Small Business Neglected in CFPB Rules: SBA Advocacy Office

Echoing many of the concerns of credit unions, the Small Business Administration’s advocacy office says the CFPB does a poor job of evaluating the impact of its rules on small entities.

The advocacy office’s comments were filed in response to the CFPB’s request for information on its rulemaking processes.

Acting CFPB Director Mick Mulvaney has requested comments on many of the agency’s operations.

Since the Trump Administration’s CFPB has not yet issued any major rules, the SBA’s comments represent another stinging indictment by the Trump Administration of the rulemaking process under former Director Richard Cordray.

“The bureau should discuss the potential regulatory alternatives with small businesses during the formulation of the proposal,” Major Clark, the advocacy office’s acting chief counsel and Jennifer Smith, the office’s assistant chief counsel for economic regulation and banking, said in their comment letter. “Soliciting input only at a later stage makes it more difficult for the bureau to make meaningful modifications in the proposal.”

The SBA’s advocacy office is independent from the SBA and the two officials said that their evaluation does not necessarily represent the SBA’s views.

Credit unions, particularly small ones, have said that the cost of understanding and complying with the CFPB’s rules is daunting. And they have said that they believe that the agency does not adequately evaluate the impact that rules may have on credit unions.

The SBA has criticized the bureau in the past for the way it adopted its controversial payday lending rule. Clark and Smith returned to that issue in their comments.

While the federal government broadly requires agencies to write rules in plain English, the proposed payday lending rule amounted to more than 1,300 pages. Reading and understanding that document would be impossible without the aid of an attorney, they said. And smaller entities might have to comply with the rule even though they may not be able to afford to hire someone to interpret them, they said.

The advocacy officials also said that once rules are adopted, the CFPB often issues compliance guides that are too cumbersome and contain disclaimers.

“A compliance guide with a disclaimer is not useful. A small entity should be able to feel comfortable in the fact that if it follows the guide, it will be in compliance with the law.”