Open publication of the Consumer Financial Protection Bureau’s consumer complaint narrative database is unfair, unlawful, prohibitively expensive and distracts the bureau from its actual mission.

That is the conclusion of Senior Research Fellow Hester Peirce and Research Assistant Vera Soliman at the Mercatus Center at George Mason University, who detail the problems in an open letter to the CFPB.

(The full text of the letter can be read here.) And HousingWire has covered a number of problems with the program in news articles and op-eds.

The Mercatus authors claim the problem is the complaints the CFPB wants to publish on their site will not have been vetted, investigated or adjudicated.

For instance, eight out of 10 mortgage complaints – when the CFPB investigates them – are tossed out. The CFPB received 163,700 consumer complaints in 2013, nearly double the total 90,000 they received in 2012. Of that, 59,900 are mortgage related.

Of all mortgage complaints, 77% are closed with a simple explanation or clarification to the consumer, without relief of any sort.

That means four out of every five complaints get closed with an explanation, or dismissed without even bothering with an explanation, much less relief to the consumer complainant.

“In its current consumer complaint program, the Bureau invites consumers who ‘have an issue with a financial product or service’ to make complaints,” they write. “The Bureau publishes the complaints in a publicly accessible consumer complaint database. Other than verifying that the customer has a relationship with the company that is the subject of the complaint, the Bureau makes no attempt to assess the veracity of the facts, let alone whether the financial institution named in the complaint has violated a law.”

The database currently includes basic information about the complaint and its resolution. The CFPB proposes to expand the existing database to include unverified consumer narratives and company responses. The CFPB will scrub complaints and responses of information that could identify the consumer.

Soliman and Peirce argue that there is not a market failure that would justify the public database. They identify the costs to the consumers whom the database will mislead; the financial service providers whose reputations the database will tarnish; and the CFPB, which will have to incur great expense to prevent the database from undermining its mission of protecting consumers.

The two also raise concerns about the lack of statutory authority to expand the database and its incompatibility with open government directives.

For starters, the CFPB has not identified a problem that requires a regulatory solution.

“The Bureau contends that, absent publication of complaint narratives, it cannot meet the needs of consumers ‘who may choose to file a complaint only if they will have the opportunity to share their story and other consumers who may overcome their reticence to submit a complaint by reading the experiences of others,’” they write. “There may be a powerful consumer demand for sharing bad experiences, but a private complaint database provider can more effectively satisfy that demand. Such databases already exist for many products and services.”

As HousingWire has done, they point to services like Yelp and that collect and publish feedback on numerous consumer products and services. These companies, mindful of their own commercial interests, foster the provision of helpful and accurate content.

“Unlike the Bureau’s website, these companies include both positive and negative comments. As a result, these sites contain more balanced and complete information for consumers than a government website designed solely to collect complaints,” they write in their open letter.

The existence of Yelp, Amazon and many other similar private websites suggests that there is no need for the government to run its own complaint publication website.

They point out that private comment databases have a commercial incentive to develop ways to signal the relative trustworthiness of reviewers, to encourage accurate reviews, and to ensure that the mix of reviews is representative of consumers’ actual experiences. The CFPB does not propose to take comparable steps to ensure the quality of its database and would likely be reluctant to do so for fear of appearing to take the concerns of some consumers more seriously than others.

Aside from the CFPB’s proposal being a solution to a problem that doesn't exist, there is the issue of financial costs.

“The public consumer complaint database is not only unnecessary, but costly. Expanding the database to include customer narratives only adds to the expense. Consumers, providers of financial products and services, and the Bureau will incur costs if the database is expanded as proposed,” the two write.

The proposal is also harmful to consumers.

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