Why the consumer bureau’s independence matters to small businesses

Small businesses will be greatly affected if the Supreme Court hamstrings the CFPB

Washington, DC -  The Supreme Court will hear oral arguments this week on the very structure of one of the most important consumer protection agencies in the government. Typically, many think of consumers as customers, and the public, but as small business owners and business press we still need to pay attention. What happens here could have huge impacts for financial capital for small businesses.

That’s why Main Street Alliance, along with many others, filed an amicus brief in support of the Consumer Financial Protection Bureau’s (CFPB) independence from undue political influence. Small businesses face many of the same financial challenges as do consumers, and benefit from the CFPB’s ability to efficiently take action to curb predatory or discriminatory financial activity.

“We’ve heard stories from across our membership: of difficulties accessing capital and predatory loans targeting small business owners,” said Main Street Alliance Executive Director Amanda Ballantyne. “The CFPB has an opportunity to expand its role in protecting small businesses, but this is only possible if it is itself protected from excessive political influence.”

Like consumers, small businesses struggle with access to credit. The denial of quality financing can devastate even healthy small businesses. Those running on tight margins and with little cushion cannot always weather a storm. This is especially true for minority-owned businesses. 

And when a small business owner is scrambling to make payroll, pay a supplier, or cover rent, alternative financing may appear to offer a quick way out. Often these types of loans come with hidden, onerous, or abusive terms that may not be comprehensible to typical borrowers, such as Confessions of Judgment. These predatory practices can be devastating on small businesses, and the economy. 

Consumer financial protections are also critical to small businesses because small business owners often draw on their personal finances to fund their businesses. As one study found, nearly two-thirds of new businesses used the owner’s personal or family savings as startup capital, and personal credit cards are one of the top three sources of short-term capital used by small business owners.

Effective consumer financial protection ensures that large and small businesses operate on an equal, transparent playing field, but is only possible with a strong, regulatory body that remains independent from undue political influence to address the evolving, complex consumer financial market. Changing the leadership structure of the CFPB, or attempting to undermine it entirely, would fundamentally undermine the agency’s work protecting the small business community. Small businesses need protections, and an independent CFPB is best poised to support them.

“Small businesses desperately need fair and equitable access to personal financing, consumer confidence, and transparency to be successful and thrive,” said Ballantyne. “To date, the CFPB has worked to advance the same interests. Changing the present leadership structure, however, would introduce unpredictability, instability, and politicization into the agency and the consumer finance market at large, ultimately harming small businesses and their owners.”