CFPB Proposes to Include Narrative Information in Consumer Complaint Database (with Peirce and Lofchie Comments)

The Bureau of Consumer Financial Protection ("CFPB") issued a proposal to expand the disclosure of complaint data on its Web site to include "unstructured consumer complaint narrative data."

Currently, the CFPB discloses certain complaint data it receives regarding consumer financial products and services on its web-based, public-facing Consumer Complaint Database. The proposal would expand these disclosures to narrative information rather than the limited information it now publishes about complaints. The CFPB stated that only those narratives for which "opt-in consumer consent had been obtained and a robust personal information scrubbing standard and methodology applied" would be subject to disclosure.

Comments on the proposal will be due 30 days after it is published in the Federal Register.

Mercatus Scholar Hester Peirce Comment: Whether in its current form or in its proposed expanded form, the database should be of concern to financial companies and their customers. Regardless of disclaimers, a government-run complaint database like 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 the 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 customers whose complaints are well-intended may – as most people do – describe the situation in the light most favorable to themselves. Others simply may 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 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 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.

Lofchie Comment: A good number of privately-run Web sites (cf. Facebook, Rotten Tomatoes and Zagat) provide the means for the public to express their views on the quality of goods and services. It is not clear why it is necessary for the government to run such a site.

See: Text of CFPB Proposal; Complaints about the CFPB's Complaint Database, by Hester Peirce.