The Chamber's David Hirschmann says that financial consumer protection legislation should make government better—not bigger.

 
A proposed Consumer Financial Protection Agency (CFPA) will not enhance consumer protection and will in fact harm small businesses, particularly their ability to access credit, according to a new study commissioned by the U.S. Chamber.

"The smallest businesses—those we are most counting on to add jobs in the early stages of the economic recovery—have the hardest time obtaining credit," said David Hirschmann, president and CEO of the Chamber's Center for Capital Markets, during testimony before the House Small Business Committee on September 23.  "As a result, they often rely on consumer credit products such as credit cards and title and home equity loans to meet their needs, including payroll. The CFPA would likely have a significant impact on the availability and cost of credit to these businesses. In addition, smaller financial businesses would be significantly disadvantaged by the regulatory burdens of the proposed CFPA."

The administration has proposed creating a new agency that would have authority to oversee a range of financial products, including mortgages, checking and savings accounts, and credit cards, which 77% of small business owners use to help finance their businesses. The proposed agency would mandate that every institution offer a government-designed financial product, reducing the ability of financial institutions to offer alternative products that are tailored to the needs of small business owners. Reduced access to credit and more expensive credit products could result.
 
The Chamber's study, The Impact of the Consumer Financial Protection Agency on Small Business, was authored by Thomas Durkin, an economist who spent more than 20 years researching and monitoring the markets at the Federal Reserve. The study found that because the legislation adopts a "one-size-fits all" approach to consumer protection, it would likely restrict or eliminate altogether small business access to credit, and increase the costs of the credit they would be able to obtain. This "CFPA credit squeeze" could result in business closures, fewer start-ups, and slower growth, ultimately costing a significant number of jobs that would either be lost or not created. 

Speaking at a September 24 event at the Chamber's Washington D.C., headquarters, small business owner Kara Lowrie said thatshe would not have been able to start her mortgage company if an agency such as CFPA had been in place in 1998. Lowrie and her husband took out a home equity line of credit to get their business going in Bossier City, Louisiana, and now as a lender, she finds herself regulated by five different agencies. The problem isn't if there is enough regulation, Lowrie says, but whether there's enough enforcement. Adding another regulator to the mix is just "layering on another agency on a flawed system," Lowrie said. "Small businesses did not get us into this mess," Lowrie says. "Do we drive out small business because the government was unable to enforce regulations already on the books?"

Rep. Walt Minnick (D-ID), a member of the House Financial Services Committee, echoed Lowrie's comments. "It's clear we need more consumer protection and greater transparency," Minnick says, "but I don't think we need another regulator." Minnick called on the Chamber to use its members and influence to help shape the debate. "The U.S. Chamber of Commerce is an organization that is heard," Minnick said.

Read The Impact of the Consumer Financial Protection Agency on Small Business.

Learn more at www.stopthecfpa.com