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Financial Reform Bill Concerns Some Small Businesses

By Jason Beahm on May 27, 2010 | Last updated on March 21, 2019

After the Senate passed a major financial reform bill, some small businesses are concerned that the new oversight will hurt business and create unnecessary red tape. The uncertainty has many small businesses speculating whether they will get caught up in new financial regulation. For now, the speculation is just that, as the bill will face changes in the House of Representatives.

The biggest loser in this round appears to be car dealers, who despite a campaign on Capitol Hill, are subject to new regulation in the Senate bill. An amendment to exempt them was withdrawn from the Senate bill before it passed. However, the fight will continue in the House bill and the regulation of car dealers could still be removed. 

Overall, small businesses look like they will avoid much of the legislation. Orthodontists, plumbers, bakers and butchers were worried that they would be subject to the new regulations because they sometimes extend credit to their customers. However an amendment sponsored by Senators Snowe and Landrieu would excludes businesses that can answer no to the first two parts and yes to the third part of a three-pronged test:

1) Do you sell financial products?

2) Do you securitize consumer debt?

3) Do you meet the definition of a small business?

However, despite the exemptions for many small businesses, others are worried about the wisdom of the regulation. Medium-sized businesses feel like they may bear the worst of it, by virtue of not being exempt as a small business and not having a team to manage regulations like a large business. 

Both House and Senate bills include a new agency that would oversee all types of consumer loans, including credit cards, payday loans and mortgages, debt settlement companies, debt collectors and check-cashing stores. As the New York Times reports, currently most non-bank lenders are overseen by state regulations and the Federal Trade Commission, which lacks the authority and resources of bank regulators.

"The idea that you have consumer protection no matter where you buy the product is largely in this bill," said Ed Mierzwinski, director of consumer programs for the United States Public Interest Research Group.

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