Examination as a Method of Consumer Protection

Lack of compliance with consumer protection law has been a crucial problem in the field for as long as such law has existed. The Consumer Financial Protection Bureau (“CFPB”) has the potential to change this state of affairs, especially with its supervision powers, which provide for dedicated consumer protection examination, a new development in the law. Although examination commands resources both from the agency and regulated entities, it is far less resourceconsuming than litigation. It thus provides a relatively cost-effective way for an agency to obtain both changes in company practices and compensation for victims.

For a symposium honoring the scholarship of Professor William C. Whitford, we apply to the CFPB’s supervision program a framework Whitford developed for predicting whether a consumer protection law will produce compliance. Our answer to this question is a tentative yes. The CFPB’s statutory structure enables a strong commitment to consumer protection, especially with respect to supervision. In practice, the CFPB relies heavily on this robust regulatory tool, and there is evidence the CFPB is using this power to the fullest. If the CFPB maintains this level of commitment, its supervision program has the potential to radically reshape the market for consumer financial services. Reading the CFPB’s reports on its supervision activities is like stepping into an alternate universe in which consumer protection is the norm. Major problems that academics, advocacy groups, and the news media have been documenting for the past several years are now being written up as official government findings and followed with corrective action. But supervision is necessarily a confidential process, which makes it susceptible to agency capture. The CFPB, however, is currently implementing two strategies that may mitigate this risk in the future—so long as political forces do not eliminate the agency outright.