WASHINGTON D.C. – Ranking Member of the Senate Committee on Small Business and Entrepreneurship, Senator Olympia J. Snowe (R-Maine) and Chair Mary Landrieu (D-LA) today offered an amendment to the Restoring American Financial Stability Act of 2010 to protect American small businesses from unintentionally being regulated by the Consumer Financial Protection Bureau (CFPB). The Snowe-Landrieu amendment was accepted in the Senate by a voice vote today.
“While I strongly believe that Congress should pursue the providers of abusive and predatory financial products that harm Americans, we must be careful not to inadvertently target Main Street small businesses,” said Senator Snowe. “Given the current state of the economy and the difficulties plaguing small businesses struggling to keep their doors open, entrepreneurs already have enough to be concerned about. We should not be injecting more uncertainty into the very enterprises we are counting on to reverse the 7.8 million job losses we have experienced in this recession and create opportunities for the 15.3 million Americans who remain unemployed. Additional uncertainty will make small firms far less likely to take risks and make new investments.”
The Restoring American Financial Stability Act of 2010 contains language that could unintentionally ensnare small businesses within the CFPB if they were judged by the Bureau as having “engaged significantly” in consumer financial products or services, such as selling goods or services on credit through an installment program. The term “significantly” is unclear and could potentially lead to Main Street enterprises, such as jewelers, orthodontists, or furniture store owners, being roped into bureaucratic regulations intended only to cover providers of financial services.
“Every day I hear from small businesses owners who are still struggling to keep their doors open, when, out of nowhere, they are hit with another bureaucratic roadblock that hinders the growth of their business,” Senator Landrieu said. “Rather than putting more pressure on the nation’s entrepreneurs, we should be working harder to support them. Small businesses account for 65 percent of all new jobs in the country. Continuing on the road to recovery means increased access to credit and creating jobs. We don’t accomplish this when we burden small businesses with a bill never intended to have an impact on them.”
The Snowe-Landrieu amendment clarifies that the CFPB cannot regulate small businesses if they meet a three prong test. Specifically, the amendment, which is endorsed by NFIB and the American Association of Orthodontists, exempts a business from CFPB regulation if it sells non-financial products, does not securitize its consumer debt, and falls within the North American Industry Classification System (NAICS) code’s definition of a small business. (NAICS codes are used by the Small Business Administration to determine whether or not a business is considered a “small” business and are commonly used by small businesses when filling out their tax forms.) New businesses would also be exempt from the CFPB so long as a reasonable determination could be made that the business would fall within the NAICS code guidelines during its first year in existence and comply with the first two prongs of the test discussed above. In addition, businesses that fall under this safe harbor are specifically exempted from Section 1042(a) which allows state Attorneys General to bring lawsuits to enforce the provisions in this bill.
“In Maine, I have been told time and time again by constituents and small business owners that they are concerned about the future and worried about the growth of government. Adding another regulator with ambiguous powers is not the answer small businesses and Mainers are looking for to enable them to make plans about their business models and future growth,” Senator Snowe said. “This amendment is a common sense solution that will grant small business owners with a measure of stability in these very uncertain times.”