This study intends to identify the relation between consumer protection and a firm’s cost of capital. Designed to ensure the rights of consumers and fair trading environment, consumer protection could affect firms’ daily operation by increasing quality failure risk and impede operating flexibility. Using a sample from 19 European countries, I test how consumer protection affects cost of equity and cost of debt respectively. I find that firms in countries with stricter consumer protection policies usually have higher cost of capital. This is the first study that examines comprehensively the consequence of consumer protection on cost of capital. In addition, this paper also explores the effect of industrial market concentration on the association between consumer protection and cost of capital. My study provides insight on the role of consumer regulation in shaping corporate behavior.