Richard Cordray, the director of the Consumer Financial Protection Bureau, will likely face questions Wednesday about a massive mortgage holder database his agency helps run and how closely the agency is working with the Justice Department.
Cordray is testifying before the House Financial Services Committee, where he could again face unanswered questions about the national mortgage database – which contains information that can be shared with law enforcement — and whether the bureau is working with the Justice Department’s Operation Choke Point.
As TheBlaze previously reported, Operation Choke Point is a program that targets the banks handling the accounts of payday lenders, gun stores along with porn shops among other businesses deemed as high risk by the Justice Department.
Congressional Republicans have raised privacy and security questions about the database, which is maintained by the CFPB and by the Federal Housing Finance Authority. The database information can also be used for law enforcement purposes, according to Investors Business Daily.
The federal registry states: “Where there is an indication of a violation or potential violation of law, whether civil, criminal or regulatory in nature, and whether arising by general statute or particular program statute, or by regulation, rule or order issued pursuant thereto, the relevant records in the system of records may be referred, as a routine use, to the appropriate agency, whether federal, state, local, tribal, foreign or a financial regulatory organization, including the Financial Crimes Enforcement Network and other law enforcement and government entities, as determined by FHFA to be appropriate and that are charged with the responsibility of investigating or prosecuting such violation or charged with enforcing or implementing a statute, or rule, regulation or order issued pursuant thereto.”
In a letter last month to Cordray and to Federal Housing Finance Authority Director Melvin Watts, House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and ranking committee member Sen. Mike Crapo (R-Idaho), sought more information about the database.
“Our principal concern is that the [federal registry] notice proposes to vastly expand the scope of FHFA’s data collection … to include a mortgage borrower’s Social Security number, financial account numbers, address, zip code, telephone number, race, religion, marital status, language spoken, education, military record, employment, presence of children by various age categories, deceased indicator, financial, and life events in the last few years, bankruptcy information, other assets/wealth, and performance data on all credit lines (i.e., credit cards, student loans, auto loans, and other loans reported to credit bureaus) of the mortgage borrower and all those associated with mortgage,” the letter said.
“Moreover, the FHFA and CFPB have already publicly indicated that borrowers do not have the opportunity or the right to opt out of the database,” the letter continued.
The CFPB did not respond to inquiries from TheBlaze Tuesday.
“This database is comparable to the NSA,” John Berlau, senior fellow with the Competitive Enterprise Institute, told TheBlaze. “The whole program is an abuse. It’s inconsistent for liberals to be upset about the NSA and not about this.”
The Competitive Enterprise Institute is suing to have the CFPB declared unconstitutional, in part because it is not accountable to Congress.
“Is the DOJ accessing the database and violating Americas right to financial privacy? Berlau said. “It could be used to aid Operation Choke Point.”
In 2011, the Obama administration ordered federal regulators to increase scrutiny of banks and their customers. The Federal Deposit Insurance Corporation instructed financial institutions to carefully monitor customers who rely on payment processors such as PayPal. These reportedly include porn stores, gun shops and drug paraphernalia shops, classified by the government as “high risk.”
Crapo questioned Cordray about the CFPB’s involvement with Operation Choke Point during a Senate Banking Committee hearing last week.
“I think the CFPB has a job to do as a law enforcement agency to police illegal lending whether it’s online or in person and much of what we’re talking about here is online,” Cordray responded. “The further issue that has been raised: What about illegal lending that operates by piggybacking on the existing payment banking system? That’s not something the banks like. It’s not a risk they want to be exposed to.”
Crapo followed up, “Does this mean you are participating with Operation Choke Point?”
“I’m not sure what you mean by participating,” Cordray responded. “I think the agencies have all tried to discuss what is the appropriate to know your customer.”
The FDIC urged banks to reassess their relationships with “high risk” merchants. This was part of the Justice Department’s Operation Choke Point, a campaign to probe credit card fraud and payment processors.
“Many of those non-bank lenders if they’re operating illegally – and this is one of the enforcement actions I described in my opening remarks – need to be addressed, and that is what I said in my opening remarks,” Cordray continued during his Senate testimony. “Let me say this, it’s about whether the activity is legal or illegal. It shouldn’t be about whether it’s disfavored or favored.”
Crapo pressed further, and Cordray said, “I have not given advice to the Department of Justice on this.”