Last week, reports emerged that Senate Banking Committee Chairman Chris Dodd (D-CT) was contemplating dropping the proposal to create an independent Consumer Financial Protection Agency (CFPA) from his regulatory reform bill. Regulatory reform is one of the big issues facing Congress in 2010, and the CFPA remains the provision onto which the right is focusing most of its ire.
The parties most concerned about the CFPA are the U.S. Chamber of Commerce and the biggest Wall Street financial firms. But having Wall Street firms as the face of the opposition is not the most PR-savvy of moves these days. So the Chamber is planning to “fly-in” some representatives from small businesses to Capitol Hill tomorrow, and “lead” them to a pre-arranged series of anti-CFPA meetings:
The U.S. Chamber of Commerce is hosting a “small-business fly-in” day on Wednesday to discuss the “harmful impact” of the CFPA. After a panel discussion that Sen. Mike Johanns (R-Neb.) is expected to participate in, Chamber lobbyists will lead small-business owners to a series of meetings on Capitol Hill against the creation of the CFPA.
The Chamber has openly admitted that its tactic in the fight against the CFPA is to “move the spotlight off the unpopular commercial banks and mortgage lenders that are the target of the legislation and muster a roster of more sympathetic opponents.” This seems to be part and parcel of that approach.
However, the notion that the CFPA will cripple small business doesn’t hold much water. First, the Chamber’s often invoked charge that the CFPA will be able to regulate small businesses like butchers and florists is false, as the legislation clearly exempts “merchants, retailers, and sellers of nonfinancial services.” Furthermore, the Chamber leaves out that small business would benefit from the protections enforced by the CFPA, just as individual consumers would. As the Woodstock Institute pointed out:
The agency would require understandable disclosure, not the reams of fine print that has trapped business owners in unfavorable credit card contracts. It would prohibit unfair and deceptive practices, not let hazardous products like automobile title loans, which many businesses rely on to manage cash flow, slip through regulatory loopholes…Business owners need the security of knowing that the product they receive from one lender carries the same level of protection as a product from any other lender, and that all lenders — credit cards, trade credit, and independent finance companies included — are offering fair financial products.
So as Harvard Law’s Elizabeth Warren put it in an interview with Reuters today, without the CFPA “the tag on U.S. financial regulation reform may as well say ‘Made on Wall Street’.” “The CFPA is the best indicator of whether Congress will reform Wall Street or whether it will continue to give Wall Street whatever it wants,” she said.