States Ask CFPB to Keep Complaints Database Public

By Lydia Beyoud

Fourteen Democratic state attorneys general are asking the CFPB to keep its consumer complaint database open to the public.

State law enforcers risk losing a valuable tool to help “identify patterns of widespread misconduct,” New York Attorney General Barbara D. Underwood and 13 other state AGs said in a June 4 comment letter to the Consumer Financial Protection Bureau.

The letter is in response to the CFPB’s March 6 request for comment on whether to change reporting practices for the database. Comments due June 4 reveal the entrenched polarization between consumer groups and the financial services industry over the importance of publishing consumer complaints on mortgages, for-profit universities, auto loans, debt collection, and credit and debit card charges.

Patterns revealed through the database have led to investigations into debt collection companies, student loan servicers, for-profit universities, “and other companies whose misconduct was initially brought to our attention through a critical mass of complaints filed with the CFPB,” the state enforcers said.

The complaints database faces a real risk of going dark, at least to the public.

Acting CFPB Director Mick Mulvaney has repeatedly said the agency will maintain a database but doesn’t feel the need to run a Yelp.com, the online business review site, for the financial services industry.

‘Go No Further’

The database is unpopular with that industry.

The American Bankers Association said in its comment letter that it supports Mulvaney’s policy stance: “ABA supports your recent statements that you are ‘committed to fulfill the Bureau’s statutory responsibilities, but go no further,’” the trade group said in its letter.

The ABA pointed out that regulators already monitor individual banks for consumer complaints.

“Prudential regulators require individual complaint handling by the recipient bank and monitor individualized responses for alerts to potential compliance risks warranting more systemic attention, when necessary,” the ABA said.

The bureau’s current practice exceeds its authority to collect consumer complaints by making them public, the Independent Community Bankers of America trade group said in its comment letter.

Moreover, the practice exposes banks to reputational risk and can lead to “misleading comparisons” through disaggregated data results, the ICBA said.

Public Prodding

Consumer advocates said the public database can be a helpful prod to get financial services companies to respond to consumers.

“A public complaint database empowers consumers with reliable information to make better pre-purchase decisions about their financial choices,” the Consumers Union said in its comment letter.

The advocacy group said it hears from consumers “whose complaints were initially dismissed by the companies but then quickly resolved by those same companies once the CFPB was involved.”

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bloomberglaw.com

To contact the editor responsible for this story: Michael Ferullo at mferullo@bloomberglaw.com

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