CFPB’s Complaint Reporting Process Creates Significant Limitations

NEW YORK – The Consumer Financial Protection Bureau’s complaint reporting is a potentially powerful resource with serious drawbacks, Auriemma Consulting Group said in a comment letter to the financial regulator. But there are also opportunities to improve it to better serve consumers and the industry.

Submitted in response to a “call for evidence” issued by the CFPB’s leadership, the letter highlights flaws in the Bureau’s complaint process, including insufficient complaint verification, controls, and context for complaint numbers. As a result of these issues, the Bureau’s complaint reporting creates undue reputational risk for financial institutions and could lead consumers to make misinformed decisions about financial products and services.

“The CFPB’s Consumer Complaint Database has the potential to serve as a rich source of market-level complaint data, and ideally would enable financial institutions to draw meaningful comparisons about their complaint volume relative to peers,” Auriemma said in the letter. “However, in its current form, complaint data is unverified, lacking in context, and potentially misleading to consumers.”

Under its current approach, the CFPB does not validate the facts of complaints and reports complaint volumes without context on the number of accounts a company services or the composition of its loan portfolio. For instance, a larger company is likely to have a larger volume of complaints regardless of service quality. Additionally, controls to prevent duplicate complaints are insufficient in practice, further skewing the data.

Despite flaws in the current system, the CFPB has aggressively expanded the frequency and scope of its complaint reporting and provided public access to unverified complaints through its database. This approach is out of sync with the CFPB’s FY 2018-2022 strategic plan, which realigns the Bureau’s mission and goals with the requirements set forth in the Dodd-Frank Act. While the Act requires the Bureau to collect complaints, it does not require it to provide public access to complaint data.

In its comments to the CFPB, Auriemma recommends specific changes the Bureau can make to its complaint reporting to improve outcomes for consumers and the lending industry. These recommendations include enhancing complaint verification and controls to improve data quality, and supplementing complaint numbers with more context on company size, market share, and portfolio composition. In the spirit of the CFPB’s new strategic plan, Auriemma recommends the Bureau align complaint reporting with the statutory requirements and refocus its role in the complaint process on financial education – empowering consumers with information and resources instead of acting as an intermediary between consumers and companies.

With these changes, the CFPB’s complaint reporting could be a beneficial resource for financial institutions, which devote substantial resources to internal complaint reporting and analysis and rely on complaint data to better serve their customers.

“The industry believes this data could potentially provide insight into product and process improvements and add value to the extensive complaint reporting and analysis [financial institutions] perform internally,” Auriemma said. “However, the [current process] creates significant limitations.”

About Auriemma Group

For more than 30 years, Auriemma’s mission has been to empower clients with authoritative data and actionable insights. Our team comprises recognized experts in four primary areas: operational effectiveness, consumer research, co-brand partnerships, and corporate finance. Our business intelligence and advisory services give clients access to the data, expertise and tools they need to navigate an increasingly complex environment and maximize their performance. Auriemma serves the consumer financial services ecosystem from our offices in New York City and London. For more information, call (212) 323-7000.