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CFPB Open for Business

Mark Marich

Consumer Financial Protection Bureau Open for Business

PDE staff were on hand for “Open for Business: The Impact of the CFPB on Small Business”—an investigative hearing by the subcommittee on Oversight and Investigations of the House Committee on Small Business.

Last week, the likely impact of the Consumer Financial Protection Bureau (CFPB) on new and small businesses came under scrutiny by members of the subcommittee of Investigations, Oversight and Regulations of the House Committee on Small Business. Appearing before the committee to testify were:

  • Dan Sokolov, Deputy Associate Director for Research, Markets and Regulations of the CFPB
  • Terry Jones, Chairman of the Legislative and Regulatory Affairs Committee of the Colorado Mortgage Lenders Association
  • Jess Sharp, Executive Director for the Center for Market Competitiveness of the US Chamber of Commerce
  • Daniel Fleming, President of Fleming Leasing (testifying on behalf of the Truck Renting and Leasing Association)
  • Adam J. Levitin, a Professor of Law at the Georgetown University Law Center

CFPB’s Anticipated Impact

The Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted in July 2010, established the CFPB as the agency responsible for regulating consumer financial products and services. Given the fact that the CFPB just began operations, members of the committee were trying to assess its potential impact on small businesses, and to explore what could be done to protect small businesses from overregulation. In light of this, Chairman Coffman stated that in the “rush” to set up the CFPB, there was a “fundamental element of regulation lost.” This lost element of regulation is a “comprehensive review of how rules will affect the industry and whether the financial products are meeting the needs of consumers.” Rep. Coffman’s argument is that a society is built on the “optimism of entrepreneurs.” Therefore, instead of creating “onerous rules and regulations” that would most likely have negative impacts on businesses, creating a vibrant market place is what is needed. In short, small businesses are being burdened by over-regulation. In that regard, Rep. Coffman was interested in learning about the provisions being made by the CFPB in protecting small businesses from the burdens of over-regulation. Additionally, the Ranking Member of the committee, Rep. Jason Altmire (D-PA), in his opening statement, cited two surveys and how their findings went to show that small businesses would be negatively affected with respect to having ready access to capital and credit for their operations: “According to the last Federal Reserve survey on small business finance, nearly half of all small firms need personal credit cards to finance their enterprise. In another survey, 1 in 5 entrepreneurs reported using a home-equity loan for business purposes. As such these findings guarantee that the rules developed by the bureau will inevitably have an impact on access to capital for small businesses.” Consequently, Rep. Altmire called for the urgent need for the CFPB to come up with regulations that would not further worsen the credit choice for small businesses. Taking his turn, Mr. Sharp expressed concerns that CFPB regulation may decrease the availability or increase the costs of the forms of credit small businesses rely on to provide working capital or credit, such as home equity loans, and credit cards.

The Way Forward: How the CFPB would Protect Small Businesses

Ending his testimony, Mr. Sokolov outlined three steps the bureau was going to undertake in helping small businesses owners:

  1. Implement the Equal Credit Opportunity Act, which prohibits discrimination in business lending.
  2. Provide the public with new data that would shed new light on the demand for and supply of small business credit.
  3. Work to ensure that consumer credit histories are as accurate as possible as more accurate histories will help start-ups.

[Reported by Fertaa Yieleh-Chireh]

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