U.S. Chamber Says Consumer Protection Agency Proposal Won't Enhance Consumer Protection

Releases Study Showing Harm to Small Businesses

WASHINGTON, D.C.—David Hirschmann, president and CEO of the Chamber's Center for Capital Markets, today testified before the House Small Business Committee on the unintended consequences of the proposed Consumer Financial Protection Agency (CFPA) Act, citing a new Chamber-commissioned study which highlights how the legislation would harm small businesses and their ability to access credit.

"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," Hirschmann said. "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. They use the same products as consumers but use them very differently. 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 Chamber's study, The Impact of the Consumer Financial Protection Agency on Small Business, was authored by Thomas Durkin, an economist that spent more than 20 years researching and monitoring the markets at the Federal Reserve. The study found that 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.

"The U.S. Chamber supports the administration's goal of enhancing consumer protections. The Chamber's Center for Capital Markets Competitiveness has been calling for regulatory reform that includes strong consumer protections since before the financial crisis," Hirschmann testified. "The financial crisis, however, certainly shined a light on the weaknesses and shortcomings of our outdated regulatory system, and millions of consumers and investors were harmed due, in part, to regulatory failures. Consumers need clearer disclosure and better information. They also need vigorous enforcement against predatory practices and other consumer frauds."

"While we appreciate Chairman Frank's recent changes to the CFPA, we continue to believe that the CFPA is the wrong way to enhance consumer protections and will have significant and harmful unintended consequences for consumers, for the business community, and for the overall economy," continued Hirschmann. "We are particularly concerned that these unintended consequences may fall disproportionately upon small businesses."

"Legislation to enhance consumer protection should focus on ensuring disclosures to consumers are transparent, understandable and concise; improving consumer education; enhancing the ability of consumers to choose between competing products whose terms are well disclosed and truthfully conveyed; and ensuring strong and consistent enforcement to deter and punish illegal and predatory activities," he said. "Because we do not believe that the proposed Consumer Financial Protection Agency will achieve these objectives, we oppose legislation to create it."

"The Chamber looks forward to working with Members of Congress to craft legislation that protects consumers—but in a way that also protects economic opportunity and consumer choice," Hirschmann said.

For a copy of today's testimony please visit: /issues/testimony/2009/090923_hirschmann_cfpa

For a copy of the small business study, please visit: /publications/reports/090923_cfpa_sb

The U.S. Chamber is the world's largest business federation representing more than 3 million businesses and organizations of every size, sector, and region.

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