by Jeff Sovern
Twice a year, CFPB Director Kathy Kraninger testifies before the House Financial Services Committee about the Bureau's Semi-Annual Report. A committee member I always look forward to hearing from is Katie Porter, a former law professor at UC-Irvine, among other schools, with an impressive record of consumer law scholarship and accomplishment. Representative Porter often devotes her time to quizzing Director Kraninger on the Director's consumer law knowledge, a test on which the Director typically fares poorly. One such interaction went viral. Last week's hearing featured a series of questions about reverse mortgages with the usual result. There are at least two takeaways from these exchanges. One has to do with the level of Director Kraninger's knowledge about the area over which she has jurisdiction, though her command of consumer financial law has certainly (to use one of the Director's favorite words) improved dramatically during her tenure. The other takeaway, which to me is more worrisome, involves consumer education. If even the CFPB director has not mastered so many of the important consumer protection concepts that Representative Porter asks about, how can we expect consumers to do so? And if we can't expect consumers to master these concepts, how can we expect consumer education to provide adequate consumer protection? As Lauren Willis has demonstrated, the empirical support underlying the claim that financial literacy education provides sufficient consumer protection is insufficient. And yet, Director Kraninger, among others, continues to stress such education as a solution to consumer protection. Financial education may have a place, but it is not up to the task some seem to assign it–as Director Kraninger should be able to tell from her own responses.
