CFPB’s publication of narratives is a Bad idea

July 17, 2014 at 8:59 am 2 comments

Those wacky kids at the CFPB are out it again. This time they want to go Wiki leaks with consumer complaints.  They are proposing that the CFPB’s consumer complaint database be expanded to include consumer narratives of complaints consumers agree to publicize. The allegedly offending company would be given the option of responding with its own competing narrative. According to the CFPB,  publishing narratives would “be impactful by making the complaint data personal (the powerful first person voice of the consumer talking about their experience), local (the ability for local stakeholders to highlight consumer experiences in their community), and empowering (by encouraging similarly situated consumers to speak up and be heard)” Let Freedom Ring!

Cut through the hyperbole and what you are left with is a debate about the value of empowerment of which I am proudly on the losing  side. Amazon just celebrated its twentieth anniversary and, in addition to providing us books and consumer goods with great service at a lower price, it gave us the consumer narrative review. I have never used one of the narratives to buy anything of value. Given the choice I will look at Consumer Reports before I buy a TV or read a book review written by an expert when deciding what to read next. To me these are more reliable than on someone so enamored or annoyed about a product or service that they actually took the time to sit down and write a review. The internet indeed can “empower” anyone to think they are an expert but that doesn’t make them one..

But I am a dinosaur . More and more people are as likely to get their news from Facebook as from the New York Times. The whole idea of an information hierarchy is viewed with suspicion. What is the big deal they say? After all if someone doesn’t find an internet review-or an association blog for that matter -credible than they can just ignore it. They can just ignore a complaint they find on the CFPB’s website.

The problem is that the mere fact the complaint is on a government database is going to be giving complaints much more credence than they deserve.  I was against the CFPB granting public access to its credit card complaint data base because I believe that the CFPB has an obligation to investigate complaints before throwing them out to the general public. Unsubstantiated allegations can do a lot more harm than good.   A Government website isn’t a free market place of ideas. Unlike those reviews on Amazon it has the government’s imprimatur.            

Not to worry says the CFPB; the accused company will always have the right to respond. But responding takes time and resources and the mere fact that a response is made to an allegation doesn’t mean that the damage is undone. For instance let’s say someone accuses XYZ credit union of discrimination after being denied a car loan. Publishing a response that the member was subject to the same race neutral criteria as everyone else won’t undue the seriousness of the allegation.

CFPB should pull the plug on this idea but it won’t. Here is a compromise: Lets recognize that not all financial institutions have the time to respond to a consumer narrative or the resources it takes to martial an effective PR campaign against serious but unsubstantiated allegations. Let’s establish a threshold for company size below which the narrative won’t be made public. It will still be sent to the CFPB which can investigate it; it will still be sent to the institution for a response and the consumer will still have all the legal rights and remedies he has today but smaller institutions won’t have to choose between letting an allegation fester or engaging in a public dispute with a disgruntled consumer at the same time they are trying to run a business. Here is a link to the proposal Institutions have 30 days after publication to respond.

http://files.consumerfinance.gov/f/201407_cfpb_proposed-policy_consumer-complaint-database.pdf

See you Monday

Entry filed under: General, Regulatory. Tags: , .

UPDATED: Busy day in DC..sort of Is Auto Lending The New Subprime?

2 Comments Add your own

  • 1. CFPB News | VP Compliance Services  |  August 12, 2014 at 5:55 pm

    […] July 17, 2014 at 8:59 am  Published July 17, 2014 New York’s state of mind – Credit Union Association of New York […]

    Reply
  • 2. CFPB | RAR  |  August 19, 2014 at 4:01 pm

    […] July 17, 2014 at 8:59 am  Published July 17, 2014 New York’s state of mind – Credit Union Association of New York […]

    Reply

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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