Peering Behind the Curtain: Consumer Protection Agency Proposes Public Credit Card Complaint Database
In December, the Consumer Financial Protection Bureau (CFPB) proposed a public online database of consumer complaints about credit cards. The database would empower consumer choices on credit cards and position the agency as a leader in government transparency. However, the financial industry opposes disclosure and may use its considerable political influence in an effort to block public access to the information.
The Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, created the CFPB and gave it authority to address consumers' credit card complaints. Because it expects significant public interest in the complaints it receives, the CFPB has proposed to proactively disclose them online.
In July 2011, the CFPB began accepting consumers' complaints about credit cards. The complaint form contains several short, non-narrative fields for single pieces of information such as the consumer's name, the credit card issuer involved, and the type of complaint (e.g. interest rate or collection practices). The form also includes two longer narrative fields for the consumer to describe the complaint and his or her desired resolution.
Under the current process, upon receiving a complaint, the CFPB forwards the information to the company that issued the credit card. The company handles the complaint as it deems appropriate and sends the CFPB a description of the resolution. The CFPB then contacts the consumer to ask whether he or she found the resolution satisfactory. If the issuer does not respond, or if the consumer contests the resolution, the CFPB can investigate further. Currently, none of the complaint information is shared with the public.
The CFPB received more than 5,000 complaints from its opening in July 2011 through October 2011, according to an agency report. That total includes complaints submitted directly to the CFPB by consumers, as well as those referred from other regulators.
Under the proposed policy, the CFPB would give companies one month to inform the agency if they have been incorrectly identified as the credit card issuers. After that period, the CFPB would disclose most of the non-narrative fields in an online database. Fields containing personal information, such as the consumer's name or address, would not be included in the database to protect the privacy of consumers who file complaints. The public would be able to search and download the disclosed information from the database.
Narrative fields would initially be excluded from the database because CFPB is concerned that they might contain private information. According to the proposal, the CFPB intends to study the resources that would be required to review and redact any such information before posting those fields. The narrative fields are important because they more fully explain the specific activities that are drawing complaints and the context in which they occurred, as well as the companies’ responses to the complaints. These fields will allow the public to better evaluate complaints and responses.
A credit card complaint database would be a boon to consumers. Credit card terms and agreements can be very complicated and confusing. People thinking about obtaining a credit card would be able to search the CFPB database to see if others have complained about the company they're considering and what type of complaints were filed. A consumer who has been frustrated by repeated rate hikes, for instance, might opt to avoid credit card companies with multiple complaints about their interest rates.
Online disclosure could also boost the use and usefulness of the database. More consumers might submit complaints if they know that they will be seen by the public. Similarly, as awareness of the database grows, more consumers may make use of it to resolve their issues with credit card companies. A high public profile for the complaint database should eventually bring enough attention to abusive practices that credit card companies avoid them and respond more quickly to consumers' complaints to prevent a poor showing in the CFPB database.
The CFPB has deliberately worked to set a high standard for transparency since its start, declaring that "transparency is at the core of our agenda, and it is a key part of how we operate." The agency publishes its leader's calendar, and it extensively solicited public participation when redesigning disclosure forms for financial products to ensure they would be clearer to consumers. Establishing the credit card complaint database would further CFPB's efforts to encourage more transparency and disclosure within the financial sector.
Credit card companies are unhappy with CFPB's proposal. The National Association of Federal Credit Unions argued in 2011 that "consumer complaints should not be publicly disclosed in any way, shape or form." Other industry groups, including the American Bankers Association and the Financial Services Roundtable, have also sought to limit the public's access to the complaint information.
Consumer advocates have voiced strong support for public access to the complaints. In May 2011, 20 organizations, including OMB Watch, sent a letter to the CFPB calling for the database to be publicly accessible. In August, 11 members of Congress sent the agency a letter supporting public access, noting that "we believe that public complaint information will help other consumers make better financial decisions up front."
"The ability to check [a] database for consumer complaints against a financial services provider before signing on the dotted line for a mortgage or credit card could potentially save people a lot of misery by helping them avoid problem providers," commented Claes Bell, a contributor to Bankrate.com.
As a member of the public, you have a chance to weigh in on this issue, too. On Jan. 23, OMB Watch issued an action alert encouraging individual consumers to voice their support for public access to the proposed database. The public comment period closes next Monday, Jan. 30.
Models for Transparency and Empowerment
Two other federal agencies currently operate public complaints databases. The National Highway Traffic Safety Administration (NHTSA), an agency of the U.S. Department of Transportation, provides online access to a searchable database of safety complaints about cars and automotive equipment. The Consumer Product Safety Commission (CPSC) launched its consumer product safety database, SaferProducts.gov, in March 2011. The CFPB's proposed database of credit card complaints would provide a third federal model for how to strengthen transparency and empower consumers.