CFPB

The CFPB’s Consumer Complaint Database: The Next Battle Between Regulators And Legislators

In an act that some are calling a governmental attempt to “mute a consumer megaphone,” the Trump administration is looking to make the complaints logged by consumers into the CFPB complaints data base private (as opposed to publicly available, as they now are).

Advocates of the database say it is a necessary tool for businesses and consumers to resolve disagreements — opponents and business leaders say the unvetted information gathered in it is spread liberally around the marketplace, despite the fact that it could both damaging and ultimately untrue.

The database, as constructed, draws thousands of complaints about businesses per week. Since its 2011 launch, it has become a favored tool of consumers and consumer advocates when it comes to logging the shortcomings of various financial services players.

As of today, 1.2 million consumer complaints have gone into the database on issues ranging from mortgage practices to debt collection and credit ratings. By comparison, 30,000 cases have been logged and handled through the Consumer Product Safety Commission’s complaint portal, which opened the same year.

According to the CFPB, consumers receive responses to their complaints within 15 days of filing 97 percent of the time; social media reports by consumers indicate that using the complaints portal can very effectively speed up the process and get resolutions to issues to occur faster. But FinServe firms are not quite so enthused and have long argued that the database damages their reputations.

As a result of those complaints, the Treasury Department, in June, recommended restricting access to the data to federal and state regulators.

“One of the most frequent criticisms of the database is that, because it does not verify complaints or provide sufficient context regarding the related market and industry practices, it subjects companies to unwarranted reputational risk,” the Treasury Department said in its June report on financial regulation.

Consumer groups, shockingly, do not agree with that assessment.

“It’s the Yelp of financial services. Why would you want to eliminate that?” said Aaron Klein, policy director of the Center on Regulation and Markets at Brookings Institution.

According to the banks, the answer to that question is efficacy.  The database doesn’t solve problems for consumers, they say — it just causes them for FIs.

“Public disclosure of unverified consumer complaints does nothing to help people make informed and responsible financial decisions,” said Virginia O’Neill, senior vice president at the Center for Regulatory Compliance at the American Bankers Association. “The bureau has failed to address the significant problems in the accuracy, integrity and usefulness of the information reported in the database.”

The move comes as the Trump administration — with a big assist from the Republican-controlled Houses of Congress — has been working overtime to rollback financial regulations put in place after the crisis to reign in some of the more excessive (and abusive) practices that had become ascendant in the early 2000’s. Other recent moves have included an ongoing attempt to be rid of CFPB director Richard Cordray, numerous attempts to rollback or soften Dodd-Frank and a recent effort to undo the CFPB’s new rule banning arbitration clauses in financial contracts.

The CFPB notes that it does not vet consumer complaints past establishing that the consumer has actually had a business relationship with the firm they are complaining about. It also confirms it is considering allowing consumers to offer additional feedback about what the company’s response had been — a move that is very fiercely opposed by financial services players.

The regulatory body additionally affirms the database’s uses in helping it determine stances in bank supervision and enforcement matters.

According to PerformLine Inc, which specializes in the analysis of regulatory data, firms that have received more than 10,000 complaints through the CFPB face a 64 percent chance of being fined by the regulator, compared with 7 percent for those with fewer than 2,000 complaints.  For example, right before Wells Fargo found itself hit with $185 million in CFPB fines for fraudulently creating millions of consumer accounts, the bank had logged 45,710 complaints.

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