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As the economy continues to rebound from the 2008 financial crisis, Democrats of the House Committee on Small Business are working to prevent a similar crisis in the future. During the financial crisis, small business lending seized up and millions of jobs disappeared, leading Congress to pass a series of consumer protections and financial reforms. In today’s hearing, Democrats pointed to financial reforms such as the Dodd-Frank Act as proven tools to stabilize the economy, paving the way for recent growth in small business lending and job creation. 

“As both lenders and borrowers, small businesses have much at stake when it comes to financial regulatory reform,” said Ranking Member Rep. Nydia M. Velázquez (D-NY). “The Dodd-Frank Act touches on all aspects of the financial industry and has the potential to make the entire system more stable and safer for small firms in the real economy to grow and create jobs.”

Since the passage of Dodd-Frank, lending at community banks has increased over 7 percent in the past year alone, and credit unions are thriving, with loan portfolios growing at nearly 3 percent in the third quarter of 2017. In the hearing, Democrats stressed that most provisions in the law target the largest financial services firms—institutions with over $10 billion in assets. As a result, smaller institutions—over 98% of all banks in the U.S., are exempt from many regulatory provisions. Furthermore, in crafting Dodd-Frank, lawmakers were careful to include input from the small business sector, and regulations that do apply to small financial firms are subject to the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act.

A recent Government Accountability Office (GAO) report found that much of the costs that small firms bear from financial regulations stem from a misunderstanding of the laws—not the laws themselves. To this end, GAO has recommended outreach and guidance by agencies to small firms to reduce confusion and provide more public information. The report also found that regulations have led to greater public benefits such as fewer discriminatory practices in lending and increased transparency.

Since the passage of Dodd-Frank in 2010, credit unions are expanding membership and business lending has increased 75 percent. Furthermore, the law was enacted in a tiered manner, focusing most regulations on high-risk large financial institutions, and exempting smaller banks and firms.

“It is our job to ensure that Main Street businesses have the tools they need to succeed,” said Velázquez. “Democrats of the Committee remain committed to safeguarding existing regulations that are proving successful in growing small business lending and jumpstarting job creation. The stakes are too high to abandon regulations that work to protect American consumers and the small business sector.”

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