In honor of New York Fashion Week, in today's post, we look at one of the hottest fall trends coming out of the CFPB.
Over the last two months (here and here), we have reviewed and analyzed the CFPB's monthly consumer complaint snapshot. Each report focuses on trends in consumer complaints and highlights an industry area and geographic region. This week, the CFPB released its third monthly snapshot, specifically highlighting mortgage complaints and trends in Denver, Colorado.
The data in the most recent report is similar to the first two, so we are not going to break down the numbers in detail this month. Instead, we delve deeper into a trend that has emerged over the last three months.
Each of the first three reports shows that complaints about consumer loan products (including pawn loans, title loans, and installment loans) experienced the greatest percentage volume increase over the previous year. Looking at the most recent report, consumer loan complaints increased by 47% for the trailing three month period compared to the same time last year. In other words, the fastest growing area for consumer complaints is the consumer loan industry.
As we mentioned in last week's post, in our law practice, we are seeing this trend first-hand. Finance companies now, more than ever, are bombarded with complaint letters directly from consumers and complaints through the CFPB database. Complaints are becoming a major headache for the consumer finance industry.
Why is this the case? Is the consumer loan industry significantly worse this year than it was last year? Or, is the CFPB doing a better job of publicizing its consumer complaint database?
Reviewing a sampling of installment loan complaints gives interesting insight. As we have discussed, the CFPB now publishes complaint narratives, so we can see the substance of many of these complaints.
Consumers are making complaints against both bank and non-bank companies. Some of the complaints deal with a specific transaction (e.g., I was turned down for a loan) while others do not (e.g., I received an advertisement and the company's rates seem outlandish). Many of the complaints cover collection tactics or a company's refusal to settle.
We have written a lot about complaints lately. So has the CFPB. Put simply, complaints are a really big deal. All financial institutions – and especially consumer finance companies – need to have a good consumer complaint response protocol. It is an essential element in a compliance management system.
A good complaint response protocol will record the substance of each complaint and document how the company responds. This is important for two reasons. First, complaints are typically the earliest sign of systemic compliance problems – especially unfair, deceptive or abusive acts or practices (UDAAP). Second, in the event of an enforcement action or investigation (such as a Civil Investigative Demand), the CFPB will want to see documented evidence of how the company deals with consumer complaints.
After all, consumer loan complaints are trendy this fall.