Despite some positive economic trends, U.S. consumers are still not feeling optimistic about the country’s economic outlook. A new survey from the New York Federal Reserve, for example, indicates that U.S. consumers are growing increasingly pessimistic about their ability to access most forms of credit. Additionally, the latest University of Michigan consumer-confidence survey showed a drop from the previous month, as inflation continues to linger and impact millions of Americans buying gas and groceries.
In today’s environment, small ventures and family businesses are in distress, as well, as they frequently need loans to get started and keep things moving in hard times. Unfortunately, that need isn’t being adequately met due to lack of action by regulators. A staggering 59 percent of small businesses in the country report being in “fair or poor financial conditions.”
To grow our economy and ease the burden on consumers and family businesses requires pushing all levers of the private and public sector in the same direction. However, one government agency designed in the aftermath of the Great Financial Crisis to supposedly help consumers – the Consumer Financial Protection Bureau (CFPB) – is having the opposite effect and making things harder for those it is supposed to protect. In reality, the CFPB has become a barrier to consumer credit markets.
Quite the opposite of being a champion for consumers, the CFPB has robbed Americans of the choice to safely access credit when they determine they need it, by preventing companies from lending to customers with imperfect credit. This is extremely problematic; everyone needs access to credit at some point, and it’s hard to expect people to improve their credit scores if they can’t take out loans and work on improving them. When consumers and small business owners are in need of a line of credit or a loan, they should be able to access those products without big-brother interference from the CFPB.
Not only does the agency operate without congressional oversight, making rules and regulations that well exceed its charted purpose, it’s also causing confusion throughout the industry. The CFPB’s unnecessary rules and regulations in some areas, as well as its lack of clarity in others, harm both borrowers and lenders. Not only does the CFPB routinely create conflicting and unclear rules for lenders, the agency’s directives have been at odds with current federal or state laws.
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Lenders should be able to trust in their regulators so they can best serve their customers without fear of breaking rules that are published as press releases or blogs on the CFPB website – an untenable yet common practice at the CFPB. For instance, in a quick post to its Newsroom, the CFPB banned “excessive credit card late fees” (ironically, dissuading consumers from paying their credit cards on time will lead to lower credit scores, hurting them over the long run). The CFPB’s progressive power grab is antithetical to its parameters, with the Wall Street Journal Editorial Board noting the expansion of “remit and assumed responsibilities of federal agencies whose resources are constrained by Congress.”
The CFPB is getting it wrong, because its priorities aren’t straight. Consumers want safe and affordable loans to be within reach. They want to have access to funds in case of unexpected expenses, to pay their bills on time to avoid penalties, and to be able to keep up with the rising cost of essentials like groceries and housing, with inflation still a concern.
The overreach is extensive. Our small business members are negatively impacted by the CFPB regulating their websites by defining pop-up windows/drop-down menus as “abusive business practices.” On the lender side, the CFPB shouldn’t force borrowers to be asked for their sexual orientation or to detail their weekly bills and expenses, both of which are overly burdensome and unnecessary.
Instead, credit lenders deserve clear rules of the road so that they feel confident in their ability to serve their customers, rather than fear being caught in a regulatory trap. Family businesses and everyday consumers who the CFPB is supposed to serve just want regulators to enforce existing consumer laws and ensure their access to safe, affordable credit.
America isn’t out of the economic woods…government regulators like the CFPB need to immediately reexamine their goals and refocus on truly helping consumers.
Palmer Schoening is chairman of the Family Business Coalition in Washington
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