The Restoring American Financial Stability Act of 2010 currently under consideration by the U.S. Senate contains a provision to create a Bureau of Consumer Financial Protection. The Bureau would be operated through the Federal Reserve, and its functions would be: To conduct financial education programs; collect, investigate, and respond to consumer complaints; collect, research, monitor, and publish information relevant to the functioning of markets for consumer financial products and services in order to identify risks to consumers and the proper functioning of such markets; supervise covered persons for compliance with federal consumer financial law; and enforcement.

The leaders of the Senate Committee on Banking, Housing and Urban Affairs have exchanged heated words over which businesses would be subjected to the authority of the bureau. Specifically at issue is the language of Section 1027 of the bill, which says that the bureau will not have authority with respect to a "merchant, retailer, or seller of non-financial goods or services that is not engaged significantly in offering or providing consumer financial products or services." Senate Minority Leader Mitch McConnell (R-KY) had stated during floor debate last week that the bureau's authority could extend to small businesses such as orthodontists. The U.S. Chamber of Commerce has also opined that small businesses that allow installment payments will be affected.

Following McConnell's remarks, Senator Christopher Dodd (D-CT), Committee Chair, responded that small businesses that extend credit to customers such as orthodontists and dentists will not be under authority of the bureau, contrary to the Senate Republican accusations. "Another day, another misrepresentation of our efforts to bring accountability to Wall Street," Dodd said in a press release. "This new bureau will protect consumers from abusive financial products and services like the outrageous practices we've seen by credit card companies, or the subprime mortgages that left millions in foreclosure and fueled the economic crisis.

Dodd further explained that an orthodontist is not a "significant" financial player. "If your orthodontist, or doctor, or dentist lets you pay your bill over a series of months, they're not covered. If your local grocer or butcher keeps a tab and bills you at the end of the month, they're not covered."

But Committee Ranking Member Richard Shelby (R-AL) then said in his own release that the Democrats were being "misleading" on the bill. "What Democrats won't tell you is that the word "significantly" is not defined," the senator said. "If your orthodontist, or doctor, or dentist lets you pay your bill over a series of months, they could be covered, depending on how the consumer protection czar defines the word significant.

"As I have repeatedly said, it is not what Democrats say about their bill that matters. What matters is what is in the language. And, in the language of the bill, the word significantly is not defined. That means every small business who offers credit as a matter of course can be subjugated to the supervision of the new consumer bureaucracy."

Adapted in part from press releases from Senators Dodd and Shelby.

Senator Dodd's remarks: http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&ContentRecord_id=463e398b-9327-d170-d34a-1ecfcdcd310e&Region_id=&Issue_id=

Senator Shelby's remarks: http://banking.senate.gov/public/index.cfm?FuseAction=Newsroom.PressReleases&ContentRecord_id=507b9351-f501-f77b-24b5-4daa488e8001&Region_id=&Issue_id=

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