By Trey Garrison
Despite numerous objections from the mortgage finance industry and some basic reasoning that publishing unvetted, anonymous complaints on a government website could be problematic, the Consumer Financial Protection Bureau is moving ahead with its plan for opening its consumer complaint database to the public.
When consumers submit a complaint to the CFPB, they now have the option to share their version of the interaction on the CFPB’s public-facing Consumer Complaint Database.
Businesses complained about will have little recourse to respond to or deny the complaints, and could face sanctions for violating financial privacy if they post consumer-specific evidence that is contrary to the claim.
Under the proposed plan, the CFPB employs no mechanism to verify the complaints, beyond that there was an interaction between the complaining party and the company named. This action marks the second time in recent memory the regulatory agency has moved ahead on an initiative despite industry concerns. It has kept its mortgage tracker tool up despite numerous problems cited by the industry.
“Consumer narratives shed light on the full consumer perspective behind a complaint,” said CFPB Director Richard Cordray. “Narratives humanize the problems consumers face in the marketplace. Today’s policy will serve to empower consumers by helping them make informed decisions and helping track trends in the consumer financial market.”
The CFPB began accepting complaints as soon as it opened its doors more than three years ago in July 2011. It currently accepts complaints on many consumer financial products, including mortgage products.
The CFPB received 163,700 consumer complaints in 2013, nearly double the total 90,000 they received in 2012. Of that, 59,900 were mortgage related.
Of all mortgage complaints in 2013, 77% are closed with a simple explanation or clarification to the consumer without any relief, with another 3% closed without relief or explanation – meaning that they were found to be without merit.
Just 2% involved the case being closed with monetary relief for the complainant.
As of March 1, 2015, the bureau has handled 558,800 complaints, with mortgages and debt collection being the most frequent topics.
In June 2012, the CFPB launched its Consumer Complaint Database, which is the nation’s largest public collection of consumer financial complaints. It includes basic, anonymous, individual-level information about the complaints received, including the date of submission, the consumer’s zip code, the relevant company, the product type, the issue the consumer is complaining about, and how the company handled the complaint.
David Stevens, president and CEO of the Mortgage Bankers Association, said this open database of unverified consumer complaint narratives won’t do anyone any good, and he is vowing to put a stop to it through legal or legislative means.
“MBA is disappointed that the CFPB seems not to have listened to the myriad of important legal and other concerns we, along with a number of others, have voiced about the posting of unverified consumer narratives to the Bureau’s complaint database,” Stevens said. “The final policy still doesn’t ensure that that consumer complaints that the CFPB solicits and posts are valid, does not give financial institutions an equal opportunity to respond and does not sufficiently protect consumers’ privacy. Both the CFPB’s and industry data show that very few consumer complaints submitted to the Bureau actually warrant any action beyond an explanation.
“Finally, the posting of unverified consumer complaints under the imprimatur of the federal government are bound to mislead the very consumers CFPB is charged with protecting. As a result, MBA will consult with its members on next steps to bring this ill-advised project to a halt.”
Brian Wise, senior advisor for the US Consumer Coalition, said it was a bad idea because of the potential for abuse, and for perpetrating fraud.
“By finalizing the rule that allows narratives to be published with consumer complaints, the portal will provide a vehicle for companies to target other companies with false or misleading information, unverified and biased accounts of activity, and no mechanism for businesses to adequately respond or refute consumer stories. Even Yelp does better,” Wise said. “This system will potentially make the CFPB complicit in enabling fraud through their complaint system in the same way that the CFPB, and other executive agencies, are claiming that third party payment processors and banks are complicit in fraud within other industries. This portal will be used as a way of damaging the reputation of lawfully operating businesses without any trial.
“This is another case of laudable goals leading to unintended consequences, but in this case the CFPB was warned by industry and consumer groups before the rule went into effect. The CFPB ignored the warnings," Wise said.
Several of the MBA and USCC complaints track with issues raised by the Mercatus Centerat George Mason University, which can be read here. HousingWire has covered a number of problems with the program in news articles and op-eds.
This is a move that the National Association of Federal Credit Unions believes has the potential to unnecessarily increase reputational risk to credit unions.
“Credit unions already take great care in resolving their members’ complaints directly,” said NAFCU Director of Regulatory Affairs Alicia Nealon. “NAFCU, however, is concerned that this new policy may allow unsubstantiated information into the complaint resolution process. We believe such incomplete and unsubstantiated information will not only create an inaccurate picture of an institution, but it will also make the complaint process more complicated and confusing for consumers and institutions.”
The CFPB has fielded similar complaints about the program from other sources and from HousingWire, and their response to these objections can be read here.
Meanwhile, one advocate for affordable housing policy praised the CFPB’s move to allow anonymous complaints on the Internet. But she says it doesn’t go far enough.
“The CFPB has gone to great lengths to enhance the public database for consumers while protecting their identities. Today’s announcement from the CFPB is a good step forward in helping shed light on the bad treatment we have seen disproportionately affect borrowers of color in the financial marketplace, but more must be done to make the database a better tool for identifying patterns of discrimination,” said Shanna Smith, president and CEO of the National Fair Housing Alliance. “Unfortunately, the CFPB has decided not to share demographic information in its complaint database, leaving open a critical gap in the tool’s ability to identify discriminatory patterns before they cause widespread damage like we saw during the height of the foreclosure crisis.”