Why it matters
Already unhappy with the Consumer Financial Protection Bureau's (CFPB) creation of a public database of complaints featuring consumer narratives, financial institutions now have even more to worry about: monthly "snapshots" issued by the agency about the complaints. The CFPB announced that it will issue monthly reports intended to "highlight key trends" in consumer complaints submitted to the Bureau, with data on complaint volume and company performance, including a list of the companies the agency received the most complaints about and the most complained-about products. In addition to sharing statistics each month, the agency said it will focus on a particular product and geographic location. For the July snapshot, the CFPB took a closer look at debt collection complaints and the complaints filed by consumers in Milwaukee, Wisconsin. In the debt collection ecosystem, the Bureau said consumers complain about the collection of debts not owed and the communication tactics used by collectors; as for Milwaukee, the CFPB reported that the city generates a high number of debt collection complaints and lower mortgage and credit reporting complaints than the national average. Although debt collection was an obvious first target, the CFPB in future snapshots is likely to focus on more mainstream products and services, including home loans, credit cards and add-on products.
The Consumer Financial Protection Bureau (CFPB) began accepting consumer complaints in July 2011, initially limited to credit card products. Since then, however, the Bureau has continued to add new categories of products, including mortgages, bank accounts and services, private student loans, auto and other consumer loans, credit reporting, debt collection payday loans, money transfers and, most recently, prepaid cards and nonbank products. As of July 1, 2015, the Bureau has handled 650,700 complaints.
Earlier this year, the Bureau introduced the addition of narratives to the Consumer Complaint Database, allowing consumers to publish details about their problem with a financial institution. While the CFPB argued that the "natural extension" of the complaint process would spur competition among businesses, the industry expressed concern about reputational damage resulting from the disclosure of complaints that were unverified.
Expanding the potential negative publicity for financial institutions: the addition of monthly "snapshots" released by the agency.
"Consumer complaints are the CFPB's compass and play a central role in everything we do. They help us identify and prioritize problems for potential action," director Richard Cordray said in a statement. "These monthly reports will enable us to share that data with the public more regularly, so that everyone can benefit from the information."
The monthly reports will reveal complaint volume, product trends, state-specific information, and spotlight one consumer product and one geographic location for a deep dive, the CFPB said. For the first monthly report, the agency reviewed data as of July 1, 2015.
Of the 23,400 complaints handled by the Bureau, more than 7,400 of them—or roughly 32 percent—were about debt collection, making it the most complained-about category, followed by mortgages (upwards of 4,700 complaints) and credit reporting, with about 4,300 complaints. The CFPB noted that consumer loan complaints showed the greatest percentage increase, nearly doubling over the course of a year from an average of 660 complaints to 1,020 complaints per month.
The number of complaints filed in each state fluctuated, with Hawaii, West Virginia, and Maine experiencing an increase in volume (up 41, 38, and 38 percent, respectively), while South Dakota, Iowa, and Rhode Island trended downward in complaints, at a rate of 40, 14, and 12 percent, respectively.
Each snapshot will also feature a list of the most complained-about companies. For this category, the Bureau currently uses a three-month rolling average of complaints, with data lagging behind the other complaint data in the report to reflect the 60-day period given to companies to respond to complaints. The CFPB questioned how to "normalize" complaint data for the size and volume of larger businesses, issuing a Request for Information asking for public input on how to achieve this goal, with a comment period open until August 31.
Turning to the monthly product spotlight, the Bureau focused on debt collection. After handling more than 163,000 debt collection complaints, the CFPB found the most common reason for grievances is the collection of debts not owed, followed by the communication tactics used by collectors (being contacted too frequently or at inconvenient times of the day, for example).
For the geographic component of its spotlight, the agency reviewed data from Milwaukee, Wisconsin. "Highlighting one particular region or location can spur people into creating their own localized reports and seeing what consumers in their own areas are saying about the financial marketplace," the CFPB said. Of the 650,700 complaints handled by the Bureau over the last four years, just 1 percent—or about 7,700—were filed by consumers in Wisconsin. Of those, 34 percent came from consumers in the Milwaukee metro area.
Debt collection again ranked first as the most common complaint from Milwaukee, although consumers in the metro area submit fewer mortgage complaints (26 percent versus 28 percent), the CFPB reported, and fewer credit reporting complaints (12 percent versus 15 percent), than the national average.
To read the CFPB's Monthly Complaint Report for July 2015, click here.
To comment on the Bureau's Request for Information to normalize company data, click here.