As the fight over who will lead the nation’s newest consumer protection agency heats up, Republicans are trying out a new line of attack in their ongoing efforts to limit the agency’s power: That the Consumer Financial Protection Bureau could hurt small businesses.
Last week, a Congressional subcommittee grilled Dan Sokolov, deputy director of the bureau’s research department, on whether the new agency will hurt the ability of small businesses to offer consumers credit, and obtain credit themselves.
“Creating onerous rules and regulations on an industry is not the answer and is likely to have an adverse effect by driving many providers out of the marketplace,” Rep. Mike Coffman (R – CO), chair of the Subcommittee on Investigations Oversight and Regulations, said in his opening remarks. He especially wanted to learn “what provisions they are putting into place to protect small business from the burdens of overregulation.”
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Actually, Congress already put those provisions in place the moment it created the bureau, Sokolov pointed out. The Dodd-Frank financial reform act, which made the bureau, specifically limits the new agency to regulating only large banks, as well as the largest companies in non-bank financial sectors like payday lenders and prepaid debit cards.
Dodd-Frank specifically bars the bureau from writing rules concerning small companies like car dealers and realtors. And while the bureau’s rules will apply to community banks, it is not allowed to bring enforcement actions against them.
The bureau is focused “on financial products and services for consumers,” Sokolov testified. “The Bureau does not have jurisdiction over small business credit except in limited cases where Congress has explicitly and affirmatively granted the Bureau such jurisdiction.”
But don’t think you’ve heard the last of this argument. Richard Cordray, who is President Obama’s nominee to become the bureau’s first director, faces his first confirmation hearing on Aug. 4. The question of whether it has any power to disrupt small businesses will almost surely feature prominently in that debate.
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Image: edenpictures, via Flickr.com
Christopher Maag Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics. Have a question for our experts? Email them at CreditExperts@Credit.com.
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Great post – it should be interesting to see what happens on the 4th of August and beyond.
Gene Marks
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