Craig Cowie

Volume 75, Issue 3, 601-660

Relatively few regulated entities are the targets of enforcement activity or otherwise have direct contact with regulators. Given that absence of direct contact, this Article posits that regulators influence behavior by creating “compliance climates” that project regulators’ priorities into the market. These climates are what drive participants’ behavior. This Article begins by defining compliance climates and describing, as examples, two diametrically opposed climates created by Directors of the Consumer Financial Protection Bureau (“CFPB”). It then identifies constraints on the creation of compliance climates. In particular, the Article demonstrates significant limitations on using new enforcement actions or rulemakings to set compliance climates. The Article concludes by showing that effective regulators generate compliance climates efficiently and quickly by: (1) using their “bully pulpits;” (2) making creative use of enforcement and rulemaking activities they inherited from their predecessors; and (3) taking quick actions like guidance or amicus briefs that require relatively little staff time or resources. Although every regulator has different powers and mandates, the lessons derived from the CFPB’s experience are broadly applicable. Regulators cannot rely simply on bringing new enforcement actions or promulgating new rules to enforce compliance with their regulatory agendas; they must use all the available tools to effectively and efficiently generate a compliance climate that reinforces their agendas.