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CFPB Releases Policy Statement on Consumer Complaint Narratives, Also Issues RFI
On March 19, the CFPB announced the publication of its Final Policy Statement on disclosure of complaint narratives. The Final Policy allows consumers who file complaints with the CFPB to “opt-in” to have the actual narrative of the complaint disclosed in the CFPB’s consumer complaint database, with private information scrubbed out of the narrative. Until now, the database contained only general information. The company identified in the complaint will have the option, for a 180 day period, to select from a pre-set list of structured responses to accompany the consumer complaint narrative. Further, the CFPB will disclose the consumer narrative when the company provides its public-facing response or after the company has been in receipt of the complaint for 60 calendar days, whichever occurs first. On the same day, the CFPB issued a Request For Information regarding the potential collection, identification, and sharing of consumer feedback specific to positive interactions with banks and non-banks in conjunction with the complaint handling process.
CFPB Details Complaints About Reverse Mortgages
On February 9, the CFPB released a report detailing complaints associated with reverse mortgages. According to the report, a high volume of complaints concern requests for changes to loan terms, issues related to loan servicing, and foreclosure activities. The report covers approximately 1,200 complaints received from December 1, 2011 through December 31, 2014. The report also notes that “[s]ince the CFPB began accepting reverse mortgage complaints in December, 2011, HUD has issued more than 10 policy changes to the HECM [Home Equity Conversion Mortgage] program.” One of these policy changes, effective after March 2, 2015, will require lenders to conduct financial assessments of prospective borrowers prior to approving the loan. The change is expected to decrease defaults due to non-payment of real estate taxes and insurance for loans originated after March 2.
CFPB Releases Report Highlighting Debt Collection Complaints Among Older Americans
On November 5, the CFPB announced the release of a report highlighting debt collection issues among older Americans. The report analyzed nearly 8,700 complaints made by older consumers from July 2013 to September 2014. The most common debt collection complaints noted in the report relate to medical debt, debts of deceased family members, and threats to garnish older American’s federal benefits. Notably, of the complaints submitted, 17 percent were related to credit cards and 5 percent to payday loans.
CFPB Announces Two Actions Related To Virtual Currencies
On August 11, the Consumer Financial Protection Bureau (the CFPB or Bureau) issued a "consumer advisory" concerning virtual currency and also announced that it would begin accepting consumer complaints about virtual currency or virtual currency companies. These actions are the consumer agency’s first foray into virtual currencies, and they follow a recent GAO report that recommended the CFPB play a larger role in the development of federal virtual currency policy.
Consumer Advisory
The advisory describes virtual currencies, briefly notes their potential for innovation, and cautions consumers about the numerous and significant risks the CFPB believes virtual currencies present for consumers. Specifically, the CFPB cautions virtual currency consumers that there are risks related to hackers, fewer consumer protections, costs, and scams. The advisory elaborates on the risks for each stage of a virtual currency transaction: purchasing, storing, or transacting in virtual currencies. For example:
- Purchasing: Warns consumers purchasing virtual currencies to beware of cost fluctuations and potential scams.
- Storage: Expresses concerns about data security risks and the lack of federal insurance for virtual currencies.
- Transactions: Advises consumers transacting in virtual currencies to read their agreement with their wallet provider and be mindful of the risks of linking their digital wallet account to their bank account or payment card.
Consumer Complaints
The Bureau announced that it is working on a new form for virtual currency complaints, but in the meantime will accept such complaints using its money transfer complaints form.
Virtual currency complaints will be subject to the CFPB’s standard complaint process. As described in the CFPB’s most recent consumer complaint report, once a complaint is submitted, the CFPB sends the complaint to the appropriate company and works with the company to get a response within 15 calendar days. Each complaint is published in a public database after the company responds to the complaint or after the company has had the complaint for 15 days, whichever comes first. If a company can demonstrate within the 15-day period that it has been wrongly identified, no data for that complaint will be posted unless and until the correct company is identified. The CFPB states that if it receives a complaint about an issue outside its jurisdiction, the Bureau will forward the complaint to the appropriate federal or state regulator.
Jurisdictional issues notwithstanding, the Bureau promises to use all virtual currency complaints it receives to better understand the virtual currency market and its effect on consumers. The CFPB also asserts that it will use complaints to help enforce federal consumer financial laws and, if appropriate, take consumer protection policy steps. The Bureau has demonstrated through its examination and enforcement activity in other areas that consumer complaints play a significant role in the Bureau’s risk-based approach to supervision and enforcement. Moreover, the CFPB recently proposed to publish consumer complaint narratives with other complaint data already made public, noting in its proposal that by increasing consumer complaint volume, publication of narratives would benefit “the many Bureau functions that rely, in part, on complaint data to perform their respective missions including the Offices of Supervision, Enforcement, and Fair Lending, Consumer Education and Engagement, and Research, Markets, and Rulemaking."
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Our Digital Commerce & Payments Practice group is experienced in regulatory matters arising at the intersection of digital payments, financial institutions, and technology providers, and is uniquely positioned to assist virtual currency and related companies whose business brings them into contact with the CFPB.
Our Consumer Financial Protection Bureau group has advised clients in dozens of CFPB examinations, investigations, and enforcement actions and frequently represents clients in connection with CFPB supervision preparedness and matters pertaining to compliance with CFPB rulemakings and regulatory expectations, including consumer complaint issues.
Please contact one of the attorneys listed below if you would like to discuss the CFPB advisory or complaints announcement.
- Manley Williams, (202) 349-8060
CFPB Extends Deadline To Comment On Complaint Narrative Proposal
On July 29, the CFPB announced that it extended 30 days to September 22, 2014 the deadline for submitting comments on its proposal to publish consumer complaint narratives. In doing so, the CFPB again defended the proposal as consistent with practices at other government agencies and as an extension of its efforts to give voice to consumers’ concerns. The extension followed a request from a group of industry trade associations that noted the numerous legal and practical issues raised by the proposal.
SEC Approves FINRA Rule To Prohibit Conditioning Customer Settlements On Expungement
On July 23, FINRA announced that the SEC approved a new rule prohibiting FINRA-supervised firms and registered representatives from conditioning settlement of a customer dispute on—or otherwise compensating a customer for—the customer's agreement to consent to, or not to oppose, the firm's or representative's request to expunge such information from the Central Registration Depository (CRD) system. The CRD system is an online registration and licensing system for the securities industry, which contains information regarding members and registered representatives, such as personal information, registration, and employment history, as well as disclosure information including criminal matters, regulatory and disciplinary actions, civil judicial actions, and information relating to customer complaints and disputes. The information FINRA makes public through BrokerCheck is derived from CRD. Brokers who wish to have a customer dispute removed from the CRD system and, thereby, from BrokerCheck, must obtain a court order confirming an arbitration award recommending expungement relief. FINRA will announce the effective date of the new rule in a regulatory notice to be published shortly.
CFPB Expands Complaint Collection To Include Prepaid Cards, Additional Nonbank Products And Services
On July 21, the CFPB announced that it is now accepting consumer complaints regarding (i) prepaid products, including gift cards, benefit cards, and general purpose reloadable cards; (ii) credit repair services and debt settlement services; and (iii) pawn and title loans. The CFPB’s decision to field prepaid card complaints comes as the agency prepares a proposed rule related to those products. The press release states that the CFPB is planning to initiate the prepaid card rulemaking “in the coming months.” Director Cordray recently stated the rule would be proposed at the “end of the summer.”
The CFPB provides the following options for consumers to identify the nature of their complaints:
- Prepaid Cards - (i) managing, opening, or closing your account; (ii) fees; (iii) unauthorized transactions or other transaction issues; (iv) advertising, marketing or disclosures; (v) adding money; (vi) overdraft, savings or rewards features; or (vii) fraud or scam.
- Credit Repair and Debt Settlement - (i) advertising and marketing; (ii) customer service/customer relations; (iii) disclosures; (iv) excessive fees; (v) unexpected/other fees; (vi) incorrect exchange rate; (vii) lost or stolen money order; (viii) lost or stolen check; or (ix) fraud or scam.
- Pawn and Title Loans – (i) charged fees or interest I didn't expect; (ii) can't stop lender from charging my bank account; (iii) received a loan I didn't apply for; (iv) applied for a loan, but didn't receive money; (v) lender charged my bank account on wrong day or for wrong amount; (vi) lender didn't credit payment to my account; (vii) can't contact lender; (viii) lender sold the property / repossessed or sold the vehicle; or (ix) lender damaged or destroyed property / vehicle.
As with all of the CFPB’s complaint categories, consumers also have an opportunity to describe their complaints regarding these new products and services in narrative form. Last week, the CFPB proposed a policy change under which it would publish those consumer complaint narratives, a move it hopes will increase the number of complaints the CFPB fields. At the same time the CFPB released its latest “snapshot” of consumer complaints, which provides an overview of the complaint process and summary analyses of complaints handled by the CFPB since July 21, 2011.
Education Department OIG Reports On Borrower Complaints Against Collection Agencies
On July 15, the Department of Education’s Office of Inspector General (OIG) published a report on its audit of the Department’s Federal Student Aid (FSA) office, which revealed that the FSA has failed to effectively: (i) monitor borrower complaints against private collection agencies (PCAs) and ensure that corrective action is taken; (ii) ensure PCAs are abiding by federal debt collection laws and the related terms of their contracts; and (iii) consider borrower complaints in its evaluation and compensation of PCAs. The audit covered the period October 1, 2009, through September 30, 2012. The OIG recommended that FSA, among other things, (i) enforce the contract requirement that PCAs submit all complaints to FSA and establish procedures that include ensuring PCAs take corrective action; and (ii) require relevant staff to monitor, review, and evaluate the PCA deliverables and reconcile the management/fiscal reports with recorded complaints. The FSA concurred with the findings and most of the recommendations and stated that it has taken a number of steps over the past two years to strengthen its PCA oversight efforts. The FSA further stated that it has planned additional improvements that will further enhance its ability to effectively oversee PCA’s interactions with defaulted borrowers.
CFPB Proposes Publishing Consumer Complaint Narratives
Yesterday, in advance of a field hearing being held today on consumer complaints, the CFPB released a proposal to expand the amount of information that will be included in the Consumer Complaint Database to include certain consumer complaint narratives, along with any response to the complaint submitted by the identified financial institution. The CFPB already collects the narrative information as part of the complaint intake process, but to date has not published narratives over privacy concerns it believes it now has addressed. The CFPB describes the proposed change as a natural extension of a policy designed to “provide consumers with timely and understandable information about consumer financial products and services, and improve the functioning, transparency, and efficiency of markets for such products and services.” The CFPB will accept comments on the proposal for 30 days following publication in the Federal Register.
The Proposal
Under the proposed policy, the CFPB would seek consumer consent for publication of the complaint narrative, and would “scrub” personal information from each such narrative. The CFPB would also allow the identified company to submit a response to the narrative to be published. A company that wishes to publish a response would be instructed not to provide direct identifying information in its public-facing response, and the CFPB would take reasonable steps to remove personal information from the response to minimize the risk of re-identification.
Perceived Benefits
The CFPB has been considering publishing complaint narratives for some time, and has faced pressure from consumer advocates seeking publication of narratives. Indeed, the CFPB acknowledges this influence in the proposal, stating that in response to a prior proposed complaint policy statement, “consumer, civil rights, and open government groups supported disclosure on the grounds that disclosing narratives would provide consumers with more useful information on which to base financial decisions and would allow reviewers to assess the validity of the complaints.” In addition, during a March 2013 field hearing on consumer complaints that corresponded with a major expansion of the complaint database, consumer groups repeatedly stressed the need for more specific complaint data, including the full narrative description of complaints submitted by consumers.
The CFPB now believes that with privacy concerns addressed, the benefits will outweigh risks associated with publishing the complaints. To assess the benefits and risks of disclosing narratives, the CFPB focused on the direct and indirect benefits to consumers, the benefit to the CFPB, and the advancement of open government principles. The CFPB identifies the following as potential benefits:
- allowing consumers to share specific stories may expand the number of complaints submitted and enhance the CFPB’s consumer response function;
- additional information will increase use of the complaint database by advocates, academics, and the press; and
- consumer finance markets will benefit as the narratives influence companies to adjust prices to match product quality and improve customer service to remain competitive
The CFPB has demonstrated through its examination and enforcement activity that consumer complaints play a major role in the Bureau’s risk-based approach to supervision and enforcement, and the proposal admits that by increasing consumer complaint volume, publication of narratives would benefit “the many Bureau functions that rely, in part, on complaint data to perform their respective missions including the Offices of Supervision, Enforcement, and Fair Lending, Consumer Education and Engagement, and Research, Markets, and Rulemaking.”
Industry Concerns
Although it acknowledges that “trade groups and industry commenters nearly uniformly opposed disclosure of consumer complaint narratives,” the CFPB’s proposal makes only a superficial attempt to address those concerns. For example, the CFPB currently takes no steps to verify the accuracy of a complaint before it publishes the complaint, and the policy proposal does not propose to alter that process. The proposal admits that there is a risk that financial institutions could incur “intangible reputational damage” as a result of the dissemination of factually incorrect complaint narratives. It also briefly mentions the lost opportunity cost of consumers that may have otherwise done business with a particular company but for the (mis)information in a complaint narrative, stating that the company and the consumer that lose business would be disserved. However, the CFPB rationalizes these costs, asserting that “the marketplace of ideas would be able to determine what the data shows.”
Moreover, the CFPB asserts that its proposal to publicly release company responses to narratives mitigates this risk by assuring that, to the extent there are factual disputes, both sides of the dispute will be made public. The CFPB’s press release states that “in most cases, this response would appear at the same time as the consumer’s narrative so that reviewers can see both sides concurrently.” However, the proposal does not discuss the timing of publication of narratives, and it remains unclear exactly when consumer and company narratives would be published. Under its current practice, the CFPB publishes a consumer complaint before it receives a response from the company. If narratives and responses are not published concurrently, potentially factually incorrect information could be in the public domain before a company has an opportunity to respond. Regardless of timing, financial institutions may be hamstrung in defending themselves in this forum given, among other things, obligations to maintain the confidentiality of customer information.
Request for Comments
The CFPB asks stakeholders not to submit comments on the complaint database generally, or current data fields. The CFPB seeks comments in response to the following specific issues:
- The need for any additional information to help inform consumer consent, the precise language to most effectively communicate with the consumer, at what point in the complaint process (at complaint submission or later in the complaint handling process) and where on the Bureau website the information in support of the opt-in consent should be displayed.
- Whether company responses should be distinct and in addition to the response companies send directly to the consumer.
- The standard and methodology for removing customer information, including suggestions of appropriate analogues to the HIPAA identifiers in the consumer financial domain, and any other identifiers which could reasonably be used to identify individuals.
CFPB Issues Annual Consumer Complaint Report
On March 31 the CFPB published its Consumer Response Annual Report, providing a review of the CFPB’s complaint process and a description of complaints received during January 1 through December 31, 2013. According to the report the Bureau received approximately 163,700 complaints in 2013. Mortgage complaints outpaced all others (37%), followed by complaints regarding debt collection (19%), bank accounts (12%), and credit cards (10%). Complaints related to consumer loans, student loans, payday loans, money transfers, and “other” each comprised 3% or less of the total. The report also breaks down the types of complaints for each category and summarizes companies’ responses. The majority of closed complaints for all categories were resolved with an explanation by the company, i.e. without monetary or other relief, and companies responded to complaints in a timely fashion 99% of the time, or better. The report also stated that the CFPB “continues to evaluate, among other things, the release of consumer narratives, the potential for normalization of the data to make comparisons easier, and the expansion of functionality to improve user experience.”