The Consumer Financial Protection Bureau (CFPB) recently proposed an expansion of its consumer complaint database that would include publicly publishing full narratives of consumers' complaints against financial institutions.
While the bureau suggests such action supports the goal of "provid[ing] consumers with timely and understandable information about consumer financial products and services," which ultimately "improve[s] the functioning, transparency, and efficiency of markets," not all agree. Researchers at George Mason University suggest expanding the complaint database to include consumer narratives would harm the CFPB, consumers, and financial institutions. Furthermore, the researchers claim, such action falls outside the bounds of the bureau's authority.
First, with no intent to verify the accuracy of the consumer narratives, the CFPB may be simply offering up the biased, unfounded grumbles of dissatisfied individuals.
Furthermore, the complaints will not be balanced with positive customer reviews of the financial institutions in question, and the complaints will not be quantified in terms of the size of the institution in question.
The researchers at George Mason University call the expanded database "a solution in search of a problem." They say superior consumer databases already exist to offer the public a view of customer experiences at various businesses. Yelp, for example, allows consumers to rate businesses and offer details of their experiences. However, Yelp also has "a commercial incentive to develop ways to signal the relative trustworthiness of reviewers, to encourage accurate reviews, and to ensure that the mix of reviews is representative of consumers' actual experiences," according to the researchers. CFPB, on the other hand, faces no such incentives and does not plan to pursue such measures.
Thus, consumers may be driven away from credible financial institutions that could meet their needs in the mortgage marketplace.
At the same time, financial institutions might be harmed as they will be "unable to effectively counteract or provide context" for the published complaints. CFPB does plan to allow financial institutions to provide a response to consumer complaints. However, institutions will have only 15 days to respond, and they will be barred from providing any details that might identify a customer, which could diminish their defense.
The researchers suggest small financial firms will face greater potential harm as "a single baseless complaint would likely constitute a larger percentage of the total mix of available information."
In addition to the potential harm to consumers and financial institutions, CFPB itself will absorb real financial costs in the administration of the expanded complaint database, according to the George Mason University researchers. While CFPB will not take the time to verify the validity of the consumer narratives, it stated it will ensure there is a relationship between the individual submitting the complaint and the financial institution listed in the complaint. This verification process will have "substantial" costs, according to researchers.
Another cost comes with CFPB's commitment to maintaining the anonymity of consumers. CFPB will be charged with reading each complaint and omitting personally identifying details before publishing them to the database. Again, this process has real financial costs.
Lastly, in terms of costs to the bureau, researchers point out that the expanded database exposes CFPB to litigation risk from financial institutions that identify inaccurate information about their firm on the CFPB database.
The researchers also wrote that "to expand the database to include consumer complaint narratives is outside [CFPB's] statutory authority."
While CFPB has indicated its database fits within the Open Government Directive of the Office of Management and Budget, researchers argue that CFPB's database deals with private companies and not government operations. Therefore, the database in no way falls under the Open Government Directive.