center. i focus on financial regulation and a small business owner. the consumer financial protection bureau has only limited and regimely indirect connections to small business finance with three limited exceptions. the cfpb's is restricted to consumer financial products. while small businesses use products like perm credit cards for business transactions, small business owners need, deserve, and want the same protections on their financial products whether it's personal or business use. thus, the national of small business association advocated for extending truth in lending act protections to small business credit cards. now, there's only two ways the cfpb effects small business lending. first, it requires the cfpb to collect data.

this is to ensure against discriminatory lending in the small business space. the data requirement imposes limited cost on lenders, but provides an important protection for small businesses, particularly those owned by women and people of color. more regimely though, there's authority over almost all service providers, large and small. the regulations could effect credit, but i want to emphasize it's premature to judge the impact on financial providers or the impact of the cfpb on small business credit costs and availability. instead, individual rules will need to be evaluated on their own marts when, and if they are proposed. the dodd-frank act imposes safeguards on rule making to ensure against unregulatory burdens. this rule makes and adjudication is subject to the act and supght to the regulatory flexibility

act. the cfpb is one of three agencies required to have regulatory flexibility review panels under the enforcement and fairness act. they are required to consult with regulators on the rule makes and reevaluate them within five years. they are subject to oversight counsel review for its rule makes unlike any other bank regulator. finally, small banks in all but three credit unions are exempt from enforcement. the supervision remains with the prudential regulators. i want to emphasize this is a battery of safeguards that does not apply to any other bank regulator. it's important to point out this helps small businesses and can help improve competition in the small business lending by ensuring that consumer -- that consumer financial products which are used by small businesses are fair and

transparently priced. small businesses want to use fair and transparent products. second, the cfpb can help small businesses by helping small business customers. when they feel they will not get caught in traps, they will have greater willingness to make purchases and the cfpb can protect against bubbles and thus smooth the volatility of consumer spending meaning a more stable business environment benefiting small businesses. they have limited jurisdiction over small businesses and subject to numerous safeguards to prevent burdens on small business and may help the efficiency of small business lending by increasing consumer confidence and spending staibt. thank you very much. >> thank you, mr. levitin. the final witness to testify

here this afternoon is daniel fleming, a trucking business in virginia. it's a family-owned business founded in 1903 with the transportation services, they were provideing consisted of a horse and buggy when they started. he is testifying on behalf 69 truck representing and leasing association that mr. fleming -- you have five minutes to present your testimony. >> thank you mr. chairman. as you said, i'm daniel fleming, president of national trucking lease, and we're a member of the truck renting and leasing association. i'm testifying today on a troweling aspect of the dodd-frank act, namely section 10 # 71, the small data loan collection division. we are a family-owned business with 18 permanent employees in

springfield, virginia, and landover, maryland. we are proud association comprising of 550 companies employing 1,000 people in 25 locations throughout the united states. not only with all of 550 members small businesses themselves, but the vast majority of the customers we deal with are also small businesses in search of vehicles and equipment for rent or lease at a small price. you have to fill out an application of credit. as written, section 1071 adds extensive new application requirements to the ecoa. these requirements are offered by and monitored through the cfpb. while they do not operate a bank, under the definitions listed within the new law, i am considered a financial institution because i have an application for credit for my customers. in my opinion, small business data collection provision is

contradictory, costly, and confusing. it's counterproductive that it was created with the expectation that they find more options for information in obtaining a loan, but now is intended to regulate loans and lenders. section 1071 is contradictory that the language conflicts with existing language already in the books. my understanding is that section 202.5 of regulation b under the ecoa says a creditor shall not inquire about the race, color, religion, national origin, or sex of the applicant. the personal information should have no basis in determines whether or not someone receives a truck from fleming national lease. this could cause a strain on my bottom line. according to section 1071 after a lender inquires whether an applicant is a minority, nobody

involved in the credit decision has capital access to this information. this requires me, the so-called lender under this definition, to alter my application process which would be expensive. if we comply with this new regulation, i submit we have to at a minimum, have to hire a new part time employee costing our company $10,000-$20,000 annually. it doesn't seem much, but i could hire another mechanic or buy a new vehicle that makes my company more profit l, but instead is spent on administrative burdens. this is confusing leaving many questions unanswered regarding what information i am to collect and what definitions are used to ensure compliance. there also remains a concern over whether or not the cfpb and the federal reserve work jointly to rectify issues that remain

with exemptions that exist. just to touch on the final point since section 1071 amended the ecoa, both the federal reserve has entities over auto dealers. this is enacted and forced, regulators must coordinate their implementation of the requirements. if not, financial companies could receive different data from the dealers than that required to file with the cfpb and open an entirely new problem. while i recognize the fact that the cfpb decided to issue a formal rule that hopefully addresses and answers the confusing qualities within the law, i remain uncon -- unconvinced there needs to be such a rule. i'm not a banker. i lease trucks. to be placed in the same category of a financial giant makes no sense to me. in my opinion, making a truck

leasing company or any small business comply with section 1071 is a mistake. thank you for allowing me to issue my testimony today. >> thank you, mr. fleming. questions -- i'll start with mr. jones. on a scale of 1-10, how would you rate the cfpb's outreach on the mortgage disclosure forms that they are currently in the process of revising? >> thank you, chairman coffman. i would rate them at a six or seven and especially compared to previous regulatory form changes. i think they really have reached out and provided an opportunity for our members and members of the mortgage lending community to comment on those forms. >> thank you.

with your 40 years of mortgage lending experience, can you tell me what happens if an entity is seen by its customers as being abusive? >> i think -- if an entity is seen by its customers as abusive, basically they stop using the lender. i think good businesses, our business, and any business have to be close to the customers, and that, i think, is one of the real benefits of being a small business and being located with your customers in the same town, going to the same functions and churches. it's critical to have good cues mefer relationships. >> mr. sharp, we hear there's a fight between main street and wall street, however, the economy is interconnected, and we must make sure both a healthy if we want to grow our economy. can you tell me about the impact that financial regulations will

have for main street small businesses? >> yes, mr. chairman, thanks for the question. as i said in my testimony, it's hard to know exactly what the impact will be. we heard that from the first panel as well. small businesses have the hardest and most expensive time really complying with new regulations, and as you know, there's a flood of regulations headed their way, and in this space in particular, again, our concern is that some companies may be directly regulated who didn't expect to be regulated as my fellow panelists, mr. fleming mentioned, and others may find access to credit lines or credit instruments they rely on are more expensive or unavailable. there's no way to know for sure what the impact is going to be, but those are the two areas where we're hopeful there won't be an adverse impact. >> can you tell me how small

businesses use the equity in their home to finance small businesses particularly in the early stages of development? >> sure. i think it's pretty widely accepted that particularly the very smallest businesses, sort of the, you know, two guys in a garage, very early stage of the small business, and i think, you know, if you look at google or the tech giants, you can trace them to a couple guys in a garage with a personal credit card or borrowing against their house or borrowing against their car. now, of course, you grow out of that phase at some point and have access to the capital markets, but it's -- each of those tools which are not, you know, designed to be for commercial lending have become critical lifelines for small businesses. >> based on your experience in government and observing the cfpb, do you think they are prepared to assume authority, or do you feel that they have been

rushed? >> well, you know, a year sounds like a lot of time, but it's really not to stand up a brand new agency, particularly when you have a responsibility to sort of gather up bits of law i think in seven other agencies, it's 19 statutes they are consolidating under one roof. we do have a concern that they are moving awfully fast. we don't, on the transfer date, they began to issue interim final rules essentially saying this is the final rule, but we're going to -- we're going to take comments and adjust as needed. in some cases that's good, and in other cases, we have concernedded. we are trying to keep up as well. i don't think a year is enough time without a confirmed directer. i think that creates serious challenges for them. >> all right. mr. fleming, you mentioned compliance cost in your testimony, but can you reiterate

how much will it cost for your business to comply with a new data, collection requirements? >> well, again, mr. chairman, i'm estimating we have to add at least a part-time clerk which for us as a small business that's flat, that's really a significant investment for us for really a position that doesn't add to the bottom line. i'd prefer to spend those funds on a mechanic or some equipment that adds to revenue for our customer. you know, we are constantly looking for good qualified diesel technicians to fix the truck and produce revenue for the company. while i said one part-time position seems small, it's better used in a revenue generating position rather than an administrative burden to comply with new federal regulations. >> are you still taking advantage by the bangs you work with? if so, do you just switch banks or providers?

>> we -- actually, we did switch the banking relationship. i wouldn't say felt taken advantage of, but just didn't feel it was working for us, and we had a relationship with banks out in ohio, and changed those banking relationships. i think as other members in the panel said it's a free market, and there's plenty of other opportunities for us, and we took advantage of other opportunities when they presented themselves. >> thank you. according to the office of advocacy, small businesses create seven out of every ten jobs in america, but you claim that small businesses contribution to long-term stable employment is limited. do you disagree about the importance of small businesses in helping our country recover from 9% unemployment? >> no, i do not disagree with that. i'll point out that what i said is entirely consistent with the small business administration of the advocate that small businesses create tremendous

number of jobs every year, but the small businesses are failure and don't last more than a couple years. instead you get churning rather than stable long-term employment. >> as a professor, i assume you see the values lawyers drafting contracts and this creates certainty. how can plain lang increase certainty in contacts? i can see the value of getting rid of legalese, but isn't there language always made into, quote-on-quote, plain language? >> it falls into specifics here. if i understand your question, how will the cfpb make markets more efficient. getting rid of legalese is something everybody think is a wonderful thing. that's move one. not everything can be boiled down to legalese. the second part is ensuring when

a business goes out or when a consumer goes out and compares financial progs, they compare them on an apples to apples base sis. that's difficult to do now. it's not like going to a grocery store with unit pricing and you can see the cost for an ounce of orange juice on brand one and brand two. instead, financial products are designed in a way that they are too complex to compare on an apples to apples basis. the cfpb may be able to improve that by encouraging standardization of financial products to the things that consumers really want. >> thank you. >> thanks, mr. chairman. mr. levitin, i wanted to follow-up on a question i asked to the earlier pam regarding the fact that many entrepreneurs use personal credit cards to finance new business veeptures. -- ventures.

how should the cfpbing the for these small business owners when drafting regulations specifically for credit cards and home mortgage products? >> well, as someone who uses a small business credit card for some purchases, i think it's important to note that many small businesses use the same credit card for their both business and perm transactions. if you fill up your car with a tank of gas and use that partially for business use and partially for personal use. i think you would want the same protections on that transaction because you don't know whether you're going -- you don't know whether that gas in the tank is used for when you drive your kids to the soccer game or whether you use it for work. you don't know at that point whether it's a business transaction ultimately. decisions like that, small business owners should have the

same protections that they have when they are consumers. >> mr. jones, over the past three years, we've up fortunately -- unfortunately learned bad mortgages is costly to everybody and to be successful your business in particular had to make loans that borrowers could replay. is there a benefit to the cfpb's ability to repay rules are structured appropriately? >> thank you for the question. yes, i think so. the ability to payroll again if it's characterized as a safe harbor which will provide a bright line for especially for small lenders that don't have the ability to hire the compliance staff. if you have a 25-person business, and you need to hire an attorney to help you with the

rules and regulations, it becomes a very burdensome endeavor. it's important if they do characterize it as a safe harbor that it's clearly interpretable by small businesses. i think it will be a vast boom to our industry and to the consumers of america as well. >> thank you. for mr. sharp, many in the banking industry have expressed concern that the dodd-frank act stifles lending to small businesses. hasn't the small business community been struggling to get credit from banks well before the financial reform was enacted, and is there something that could be done perhaps outside of this law or something different to help correct for that? >> thank you, mr. altmire. to answer the first part, yes. the challenge small businesses face in the credit markets right now are not unique to 2011 or

2010. they are there for several years now and stagnant. it's not improving, and that's a real concern. you know, honestly, at this point, i think part of what everybody is hearing is let's not do anything to make it worse. it's not exactly clear what it is what is gumming up the works, but what we know for sure is that the commercial lending markets are not froze p, but they -- frozen, but they are not in good shape. the message we hear is let's certainly not take away some of the tools that do some toke working now. we can use the credit cards, borrow money against our car or home. even those markets are functioning fairly well, so their message to us is do no harm essentially, and that means working closely with the cfpb to make sure they understand the effects in, you know, to the small business lending world and the actions they are taking. >> thank you, mr. chairman.

>> mr. west? >> thank you, chairman, and thank you to the pam for being here. mr. sharp, i'll ask you first -- what do you really see in your assessment the purpose the cfpb to be? >> well, i believe the purpose of the cfpb is to find fraudsters in the consumer market, put them out of business or clamp down on their fraudulent practices. protect consumers against bad actors in the market. >> okay. anyone else? >> i think that's part of the mission, and an important part, but it's broader. we have to ensure there's fair, transparent, and competitive consumer finance markets, and that's not just getting rid of fraud, but ensuring that disclosures are clear, that we can have good price competition in the market. >> have we had prior to this any other government agency or

someone else doing this? i mean, do we see this as a redundancy or see it as some type of duplication of effort out there from the government? >> prior to the dodd-frank act, some parts of the consumer finance space were regulated by a laundry list of federal agencies, and this is one of the problems that you had a regulatory market that was splintered so you had the federal reserve, fdic, officer of comptroller, thrift supervision, department of defense, and hud having little spaces in the market, and things fell between the crashings, and also -- cracks, and the missions given to the agencies was typically secondary and subordinate to other missions particularly to bank safety and soundness which is a fancy term for bank profitability. abusive lending practices, the

only reason to do them is because they are profitable. if you are the comptroller of the currency and your mission is ensures that banks are profitable, that puts you in a bind where you want to turn a blind eye to abusive practices because they are profit l. that led up to the housing bubble. >> for your assessment, this is something we needed to institute? it was an agency or bureau or a government program where you needed to institute? >> without a doubt. the financial crisis in 2008 came out of consumer financial products, out of mortgage products, that was the root of it. to ensure that doesn't happen again, we need better consumer financial protection. >> i'll just say, you know, it's no secret that the chamber didn't support the creation of the bureau, and at this point, you know, our focus is -- you though, it's there, it's up and

running, no longer an idea on paper, and, you know, our concern now is as it is beginning -- as the gearing begin to turn and issue regulations and begins to do its work, our concern is that it not become sort of a duplicator of other agencies' work. there was one commission where the bureau's jurisdiction and the trade commissions jurisdictions overlap. that was intentional to some degree, and the law requires the agencies to prevent, you know, stepping on each other's toes, you know, to prevent situations where the duplicating or conflicting with one another, but we have concern, sort of a general concern that will be very difficult to avoid. >> mr. jones and mr. fleming, do you believe that the cfpb will enhance free market and entrepreneur spirit or not?

>> mr. west, thank you for the question. i think we were happy to see the cfpb's move towards consolidating the truth in lending and the good faith estimate disclosures to forms that have been a challenge for the industry add ministered by -- administered by two agencies that did not always see eye to eye in terms of what should be dong. -- should be done. our industry is very heavily involved in automation in order to comply with the multiplicity of rules and ranks that we have, and to the extent i was very encouraged today to hear that the cfpb will be doing an economic, you know, cost benefit analysis to really determine whether or not and to the extent that that is what we do, then i think it can be a boom to the --

not only to the industry and help to lower some costs, but it also will be a boom to consumers who hopefully will have less confusing and clearer disclosures so there definitely are some benefits. >> mr. west, as a trucker and not a banker, i'm hard pressed to express an overall opinion. i'm concerned about any new regulations that seem to me as someone sitting in virginia shouldn't really apply to me, all the sudden coming down and creating new regulatory requirements, so from that perspective, i'm concerned about that section, but overall, i'm certainly not in a position to register an opinion on the group as a whole, so, thank you. >> very well. mr. chairman, i yield back. >> thank you, mr. chairman -- thank you, mr. west.

each of the panelists, if you could identify one top issue that bothers you about cfpb, just a top issue that you think should be changed or to improve it, what would that be? mr. jones? >> thank you, mr. chairman. i think our top issue with the cfpb will be the clarity of the issues, and the clarity of the rules and regulations that are issued, and the ability to receive and respond to industry up put prior to those regulations being implemented. >> mr. sharp? >> mr. chairman, our primary -- the changes we're pushing for primarily are structural. you know, it's very difficult as we all discussed today to know exactly where -- what problems may arise, where, and when, and in what sector. what we're advocating for is expanding the, you know, replacing the single directer with the panel and ensuring

safety and soundness is not compromised through an effective check of the prudential regulator. at this point, we think the best long-term hedge against, you know, poor policymaking by this agency or any other independent agency is collaborative decision making from the top with input from diverse sectors, bipartisan up put. that's our top priority. >> okay. mr. fleming? >> mr. chairman, i would just ask the organization to take into consideration unintended consequences such as the data collection requirements that maybe in theory are of interest and helpful to the organization, however, be burdensome for us small businesses that have to comply with the new regulations to provide the data. >> i'll give a different answer as you might have guessed. if the two most important things are number one that the