Coffman: CFPB needs to fully consider the impact of each of their regulations on small business
WASHINGTON, DC— Investigations, Oversight and Regulations Subcommittee Chairman Mike Coffman (R-CO) today held a hearing to examine the impact of the new Consumer Financial Protection Bureau (CFPB) regulations on small businesses. The CFPB was created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created a regulatory structure for financial products.
“Access to capital continues to be a roadblock for many small companies around the nation. Small business owners are saying they need lending but are getting turned down while banks are saying they have money to lend but aren’t finding qualified applicants. Somewhere there is a disconnect, and I believe new regulations from Dodd-Frank and the new CFPB have a lot to do with this conundrum.”
“The CFPB is the product of a rushed response to the 2008 Wall Street crisis and even though small businesses and community banks didn’t cause the crisis, they are the ones who may be negatively impacted. The creation of a new agency with such broad regulatory authority creates uncertainty which often plays a role in preventing businesses from growing their company and creating jobs. With record high unemployment, we must do more to bring relief to our most robust job creators -- small businesses.
“I appreciate hearing from the CFPB about the operations of this new bureau and I hope that protecting small businesses becomes a serious priority throughout the agency. Any new regulation will have a downstream effect on small business lending, therefore CFPB needs to fully consider the impact of each of their regulations on small business before they propose or implement them.”
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Notable Witness Quotes:
Jess Sharp, Executive Director for the Center for Capital Markets Competitiveness at the U.S. Chamber of Commerce said, “The CFPB poses two significant threats to small businesses: First, small businesses may be subject to the CFPB’s regulation and other oversight because they engage in one of the 10 broadly described activities laid out in the law, or are a service provider to one of those companies. Virtually all of these businesses are already subject to oversight by the Federal Trade Commission. The Chamber fears that overlap and duplication will be inevitable as the federal agencies sort out lines of jurisdiction and responsibility. In the meantime, even those businesses that are ultimately deemed to be outside the CFPB’s authority may see their compliance costs go up in the short term because there is still so much uncertainty about the extent of the CFPB’s jurisdiction. Second, 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, as described above – home equity loans, credit cards, etc. In this scenario it is even possible that policies that seem to benefit consumers could indirectly harm their small businesses by limiting their access to the credit they need.”
Daniel Fleming, President of Fleming Nationlease in Alexandria, VA and member of the Truck Renting and Leasing Association (TRALA), said, “…the Dodd-Frank Wall Street Reform and Consumer Protection Act adds extensive new business credit applicant data collection requirements to the Equal Credit Opportunity Act (ECOA). These requirements would be offered by and monitored through a new entity called the Consumer Financial Protection Bureau, or CFPB. While I certainly do not operate a bank, under the definitions listed within this new law, I am considered a “financial institution” because I have an application for credit for my customers. In my opinion and that of TRALA, the Small Business Data Loan Collection provision is: Counterproductive, Contradictory, Costly and Confusing.”
“At a time of historic economic uncertainties, making a truck leasing company – or any small business not directly working in the banking industry – comply with Section 1071 is a mistake and I hope this committee and this Congress can put partisan politics aside and realize the unintended consequences that this provision would have on small businesses and stop it before it takes effect in the near future.”
Terry Jones, Chairman of the Legislative and Regulatory Affairs Committee for the Colorado Mortgage Lenders Association in Castle Rock, CO said, “We respectfully urge Congress and this subcommittee to carefully monitor all of these new rules to make certain that they do not unwittingly harm American families, small business, the housing and mortgage market or the nation’s economic recovery.
“No matter how well intentioned rules may be, they must not be allowed to harm the very consumers they set out to protect or jeopardize the housing recovery or the nation’s economic recovery.”