We have written a lot about consumer complaints lately. Of course, the CFPB has written a lot about consumer complaints lately. Put simply, consumer complaints are a big deal for the CFPB.
Last month, the CFPB began publishing consumer narratives in its online complaint database (which we discussed in detail here). And last week, the CFPB took another step in utilizing complaint data by publishing its first-ever monthly complaint snapshot.
The CFPB will begin publishing monthly reports analyzing complaints, specifically with respect to company performance, complaint volume, state and local information and trends. Each month’s report will highlight an industry area and a geographic area. The first report looks at debt collection complaints and consumer complaints in Milwaukee, Wisconsin.
The CFPB press release promises, “The reports will provide insight for the public into the hundreds of thousands of consumer complaints on financial products and services handled by the CFPB.”
Let’s take a look at the snapshot:
- Over the past four years, the CFPB has logged over 650,000 complaints. About 25,000 of those are in the consumer loan category.
- In June 2015, the CFPB handled approximately 23,400 complaints. The top three areas were debt collection (over 7,400 complaints), mortgages (over 4,700 complaints), and credit reporting (over 4,300 complaints). Debt collection leads for the 22nd consecutive month. The consumer loan category is in the middle-of-the-pack with about 1,100 complaints in June. However, the average monthly volume of consumer loan complaints increased 55 percent over last year. That is, by far, the largest proportional increase of all industry areas.
- The report actually highlights—in its words—the “top 10 most-complained-about companies” for February through April of this year. Congratulations Equifax, Experian and Bank of America. You top the CFPB’s inaugural list. The report also lists the most-complained-about companies in the monthly featured area—debt collection.
- The report gives an interesting geographic breakdown of complaints. Looking at sheer volume, most complaints, unsurprisingly, come from California, Texas, Florida and New York (together accounting for about 38 percent of all complaints). Alabama, my home state, contributed about 7,000 complaints overall. But looking at trends, Hawaii, West Virginia and Maine have the largest percentage increase over last year. Alabama is thirteenth on that list with a 15 percent increase over last year—trending the wrong way.
- Each monthly report will spotlight a geographic area to, in the words of the CFPB, “spur people into creating their own localized reports and seeing what consumers in their own areas are saying about the financial marketplace.” This month, the CFPB focused on Milwaukee.
So, what do these monthly reports mean for the consumer finance industry? In my view, there are positives and negatives.
First, the good: The primary function of the CFPB is to protect consumers from harm, and complaints are usually the first sign of a problem. Providing a summary of the data can help companies address problems. Last week, CFPB Director Richard Cordray noted, “The reports provide a high-level snapshot of trends and analyses found in the consumer complaints we receive. They can be used to inform the public, the industry, researchers, reporters, and everyone interested in the financial marketplace.” Generally, information is a good thing.
And, now the bad: Publishing lists of ‘most-complained-about companies’ is dangerous. For reasons we have discussed in previous posts (here and here), unverified, unsubstantiated and unproven complaint data should be taken with a grain of salt. Albeit the lists are based on pure volume and there are explanations in the report; but, in my view, compiling a list of names is unnecessary and irresponsible.
Are these lists going to become the ‘CFPB’s 10 Most Wanted’? Possibly so. Director Cordray explained, “Notably, these monthly reports will include information about a new category in the lexicon of consumer finance, which we call the ‘most-complained-about companies.’”
A new category in the lexicon of consumer finance? It certainly sounds like we have moved beyond just looking at raw data. Equifax, Experian and Bank of America, do you agree?