The Democrat Credit Crunch–Hurting Families, Hurting Businesses

During a time of economic crisis and high unemployment, Democrats enacted legislation to restrict consumers' access to credit. This legislation has been particularly harmful for small businesses and families, which rely on many types of credit products to finance their day-to-day operations and household budgets. On August 5, 2009, the Wall Street Journal reported on the effects of the Democrats' recently passed Credit Card Accountability Responsibility Disclosure Act of 2009 stating, "Banks are suddenly freezing out all but the most creditworthy customers...And they're being hit with higher rates and fees." On the same day, the USA Today reported, "The fees represent issuers' latest attempt to mitigate the effects of a credit card law passed in May...One fee making a comeback is the annual fee."

Despite these reports of the increases in the costs of credit and the reduced access, Democrats are continuing their assault on families and small businesses by championing the creation of a Consumer Financial Protection Agency (CFPA). The CFPA and its mandate, like the credit card legislation would further restrict the access to credit while driving up its costs. This unprecedented power-grab by Congress and its many negative consequences on families and small businesses have even caught the attention of the current following financial regulators.

Issues of Concerns

Regulatory Burden: "There are many issues to consider, including that overly restrictive or burdensome regulations can lead to increases in product pricing or product withdrawals that would overly constrain credit, or in extreme cases, severely impact the availability of responsible credit for consumers." -Ben S. Bernanke, Chairman, Federal Reserve

Increase Litigation Risk: "It is very unusual for private parties to be required to offer products configured according to terms and conditions specifically dictated by the Federal government, and the full implications of this aspect of the legislation are very difficult to predict. While the goal of the proposal is to provide simplified options to consumers, there is also the potential for the standard products approach to limit product offerings because product providers may be deterred by extra costs and potential liability arising from offering versions of a type of product that depart from the features of the standard product promulgated by the CFPA." -John C. Dugan, Director, Office of the Comptroller of the Currency

Decrease in Products Offered: "[T]he CFPA would operate under rulemaking standards that require it to consider potential costs and benefits to consumers...Losing access to credit would certainly be a cost to consumers. However, we are concerned that the new agency could operate in a manner that would limit business options and constrain financial services products and innovations." -John E. Bowman, Acting Director, Office of Thrift Supervision

Increase Costs for Compliance: "The proposed legislation [H.R. 3126] could cause financial institutions to incur additional costs, including those for fees, staff training, and policy development. The higher operating expenses associated with compliance could have a negative impact on the availability of credit." -Michael E. Fryzel, then-Chairman, National Credit Union Administration

Increase Costs to Consumers: "[T]he creation of a brand new Executive branch agency [the CFPA] will come at a great financial cost to consumers." -J. Thomas Rosch, Commissioner, Federal Trade Commission.