Dodd-Frank Consumer Credit Reforms Under Assault

Do you accept credit cards in payment from your customers? Does your business use credit cards to pay vendors? Either way, you will be affected by the new consumer protection rules to be promulgated by the Consumer Financial Protection Bureau under the Dodd-Frank financial regulatory reform bill signed by President Obama in July. One of the top Republican congressmen on the Financial Services Committee, Representative Jeb Hensarling of Texas, has promised to defund the Bureau once the new Republican House majority assumes power in January.

Other incoming House Republican leaders, including presumptive Majority Leader Eric Cantor of Virginia, and leading Financial Services Committee chair candidates Spencer Bachus of Alabama and Ed Royce of California, are expected to introduce legislation revoking the independent funding of the Bureau from the Federal Reserve which is set to begin in July, 2011. Royce has also proposed giving bank regulators the power to veto any Bureau rules.

Republican Congressmen and banking industry lobbyists are attacking the rulemaking powers of the Bureau, because President Obama is likely to veto any Republican backed legislation weakening the power of the new regulators, headed by Harvard Law Professor and consumer advocate Elizabeth Warren. Republicans believe subjection of the Bureau’s budget to the annual Congressional budgeting process will subject the Bureau’s exercise of its rulemaking powers to increased political pressure from a Republican dominated House, where appropriation measures must originate.

Financial Market Reform Legislation Moves Ahead

With Senate passage of a second version of the financial markets regulatory legislation last week comes a prediction by Congressman Barney Frank that the conference committee will have a final markup very soon, and Congress will have a bill on President Obama’s oval office desk by Independence Day. If you are in the business of building houses and condominiums, it won’t matter which version of this bill comes out of conference committee, the legislation will put another brick on financing for your business. New rules on consumer lending will make it harder for home buyers to get mortgage loans, and this will keep the housing market in the doldrums for both new and existing homes and condos. New working capital for home builders is going to remain difficult to find because of this legislation.

Frank and his Senate counterpart Christopher Dodd have yet to release a timetable for conference committee action on the bills. The principal difference between House and Senate version of the measure is the Senate requirement that banks spin off their financial derivatives business into separately capitalized business units. Lobbying activity respecting this legislation will surely intensify in the coming weeks. So far in the 2009 and the first quarter of 2010 business and consumer groups have spent $1.33 billion in lobbying efforts regarding this bill, with 3,000 lobbyists contacting our 100 Senators and 435 Representatives, making a ratio of more than five and a half lobbyists for every politician in Congress.