|April 9, 2013|
Previously published on March 28, 2013
The CFPB’s Director, Richard Cordray, announced that the CFPB is expanding its current consumer complaint searchable database from approximately 19,000 viewable credit card complaints to more than 90,000 complaints regarding a variety of financial products, including mortgages, bank products, student loans and consumer loans. Director Cordray classified such development as an effort in “creating greater transparency in consumer financial products and services.” Many consumer financial service providers and industry groups, however, have raised concerns about the database because it consists of consumer complaints that are being published publically ithout first being verified.
In announcing the availability of such complaints, Director Cordray conceded that the CFPB does not “verify each and every allegation that consumers make in their complaints.” Instead, he stated, the CFPB only verifies that “a commercial relationship exists between the consumer and the named company . . . . [and that] [t]he complaint only gets uploaded onto the database after the company verifies that the consumer is in fact its customer.” In other words, consumers will be permitted to make allegations of wrongdoing against companies and the CFPB will publish those allegations without investigation so long as the consumer is an actual customer of the company. Such a de minimis standard has the potential to cause substantial harm to companies’ reputations.
Indeed, the CFPB is even encouraging third parties to rate companies based upon this new publically available, but unverified, information. In an effort to protect their ratings, affected companies will therefore have to aggressively monitor, respond to, and address all complaints - including those without merit. Such responses by affected companies will also be needed to ward off future potential regulatory actions, because the CFPB intends to expand its sharing of consumer complaint information with other federal and state agencies that could possibly use such information to launch their own investigations. Moreover, the complaint database could also serve as a potential treasure trove of information for future consumer plaintiffs and will certainly be a frequent target of discovery in lawsuits.
Despite its many areas of concern for impacted companies, the complaint database may provide some benefit to those companies that utilize it properly. For example, companies can use the publically-available information for self-performance assessments because it will serve as a roadmap to what companies should expect to be examined for and what conduct may raise certain complaints. Such information may also provide the opportunity for companies to learn from the mistakes of their competitors, and assist in developing and adopting appropriate remedial measures without a formal regulatory action against them.
The use of unverified allegations and complaints was described by Director Cordray to be like a mosaic - implying that although a database consisting of unverified complaints “is certainly not perfect . . . you can still step back from it and see something new.” As a result, companies will need to actively monitor and respond to complaints in the database to help paint the picture they want the consumer to see.