Researchers Dub CFPB Consumer Complaint Database Unlawful

As the Consumer Financial Protection Bureau (CFPB) continues to solicit comments on its proposed consumer complaint narrative database, several researchers are questioning the initiative’s legitimacy and authorization.

Raising a number of concerns related primarily to efficacy and potential costs a consumer complaint narrative database would incur, researchers from the Financial Markets Working Group at George Mason University’s Mercatus Center sent a letter to CFPB’s Office of the Executive Secretary Monica Jackson detailing why the agency’s initiative is inappropriate.

“The Bureau’s plan to expand the database to include consumer complaint narratives is outside its statutory authority,” write Senior Research Fellow Hester Pierce and Research Assistant Vera Soliman, both of GMU’s Financial Markets Working Group.

Though the Bureau cites several statutory provisions in support of the proposed database expansion, including the agency’s ability to establish general policies and report to Congress about the complaints it receives, none of the provisions authorizes the CFPB to establish a publicly accessible complaint database, according to Pierce and Soliman.

A primary concern for the database, which would publicize consumer complaint narratives regarding financial institutions, is that there isn’t a way to discern whether a complaint involves a violation of federal law, leaving the database open to unwarranted grievances or intentional efforts to damage the reputation of a financial services provider.

Additionally, the CFPB’s acknowledgement of the possibility that “a complainant’s misunderstanding or misrecollection of what happened” could result in the publication of “factually incorrect information.”

For financial institutions, the creation of an expanded database could result in “severe” repetitional harm as well as substantial costs in resolving potentially meritless complaints, write Pierce and Soliman.

Even the Bureau would incur unnecessary costs associated with the expanded database, researchers suggest, as it will likely have to spend substantial resources to responding to financial institutions about complaints they believe to be misleading.

Publishing inaccurate information about financial institutions may also exposure the CFPB to litigation risk and its associated costs, as well as costs tied to screening “baseless” complaints in efforts to make the database less misleading.

“Although the information in the expanded database may be timely, it will not be uniformly correct, complete, representative, or understandable,” Pierce and Soliman write. “Consumers, markets, and the Bureau itself stand to lose from the expansion.”

Rather than proceed, researchers suggest that the CFPB “return to the drawing board” and analyze whether there is a market failure and if it is well-suited to solve it, along with the potential costs and benefits of creating a responsible public complaint database.

View the letter.

Written by Jason Oliva

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