Insights

Since the Consumer Financial Protection Bureau launched its Consumer Complaint Database in June 2012, the consumer financial services industry has closely tracked the database's evolution. In its short life, the database has expanded to publicly track data for more than 550,000 consumer complaints involving 10 different consumer financial products: bank account or service, credit card, credit reporting, debt collection, money transfer, mortgage, payday loan, prepaid card, student loan, and vehicle or other consumer loan. On March 19, 2015, the CFPB finalized a new policy allowing consumers submitting complaints through the database to elect to publish a narrative account of what happened. This latest development underscores the necessity of resolving customer complaints internally to reduce the risk of a customer submitting a complaint through the database.

From the beginning, the CFPB's database has included the following anonymous complaint data: product, sub-product, issue, sub-issue, state, zip code, date received, date sent to company, company name, company response, timeliness of response, and whether the consumer disputes the response. Before publishing this information, the CFPB verifies that the complaint is not duplicative of another complaint from the same consumer, that the complaint is not a whistleblower complaint, that the complaint involves a consumer financial product or service within the CFPB's jurisdiction, and that a commercial relationship exists between the consumer and the company. The CFPB does not validate the factual allegations of the complaints before publishing them in the database. Because the information in the database is public, easily searchable and not factually validated, industry has expressed legitimate concerns about the accuracy of complaint information and risk for reputational harm.

Under the new policy, the database will now allow consumers to also include an unstructured narrative describing the events leading to the complaint. The CFPB believes publishing consumer complaint narratives will enhance the utility of the database by providing context to complaints, spotlighting trends, and helping consumers make informed decisions. In order for the CFBP to publish a consumer's narrative, the consumer will need to "opt-in" by providing his or her informed consent. The CFPB will not publish any narratives for at least 90 days after the policy's publication in the Final Register.

If a consumer elects to publish a complaint narrative, the company will have the option to publish a response. The CFPB will publish the consumer narrative when the company provides its public-facing response, or after the company has had the complaints for 60 calendar days, whichever occurs first. Significantly, while the consumer's narrative is unstructured, the company is limited in its response to choosing a response from a set list of structured options. The CFPB adopted this structured response approach based on industry comments expressing concern that companies would be limited in their ability to provide meaningful public-facing unstructured responses. The CFPB has expressed its belief that the adopted approach will give companies sufficient flexibility in deciding to publish a response. However, the CFPB also noted its determination that, even absent an opportunity for public-facing company response, the benefits of publicly disclosing unstructured consumer complaint narrative data justify the disclosures.

The inclusion of unstructured consumer complaint narratives in the database, with or without a public-facing company response, magnifies industry concerns about the accuracy of complaint information and risk for reputational harm. While the CFPB will take new measures to protect consumer privacy by removing personal information from the complaint narratives, the CFPB will not take any additional steps to validate the factual allegations in a narrative. Because the database will include additional un-validated information about consumer complaints, the CFPB's new policy makes the database less data-driven and more akin to a consumer gripe site.

Thus, in light of this development, companies should be more concerned than ever about their customers submitting complaints through the database. The best way to address this concern is to head off customer complaints before they make it that far. By implementing a robust complaint management system to promptly and consistently address and resolve complaints internally, companies can reduce the risk of their customers submitting complaints through the database.

Catharine Andricos is a partner in the Washington, D.C., office of Hudson Cook, LLP. Catharine can be reached at 202-327-9706 or by email at candricos@hudco.com.