Orthodontists, Auto Dealers Fight Finance Rules Fallout
Bray is worried that orthodontists may be subject to new consumer-protection rules that Congress is drafting for banks because their practices allow patients getting braces to pay over time. That would mean costly new regulations that might discourage orthodontists from extending credit.
“Orthodontists did not cause this financial crisis, and we should not be a part of this in any way,” said Bray, former head of the American Association of Orthodontists in St. Louis.
Bray, 61, and fellow orthodontists brought that message to Capitol Hill this week, telling lawmakers that industries far from Wall Street may be hurt because the regulations will be written so broadly.
Theirs is the latest in a series of grassroots efforts by non-financial industries, including car dealers for Toyota Motor Corp. and Audi AG, owners of restaurant franchises such as McDonald’s, and advertising agencies and their clients.
The Senate is debating the biggest financial-regulations overhaul since the Great Depression, focusing mainly on firms such as New York-based Goldman Sachs Group Inc. Among other provisions, the legislation would create a consumer-protection bureau and bolster derivatives oversight. The House passed its version last year.
Car Dealers Fly
The grassroots groups are counting on small-business owners to hammer home the theme that Main Street isn’t Wall Street and shouldn’t be penalized like banks.
“There is a long history of unintended consequences of regulation,” said Barry Mitnick, a professor of business administration at the University of Pittsburgh. He cited the old Interstate Commerce Commission, initially created to protect shippers from railroads, and later used to protect the railroads against competitors.
The National Automobile Dealers Association flew in about 100 members to visit senators last week. The group says most dealers connect buyers with lenders and don’t make loans themselves. While they may profit off the loans, they say they shouldn’t face the regulatory burden that the lenders do.
“I don’t sell the car until I find somebody to help you pay for it,” said Michelle Primm, who sells Audi, Mazda, Porsche and Subaru cars in Cuyahoga Falls, Ohio, and visited her home-state senators, Republican George Voinovich and Democrat Sherrod Brown. “If we shut down credit, we’re not going to sell cars.”
The association, which says it represents more than 17,000 franchised U.S. auto dealers, is backing Kansas Republican Senator Sam Brownback’s proposal to exempt most of them from the oversight of a new consumer protection agency.
The dealers say they are already subject to laws that protect consumers. Consumer groups want more, arguing that dealers need additional oversight because of reports of predatory practices and because they profit off loan transactions.
“There’s a whole lot of abuse,” said Pam Banks, policy counsel for the Consumers Union in Washington. Still, Banks said she doesn’t think businesses such as orthodontist practices that offer credit will be subject to the new rules, or should be.
No Dentists, Grocers
Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said he isn’t targeting “the local grocer” with consumer-protection language. “You have to be in the business of financial services or products to be affected,” he said on the Senate floor last week. “We took care of those dentists and others who were worried.”
The bill says it intends for the consumer bureau to protect Americans against financial-services abuses. It says the provision doesn’t apply to “a merchant, retailer, or seller of nonfinancial goods or services that is not engaged significantly in offering or providing consumer financial products or services.”
Critics such as the Senate Banking Committee’s top Republican, Richard Shelby of Alabama, say one problem is “significantly” isn’t defined.
Some groups, such as advertisers, say their interests might be compromised because of a provision allowing the Federal Trade Commission to speed up rulemaking.
“There should be a deliberative process,” said Clark Rector, executive vice president at the American Advertising Federation. Congress can already give the commission power to expedite rules, as it did for the do-not-call registry, Rector said.
Rector sent a letter to the Washington-based group’s 40,000 members, including General Electric Co. and Pfizer Inc., asking them to call senators. Voters in lawmakers’ districts have more sway than lobbyists, he said.
“There’s a special power when you’re hearing from your boss,” Rector said.
Some of the 1,200 members of the International Franchise Association have already called.
“This is a concern for almost everyone in the economy, that an unelected body can create new law on a very expedited basis,” said David French, vice president for government relations at the Washington-based association, whose members include McDonald’s Corp.
Until final legislation is passed, one concern for many groups is the language is so sweeping that they can’t be sure whether they’re affected.
“We are exempt only if we don’t offer any financial arrangements to patients,” said Matthew Messina, a dentist in Fairview Park, Ohio. “Now I can’t be a nice guy. I don’t want to be a bank.”