Rep. Altmire Statement on the CFPB's Effect on Small Businesses

WASHINGTON, July 28, 2011 /PRNewswire-USNewswire/ -- Rep. Jason Altmire (D-PA), the Ranking Member of the Subcommittee on Investigations, Oversight, and Regulations delivered the following statement today at a hearing entitled "Open for Business:  The Impact of the CFPB on Small Business."

"It was just over one year ago that the Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law by the president.  Perhaps no other part of this law has attracted as much attention as the creation of the Consumer Financial Protection Bureau (CFPB).  Last week, the CFPB officially assumed its duties, making this an ideal time to step back and take stock of how this law will affect our nation's small businesses.  

"While the authority of this new regulator will primarily extend only to financial products that are marketed to consumers, its rules will affect small business owners as well.  According to the last Federal Reserve Survey on Small Business Finance, nearly half of all small firms used personal credit cards to finance their enterprise.  In another survey, one in five entrepreneurs reported using a home equity loan for business purposes.  

"These findings guarantee that the rules developed by the CFPB will inevitably have an impact on access to capital for small businesses.  It is imperative that as the agency develops these regulations we bear in mind the needs of small businesses and not further worsen the current credit shortage these firms face.

"For precisely this reason, significant efforts were made to ensure that potentially negative effects on the small business community were mitigated by excluding merchants and retailers as well as businesses that are already subject to insurance or securities regulation at the state level.  Additionally, some entire industries were 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 should therefore not bear the burden of new regulations.  

"As an additional safeguard, the CFPB will be subject to the Regulatory Flexibility Act and the Small Business Regulatory Enforcement Fairness Act.  These laws will ensure that small businesses have an opportunity to participate in the CFPB's rulemaking process.   This will help reduce the potential impact on small businesses while minimizing any additional cost of credit for small firms.

"The devastating effects of the financial collapse of 2008 are a constant reminder of why this new agency was created. The recession and the resulting job losses were sparked by subprime mortgages, preapproved credit cards, and payday loans that should never have been approved by the issuer.  As long as consumer loans are dominated by fine print, incomprehensible language, and interest rates that reset overnight, our financial system will remain at risk of another collapse.

"While efforts have been made over the past year to stall the law's implementation and modify the powers of the CFPB, a recent poll sponsored by AARP, the Center for Responsible Lending, and Americans for Financial Reform, found that the majority of Americans— Republicans, Democrats, and Independents—favor "strong, sensible oversight of the financial services industry."  By a 3 to 1 margin, Americans want financial firms held accountable and financial reforms to take place as soon as possible. The question facing regulators and Congress is not whether this should be done, but how it can be most effective.  If done properly, this agency can make the entire financial system more stable and safer for small firms that depend on the flow of credit to expand and create jobs.  It is my hope that the testimony today will add important perspectives to how this can be achieved."  

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SOURCE House Committee on Small Business Democrats