The Trump administration may shut down a federal database of consumer complaints about the financial-services industry. Banks think that’s a swell idea.
The attorneys general of California and more than a dozen other states think it’s a foolish move.
Want to guess which way President Trump will go on this?
“In what world does it make sense to give consumers less critical information and transparency about a product or service they may purchase?” asked California Atty. Gen. Xavier Becerra. “What is the Trump administration trying to hide?”
The Trump administration wants to spare its business buddies the annoyance of customers revealing unfair, unethical and unscrupulous practices.
If, as they say, sunlight is the best disinfectant, then darkness is the perfect place to grow the mold and mildew of corporate chicanery.
The comment period closed this week for possible changes to the Consumer Financial Protection Bureau’s complaint system. It’s already clear which way the bureau is leaning.
Mick Mulvaney, Trump’s budget chief who’s serving as interim head of the CFPB, said at a banking industry conference last month that there’s nothing in the law that created the watchdog agency requiring a complaint database.
“I don’t see anything in here that I have to run a Yelp for financial services sponsored by the federal government,” he said. “I don’t see anything in here that says that I have to make all of those public.”
A bureau representative declined to elaborate on his remarks.
Before the business-lovin’ Trump gang rode into town, the complaint database was a routine and well-regarded part of the CFPB’s operations.
It went live in 2012 as a way for consumers to share negative experiences with financial firms and alert officials to potentially troublesome practices. The searchable database now contains more than a million listings.
Businesses say the database is unfair because it allows disgruntled customers to publicly besmirch their good name.
In a letter to Mulvaney this week, the American Bankers Assn. said allowing public complaints to be made available to the public “has eroded customer privacy, impaired the confidential nature of the exchange between customer and banker, compromised the supervisory process, and introduced unreliable and misleading information into the market.”
Of course, the database has done none of those things.
Customer privacy isn’t an issue because customers themselves are posting the complaints. They’re likely taking this step because “the exchange between customer and banker” has produced an unsatisfactory result.
Is information in the database unreliable and misleading? Unlikely. The way it works is that when a complaint is filed, it first goes to the company involved so it can review and respond to the matter. The company has 15 days to submit a response before a complaint is posted online.
The CFPB says 97% of complaints get timely responses from companies.
The database is a valuable resource for consumers because it allows people to search for specific companies before doing business with them. Numerous complaints can serve as a red flag. Reasonable responses from a business can demonstrate integrity.
In their own letter this week to the CFPB, the attorneys general noted that federal law defines one of the bureau’s “primary functions” as “collecting, researching, monitoring and publishing information relevant to the functioning” of financial markets.
“We have used information gleaned from the CFPB’s database in connection with investigations into debt collection companies, student loan servicers, for-profit universities and other companies whose misconduct was initially brought to our attention through a critical mass of complaints filed with the CFPB,” they said.
Becerra told me that the bureau’s database “helps us determine where to put our investigative resources.” Without such a tool, he said, this work would be “exponentially more difficult.”
Any reasonable person would hear that from him and other law enforcement officials and conclude that the bureau’s database plays a key role in consumer protection.
But we’re not talking about reasonable people here.
While mulling over the fate of the complaint database, Mulvaney this week also sacked the CFPB’s 25-member Consumer Advisory Board, which includes consumer advocates, academics and industry execs who provide input on the bureau’s policies. He said he’d put together a new advisory panel in coming months.
The move came after a news conference Monday at which 11 members of the advisory board criticized Mulvaney for ignoring the group’s advice and canceling legally required meetings.
John Czwartacki, a CFPB spokesman, said in a statement that board members “seem more concerned about protecting their taxpayer-funded junkets to Washington, D.C., and being wined and dined by the bureau than protecting consumers.”
Anthem kneelers, one and all.
Chi Chi Wu, a staff attorney with the National Consumer Law Center, was one of the 11 board members who spoke their mind before being handed their hats. She told me the extent of the board’s wining and dining was “muffins and coffee and a room at the Hampton Inn.”
Wu noted that Mulvaney told banking executives in April that, while still a South Carolina congressman, he had a strict rule about only meeting with lobbyists if they gave him campaign cash.
“We had a hierarchy in my office in Congress,” Mulvaney said. “If you were a lobbyist who never gave us money, I didn’t talk to you. If you were a lobbyist who gave us money, I might talk to you.”
The comments were taken as a none-too-subtle message to the banking industry that the new head of the Consumer Financial Protection Bureau was open for business.
Wu said it looks like Mulvaney would rather grant audiences to handpicked supplicants rather than people with broad experience in consumer protection.
It’s also increasingly looking like he’ll make those money-giving lobbyists happy by pulling the plug on the CFPB’s complaint database.
Fun fact: Eight of the 10 financial institutions with the most complaints in the database contributed to Mulvaney while he was in Congress, according to an analysis by the advocacy group Public Citizen.