Republican Bill Could Draw the Shutters on the CFPB Complaint Database

By Gregory Roberts

The Consumer Financial Protection Bureau’s public complaints website effectively would be shut down under a proposal by House Republicans, according to former bureau staffers, consumer advocates and a lawyer who often clashes with the agency.

That would amount to a major setback for consumer interests, the advocates say. But others say the effect would be less dramatic for both the bureau’s mission and for companies publicly targeted by the current set-up, which posts online in consumers’ own words complaints collected in the CFPB database.

The proposal says the CFPB “may not make any information about a consumer complaint in such database available to the public without first verifying the accuracy of all facts alleged in such complaint.”

“It’s ridiculous,” Linda Sherry, director of national priorities for the nonprofit advocacy group Consumer Action, told Bloomberg BNA.

“To require the CFPB staff to do this would be costly and laborious and clunky, and would potentially eliminate the valuable information that consumers get when they look at these complaints,” she said.

The proposal on the complaints portal was included in the Financial Choice Act sponsored by House Financial Services Committee Chairman Jeb Hensarling (R-Texas) and approved by the committee in 2016.

The bill died with the end of the 114th Congress in December, but Hensarling has said that he will propose a version in the current Congress that closely tracks the 2016 measure — although he said Jan. 5 that it’s doubtful any action will take place until late 2017.

“In order for them to verify everything, they would have to devote a lot of manpower for that, and they aren’t geared up for that,” Alan Kaplinsky, a partner at Ballard Spahr LLP who is a regular critic of the CFPB, told Bloomberg BNA. “It would radically change the way that their complaint portal functions.

“Right now, it’s like a gripe site, like Yelp,” he said. “Anybody can post practically anything they want. Nothing is ever verified.

“If they need to verify it, it’s going to be very difficult for them to do that.”

One Million and Counting

Since its 2011 launch, the database has logged more than 1million complaints. The CFPB forwards a complaint to the company involved. Complaint information appears in the database when the affected company responds to the complaint or in 15 days, whichever comes first. The information is not entered if the company says the complainant was not its customer or if it suspects fraud.

Beginning in 2015, over objections from the financial services industry, the bureau has posted the consumer’s account of the issue, with the consumer’s permission. Identifying information about the consumer is edited out.

The entries include the response, selected by the company from a set list of options.

The CFPB does not attempt to fact-check the consumers’ accounts. Even if that requirement were imposed and it led to a virtual blackout of public complaints on the portal, it might not make that much of a difference, some former CFPB staff members say.

“It wouldn’t really damage the bureau’s mission, but it would change the way complaints are being used,” Gerry Sachs, a lawyer with Paul Hastings LLP in Washington and former senior counsel for policy and strategy with the enforcement office of the CFPB, told Bloomberg BNA.

The bureau, akin to other federal agencies such as the Federal Trade Commission, could still collect complaints and look for patterns in them to guide investigations, and could also contact complained-about companies to seek resolution. But complaints would no longer be open to wholesale inspection by the public, nor by advocacy organizations that mine the data for their own reports on industry practices.

No Harm, No Foul

Raj Date, a former deputy director of the CFPB now with the Fenway Summer venture capital firm, in Washington, said that pulling the curtain down on the database also wouldn’t amount to a big win for industry — because the public complaints don’t inflict much damage in the first place.

“The notion that banks’ reputations have been meaningfully impaired by unfounded allegations on the CFPB data base — I have seen zero evidence for that,” he told Bloomberg BNA.

Congressional Republicans have directed steady fire at the CFPB almost since its creation by passage of the Dodd-Frank Act in 2010 in response to the financial crisis. The bureau’s Democratic supporters argue it’s necessary to police big banks and financial services and combat abuse of consumers. Its detractors accuse the CFPB of regulatory overreach that stifles businesses.

The Financial Choice Act, which would overturn many provisions of Dodd-Frank, would rechristen the CFPB as the Consumer Financial Opportunity Commission and place it under a five-member commission instead of the sole, independent director who now oversees the agency. It would bring the agency under the congressional appropriations process; the agency now is funded outside that process, through the Federal Reserve Board.

The act would subject proposed regulations to a stronger cost-benefit analysis and to review by Congress. It would charge the agency with promoting free-market competition, and it would roll back proposed or approved rules on payday lending and arbitration clauses in consumer contracts.

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