The planned public disclosure of consumer complaints has many in real estate finance concerned. In addition to being limited about how lenders can respond — complaint validity, consumer confusion and privacy are issues that have been raised.
In the March 24 edition of the Federal Register, the Consumer Financial Protection Bureau published its Disclosure of Consumer Complaint Narrative Data, which serves as the bureau’s final policy statement concerning its plans for allowing consumers to volunteer their grievances for public consumption.
The 43-page PDF document was put together to serve as a guide for how the regulator will facilitate the consumer complaint publication process. In the text, the agency also addressed industry and consumer-related concerns in the 137 comments it received during the comment period. As well, the federal entity defended its decision to make consumer complaints publicly available through its Consumer Complaint Database.
“Consumer narratives shed light on the full consumer perspective behind a complaint,” Cordray said in a press statement. “Narratives humanize the problem consumers face in the marketplace. Today’s policy will serve to empower consumers by helping them make informed decision and helping track trends in the consumer financial market.”
According to the final policy, customers of credit, loan and other similar financial services may consent to allow their troubled tales to go public, an option currently available through online submission only. From there, the bureau will prepare public narratives by redacting the consumer’s original complaint for personal information and screen the complaints for existence of a corporate relationship.
As a result, the CFPB believes allowing individuals to air their dissatisfaction with companies will aid other customers in making clear, well-informed market decisions.
All this starts in less than three months.
The financial sector, however, is unconvinced.
“There might be a large lender who has a very good track record and a low number of complaints relative to the number of transactions that they do, but if you don’t get past the consumer narrative, you just make a decision on the narrative,” said Pete Mills, senior vice president of residential policy and member engagement for the Mortgage Bankers Association. “If it’s just the narrative, it’s very hard for the consumer to get a full-sum picture over whether this is useful data or not. Somehow the bureau thinks that consumers will be able to figure out which complaints are legit and which ones aren’t. I have no idea how they expect consumers to do that.”
Originally, the regulator intended to offer companies the chance to volunteer unstructured narrative responses that would publicly appear alongside their corresponding complaints. The final policy statement, however, changed that capability due to corporate sector concerns involving legal and business considerations that handicapped their ability to provide helpful responses.
Subsequently, the CFPB’s final policy statement said it chose the best option that gave the corporate sector the most flexibility. Companies could opt to issue a private, detailed response to the consumer, but any public-facing response would be selected from a list of structured responses.
Still, Mills said he thought the public response option was unfair.
“The way that it’s set up is you have a drop-down menu. So the consumer gets to fully explain, and the lender is left to choose from a drop-down menu of responses,” Mills said. “And you only get to choose one of the above. The drop down menu has six or eight choices. Multiple choices might fit in various cases, but you only get one option and no option to provide a narrative response.”
If companies want their structured response selection to simultaneously publish alongside the customer’s criticism, they must opt to generate the response no later than 60 days from when they first received the complaint. Otherwise, they have 180 days to consider using the public response tool.
As of March 1, the CFPB has handled 558,000 complaints since July 2011, when the agency first opened shop. A March 19 press release cited mortgages and debt collection as the most recurring targets of buyer distaste.
Unsurprisingly, mortgage providers and related businesses are troubled by the CFPB’s non-existent process for checking the validity of consumer allegations, something the CFPB readily admits. Though the bureau’s final policy and website both stated measures are in place for confirming an existing business relationship, mortgage institutions do not think this minimal step is enough, especially when illegitimate accusations have the potential to pose grave effects on a business.
“There is no mechanism to ensure complaints are valid,” Alicia Nealon, who is director of regulatory affairs at the National Association of Federal Credit Unions, said in a written statement. “Consequently, narrative data accompanying unverified complaints against each institution would be misleading and would create reputational risk issues that cannot easily be mitigated. Only legitimate complaints should be publicly disclosed.”
Nealon said that her group is encouraging the bureau to implement a system that distinguishes between legitimate complaints and complaints that are without merit. Only justified should be disclosed.
When the agency first launched its complaint database on June 19, 2012, initial data solely covered criticism of credit card companies. Since that time, the CFPB has expanded its complaint handling reach to other financial products including mortgages.
There is some question about whether public disclosure is what was intended by the
Dodd-Frank Wall Street Reform and Consumer Protection Act.
“The fact remains that the identity of individual consumers making complaints can be readily discovered,” Anne Canfield, executive director for the Consumer Mortgage Coalition, said in a written statement. “This is in violation of the Dodd-Frank act. The Dodd-Frank act requires the CFPB to have a complaint database and to keep the complaints and the database private.”
Though the bureau’s final statement policy was the featured headline for most financial businesses, the bureau also issued a simultaneous request for information on how it also could gather and share consumer compliments regarding their experiences with financial product providers. The agency said it would start accepting commentary on May 26.
While this CFPB issue has polarized affected industries, the Stratmor Group, a consulting firm for the mortgage industry, said the bureau has set customer relationship measurement as a new requirement. In a white paper, released a few day ago, Stratmor said the CFPB’s use of customer dissatisfaction may be the new method for gauging how well mortgage firms are measuring up to federal mandates for customer service.
Though Stratmor said 85 percent of consumer complaints in the mortgage-related disciplines concern servicing operations, the rest are related to originations — a growing arena for borrower frustration.
“While some may question the efficacy of the CFPB’s method to measure something that has never been measure in the industry before, it cannot be denied that the bureau has positioned itself as the champion of the American home loan borrower,” Stratmor’s white paper said. “Customer satisfaction is now a standard that the industry must pay close attention to. The truth is there is an excellent business reason for doing so beyond the obvious monetary, and in some cases criminal penalties that accompany noncompliance. Lenders should also care about customer satisfaction because it will bring them more business.”
