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NAFCU Voices Concern Over Issues Presented by CFPB’s Complaint Database

writing-on-paper1The Consumer Financial Protection Bureau (CFPB) launched its consumer complaint database in July 2012, one year after beginning operations, and it began publishing complaint narratives in June 2015.

Some financial companies expressed concern over the Bureau's publishing of complaint narratives because the narratives may damage a company's reputation based on information that is unverified. The latest organization to air a grievance about the CFPB's Consumer Complaint Database is the National Association of Federal Credit Unions (NAFCU), which wrote a letter to the Bureau saying that the Database "continues to have practical implications that undermine the complaint resolution process."

"While NAFCU and our members appreciate the CFPB continued attention to improving the usability of this tool, we remain deeply concerned about the existing reputational and consumer privacy issues with the current Database," wrote Kavitha Subramanian, Regulatory Affairs Counsel for NAFCU.

A spokesperson from the CFPB could not immediately be reached when contacted for comment by DS News.

CFPB graph

A sample from the CFPB's Complaint Snapshot for July 2015.

NAFCU's letter pointed out that the CFPB requested industry feedback on how to improve its Complaint Database so that users and market participants can effectively and easily compare products and services. Subramanian stated in the letter that the NAFCU and its members "strongly believe" that the CFPB needs to address the reputational and privacy risks presented, and that the inadvertent release of personal information may put an individual's secure financial information at risk.

"For example, in reviewing the CFPB’s June 2015 release of nearly 8,000 consumer complaints, industry has identified a number of narratives that were not properly scrubbed of personal information prior to being published online," Subramanian wrote. "Although the CFPB staff was quick to respond to rectify such occurrences, the CFPB must pay more attention to protecting sensitive personally identifiable information as the number of published consumer narratives increases."

NAFCU expressed skepticism that the benefits of the CFPB's Consumer Complaint Database justified the potential reputation and privacy risks presented. The letter contends that harmful reputational risks to credit unions and other financial institutions exist because there is no mechanism to validate a consumer's comments. And because the consumer remains anonymous, credit unions and other organizations are unable to communicate with them directly and effectively address and/or resolve their complaint, which presents a no-win situation for the credit union or financial institution.

"On one hand, if a credit union fails to respond, it appears as though there was no acknowledgement or resolution by the credit union of the customer’s complaint," Subramanian wrote. "On the other hand, credit unions are concerned about the risk of disclosing personally identifiable financial information. This encourages credit unions to respond with a generic response, rather than allowing credit unions to deal with their members directly and personally."

"On one hand, if a credit union fails to respond, it appears as though there was no acknowledgement or resolution by the credit union of the customer’s complaint. On the other hand, credit unions are concerned about the risk of disclosing personally identifiable financial information."

Subramanian said the "current framework imposes additional, and often unnecessary, costs on financial services providers" by requiring them to coordinate their complaint resolution processes with the CFPB, individual state regulators, and the National Credit Union Administration (NCUA), which creates burdensome costs–in particular for institutions with smaller staffs. The added requirements increase the time for processing complaints, which is problematic for consumers seeking timely resolutions, Subramanian wrote. The resolution process becomes duplicative, according to the letter, when a credit union resolves a complaint internally but is still required to provide a response in the Bureau's Complaint Database, which "further exacerbates valuable time and staff resources with little benefit to consumers," Subramanian wrote.

In the letter, Subramanian wrote that NAFCU "strongly recommends" that the CFPB cease publishing the monthly Complaint Snapshot Report, which began in in July. The purpose of the snapshot is to spotlight a particular product and geographic location, but according to NAFCU, the analytics are not based on an industry-wide collection of data; they provide only an "insular view of market-data based only on complaint information that the CFPB receives" and therefore do not paint a complete picture. NAFCU stated that the CFPB is incorrectly characterizing the narratives submitted online as statistically relevant "trends and analyses."

Subramanian concluded the letter by stating, "NAFCU appreciates the opportunity to share our thoughts on how the CFPB can improve the transparency and efficiency of the Consumer Complaint Narrative Database. As the Bureau continues its study of the student loan servicing market, NAFCU and our members hope to be a resource for CFPB staff to share our insights and experiences in the student lending markets."

Click here to view a complete copy of the letter.

(Editor's Note: The Five Star Institute and Black Knight Financial Services published a study in April adding more context to the complaints received in the CFPB's database. The Five Star Institute is the parent company of DS News and DSNews.com.)

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.

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