Two key congressional Republicans want answers from the Department of Justice about a controversial consumer credit card data-mining operation at the Consumer Financial Protection Bureau.
Sen. Chuck Grassley of Iowa and Rep. Spencer Bachus of Alabama also want to know if — besides invading consumer privacy — CFPB has harmed the U.S. Trustee Program by improperly using it to capture millions of bankruptcy case files it couldn’t otherwise obtain.
Grassley is the ranking minority member of the Senate Judiciary Committee, while Bachus is chairman emeritus of the House Financial Services Committee and chairman of a House Judiciary subcommittee that oversees the federal bankruptcy system.
The Grassley and Bachus questions follow Washington Examiner news stories reporting that CFPB's data-mining program seeks to capture 80 percent of all U.S. consumer credit card transactions and 95 percent of all mortgage transactions.
The Examiner also reported allegations that CFPB has pressured the USTP to give it thousands of documents from a private company that archives millions of bankruptcy case files. The USTP administers the federal bankruptcy system and is required by law to be impartial and independent.
In a Sept. 17 letter to Attorney General Eric Holder, Grassley said he is concerned that USTP “acted on behalf of the CFPB to collect personal financial data that the CFPB had otherwise been unable to obtain.”
If true, Grassley said, it “raises serious questions regarding the USTP’s independence that need to be answered and explained fully ... The integrity, impartiality, and independence of the USTP must not be compromised.”
Separately in a Sept. 13, letter to USTP Director Clifford J. White, III, Bachus noted that he had vigorously questioned CFPB Director Richard Cordray about the bureau’s relationship with the trustee program.
Cordray refused to answer any of Bachus’ questions. Cordray conceded, however, that “we are working with a number of different agencies, including the Justice Department, to carry out our responsibilities and we will try to do that.”
Bachus said Cordray’s “responses were unsatisfactory and did not allay my concerns regarding the potential for troubling coordination between the USTP and the CFPB in alleged data collection efforts.”
Bachus also warned White that it would “be inappropriate if the USTP were cooperating in an effort to obtain such personal financial information under the guise of overly broad judicial requests.”
Bachus told the Examiner the House Judiciary subcommittee on Regulatory Reform, Commercial and Antitrust Law, which he chairs, will hold public hearings on the controversy.
Last year, in a case contesting seven Florida bankruptcies, a USTP trial lawyer requested millions of bankruptcy documents from across the country held in archives maintained by Morgan Drexen, a California-based administrative support firm that provides computer storage for attorneys.
The trial judge denied the request and an email from the USTP trial lawyer to a Morgan Drexen lawyer revealed that he knew about a “non-public” CFPB investigation of the California firm.
Bachus told the Examiner that it appeared the USTP effort was a “back door” attempt by CFPB to obtain bankruptcy records it wouldn’t normally have. Federal law bars CFPB from seeking client documents from practicing attorneys.
“The company they were requesting from is a data storage firm. So they probably did nothing to come under the jurisdiction of the CFPB,” Bachus said.
“Unless you just go to this highly expansive definition that everyone who had any financial records, or any U.S. citizen is within their jurisdiction, it is wildly improbable that Congress would ever have done that,” Bachus said.
Grassley asked Holder if the USTP trial lawyer’s document request was made on behalf of CFPB, if there was consultation and coordination between the two agencies, and if there was an information-sharing agreement between the agencies.
Grassley also asked Holder if USTP was seeking information on behalf of other federal agencies. He asked for a reply by Oct. 18.
Similarly, Bachus asked White about communications between USTP and CFPB, and reminded him of the law barring CFPB from obtaining client documents from practicing attorneys.
“The Dodd-Frank Act, which was developed during my tenure as Ranking Member of the House Financial Services Committee, contains specific restrictions on the collection of personal financial information” by CFPB, Bachus told White.