New consumer bureau would hurt Main Street

Congress is to be applauded for tackling financial regulatory reform. The system that regulates our capital markets has been seriously flawed for decades, and the current financial crisis has only served to expose deep-rooted deficiencies. 

Above all, reform legislation must be bipartisan and protect consumers, job growth and economic recovery. Unfortunately, the legislation fails to meet these standards. It would, instead, place new burdens on Main Street businesses that had nothing do with the financial crisis.

{mosads}The proposed new consumer protection regulator would be able to regulate a merchant, retailer, doctor, public utility, or any other business that permits payment in more than four installments or assesses late fees. No wonder the first year’s budget for this new regulator is $410 million.  

Unlike the Federal Trade Commission or the Securities and Exchange Commission or many other agencies, the proposed Bureau of Consumer Financial Protection would be headed by a single director without a bipartisan commission to provide necessary checks and balances. 

Once confirmed by the Senate, this director would report to no one and would have the authority to write and enforce new rules and decide how to spend his or her massive budget. In fact, the budget would automatically increase each year with no oversight by Congress, the president or, for that matter, anyone else. 

Studies have shown the new regulator’s expansive scope would add additional regulatory and liability layers to small business lending, restricting access to credit. Small businesses can’t grow, or hire, without loans.  

Further, separating consumer protection from safety and soundness is ill-advised.  The proposed legislation separates regulation of the health and stability of our financial institutions from the very products those institutions offer. This is a misguided proposal driven by a misreading of populist anger, never mind bad public policy. Consumers benefit from having a safe and sound system as much as they benefit from stronger protections. They deserve and can get both, if we work on getting this right. 

Instead of a new, all-powerful regulator, the U.S. Chamber of Commerce believes we should create a Consumer Protection Council to ensure coordination of regulatory and enforcement actions among the seven existing federal financial regulators. This council would be tasked with eliminating regulatory gaps, prescribing consistent disclosure and examination standards, and identifying areas in which new regulations are necessary. In other words, fix regulation — don’t just add more regulators and regulations to our broken system. 

Supporters of the proposed consumer regulator argue that ordinary Americans need someone on their side in the wild world of consumer credit. We agree! Americans also need someone on their side to help create jobs and protect the economy — the Chamber’s proposal for enhanced consumer protection and our other financial regulatory reform recommendations do all three.

Members of Congress would be wise to heed what their constituents are saying about consumer protection. According to a recent Bloomberg survey, nearly 7 in 10 Americans prefer enhancing the existing regulatory system instead of creating a separate agency with complete independence and its own authority to make rules for consumer credit. 

Consumer protection is just one part of financial regulatory reform. The U.S. Chamber has been calling for comprehensive, urgent reform of the financial system since well before the financial crisis. In 2007, we began a campaign to draw attention to the many gaps and failures in regulation. 

We believe that bipartisan legislation to reform regulation of our financial system is a critical element to America’s economic recovery and want to see strong legislation enacted this year. However, getting reform right is just as important as getting them done quickly.  

Much is riding on the outcome of financial regulatory reform legislation. Some 60 million investors rely on our capital markets to help pay for their kids’ college education, buy homes, and build a nest egg for retirement. America’s 27 million small businesses — our principal job creators — rely on them to help start and grow their companies.

If Congress gets financial regulatory reform right, it will help ensure abundant, affordable access to capital for individuals and businesses, unleash a tidal wave of new economic growth that will help generate millions of new jobs, and attract more foreign investment. If Congress misfires, it will significantly set back our recovery, destroy jobs, and undermine our global competitiveness. 

It’s time for Congress to put politics aside and come together on a bipartisan basis to restore confidence and certainty to the markets, reform our broken regulatory structure, and help us get back on track toward a strong economy.

Mr. Donohue is President and CEO of the U.S. Chamber of Commerce.