WASHINGTON The banking industry is pushing back against a plan released this week by the Consumer Financial Protection Bureau to publicize more details about consumers' individual complaints about financial companies.
While the CFPB's public database already discloses the name of the institution and product targeted in consumer complaints, the proposal would take that a step further by allowing consumers to share their "narrative" about specific disputes.
But industry representatives derided the plan, saying it may allow the publication of unsubstantiated claims against financial institutions and unduly harm their reputations.
"The CFPB is causing reputation risk to the bank by publishing unverified data," said Richard Hunt, president of the Consumer Bankers Association. "This is supposed to be an independent agency that deals with facts, not innuendo."
To be sure, bankers have never liked the existence of a public consumer complaint database, arguing it is populated with erroneous information. But until now, the information that is available on a complaint is relatively limited. Entries mostly concern what product is involved, when the complaint was filed, which institution it was against and whether it has been resolved.
The new plan would allow consumers the option to share significantly more detail in what the CFPB calls an "unstructured consumer complaint narrative." The information would be scrubbed of personal information to protect consumers' identities.
The CFPB argues that more specific complaint information would better alert consumers about what is happening in the market and also improve financial institutions' responses.
"The consumer experience shared in the narrative is the heart and soul of the complaint," said CFPB Director Richard Cordray in a press release. "By publicly voicing their complaint, consumers can stand up for themselves and others who have experienced the same problem."
Consumer groups agree, saying the additional information would be helpful.
"More detail would be very welcome," said Bartlett Naylor, a financial policy advocate for Public Citizen. "It's useful to see what other people are facing."
But the banking industry is apoplectic, saying the narratives may contain spurious information. Unlike more amateur sites that feature negative stories about financial institutions, they say, the CFPB's database has the imprimatur of the U.S. government.
"As users of the website, will they look at the CFPB database and think that these complaints have been validated?" said Haydn Richards, director of Dykema's financial industry group. "That's a significant concern when you have the backing of this website."
The CFPB says it takes pains to ensure information on its database is accurate. It verifies that the person complaining has an account with the relevant institution. Complaints are also not included in the public database until 15 days after first being filed or until the company responds, whichever comes first. The proposal is also seeking comment on whether banks and other institutions should be allowed to post a written response that would appear next to the consumer's story.
But industry representatives say the CFPB's database does not adequately guard against bogus complaints.
"I don't think it has been demonstrated to be thorough enough," said Richard Riese, the senior vice president for the Center for Regulatory Compliance at the American Bankers Association. "There are certainly complaints that continue to get through the system that are submitted to banks that are not well-founded, in some cases of questionable rationality.
"The bureau is aware of these kinds of complaints," he added. "How they evaluate those is obviously a concern because otherwise they are joining in the publication and providing a government forum for the republication of unsubstantiated allegations."
Richards estimated that around 50% of the complaints in the database currently are duplicative to complaints already received by individual bank. In many cases, the bank has already decided whether the complaint has merit and has taken appropriate action, he said.
As for giving firms a chance to respond, that also raises issues. For one, a company may not want to provide the same level of detail as a consumer about how it responded, or worry about unwittingly disclosing the consumer's identity.
"The CFPB is acting as a clearinghouse here," said Richards. "The consumers who are electing to have their dialogues posted, the CFPB is very clear in saying their privacy will not be compromised. If I'm a company, I'm at a disadvantage. The consumer can be anonymous where I certainly cannot."
In its proposal, the CFPB says other government agencies already disclose consumer narratives. It points to the Consumer Product Safety Commission and the Federal Trade Commission, which releases consumer complaint narratives through requests under the Freedom of Information Act.
The CPSC also hosts a separate website, www.saferproducts.gov, which allows consumers to provide detailed complaints about products, including narratives, photos and videos (For a sampling of complaints about various appliances, click here). Many of the complaints allege significant problems with the products.
The site makes it clear that the agency does not verify the information contained in the complaints.
There is also the issue of the burden of publicly responding to every complaint lodged against the bank. Hunt said banks are busy enough responding to the complaints internally without also needing to post a response on the CFPB database at the same time.
Overall, he criticized the CFPB for publicizing complaints without first establishing whether they were true.
"To just take all these complaints and have the public decide if they are true, it's lazy, quite frankly," Hunt said. "If they really want to get to the bottom of the complaint, they should look at them themselves."
Rob Blackwell is the Washington Bureau Chief for American Banker.
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