Statements
Statement of Ranking Member Nydia Velázquez before Full Committee hearing entitled: "Know Before You Regulate: The Impact of CFPB Regulations on Small Business"
Washington, DC,
August 1, 2012
Statement Since it was signed into law two years ago, Dodd-Frank has attracted a significant amount of attention from both critics and supporters. Of all of the Act’s many provisions, it has been Title Ten, which creates the Consumer Financial Protection Bureau that has attracted the greatest amount of scrutiny. This new agency is responsible for protecting consumers from unfair, deceptive, and abusive financial products. Last July the CFPB started operations, making this an opportune time to review how it is affecting America’s small businesses. Although the CFPB’s primary role is to regulate financial products that are marketed to consumers, its rules nevertheless impact small business owners as well. The reality is that small firms are major consumers of financial products too, as nearly half used personal credit cards to finance their enterprises, while one in five reported using a home equity loan for business purposes. As a result, it is clear that CFPB rules will predictably influence small businesses seeking capital and credit. With the agency’s broad responsibilities, it is important that it balance the need to prevent abusive practices without adversely affecting the credit conditions facing small firms. It was for these very reasons that meaningful safeguards were incorporated into CFPB’s enacting legislation. These efforts were designed to mitigate the potentially negative effects of this new agency on the small business community. For this reason, small community banks with assets of less than $10 billion were excluded from the reach of the agency, as were retailers and merchants. So too were businesses that are already subject to insurance or securities regulation at the state level. Some entire industries dominated by smaller entities are also excluded from CFPB authority, such as Realtors and auto dealers. Clearly, lawmakers recognized that small businesses were not the cause of the financial crisis and therefore should not bear the burden of new regulations. On top of these exclusions, small businesses were given additional protections. CFPB must conduct small business advocacy review panels for certain burdensome rules, becoming only the third agency to be required to do so. Along with the Regulatory Flexibility Act safeguards, this will give small businesses a voice, allowing their concerns about CFPB’s regulations to be heard. Doing so will help reduce the impact on small firms while minimizing any additional cost of credit to them. With these protections in place, the agency is able to accomplish its mission without disrupting the small business economy. And it is a mission that is clearly necessary, as coercive and abusive practices not only impair wealth creation and undermine economic activity, but also legitimate businesses. The real issue before this Committee is one of oversight. Our responsibility today is not to exhume old arguments of ancient political battles, but to examine whether the agency is carrying out its mission in a way that safeguards consumers, without overburdening small businesses. If done properly, this agency can make the entire financial system and the economy more stable and safer for individuals and small firms alike. With this in mind, it is not only the lingering memories of the financial crisis that make us member why we created the CFPB in the first place. Seemingly every day we hear from a constituent about an erroneous credit report, pressure tactics from credit card companies, abusive pay day loans, or coercive financing scams. As long as financial products are laden with fine print, scare tactics, and incoherent penalties, consumers will be unable to truly drive our economy forward. I want to thank Director Cordray for being here today and I look forward to his testimony. Thank you and I yield back. ### |
