Complaints about the CFPB's complaint database

Last week, as reported here, the Consumer Financial Protection Bureau (CFPB) released a proposed policy statement for comment. The CFPB plans to expand its existing consumer complaint database to include narrative information, rather than the more limited information about complaints it now publishes. Whether in its current form or in its proposed expanded form, the database should be of concern to financial companies and their customers.

The complaint database is essentially unfiltered. The CFPB explains that "We don't verify all the facts alleged in these complaints but we take steps to confirm a commercial relationship between the consumer and company." In other words, as long as the complainant is a customer, her complaint goes into the database. The value of a database that treats all complaints as valid is limited, but has great potential to harm the reputation of consumer financial services providers. Adding the narrative to the database only exacerbates the potential harm.

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Regardless of disclaimers, a government-run complaint database such as this one invites people to assume that its contents have been vetted and found credible by impartial government employees. The CFPB, however, seems to view its database as nothing more than a community forum through which consumers "share their experience with other consumers." In the CFPB's words, adding narrative discussion to the complaints will "be impactful by making the complaint data personal (the powerful first person voice of the consumer talking about their [sic] experience), local (the ability for local stakeholders to highlight consumer experiences in their community), and empowering (by encouraging similarly situated consumers to speak up and be heard)."

In addition to being impactful, local and empowering, the database is likely to be misleading. Some of the CFPB's complainants may be motivated by a desire to harm the reputation of a particular company. For example, the advertisements my bank runs are annoying enough to drive some customers to gin up complaints in retribution. But even the majority of complaining customers who are well-intentioned may — as most people do — describe the situation in the light most favorable to themselves. Others may simply have fuzzy memories of what transpired. A narrative written in anger immediately after a frustrating interaction with an impolite customer service representative may sound a lot worse than one written after a more productive follow-up conversation with another bank employee.

The CFPB acknowledges that "the narratives may contain factually incorrect information," but believes its policy of publishing company responses along with the complaints will mitigate this problem. Companies will not be able to include personal information in their published responses and will be reluctant to aggressively counter inaccuracies. So they will hesitate to publicly push back against unfounded complaints or fill in details of incomplete customer narratives.

The CFPB sees its proposed policy as "establishing itself as a leader in the realm of open government and open data" and cites the Office of Management and Budget's Open Government Directive in support of its proposal. That directive notes that agencies should not disclose information if doing so would damage compelling interests, such as confidentiality. The CFPB plans to take steps to protect the confidentiality of the people who submit complaints, but the business interests of wrongly accused companies are also compelling. Publishing untested complaints also may run counter to the directive's emphasis on information quality.

The CFPB expects that the database will influence consumer behavior, yet knows the database will include some information that is factually inaccurate. Encouraging consumers to act on such information is inconsistent with the CFPB's objectives of protecting consumers from deceptive acts and practices and making sure that they have access to "understandable information to make responsible decisions about financial transactions." Let's hope the financial companies it regulates do not follow its lead.

Peirce is a senior research fellow with the Mercatus Center at George Mason University.