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The Financial Services Roundtable is a powerful Wall Street lobby that spends millions of dollars annually (OpenSecrets.org) lobbying on behalf of the nation's "largest integrated" financial firms that comprise its membership. The 100-year old association has decided to try to use social media -- the web (CFPBRumors.com), twitter, and even ads in the Washington, DC subways -- in its newest attack (The Hill newspaper) on the CFPB.
But first, why are they doing this now?
FSR is opposing an important proposal out for comment (until 9/22) to enhance the CFPB's successful public consumer complaint database by adding consumer stories (narratives) to the data fields already available. Yes, like many agencies, from NHTSA's safercar.gov to CPSC's saferproducts.gov, the CFPB not only takes consumer complaints, it makes them available to other consumers, researchers and other firms. Even industry opponents have admitted that making complaints transparent has worked to make financial firms more responsive to complaints, while previously, in the view of U.S. PIRG and other observers, many banks simply ignored complaints. Further, the database has also created a trove of new data for researchers. For example, U.S. PIRG Education Fund has released a series of 5 reports (so far) analyzing complaints to the CFPB in a variety of ways.
So, what isn't true in the FSR's claims?
FSR says: "Nearly 70% of all complaints filed in 2013 were closed with a simple explanation."
Actually, the CFPB makes clear that just because a complaint is closed, it does not mean satisfactorily resolved. The CFPB said in 2012: "When a complaint is simply closed by the company that means the company is closing it without relief or explanation."
FSR says: "Authorities at the Consumer Financial Protection Bureau (CFPB) wants to begin posting anonymous, unverified complaints it collects about financial services companies onto a government website."
"Wants to begin:" In its haste to confuse the public, FSR itself appears somewhat confused. Again, the CFPB launched the Public Consumer Complaint Database in June 2012. At first, the CFPB only accepted credit card complaints, but the bureau has gradually added other complaint categories -- such as complaints about mortgages, bank fees, prepaid cards, student loans, debt collectors, and credit bureaus -- on an incremental basis so that the bureau could manage database growth and work out any kinks. Just this month, the bureau even announced it was accepting Bitcoin and other virtual currency complaints.
By the way, none of the FSR claims about public complaint databases are new. Firms made the same claims of unfairness when the CFPB database was proposed three years ago. Toy and product companies made the same claims when CPSC implemented its database just before that.
"posting anonymous, unverified complaints:" While the CFPB explains that it protects the privacy of complainants, it actually does verify account relationships and share that information with the firm before complaints are posted.
CFPB's current practice is this: "We’ll forward your complaint to the company and work to get a response. After we forward your complaint, the company has 15 days to respond to you and the CFPB. Companies are expected to close all but the most complicated complaints within 60 days."
FSR says: The complaints will be posted publicly, but the businesses named in the complaint won’t be able to submit an explanation or a status update on the issue, even if the complaint has been fully resolved.
Wait, the CFPB's proposal for comment on enhancing the database says that this is its plan:
C. Company Response:
Where the consumer provides consent to publish their narrative, the related company will be given the opportunity to submit a narrative response for inclusion in the Consumer Complaint Database. The company will be instructed not to provide direct identifying information in its public-facing response, and the Bureau will take reasonable steps to remove personal information from the response to minimize (but not eliminate) the risk of re-identification. The Company Portal will include a data field into which companies have the option to provide narrative text that would appear next to a consumer's narrative in the Consumer Complaint Database.
So, when the consumer explains her dispute, the company gets to tell its side. If we were to use Politifact's measuring tool, we'd rate FSR's claim that businesses "won’t be able to submit an explanation" as a "pants on fire!"
But, we expect that the FSR will come back and say "that's not what we meant. We meant that the CFPB did not verify that the complaint itself was legitimate."
This gets to the real attack by FSR, which goes directly to the underlying purpose of the database. First, CFPB opponents don't want a CFPB. Second, if there is a CFPB, they don't want the CFPB to have a working, transparent, interactive public database. Instead, opponents, if they had to settle for anything, would prefer that CFPB simply post some "end of year statistics based on already-resolved legitimate complaints" that a firm agrees it had "verified" and "resolved," under its own definitions.
The purpose of this database -- and the purpose of all of the public consumer complaint databases -- is not to provide dry, static industry-approved statistics on firms, it is to make markets work. As now-Senator Elizabeth Warren (MA), the architect of the CFPB and a strong supporter of its public database, who ran the CFPB before it had a director, explains in her new book, "A Fighting Chance:"
"Angry consumers file complaints and nothing seems to happen. [...] Rarely is an agency in Washington held accountable based on the quality of its response to consumer complaints. [...] No one has the resources to conduct an investigation every time a consumer has a problem. [...] Surely there had to be a better way. To begin with, a twenty-first century agency could use new technologies to take complaints online, tag them electronically, email them to the bank [...] And what if we made the complaint data public? [...] As word about the idea began to leak, the bank lobbyists got more hostile. [...] But we went ahead anyway. We figured that by telling the world how many complaints we'd received about each of the big banks and how those complaints were resolved, we might make the market for credit work better. (From pages 182-183)"
And that's precisely what the financial industry doesn't like. They like a market that works for them, but not for you.
FSR goes on to make numerous other claims, such as that the CFPB "isn’t even trying to meet an Angie’s List standard." Actually it does. But it's an apples and oranges comparison. Consumers filing complaints to CFPB are not "rating" a food experience or the quality of a rug installation. Consumers complaining to the CFPB are complaining that a regulated financial firm made a mistake or misled them and, most likely, when they tried to get the problem resolved, the firm refused to help. Remember that the consumers filing complaints are confirmed by the CFPB to have account relationships. They're not the sockpuppets alleged to file malicious (or self-promoting) consumer reviews on a variety of websites.
Forgetting that FSR's campaign is full of half-truths and deception, I actually don't think the concept of their attack works, except perhaps with their own captive Washington "base" of legislative staff and industry lobbyists. I doubt many actual consumers will see the database the way that they do.
No, I think actual consumers will see the database the way CFPB director Richard Cordray explained it at a field hearing in El Paso last month:
"I think of the database as a mosaic. While every tile on the mosaic shows only one tiny piece of the picture, you can step back from it and see how the tiles fit together to form the whole picture. That is what the database offers – an aggregation of stories that gives a more complete picture of the consumer financial marketplace. We are now proposing to make that mosaic even more vibrant and clear by including consumers’ own narrative of their experiences, as stated in their own words."
In each of U.S. PIRG Education Fund's series of 5 reports analyzing complaints to the CFPB, we have made the following recommendation:
"Make the database more user-friendly by: Adding more detailed information to the database, such as actual complaint narratives, detailed complaint categories and subcategories, complaint resolution details, [...]"
In our view, adding narratives makes a good database better. Adding a consumer story (they'll all be in different voices, which is interesting in itself) that includes specific details about how much money (if any) was involved in a dispute, how many times and over what period of time a consumer contacted her bank (or credit bureau or other firm), how many different representatives made how many different promises to her and other information that will be made available in a narrative will enrich the usability of the public database significantly.
And the corporate narrative responses will be telling as well. Which firms are more likely to fix problems highlighted in the mosaic? Will they gain market share? They should.
This database upgrade will enable other consumers to make better decisions or to say "Hey, that happened to me, too!" It will enable researchers to spot industry trends. It will allow good marketplace actors to review their own customer service to ensure that frequently-complained-about problems aren't a pattern or practice at their own institution.
Unfortunately, veracity has never mattered much to any of the CFPB's opponents, which run the gamut from big Wall Street banks to the debt collectors and payday lenders. These financial firms are simply opposed to the idea that the government has established an agency that protects consumers in the financial marketplace.
Instead of spending some of its multi-million dollar lobbying budget in this misguided attack on the CFPB, the FSR should commission a public poll and ask consumers how to improve trust in Wall Street. Maybe they're afraid to ask consumers still recovering from the 2008 Wall Street-induced financial collapse that cost millions of jobs, millions of homes and trillions of dollars in consumer wealth and retirement income and has resulted in a lingering recession and jobless recovery for those consumers.
But if they don't want to go to the trouble, they can review the most recent poll commissioned by the PIRG-backed Americans for Financial Reform (July 2014). The public (on a non-partisan basis) continues to overwhelmingly support the CFPB and wants continued and even "tougher" oversight of Wall Street.
The idea of the CFPB needs no defense, only more defenders. We've compiled a list of ten of the ways (we've got more) that CFPB helps consumers.
Please take a moment and comment in support on the CFPB's important proposal to add consumer stories (narratives) to the information already in the database. It's an important tool to make financial markets work. You can comment here until 9/22.
Starting with yesterday's announcement, it appears that the FSR website will progressively add content on a daily basis. Watch this space for further updates if I see any more "pants-on-fires." If you see any of their anti-CFPB ads in the DC subway (Metro), please tweet them to me (@edmpirg).
Tools & Resources
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Trojan Horse Hidden In Data Breach Bill
To Senate Banking Committee
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