The Dodd-Frank Wall Street Reform and Consumer Protection Act was signed into law last week by President Obama.  The law contains a provision designed to lessen the negative impact on small business caused by a flood of federal mandates from the newly created Consumer Financial Protection Bureau (CFPB).  The Small Business Fairness and Regulatory Transparency Amendment authored by Senators Olympia Snowe (R-ME) and Mark Pryor (D-AK) does two things:

• First, it requires the CFPB to publicly consider how its new rules will impact the cost of credit for small firms and then take steps to minimize those additional costs. 
• Second, the Snowe-Pryor amendment requires the CFPB to issue a small business report prior to finalizing those regulations that will most severely impact small firms regulated by the new agency.  The Small Business Advocacy Review Panel Reports will contain recommendations by the small business community on how to improve consumer protections in specific rulemakings without unnecessarily burdening small business. 

The Snowe-Pryor provision helps two parts of the small business community; firms that need credit and firms directly regulated by the CFPB. 

Almost 90 percent of America’s 26 million small businesses use some form of credit, which may be why credit is referred to as, “the oxygen for new and young firms.”  When credit is too tight, the dreams of many entrepreneurs cannot become reality.  An economic study last year showed that the dozens of rules to be issued by the CFPB will tighten the credit squeeze, raising interest rates by 160 basis points.  The Snowe-Pryor amendment will force the CFPB to re-consider how its rulemakings will affect small business access to capital and to minimize any additional cost of credit for small firms. 

The total cost of complying with federal rules and regulations is over $1.1 trillion and that burden hits small business the hardest.  Studies issued by the U.S. Small Business Administration show that it costs small firms 45 percent more to comply with federal rules than their larger business competitors. The Snowe-Pryor amendment forces the CFPB to consult with small firms so that its major rules can maximize consumer protection without unnecessarily harming small firms under the agency’s purview. 

The small business consultation process that CFPB must follow is part of the Small Business Regulatory Enforcement Fairness Act (SBREFA) passed in 1996.  For a more detailed explanation of how the U.S. Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA) have been complying with SBREFA, click here.