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The Enduring Success of the CFPB at Three

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Three years ago today, the US Consumer Financial Protection Bureau opened its doors. It was a new government agency produced by the Dodd-Frank Act: part of Congress' attempt to address the rampant misconduct by banks, mortgage lenders, ratings agencies and other financial institutions that brought on the 2008 financial crisis and started the Great Recession. In its three years of existence, the CFPB has already forced credit card companies to return $1.5 billion to consumers that they deceived with fraudulent add on products; reformed mortgage lending rules to ensure borrowers have a genuine ability to repay their loans; and began to sue student loan companies for predatory practices, among many other accomplishments.

The agency also handles direct consumer complaints about abusive and deceptive financial products and services -- 400,000 of them so far. It's a highly impressive record for a fledging agency.

Now the CFPB wants to let consumers take their complaints public, going beyond the existing database of bare-bones information to enable consumers to provide a full narrative with context about the financial products or services they believe harmed them and how the problem has impacted their lives. Consumers can anonymously tell the whole story about the credit reporting company that refused to remove a blatant error from their report, the mortgage servicer that started a foreclosure despite a history of on-time payments, or the car dealership that marketed deceptive auto loans. The companies they are complaining against would have an opportunity post a public response that would appear alongside the complaint at the same time it is made public. Consumer participation is entirely voluntary, and "if consumers decide at any time that they would like to withdraw consent to publish their narratives, they would have that ability."

Advocates with Americans for Financial Reform (of which Demos is a member) have called for a public narrative data base for some time. A recent statement describes the benefits:

Public access to consumer complaints can help individuals make smart decisions upfront. Consumers will be able to draw their own conclusions from the data. Those who identify a company with disreputable lending practices or poor complaint resolution will be in a position to harness the power of the purse to protect themselves. Businesses with good products and customer service will benefit, and academics, researchers and others will be able to help the agency spot harmful trends and patterns before they become widespread.

At a field hearing unveiling the proposal, CFPB director Richard Cordray laid out additional reasons to make narratives public:

With these powerful stories made available to the public, companies would have more incentive to address potential shortcomings in their businesses that are harming consumers. The narratives should encourage companies to improve the overall quality of their products and compete more vigorously over good customer service. And because the database is updated daily, exposing problems early can help other consumers avoid similar problems before they become victims too. The market could react to problems as they occur, not years later. This could help spur competition based on consumer satisfaction, which has the potential to improve the functioning, transparency, and efficiency of the financial marketplace.

Who could be against that?

According to American Banker, "the banking industry is apoplectic" about the proposal. Bankers worry that complaints which a financial institution considers unfounded will be read by other consumers and harm their reputations. "A company may not want to provide the same level of detail as a consumer about how it responded" to complaints, notes American Banker. Meanwhile, a spokesperson for the American Bankers Association get to the heart of the dispute: A public database has the potential to change the balance of power between financial institutions and their consumers. "If I'm a company, I'm at a disadvantage. The consumer can be anonymous where I certainly cannot." Yet putting more power into the hands of consumers that are often taken advantage of by banks, lenders, credit reporting giants, and other purveyors of financial services is precisely what the CFPB was established to do.

The enraged opposition of the American Bankers Association reminds us that the CFPB was always an embattled agency. In 2009, the Chamber of Commerce's promised to "spend whatever it takes" to stop the CFPB from being established. When the agency was founded anyway, Republicans prevented Elizabeth Warren, originator of the agency, from ever becoming its official leader and then carried on a long refusal to confirm alternative director Richard Cordray, despite universal recognition that he was highly qualified and competent. This year, efforts to undermine the CFPB continue with the House passing legislation to gut the agency. While voters continue to strongly and consistently support the CFPB and its mission, empowering financial consumers will always be unpopular among those seeking to make a buck off their vulnerability and lack of information.

It's on that note that we wish a happy third birthday to the CFPB. They haven't managed to kill it yet. And the opportunity to publicly voice complaints about financial products and services is just its latest accomplishment worth celebrating.

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