

on any of those four buckets. so, we are notadvocating on behalf of the consumer for credit unions or banks or non-banks to provide customerservice gestures. we are simply collecting structured data at that point on how the casewas closed, if the complaint was closed. from that point, once it gets closed by thecompany, it goes to the consumer. so, we allow the consumer to provide some feedback to uson how the complaint-handling experience was. are you satisfied, essentially, with the responseyou have gotten from the company? at that point, for all intents and purposes,the consumer-facing piece of our complaint-handling process is done. you can see that a lot ofit is automated. obviously, there are a lot of exceptions and there is some human-touchwork that has to go into there. but, in order

to scale to a half a million to a millioncomplaints, that first piece has to be, frankly, highly-automated, minimizing exceptions. then, we moving into the last two pieces ofthe complaint process, they are less linear than they suggest on the slide. the reviewand investigations piece, so some element of my staff all day every day they are tearingthrough complaints, looking for legal violations. obviously, when they find things, whetherthey are technical legal violations like tila respa or things that drift into the udap territory,those are, then, bundled and packaged and handed over to supervision enforcement forlending, like i talked before. and then, they analyze and report. so, thosetwo things are commingled. and obviously,

the public database piece, which i will getto in a second. so, these are the complaints that we acceptright now. you can see we did so in a rolled-out fashion. we started with credit card. it wasthe simplest product to start with. you know, 90 percent of the waterfront is covered byinstitutions. the transactions are fairly easy to sort out. and so, we started withthat. we moved into the balance of the non-bankproducts. so, we moved to mortgages, bank accounts, et cetera. and then, at some point,we transitioned to the non-bank things that we cover. so, you can see credit reporting,money transfers, debt collection, pay to lending. in july, we launched prepaid cards and a fewother things. the fact is that, as financial

innovation continues into the future, we willcontinue to roll out new products. so, you can see there virtual currency cameout in october 2014. think virtual currency; you are thinking things like bitcoin. i thinkwe have probably gotten a very, very, very, very low volume of bitcoin complaints thisfar. but, as we move into this world you know,today ebay announced that they were spinning off paypal. you've got the apple payment issue.as you move into that kind of innovative space, i assume we are going to continue to see newproducts pop up. and obviously, then, we will have to start doing complaint intake for thoseproducts. you can see at the bottom we have handlednorth of 400,000 complaints this far. so,

to give you an idea of what we are seeing,how it falls against product, and also the channels i mentioned some of these numbersearlier the web is the biggest channel, and then, referral; phone is 10 percent. you cansee the breakdown. mortgage for a long time was our no. 1 issue. as non-big products havecome into the scene, those have started to take bigger pieces of the pie. you can seedebt collection is obviously a very big pieces, and credit card and credit reporting, bigpieces. i would anticipate, kind of moving into thefuture, that mortgage will probably shrink as a share of the pie and you will see probablydebt collection and credit reporting get to be bigger pieces.

so, how do consumers interact with us? here'sour home page, which i talked about yesterday. i think it is one, if not the best, web pagesin the federal government. our phone number is in the upper righthand corner. you cancall that, and you can get to the contact center, which i mentioned.some of the headlines there, if you click on "get assistance," you can go to the "askcfpb" product and go into the knowledge base. and then, on the right there, you see "submita complaint." so, very easy to get in touch with us.so, here is a visualization of the public database, which we will talk about in a second.it is, as i said yesterday, kind of beautiful in its simplicity and transparency. in essence,it is an excel spreadsheet. so, running down,

each row represents an individual complaint,an individual consumer that has come to us. and then, you can see the various data fieldsrunning to the right. i think there is somewhere between 13 and 15 now. so, product, sub-product,issue, sub-issue, the day we received it, the day we sent it to the bank. you know,that is an efficiency metric that we measure our self on. and over time, you will haveseen that come down. the name of the institution is there, whetheror not they net their 15- or 60-day statutory obligation with respect to a response; thezip code, to the extent that people want to crunch data based on geography.and then, i think "dispute" is another column, which is whether or not at the end of theday the consumer provided feedback indicating

to us that they want to in some way disputethe resolution of the company or the response. so, what we will talk about in a second isand you can imagine visually â there would be an additional column. so, at the end ofthese columns, there would be one more column. and that would be or i guess a couple of columnsa narrative provided by the consumer and, then, a narrative provided by the companyin response. so, i am going to intervene here to say twothings. we are now going to get to the issue of consumer complaint narratives. but i wantto just stress one thing, and scott, it is awkward for him to say it.you can imagine that, when we opened our doors back in july of 2011, very understaffed andvery preliminary in terms of anything we were

doing, this whole consumer complaint functionthat was mandated by congress for us to handle was a pretty daunting task. and we had noidea what the volumes would be, and the difficulty in actually handling this, and handling itwell, loomed large. scott's team, the consumer response group,about 150-odd now, has been one of the highest-performing teams at the bureau. you can see how thoughtfuland well-put-together this process has been, drawing on the best we could find in the publicand private sectors, and going beyond it in many ways.it has become central to the bureau because we do and we make no bones about it it isvery public that we look at complaints. and when there were just a few and they were onlyin a few areas, it wasn't very helpful. but

now that we get many across the board, itinfluences our choices about what to do in our enforcement actions, our supervisory work,our regulatory work. and so, it behooves and we stress this allthe time industry out there to pay attention themselves to our complaints. that is partof the beauty of having a public complaint database. they can see what we see, and theycan act accordingly. they don't have to wait on us and they can fix problems. so, it hasbecome very central to the bureau. the other thing i wanted to just ground herefor the members of the council is all of what we are describing with respect to the creditunions on this panel is hypothetical with respect to you because none of you are withinour jurisdiction of having $10 billion in

assets or more.so, the complaints that we might receive with respect to any of you, we would pass on, iguess, to ncua. so, everything we are talking about here is hypothetical and not actualwith respect to you all. nonetheless, we will be interested in your feedback and thoughtsabout it as we move on to the complaint narratives, which is a policy decision in front of usat the moment, whether you have insight or thoughts about it. but i just wanted to makethat clear. to the extent you were sitting there worrying about how this affects you,in fact, it doesn't. so, thank you.but you can still pay attention. you can still pay attention to the complaintsyou see, so that you can make sure you're

not having those problems yourselves, whichis a great educative function of this whole project.that is hard to follow. and the director raises a good point, andi should have said that from the outset. again, very clear, this is pointed towards institutionswith assets of $10 billion or greater or the non-banks.so, this is actually what is in the consumer complaint database. you will see not everyproduct is in there right now. the virtual currency, and the prepaid, and other, thosearen't in yet. what we like to do is launch the product, wait 90 to 120 days, make surethat the data that we are getting in the door is appropriate for publication as a product.and then, once we decide, yes, everything

is functioning as we thought, then we publishthat. so, at some point before the end of the year,we will be releasing the complaints that we have on our most releases.so now, at this point, to pivot to the proposed policy that the bureau announced in mid-july,i think we will walk through a little bit. and then, i will turn it over. i think wewill get some feedback, and i will also make myself available. and obviously, the directorwill answer questions now on the policy. so, as you can see on this slide in frontof you, very technical and i can't really read it because of the light so the bureaupublished a notice in mid-july about expanding the database that i showed you. there is thetitle, the docket number, and the comment

period, which closed about a week ago monday. the proposed policy would supplement the bureau'sexisting policy statements establishing and expanding the consumer complaint database.so, consumers who submit a complaint will be given the opportunity to give consent tothe bureau to publish his or her complaint narrative. so, again, very, very, very importantto us. you know, two of the big issues that we wrestledwith inside the bureau before we even proposed the policy were reputational risk, harm tothe institution, and the consumer privacy piece. the consumer privacy piece, we feelvery strongly that this first bullet goes directly to that issue, which is asking theconsumer if they want to opt-in.

obviously, a lot of people in here know aboutthe power of default. so, the default is typically what folks go with. so, if you have an opt-inor an opt-out, that can be a very powerful thing as far as behavioral psychology goes. we chose to go against the power of default,so that consumers have to actively think about it and decide, yes, this is something i wantto opt into. so, i think a very powerful, a very important piece to say upfront.the second piece is the opt-in consent will state, among other things, and in plain language,that whether or not consent is given will have no impact on how we handle the complaint.very important. if it is given, they can withdraw consent at anytime. we have a mechanism forthat.

and then, also, and very importantly, thesecond piece, the privacy issue, the cfpb will take reasonable steps to remove personalinformation from the complaint to minimize, but obviously not eliminate, the risk of re-identification.so, i am not sure you know, obviously, there is a lot of literature and research aroundthis idea of re-identification, the ability to look into a dataset, and even though itmay not have the person's name, but through direct and indirect identifiers, figure outwho that person actually is. so, we will take the narrative, both the onesthat the consumer provides and the one the company provides, and we will scrub it. inthe policy we have a standard, and i think we talked about it a little bit, but thereis a standard that is in the policy. and it

said these are the types of things that wewill scrub out. there are several standards out there, bothin the government and the private, that we could have adopted. the one that we have adoptedcomes most closely to the hipaa standard that they use when scrubbing medical records. itis a very, very high standard. we scrub a lot of stuff out.so that, but adopted for, obviously, a financial context. so, that is the standard. so, a verystrict standard. and then, the methodology by which we scrub.so, you take that standard and you apply it to the narratives, and through computers andhumans, you are able to, then, scrub out all these direct and indirect identifiers, makingit extremely difficult, though not impossible,

although very, very, very rare, to be ableto re-identify consumers in that database. so, complaints will continue to be publishedafter the company responds or after it has had the complaint for 15 calendar days, whichevercomes first. so, the same trigger that is in place right now.we get a complaint. it goes in the public database the sooner of two things. eitherwe get a substantive response from the company so, for example, it is a credit card complaintand they close it in two days it goes up in two days. if we send it to a company and they take 15days, we have kind of decided that is long enough for them to decide whether or not thatis their consumer. if 15 days lapses and we

don't hear back from them, it also goes upin the public database. if after 15 days they come back and they say, "no, no, no, that'snot our consumer," then, obviously, it comes down. but we decided internally 15 days islong enough. we are adopting that same timeframe for the publication of the narrative, whichwe will get to in a second. but, when the narrative goes up, contemporaneously,the company's response would go up. so, one wouldn't go before the other.so, we only disclose consumer complaint narratives, again, for which consent has been obtainedand there has been a robust personal information scrubbing standard methodology applied.companies would have the option to provide narrative text that would appear next to theconsumer's narrative in the consumer complaint

database. again, the same standards for removingpersonal information would apply to company responses. and then, i think this is last. lastly, sowe put the policy out. we got a lot of comments. the documents i have in front of me are relatedto that; i'm going through right now. there were three things, in particular, thatwe were looking for feedback on and would love to hear this group's feedback on.one is consumer consent. where in the process should that take place? what are some thingswe should be sure to alert the consumer to with respect to giving consent?two, the company response, what should that look like? what are the elements of that thatyou would suggest? are any thoughts you have

on the company response piece? and then, again, the personal informationscrubbing standard methodology. again, the standard is, what are the things, what arethe categories of things we scrub out? the methodology is, how do we go about doing that?what is the process that we go against to actually scrub the data out of those narratives?so, with that how many responses did we get?so, we got just kind of two buckets of responses. pirg did a campaign and was able to get about30,000 effectively form letters submitted in favor of the policy.we have got about 100 and i think 20 or 30 comments. i would say about half of them arefrom some type of entity; the other half are

from individuals. of the half from entities,the way it is broken out, as far as i can tell right now, kind of companies and tradeassociations related to those companies have generally come out against the policy; someare fairly moderate. a lot of them have very good suggestions. on the other side, those kind of in favorand with suggestions, one of the trade associations for the newspapers, so dow jones and newscorpand those folks, their trade association submitted something in favor. several consumer groups,including the umbrella organization afr, submitted i saw that. they thought we should discloseeverything, regardless of whether consumers consent, right?yes, they are firm believers in foia.

and so, consumer groups, open government,kind of transparent government groups, and, frankly, privacy groups have come out in favor.obviously, the privacy groups, i think about four or five of the kind of biggest nationally-recognizedprivacy groups in this area came out in favor, but, obviously, with heavy suggestions. theywant to see this done, but, obviously, they are very thoughtful about the privacy aspectof it. so, that is the kind of trend that i haveseen thus far in going through the comments. next steps, obviously, we will go throughthem, summarize them, provide responses. and at some point, to the extent the directordecides to move forward with the policy, any adjustments would be made to that and it wouldbe published. we don't have a timeframe right

now on when that all is going to take place.it depends the size of the work, you know, all the comments we got in, and also, frankly,internal decisionmaking and that process. so, with that, i want to open it up, maybeturn the microphone back. scott, i had an opportunity to speak withyou on the phone on a conference call on this. my credit union, my board accepts commentsdirectly from our membership. and just to share that experience, what oftenhappens is the member comes out of the box with a full head of steam on something. andit is pretty edgy. often, though and maybe this is where the 15 days comes in it turnsout that perhaps the member was missing some money from an atm transaction, maybe it issome ach transactions; it turns out their

son got a hold of their atm card and theyhad shared their pin number. it is embarrassing for all concerned.and so, what i would tell you from our experience and we have been doing this for four yearsnow, so there are many, many of these examples, and i think most credit unions are like thiswe are not going to go out on a comment section and say anything disparaging about that memberor their family. it is just not in our dna or our culture. but, recognizing that we could, you are allowingus to do that and you are protecting the privacy, but it is just not the type of thing thatwe are likely to do. so, then, it makes you question, what is thevalue of that exchange? and it is very common.

it is very common. and so, i think you usedthe language something to the effect of, can it be fixed? these aren't necessarily thingsthat are broken. they are exchanges of information that probably are better handled between thefinancial institution and their member. and granted, there are others that are not,that are legitimate. but i just caution you that there is a fair amount of that out there.and we wouldn't put that type of information in our comments section.i have a quick comment. i've got to run. first of all, very good work. i'm impressed.so, keep up the good work. one of the things i would caution you on,and maybe you already recognize this, is that database of narrative will be very valuable.as this goes publicly, there will be firms

that download it and use it. so, i am sureyou are aware of that. but, as that value increases, the incentive for people to populatethe database is going to increase as well. we regard that as a good thing, yes.scott, just two questions. yes.it looks like the end of this whole process where you are scrubbing narratives and doingit all, it is very manual. maybe it takes a lot of time. are you concerned that a lotof consumers are going to opt-in and you are going to have to add a lot of staff just todo that portion? and also, the second question is, you mentionedthat you are going to break it out by credit card complaints, mortgages, and other. isit going to be further broken out by institution.

so, if i am shopping for a new credit card,i can look at capital one complaints, bank of america complaints, and those types ofthings, kind of like an angie's list type of consumer review?so, thanks for those questions. on the first one, the cost, we are actually going to bescrubbing all the narratives we get. so, the bureau takes privacy very seriously. theyare privacy issues inside and outside the building.so, these complaints that we get are absolutely full of the consumer's very personal information.so, it has got their name, sometimes their social security number, their account number,what happened to them. oftentimes, in narratives they will put medical conditions they have.there's all kinds of stuff there.

as i talked, we want to share that stuff insidethe building as much as we possibly can because it helps folks do their jobs. at the sametime, there are certain elements of those complaints that folks inside the buildingdon't need to know. so, we are going to be scrubbing. we are settingup operation to scrub all narratives. so, while we are sharing it with someone in enforcementor supervision, they may not need to know the social security number or the medicalcondition, or whatever that this individual has.so, as far as kind of cost goes, we are going to amortize that across all complaints thatwe get. but you raise a very, very good point, which is at some point when volume you know,volume times cost per complaint equals potentially

a big number. the ability for computers to scrub directidentifiersâ  that is the things, you know, numbers, names, account numbers, all thatstuff, the stuff that helps you directly identify people, they are very, very good at. so, youcan run that through a computer; 99.99 percent they'll scrub it out.the tough part gets with indirect identifiers. so, let's say we've got the zip code in onecolumn and the person wrote in their narrative, "you know, i've been the fire chief for fiveyears here in kind of greenfield, wisconsin, and i broke my leg last...," whatever.so, those things that you just normally wouldn't be able to read and say i know who this is,once you start providing other clues, like

zip code and some other things, eventuallysomeone will be able to figure out who that is. and those are indirect identifiers. computersare not very good at scrubbing those out. so, not to get too far into the methodologyof how we will be scrubbing this, because, frankly, the more you disclose your methodology,the easier it is for people who are outside the building who want to re-engineer it andidentify folks, it gets easier. so, a little bit ambiguous about that.but i would suspect that the amount of eyeballs on the public-facing narratives would be higherthan the things that we share inside the building, i think for obvious reasons.and so, yes, there is a concern about cost. i think the methodology we are putting togetherwill capture that, but that is obviously something

we are going to monitor. but, as of rightnow, i feel pretty good about the cost constraints on this initiative. the second thing is already in the publicdatabase there is a column that has the name of the institution. so, today you can go andyou can sort and you can see which companies have the most complaints, both in absoluteterms and you could do some normalization. obviously, to the extent that the narrativeis available, that will, then, become part of, you know, text analytics would, then,become part of that analysis by company potentially. let me just add that what scott describes,automating some of the scrubbing, really wouldn't have been possible probably as recently asten years ago maybe five years ago. there

has been a lot of technology that has developedaround things like hipaa, the medical privacy act, where they want to find ways to haveinformation be useful, but scrub out the kind of things that create legal issues. so, thishas made leaps and bounds. but, also, it is, again, a reflection, i wantto say again, about scott's team. they faced problems and challenges every day to get tothis point. i mean, it is remarkable what they have done in three years. when i was attorney general of ohio, we hada complaint response function that was quite rudimentary, and they have been at it fordecades decades. so, you know, we will work this through. theother thing i want to say is we are trying

to be very careful, we are very careful aboutprivacy. there are plenty of consumers who come to the database and they are quite happyto be public. they don't mind being identified. many of them are also people who might goand talk to their newspaper or their local television station and have a story on theair about how they felt they were mistreated and what happened with it.so, you know, there is a certain number of consumers here who are pretty hardy and thiswon't even affect, but we are going to be looking at privacy, regardless of what theirown outlook or temperament might be about can you speak to the overall value of makingthis out to the public? and then, what your all's intentions are specifically to bringingthis out to the public, especially when it

is going to be sort of scrubbed?i will take that one. right now, we already have a public complaint database that scottdescribed. you can already go there and, for example, as you said, there is some valuein being able to go and look at institution a or institution b. what kind of problemsdo you see? what kind of concerns do you have? do i want to do business with that institution? you know, again, if it was just a handfulof complaints, you might feel pretty skeptical about whether it is worth bothering, but ifthere are many, then you start to get a sense that there is a certain pattern at this institutionthat doesn't seem to be the same pattern as another institution. and the more data wehave, the better filled-in that picture is,

as scott happily described.similarly, right now, all of that still broken down in fairly-generic categories, though.you know, it is just not as descriptive as having the detail around what actually happenedto someone and what the problem really was. the other thing is, when we did a panel onthis â we did a field hearing on this a couple of months ago there were some industry folkswho made a point to say more detail often creates more credibility. anybody can givea generalized, you know, somebody stinks or somebody isn't doing a good job. that doesn'tmean anything. nobody can make much of that. if there is more detail, you can really geta sense of whether that seems to be a legitimate problem or not. so, in that respect, it ishelpful.

also, it is more vivid. it is just more vivid.you know how it is. you draw a conclusion in the abstract as opposed to you tell a storyaround somebody's real-life event. it is just different.and by the way, scott didn't mention, but there are two agencies of the federal governmentthat have already been doing this for some time. the national highway traffic safetyadministration, you can go to their website and you can look at the narratives of complaintspeople have about particular vehicles. i've looked at my own car. it was a little bothersomebecause there were some problems with the generic make. i haven't had them myself, butit makes you think. and the consumer products safety commission,an analog to us, but not for financial products,

for general products like toys and toastersand cribs, they put up the narratives. so, it is already being done in some elementsof the federal government. so, we are not the first ones to cross the rubicon here anddo something brand-new. so, again, we are at a stage where we havejust gotten a lot of public comment, a certain amount of consternation in some quarters.we will digest all of that and think hard about it, but these are the reasons why wemoved forward with the proposal in the first place. and we will see where we go from herewithout prejudging it. but those were some of the thoughts that were in our mind as westarted in on this. if you want to add anything, you have beenthe one who has thought most carefully about

this.no, not at all. as usual, very good. scott, have you given any thought to assistingin screening some of the complaints at the entry-level of the website? and i apologize,i have not viewed it. and what i am referring to would be you arethe consumer financial protection bureau, and there are many consumers who would thinkthat any complaint that they would have, even an employee of an institution might feel thatthey could bring a complaint to you, where it would be best served at eeoc or some otherplace. so, are there any disclaimers or any informationat the beginning of the process that would help people to know that they could go toanother place or another portal might be a

better choice for that complaint? right. so, good question. we do get folksthat call us, just through the contact center, we get folks that call us about a range ofissues. it is nice when you've got a human on the phone. you can go back and forth. tothe extent that we identify that this doesn't meet the definition â you know, this is justan inquiry, it is not complaint, then we answer their question.if it is a complaint and it meets our definition, which is the satisfaction, then it goes downour complaint channel. if they are actually calling about eeoc or similar type of matters,we do our best to refer them to the other place.so, at least through the phone, we are actually

fairly effective at triaging what is oursand what isn't ours. the stuff that comes over the web and, also the mail-in/fax, thatgets digitized and goes into a universal queue. to the extent that we get it, we send it tothe company, and the company has the chance to say, before it goes up in the public database,before we start down this train, either "hey, this isn't ours. this isn't our customer,"which i think is a very important distinction betweenâ  you know, some of the comparisonhave been made between what we do and potentially what some private sector actors do.one of the issues they have is this controlling where you have people actually talk aboutproducts and services and restaurants, and they are never going to actually use the product,service, or restaurant.

so, we do confirm, in fact, there is a commercialrelationship there. so, we get it. it is in our jurisdiction. it meets our definitionof a complaint. it has everything we need to treat it as a complaint. we send it tothe institution. they say, "yes, this is our consumer."so that is the verification that we do for the complaint. and then, at that point, youknow, it goes on to the company. i have talked about this before, so some folkshave heard this. but one of the analogies that i use to talk about our system is theairline industry. so, everyone here has flown on an airplane. everyone here has flown onan airplane with a bag. everyone here has flown on an airplane with a bag and that baghas been lost. and you just understand that.

so, airlines lose baggage. everybody losesbaggage. and that's fine. there's kind of judgment is not passed on it. everyone doesthat. what you don't want to be, though, is theairline that loses the most bags relative to your peers, right? so, people lose bags;that's fine. you don't want to be the no. 1 airline that loses the most bags.second, when you lose a bag, you want to treat it like it is your mom's bag. you don't wantto treat it like it's the bag that belongs to the guy down the street who you don't likevery much. and so, there is a difference there. so, if you are a company and you pride yourselfon customer service, and you get a complaint and everyone gets complaintsâ  you say, "look,relative to my peers, i get less complaints

than everyone else." if that is part of theirbusiness model, it is part of your business model and you see this in the car industryyou can market on that and say, "we get all these awards. you know, we have a fantasticproduct, and we have been independently recognized." and the second thing on how you treat thecomplaint, hey, when we get a complaint, like it's important to us and we will do everythingwe can to resolve this complaint. and then, consumers when they are thinkingabout, well, gee, who should i do business withâ  and you can imagine the consumer thatsays, "things always go wrong for me. like my bag always gets lost. i know somethingis going to go wrong." so, as i am thinking about a credit card company,i want to go with somebody who i know, if

there is an issue, they will be on top ofit and they will treat it like it is their mom's issue, and not like it is the guy'sissue down the street who they don't like very much.but some consumers don't care about that. in that case, they don't have to look at thedatabase. they don't have to look at the data that comes out of it that people package andmake more user-friendly. but, to the extent that folks actually dovalue that and they are thinking about where to put their dollars, and that is somethingthat has value to them, and they have certain expectations in making those decisions, thenthat is where i think this information closes the gap between what people are paying forand the customer service that they are expecting,

particularly when things go wrong. well, you basically answered it. i was gettingdown to, if someone does come in and it is a complaint against a credit union or a bank,and it should be referred to fdic or ncua, how you would handle that? and i think youaddressed that well by phone, but what about on the internet? have you thought about linksor the like that would send them over that direction?so, that is a good question. right now, when we get a complaint, we will identify it asbelonging to another regulator and we will send it along.i can envision a place â you know, we did some survey work, and what we found was, youknow, people have a certain level of satisfaction

with our process. and one place where satisfactionjust goes off a cliff is if it is a referral, an incoming referral. i assume it mirrorsgoing out. so, just kind of being passed from one regulator to another causes a good 15to 20 percent drop in satisfaction. so, our ability to in the future think ofa way to kind of design, get the appropriate consumer to the appropriate regulator instantaneouslyis a goal. so, right now, it is a little kludgey. we get the complaint. we refer it out. othersget their complaints; they refer it to us. in the future, just given that delta in consumersatisfaction in my office we have three goals. one of our goals is an amazing user experience.that is really important to us. and so, over time, that is something that we are goingto put resources against to try to fix.

thank you, scott.do we have any other questions for scott? i'm sorry. jason? i'm sorry, i was just going to make a note.there is already a lot of places out there that you can go as a consumer and look atfinancial institutions, the bbb. i mean, a lot of credit unions and financial institutionshave twitter accounts, facebook. there's all those interactions already.just kind of creating one more spot that somebody has to go monitor and make sure of the responsethat it gets is going to be made public is politically correct, as marcus was sayingearlier. so, those were my thoughts. i just will have more of a suggestion on thelayout. i think you said earlier, when you

put the narrative out there, that the commentsare going to be side-by-side. and i guess i would encourage that, that they are side-by-side,because people will only read the complaint and not read the response. and sometimes,how you respond tells the consumer that that is really where i want to go. people do makemistakes, but they handled it well and they were impressed with their response. so, justin all fairness, i think it would be good to lay them side-by-side.okay. okay. well, thank you all.it sounds like, scott, that we have the same mission, to deliver an awesome member experience.and so, you are going to deliver an awesome consumer experience. so, it looks like we'reside-by-side on that front.

but thank you for your work.â  it is greatlyappreciated. and as we wrap up today, and as you have seentoday, the bureau staff is very interested in our perspectives, our views, and how webetter the lives of our members, and that we are different from the other folks.i really look forward to this council's contributions and as we move forward with our initiatives. thank you for traveling to d.c. i know timefrom your shops is very precious to you. but the work that i think that we are doing hereis benefitting our communities and our members as well.i also want to thank director cordray, zixta, and delicia for their leadership and for theirtime to giving us the opportunity to voice

our perspectives. and i just think that thatis just amazing. it is an honor for me to be here as well as i'm sure for all of youto be able to have the time of these folks, and, hopefully, put the thumbprint on somepolicymaking decisions that come our way. so, with that, travel safe. we will see younext time. thank you for the public for being here. and we're all accessible, as you have heard.so, if you have any thoughts or any comments between the time that we meet, please feelfree to reach out to delicia; also, myself and kevin. emails or telephone calls wouldbe great. so, thank you very much all and have a greatrest of the week, and travel safe.

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