The Consumer Financial Protection Bureau is preparing to take the next step in its quest to create new rules for the short-term credit market. Almost a month ago, the CFPB announced its concepts for rulemaking at a field hearing in Richmond, Va. This week, the CFPB began a process to examine the impact its proposal will have on small businesses.
Within the industry, it’s already clear the impact will be catastrophic unless the CFPB makes serious changes to its proposal. Indeed, nearly all small businesses in this sector would be forced to shut down under the agency's current plan, leaving their employees without jobs and many of their customers without access to credit.
When Washington regulators like the CFPB approach an issue, they tend to believe that more regulation is better regulation. But for small businesses, more regulation means more compliance costs and more restrictions on who they can do business with and what products and services they can offer. These costs can easily put smaller nonbank lenders out of business.