Bankruptcy's Adjunct Regulator

Abstract

Since its inception, the Consumer Financial Protection Bureau has regulated a broad swath of conduct relating to consumer credit. This regulatory activity has, in several distinct ways, carried over into consumer bankruptcy. The Bureau has regulated bankruptcy issues directly, for instance by adopting rules that apply to how mortgage creditors communicate with borrowers in bankruptcy. But more often, the Bureau’s impact in consumer bankruptcy is a side effect of its oversight of debt collection and credit reporting markets. Although these activities establish the Bureau as an adjunct regulator in the consumer bankruptcy system, the scholarly literature largely has failed to explore the scope of the Bureau's bankruptcy authority and the advantages and disadvantages of its bankruptcy-related activities. This Article fills that gap by providing the first comprehensive analysis of the Bureau's regulatory potential in consumer bankruptcy. It begins by cataloguing the history of Bureau's regulatory activities that directly or indirectly affect consumer bankruptcy. It then clarifies the Bureau's authority to carry out its consumer-financial-protection mission in the context of consumer bankruptcy. It argues that the bankruptcy system would benefit if the Bureau pursued an intentional, bankruptcy-focused regulatory strategy, and begins the work of sketching what such a strategy might entail. Finally, this paper explores how bankruptcy’s existing regulators could use the fruits of the Bureau's exercise of its core responsibilities, and in particular the vast body of information publicly available on the Bureau's website, to enhance their own effectiveness.