Rumor mill or deterrent? Debate rages over consumer database

The financial industry and the Consumer Financial Protection Bureau are on a collision course over proposed changes to a database that would allow consumers to air their grievances in public against banks, credit card and other companies.

The Financial Services Roundtable, which represents some of the largest banks in the world, has been vocal in its opposition to an expansion of the complaint system.

 In an email to members obtained by The Hill, the Roundtable said it might consider a legal offensive to stop regulators from moving forward.

{mosads}“The last option we may take — if our members concur — is litigation,” wrote Francis Creighton, the executive vice president of government affairs at the Roundtable. “It is too early to tell if that will be our path and if it is, how it will be structured. But if we want to stop this misguided proposed policy, litigation is probably the most effective path to doing so.”

The CFPB has been collecting consumer complaints since it opened its doors in 2011. A database run by the agency now covers complaints about several sectors within the financial services industry, including, mortgages, bank accounts, debt collectors, prepaid cards and payday loans.

A new proposal, rolled out in July, would add consumer stories to the stripped-down data points that are now in the database. The “narratives,” as they are called, would have all identifying information removed so that consumers would not have to fear retribution.

Consumer watchdogs have lauded the move, arguing it will help make irresponsible financial entities more accountable.

In a sign of how concerned industry is about the plan, the Roundtable’s CEO, former Gov. Tim Pawlenty (R), met with CFPB Director Richard Cordray “almost immediately” after it was released, according to the Aug. 20 email to members.

“The director [Cordray] reiterated that he was moving forward with the matter and that he would encourage the industry to be constructive in how to make it work,” Creighton’s email said.

At the end of July, the CFPB extended the informal comment period on the database proposal for an additional 30 days, to Sept. 22, which had been one of Pawlenty’s requests to Cordray.

Last month, the Roundtable began an aggressive public relations campaign against the bureau’s proposal, airing its opposition in the DC metro, on Twitter and with a website called CFPBrumors.com that features articles such as “Why the CFPB Isn’t Like Angie’s List” and “How a Government Agency Spreads a Rumor.” 

The consumer bureau has strongly disputed the industry’s characterization of the database.

“It is disappointing that some members of the financial services industry perceive their own customers’ complaints as rumors,” CFPB spokesperson Jen Howard told various media outlets in a statement.

While the CFPB’s proposal allows for companies to respond to the anonymous comments, the Roundtable says that privacy laws would limit any substantive replies to address the cause of the problem because details of a financial relationship could be used to connect a person to an account.

In other words, consumers could lodge complaints against financial institutions, but institutions could not respond in kind without revealing sensitive, personal financial information.

Further, Creighton told The Hill that publishing the critiques are unnecessary because companies are already forwarded the texts of complaints and can be held responsible by regulators for not dealing with them.

“What the database is doing right now is working,” he said. “Once the consumer makes the complaint, it’s immediately escalated inside of our [member] organizations.”

In the Federal Register notice about the database changes, the CFPB listed several reasons for making consumers’ stories publicly available.

“Publishing narratives would also be impactful by making the complaint data personal (the powerful first person voice of the consumer talking about their 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),” the bureau said.

The Consumer Product Safety Commission has a similar system that details consumer reports of harmful products, and the Federal Trade Commission also discloses some consumer complaints.

“Ultimately, CFPB will decide how it moves forward. In some cases it has abandoned proposals that have sparked significant pushback,” Creighton said in the email to FSR members. “But more often they move forward regardless of legitimate concerns raised by stakeholders and possible negative consequences for consumers.”  

Creighton, the group’s top lobbyist, told The Hill that the industry groups have been meeting with lawmakers about the database, as the email also notes, but they have not asked them to help the industry oppose the changes.

At the moment, the industry is finishing its comment letters for the CFPB, Creighton said during a telephone interview.

Asked if the group would pursue a lawsuit against the bureau, he responded there are “no other plans to take any other action at this moment.”