Form and Substance in Consumer Financial Protection

Abstract:     
The Consumer Financial Protection Bureau (CFPB), created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, went live on July 21, 2011. Less than three months later, the CFPB published its Supervision and Examination Handbook, which outlines, among other topics, how the bureau is using its new authority to regulate abusive practices as well as unfair and deceptive ones. This Article examines the theory underlying the new agency’s anti-abuse regulatory power and its early implementation efforts. Armed with insights from behavioral economics supported by extensive research, the CFPB is targeting credit products designed to exploit consumer error. This new approach, based mostly on the substance of deals rather than disclosure, is arguably the most exciting development in consumer protection since the advent of the modern consumer movement in the 1960s. Some states can be expected to follow the federal lead and incorporate “abusive practices” into their laws, creating UDAAP powers (for unfair, deceptive, and abusive acts and practices) that support and extend those of the CFPB.

Number of Pages in PDF File: 23

Keywords: CFPB, consumer protection, consumer financial protection, UDAAP, abusive practices

JEL Classification: K12, K13, K2

Accepted Paper Series