Since the inception of the CFPB complaint database you may have read, in multiple news publications, my serious concerns about the entire idea of an online review site that permits unverified complaint narratives without allowing the accused the ability to respond.
I firmly believe this database continues to fail the transparency test, and without real reforms its so-called growing pains will ultimately be its undoing.
The basic premise of this database is noble. Consumers can voice their complaints about their experience with a lender and take comfort in the knowledge that their concerns are being heard.
But the CFPB has failed to install a mechanism to substantiate or verify any of these complaints. In fact, the Bureau does not allow financial institutions to adequately respond to the claims. Equally concerning, the database could be putting the consumer’s privacy in jeopardy. Misinformation can, and has, infected the entire system and CFPB has yet to take real steps to correct it.
Just this past week, the CFPB released the monthly results of consumer complaints. Included in this snapshot are notations of the lenders with the most complaints. The biggest lenders dominate the list.
Is this surprising? The companies that issue the most loans have the most complaints? That’s like saying California has the most delinquent loans. Of course it does. California may have more loans past due than any other state, but its delinquency rate is much lower than that of other states, due to its relative size.
So what should be done about the CFPB database?
- First, the CFPB must verify all of these complaints before being published. This includes validating the authenticity of not only the complaint, but also the person making the complaint. It also means talking to the financial institutions and seeing what is being done to correct any problems.
- Second, the CFPB has to stop releasing these monthly results until they can scale these complaints to the size of the loan provider. It’s quite possible that the lenders mentioned in these monthly snapshots have a low complaint rate compared to the total number of loans they issue. However, without normalizing the data, the reader is left to draw incorrect conclusions about the financial institution.
There is a lot of good being done by the CFPB. But this database continues to provide a disservice to lenders and consumers alike. It is of the upmost importance that they fix the glitches in their system as quickly as possible.