GOP, Lobbyists Oppose Consumer Protection
At the heart of disagreement on financial reform is a new bureau to protect consumers from abusive lending practices like credit card abuse and sub-prime lending.
Some businesses say they would be unfairly regulated under the new Consumer Federal Protection Bureau. Auto dealers, pay day lenders, community bankers are pointing their fingers at Wall Street and are saying, “We didn’t cause the problem, they did!”
These concerned businesses are fanning lobbyists across Capitol Hill.
One hundred auto dealers traveled to Washington to lobby against it.
Edward C. Tonkin owns 15 dealerships in Portland, Oregon and is the Chair of the National Auto Dealers Association. “It’s such an overreach,” he said of the Consumer Federal Protection Bureau. The bureau would impact every single auto dealer in the country because the dealership assists the customer in finding a loan, said Tonkin.
The House of Representatives passed their version of financial reform last year. They created an exclusion for car dealers from consumer protection regulation, which is what the auto dealers are seeking in the Senate’s bill.
Their lobbying campaign has stuck a cord. Moderate Republican George Voinovich (Ohio) is not seeking reelection. He is signaling his support for financial reform, but says the consumer protection bureau would create a “bizarre type of consumer protection” and its power would be “immense.”
The car dealers are not the only ones lobbying to be carved out of compliance under the CFPB. So are pay day lenders and check cashing companies.
Steven Schlein is a spokesperson for the pay day lenders association, the Community Financial Services Association of America. He said, “The bill says in not so many words that they can decide what they want to regulate and how they want to regulate it.”
In a statement, Senator Chris Dodd, Chair of the Banking Committee, said the net does not reach that far. He attempted to clarify.
“Now, if you have a store credit card, that credit card falls under the same rules and regulations as a bank credit card. If your auto dealer just sells cars, they’re not covered. But if that auto dealer makes you a loan, then you’ll have the same protections you would have if you paid for that car with a loan from your community bank,” Dodd said.
The bill says businesses that do a significant amount financial services transactions will be subject to the new regulations:
(C) LIMITATION.—Notwithstanding sub-paragraph (B), the Bureau may not exercise any rule making, supervisory, enforcement, or other authority under this title with respect to a merchant, retailer, or seller of non financial goods or services that is not engaged significantly in offering or providing consumer financial products or services.
The word “significantly” is not defined.
Republicans, who have long been opposed to the a new regulatory body for consumers, say this bill would impact most businesses that sets up a payment plan.
Republican Leader, Senator Mitch McConnell (Ky), stated his opposition to financial reform two weeks ago. He asked if the “parent trying to spread out payments for their child’s braces” would have to be subject to the CFPB.
Senator Dodd said the claims are inaccurate. He challenged Republicans to tweak the language.
“If you really believe that this bill does expose non-financial servicers and providers of financial products, then what’s the language we need to fix that? Because none of us want to do that,” Dodd said.
The auto dealers are facing tough competition in their battle for exemption. The Department of Defense wrote a letter to the Senate asking the Senate resist any temptation to exclude car dealers. They say members of the military are becoming prey to predatory lending. Members of Congress do not like to oppose the wishes of the military.
Also, 500 community bankers have lobbied Senators this week. They are trying to ensure that car dealers and other businesses receive the same scrutiny as they do.
Steve Verdier, Senior Vice President of the Independent Community Bankers of America. He said, “Everybody ought to be under the same rules and playing against the same rules.”
The CFPB will see much more debate as the bill progresses through the Senate.