In the Dodd Bill, “Bank” Could Mean Anyone

David C. John /

The Dodd financial reform bill is beginning to scare executives. However, it is not necessarily scaring bankers or Wall Street fat cats. It is scaring motor cycle manufacturers, college presidents, retailers, car dealers, and even coffee shop executives. All of these people and more are waking up to the Dodd bill’s threat to their businesses.

If you read the Dodd financial reform bill carefully, the words “bank” or “financial” could refer to many more people than just bankers. Those words apply to any provider of “financial products” even if the major business of the company is something completely different. On page 131, the summary of the bill’s section creating a new Consumer Financial Protection Bureau says that the section “makes clear that financial products or services defined in the Act that are offered or provided for use by consumers primarily for personal, family, or household purposes are considered to be “consumer financial products or services” for purposes of this Act.
In addition, other key financial activities that are central to consumers are also included in this definition. These include, among others listed, the servicing of mortgage loans and debt collection services where the financial service being provided is the result of a contract between the lender and the servicer or debt collector. For example, mortgage servicers typically provide services to the owners of the mortgages. Nonetheless, this service is included in the definition of “consumer financial product or service” because of its obvious impact on consumers. A number of other financial activities of a similar nature are included in this definition.

In short, the definition is open-ended and could apply to just about any service that is sold to a consumer.

Then comes the part that worries all of these executives. Again, quoting the Senate Banking Committee’s official summary: “Paragraph 6 defines “covered person” as any person engaged in offering or providing a consumer financial product or service and an affiliate of such a person that provides a material service in connection with the provision of such consumer financial product or service is subject to the regulatory authority of and, in some cases, to examinations by, the CFPB under this title.

This definition is intentionally broad and intended to take in just about anyone who offers any of the widely defined consumer financial products. As the University of Maryland’s Center for Financial Policy noted , although the House-passed version exempts merchants, retailers and other nonbank credit providers from the CFPA’s oversight, the Dodd bill “does not impose exemptions on coverage by CFPA as the House bill [does] with respect to firm size or business”.

So, if you run a company or a college or just about anything that might remotely offer a financial product to consumers, the Wall Street fat cats this bill aims to regulate just might include you.