Statement
of
Ranking Member Nydia Velázquez
House Committee on Small Business
For hearing entitled:
Know Before You Regulate: The Impact of CFPB Regulations on Small Business
August 1, 2012

Since its enactment two years ago, Dodd-Frank has attracted significant attention from both critics and supporters. Of all of the Act's 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 marketed to consumers, its rules also impact small business owners. Small firms are major consumers of financial products too. Nearly half use personal credit cards to finance their enterprises, while one in five utilize home equity loans for business purposes. It is clear that CFPB rules will 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 should not bear the burden of new regulations.

Beyond these exclusions, small businesses were given additional protections. CFPB must conduct small business advocacy review panels for certain rules, becoming only the third agency required to do so. Along with the Regulatory Flexibility Act safeguards, this will allow small firms' concerns about CFPB's regulations to be heard. Doing so can help reduce the impact on small firms while minimizing any additional cost of credit to them.

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, without constricting our nation's entrepreneurs.

With this in mind, it is not only the lingering memories of the financial crisis that make us remember why we created the CFPB in the first place. Almost 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 and I look forward to his testimony.

I yield back.

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