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Say goodbye to the controversial CFPB consumer complaint database?

Leaked memo: CHOICE Act 2.0 may shut it down

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The Consumer Financial Protection Bureau’s consumer complaint database might not make it too much further past the one-millionth-complaint threshold due to a Republican-led effort to repeal the much-criticized database.

Last week, a memo reportedly from House Financial Services Committee Chairman Rep. Jeb Hensarling, R-Texas, revealed plans for an even more aggressive version of the Financial CHOICE Act, CHOICE Act 2.0, with the Consumer Financial Protection Bureau facing some of the most drastic changes.

Aside from the major changes to the leadership of the CFPB, outlined here, one of the most notable changes to the CFPB would the repeal of the consumer complaint database, established under Dodd-Frank as an integral part of the CFPB’s work.

The database has undergone a lot of scrutiny ever since the bureau announced it wanted to make the consumer complaints that it receives public despite many of the companies featured in the database, as well as other industry observers, taking issue with the fact that the complaints were, in many cases, unverified and unproven.

The National Association of Federally-Insured Credit Unions, which voiced concerns with the database before, Regulatory Affairs Counsel Andrew Morris commented on the data saying, “NAFCU supports consumer protection but we have always maintained that the CFPB consumer complaint database is a flawed tool that poses significant reputational risk for financial institutions.”

“As a sleek, agency-branded platform, the database gives a false impression that the CFPB has investigated complaints and determined that they are true,” said Morris. “However, this is not the case, and the CFPB regularly publishes complaints that are not fully verified. Unfortunately, there is no process in place to assure that consumer complaints are fully vetted, and without an extra level of due diligence the database frequently operates as showcase for subjective criticism.”

When it comes to credit unions specially, Morris stated that credit unions have unique relationships with their members and already operate robust customer service platforms to resolve complaints and solicit member feedback.

“In short, NAFCU supports the resolution of disputes and investigation of valid and verified complaints, but the reputational risk posed by unverified complaints is a major concern and one not easily remedied,” he said. 

Since the announcement several years ago, the bureau has tinkered with the process, and as recent as the end of last year, said it was seeking public comment on a possible update to the process.

Back in August 2016, the CFPB said it wanted to incorporate a short survey into the complaint closing process, giving consumers the option to provide feedback on the company’s response to and handling of their complaint via all channels including online, phone, fax, and mail.

The CFPB said it would use feedback to supervise companies, enforce Federal consumer financial laws, write better rules and regulations and monitor the market for consumer financial products and services.

As of the start of this year, the CFPB has handled approximately 1,080,700 consumer complaints across all products nationwide, with approximately 260,500 of those mortgage-related complaints.

And while the database is controversial, it was of use in levying the fine against Wells Fargo, as James Clark, the chief deputy of the Office of the Los Angeles City Attorney, testified that his office used the CFPB’s complaint database in its investigation into Wells Fargo.

The memo only provided a brief note on repealing the consumer complain database, with no mention of a possible replacement. And the original CHOICE act barely mentioned the consumer complaint database only stating, “the bureau is harming consumers by operating a ‘consumer complaint database’ designed to catalogue and publicize consumer complaints against companies without first verifying their veracity. Without additional verification or normalization of the bureau’s database of complaints, consumers are unable to draw conclusions about potential bad actors in the marketplace.”

However, around the same time that Hensarling introduced the CHOICE Act, Rep. Matt Salmon, R-AZ, introduced a bill, entitled the CFPB Data Accountability Act, into the House of Representatives, saying that the CFPB’s database, in its current format, is confusing to consumers and is not as usable as it could be.

“My bill would improve the current database by requiring the CFPB to verify the facts of each complaint and present this information in an aggregated format so that consumers have better access to CFPB-collected data and can make better decisions about their financial futures,” Salmon said.

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