Acting Consumer Financial Protection Bureau Director Mick Mulvaney hasn’t said yet whether he will keep public consumer complaints about banks, credit unions and other financial firms, but a former Ohio attorney general is gearing up just in case.
Marc Dann, now a lawyer in private practice who represents mortgage borrowers in foreclosure, said he plans to file monthly Freedom of Information Act requests seeking access to consumer complaints filed with the agency, and post all of the information he receives on his law firm’s website.
Moreover, if Mulvaney revokes the public database or refuses to give him the underlying data, Dann said he will sue.
“If Mulvaney doesn’t give us the information voluntarily, we’re prepared to go to court and force him to hand it over,” Dann said Wednesday in an interview with American Banker. “We’re going to do everything in our power to blow up his plan to keep consumers and regulators in the dark.”
Dann is already publicizing a copy of the CFPB consumer complaint database on his website, and has also posted a Top 10 list under the heading “Scoundrels, Scams, and Cheats Hall of Shame,” that he claims are “the companies behind many of the worst consumer frauds and scams ever perpetrated on the American public.”
He plans to feature “a consumer horror story of the month,” while also providing a link to the CFPB’s complaint form.
Dann was Ohio’s attorney general from 2007 to 2008. He resigned after several aides were fired for sexual harassment and he admitted to having an affair with a staff member.
The Dodd-Frank Act mandated that the CFPB maintain a consumer complaint database, but the statute did not say specifically that those complaints must be made public. Former CFPB Director Richard Cordray, another former Ohio attorney general who is now running for governor of the state, opted to allow public access to the complaints, even including narratives from customers describing their experiences. That sparked outrage from financial firms, which noted that the claims are not verified by the CFPB.
Mulvaney has sought public comment on whether to continue allowing complaints to be public, but suggested recently that he didn’t like the idea, calling the database “essentially a taxpayer-funded Yelp for financial institutions.”
He has questioned the usefulness of the searchable public database, which holds 1.2 million consumer complaints, but has said that no decision has been made on whether to shut down public access.
“The real question is: How does it help consumers to make it public?” Mulvaney asked at a public forum in Topeka, Kan., last week. “We’re in the middle of that analysis.”
Since the database was first started in 2011, banks and financial companies have complained that they can be unfairly maligned by consumers whose grievances have not been vetted for accuracy.
The CFPB also has been criticized in the past based on findings that the database was riddled with errors, American Banker found. For example, a single complaint can be counted dozens of times depending on each company named, or if the complaint gets referred to another agency.
“By their own admission, there is a very high percentage of complaints that were not well-founded,” said Joe Lynyak, a partner at Dorsey & Whitney. “So do you end up disparaging companies for doing something that they didn’t do wrong? The question of whether or not it should be public should be based on some confirmation that the complaints are valid.”
Banks have responded quickly to consumer complaints because of the threat that the CFPB would spot patterns or identify problems that deserve scrutiny.
Whole industries, such as payday lenders, have cited the complaint database to argue that the CFPB should not be cracking down on small-dollar lenders, which receive roughly 2% of all complaints, but rather should focus on debt collectors and credit bureaus. Last month, the CFPB released its monthly complaint data, which showed found 37% of the 30,300 consumer complaints received in March were about credit or consumer reporting. Debt collection accounted for 27% of complaints. Mortgages were the most complained-about financial product with 10% of complaints.
Some experts say the CFPB’s consumer complaint database is one of the most beneficial tools that the agency has in helping consumers, since roughly 97% of all complaints get resolved.
“Like it or hate it, the database has been the best thing for consumers since sliced bread because it works,” said a consumer finance attorney, who declined to be identified by name for fear of a backlash by the CFPB and banks. “The question is whether that line of success will be impaired without public disclosure. The database is only effective if the bureau is a strong enforcer.”
The CFPB under Cordray used the database to determine whether to investigate companies for enforcement actions. Since the bureau has only filed two enforcement actions in the past six months, lawyers are questioning whether lax enforcement by the bureau, combined with potentially taking the database public, will leave consumers without much recourse.
“The CFPB’s consumer complaint database is not only useful to lawyers, but also to consumers, scholars, the media, and ethical businesses who want to play by the rules,” Dann said. “The database is especially important to borrowers who have been in default because those loans change hands from servicer to servicer.”