Save the CFPB's Consumer Complaint Database

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(Bloomberg) -- The acting director of the Consumer Financial Protection Bureau, Mick Mulvaney, shares the industry’s dislike of one of the bureau’s most visible innovations: a public database of consumer complaints. His view is disappointing to those who think more information is better.  

Since 2011, the database has registered and tracked more than 1 million grievances about a broad range of financial companies, including banks, mortgage lenders, credit reporting agencies and debt collectors. The bureau collects complaints online and by phone, verifies the customer relationships and contacts the companies, which have 15 days to respond. The results are published on the bureau’s website, including such details as the company name, the product, the type of complaint, the consumer’s ZIP code and, in many cases, a brief narrative.

Anyone who has ever been shunted to call-center purgatory can understand the benefits that such transparency provides. It pushes companies to be more responsive — some 97 percent of complaints get a timely response, and consumers have tended to dispute only about one-fifth of outcomes. It exposes any persistent problems, making them hard for the CFPB to ignore. It provides journalists and researchers with a wealth of data for assessing the industry’s and the bureau’s performance. And consumers can consult the data before choosing a company to do business with.

Sadly, these advantages seem lost on Mulvaney, appointed to run an agency that he has said he’d rather dismantle. Last month, the bureau asked for input on its reporting and publication practices — a first step toward changing them. Mulvaney recently made his own position clear: “I don’t see anything in [the Dodd-Frank law] that says I have to run a Yelp for financial services sponsored by the federal government.”

Mulvaney would have a point — if only social media or other private initiatives provided anything nearly as comprehensive and authoritative as the data the CFPB publishes. They don’t. The court system isn’t a viable option, either: The sums involved are typically too small to justify the cost and effort of filing suit, and in any case most service agreements include mandatory arbitration clauses that rule it out. So the database is providing recourse to hundreds of thousands of people who previously had nowhere to go.

The financial industry has long opposed making the database public, and it has some legitimate concerns. The CFPB can’t vouch for the complaints, and some are doubtless made in bad faith. The focus on customers with grievances obscures the fact that they’re a small percentage of the total. Context is lacking: Larger companies, and companies in businesses such as debt collection and credit reporting, are bound to have more unhappy customers. But the bureau could fix most of these problems easily, by presenting the data more informatively. For instance, its reports could show the ratio of complaints to customers, sorted by type of business.

Displaying this information has been good for customers and good for competition — all at little added cost. It’s an innovation worth preserving.

—Editors: Mark Whitehouse, Clive Crook

©2018 Bloomberg L.P.

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