Response to Request for Information Regarding the Bureau’s Consumer Complaint and Consumer Inquiry Handling Process

We appreciate the opportunity to respond to the Bureau of Consumer Financial Protection’s (Bureau) request for information on its consumer complaint and consumer inquiry handling process. The Mercatus Center at George Mason University is dedicated to bridging the gap between academic ideas and real-world problems and to advancing knowledge about the effects of regulation on society. This comment, therefore, does not represent the views of any particular affected party or special interest group but is designed to assist the Bureau as it considers whether it should modify its consumer complaint and inquiry handling processes.

On July 23, 2014, the Bureau published to the Federal Register a notice of proposed policy statement with request for public comment proposing to expand the disclosure of information to the Consumer Complaint Database to include “unstructured consumer complaint narrative data.” The Mercatus Center at George Mason University submitted a comment in response to that notice. The suggestions made in that comment are still relevant and could help the Bureau as it assesses the handling of consumer complaints. For this reason we are resubmitting the previous letter. The previous letter is attached and is summarized below.

The Consumer Complaint Database Is a Solution in Search of a Problem

The Bureau has not identified the market failure that the Consumer Complaint Database is intended to address, and many private businesses already offer consumers avenues to provide—and offer the public access to view—both positive and negative feedback on a wide variety of products and services.

The Costs Outweigh the Benefits

Direct costs to the Bureau include the following:

•  Expending resources to verify an existing relationship between the complainant and the financial institution.
•  Expending resources to scrub comments and company responses of personally identifiable information in order to guard against the potential harm associated with reidentification of consumers.
• Responding to financial institutions about misleading or inaccurate complaints submitted by consumers.
• Publishing unverified consumer narratives, which exposes the Bureau to litigation risk and associated expense.  
• Rising costs, which are likely if the Bureau screens out baseless comments and if consumers look to the Bureau to intervene in the complaints they might otherwise make directly to the company at issue.

Indirect costs to the Bureau include the following:

• Endangering its reputation as a data-driven agency if the Bureau writes rules or brings enforcement actions based on the unverified, redacted complaints in the database that contains only negative anecdotes, which are unlikely to provide an accurate and representative reflection of a wider issue that would justify a rule or enforcement action. 
•  Undermining its ability to carry out its mission effectively—to ensure fairness, transparency, and competitiveness.

The potential for harms to financial institutions include the following:

•  Reputational harm is a serious cost, especially to small financial institutions.
• Anonymized complaints—which lack context—and the short time allowed for institutions to respond to complainants make it difficult to submit a meaningful and appropriate response.
• Pressure to address every complaint regardless of merit takes resources away from addressing complaints that have merit.

The Bureau Lacks Statutory Authority to Collect and Publish Consumer Narratives

While the Bureau does have the authority to collect complaints from consumers, to share related data with other state and federal agencies, and to report to Congress about the complaints it receives, the statute does not provide the Bureau with the authority to collect consumer narratives and to share consumer complaints with the public.

The Consumer Complaint Database as Currently Established Is Inconsistent with the Office of Management and Budget's Open Government Directive

•  Unverified consumer narratives fail to meet information quality standards (including objectivity, utility, and integrity) set forth in the Office of Management and Budget’s (OMB) Open Government Directive.
• The principles of open government described in the directive (transparency, participation, and collaboration) are intended to open the operations of government to public view, not the interactions between individuals and private companies.
• The data collection programs of other government agencies under the OMB directive, cited by the Bureau, do not collect consumer narratives.

Other Government Databases Cited by the Bureau Are Not Comparable

• Consumer complaints collected by the Federal Trade Commission and the Consumer Product Safety Commission, cited by the Bureau, differ considerably from the Bureau’s Consumer Complaint Database. 
  • The Federal Trade Commission releases consumer complaints it receives in response to Freedom of Information Act requests, not on a publicly accessible government website. 
  • The Consumer Product Safety Commission’s consumer complaint database was established in response to a statutory mandate, which includes procedural safeguards on database quality.

Conclusion

Consideration of the handling of consumer complaints announced in the Bureau’s request for information presents the agency with an opportunity to reassess the Consumer Complaint Database more thoroughly. The handling of consumer complaints requires the Bureau to consider the nature and impact of the information submitted to it and published by it (that is, unverified, anecdotal, exclusively negative feedback). For these reasons, the concerns raised in our comment submitted in response to the notice of proposed policy statement issued by the Bureau in 2014 remain relevant today.