In a letter to Treasury Secretary Tim Geithner, a business consortium, including the Chamber of Commerce, urged that rulemaking and enforcement actions by the new Bureau of Consumer Financial Protection be deferred until the confirmation of a Director. According to the business groups, issuing rules, or engaging in enforcement actions designed to define terms of the statute, prior to the Senate confirmation of a director would prevent Congress from exercising the one avenue for oversight that it expressly retained in crafting the design of the Bureau. The business groups also urged the Bureau to use the power given to it by Dodd-Frank to exempt businesses with a de minimis involvement in consumer financial products or services. The letter was also sent to House Financial Services Chair Spencer Bachus and Senate Banking Committee Chair Tim Johnson.
The letter noted that the Bureau combines extremely broad rulemaking authority with an unusual absence of meaningful checks on the exercise of that authority. Unlike the SEC and other regulatory agencies, the Bureau is overseen by a single Director rather than a multi-member bipartisan commission; and unlike other agencies it is exempt from the appropriations process.
When the Bureau does begin adopting regulations, the letter continued, it should coordinate with the Small Business Administration to assess carefully the economic impact of its actions on non-financial services businesses, including through the Small Business Regulatory Fairness Act process, recognizing that small businesses often will be situated differently than the financial services businesses likely to be the Bureau’s principal focus.
The Dodd-Frank Act provides the Bureau with broad power to require any business falling within its jurisdiction to provide information to the Bureau (Section 1022(c)(4)) and to consumers (Section 1033) The business groups urged the Bureau to issue regulations clarifying that these obligations will be limited to businesses whose principal activities fall within the financial services sector and will not apply to Main Street businesses. The regulations should also ensure full protection of confidential proprietary information.
The Dodd-Frank Act requires the Bureau to issue a rule defining the categories of nondepository businesses subject to regulation under the Act (Section 1024(a)(2)). The Bureau is not obligated to extend oversight and examination to include new categories of businesses, noted the consortium, and should not do so for several reasons. First, the Bureau faces a huge task in establishing an effective regulatory function for the varied categories of businesses already subject to oversight by operation of the statute. Adding to that burden at the outset could overwhelm the Bureau.
Second, the Bureau should consider the extent to which such oversight is in fact needed for any additional category of business, which would require gathering information regarding existing federal and state regulatory regimes as well as the frequency of violations of consumer protections by such businesses and the extent to which new federal oversight, as opposed to other approaches, would provide a cost-effective increment of protection for consumers.
Third, deferring an expansion of oversight and examination requirements would allow businesses to devote resources to job creation rather than save them to cover what might well be unnecessary regulatory compliance costs. To the extent the Bureau considers extending oversight to additional categories of businesses, the Bureau should focus on large businesses whose principal activities fall squarely within the financial services sector.
The Dodd-Frank Act requires the Bureau to issue rules regarding coordination with State enforcement efforts and authorizes the Bureau to provide guidance to coordinate enforcement with state attorney generals and other regulators (Section 1042(c)). The letter urged the Bureau to issue rules promoting consistent, nationwide interpretations of the statutory and regulatory requirements and provide for automatic intervention by the Bureau in any case in which a state proposes an interpretation of federal law not previously endorsed by the Bureau.
The groups view such an approach as essential in avoiding the fragmentation of the national credit market as a result of the application by different state attorney generals of inconsistent legal standards. The Bureau should consider establishing an office or otherwise designating staff with authority to monitor and coordinate the activities of state AGs.
The Dodd-Frank Act also requires the Bureau to assess the impact of its rulemaking on regulated small business and the availability of credit for small business. (Section 1100G). While the Office of Small Business should be an advocate for small business within the Bureau similar to the duties of the SEC’s Investor Advocate, noted the consortium, it must also develop the expertise necessary to conduct regulatory analyses as an embedded participant in the CFPB’s regulatory process.
Its role should include providing the Bureau, as well as Congress, with an analysis of the economic consequences on small business of rules and enforcement policies envisioned by the Bureau. This office also should be consulted before the Bureau decides to advocate a particular standard in an enforcement action, noted the business groups, because enforcement rulings, like regulations, can have an immediate impact on all regulated businesses, and a potentially disproportionate effect on the small business community.