Five years ago, the Dodd-Frank financial reform bill was passed by Congress, and four years ago, the Consumer Financial Protection Bureau (CFPB) opened its door for business.
Last week, CFPB Director Rich Cordray celebrated his agency's birthday with members of the Americans for Financial Reform (AFR), a coalition of more than 200 organizations that fought hard for Dodd-Frank and for the creation of the CFPB. The Center for Effective Government is proud to be a member of the coalition.
Cordray explained the vital purpose of the CFPB during his remarks to AFR: "Through fair rules, consistent oversight, appropriate enforcement of the law, and broad-based consumer engagement, the Consumer Bureau is working to restore people's trust and confidence in the markets they use for everyday financial products and services."
The CFPB has also helped strengthen the financial services companies it regulates by providing an incentive to improve customer service and reduce their exposure to lawsuits. "If we can help spur competition based on customer satisfaction, this has the potential to improve the functioning, transparency, and efficiency of the financial marketplace," Cordray told AFR members.
Among its many accomplishments, the CFPB has repeatedly brought various governmental agencies together on behalf of American citizens and consumers. Over the last year, the agency partnered with the Comptroller of the Currency and 47 state attorneys general in forcing J.P. Morgan Chase to change its debt collection practices. It also partnered with the U.S. Department of Education to win $480 million in student debt relief for former students of the now-bankrupt Corinthian College, and it cooperated with the Federal Communications Commission to gain $100 million in refunds for customers of Verizon and Sprint, who were illegally charged fees on their cell phone bills.
But the CFPB's greatest achievement has been the way it has created a vital and meaningful role for citizens to be active participants in their government. CFPB's citizen complaint database, launched in June 2012 and described in greater detail below, has been at the core of the agency's work.
"Consumer complaint data is part of our DNA, and these complaints play an important role in our supervision of companies, our enforcement actions, our rulemakings, and our engagement with servicemembers, students, the economically vulnerable, and older Americans. Each complaint is a chance for us to evaluate a perceived problem and see if it can be addressed successfully. But more importantly, complaints make all the difference by informing our work and helping us identify and prioritize problems. We know that if we hear about the same problem from fifty consumers, it likely looms larger than if we hear about it only from one or two," Corday told the AFR crowd.
On its fourth birthday, the CFPB is giving the American people another new gift: monthly reports that catalog complaints by overall volume, financial product, state, and company and that provide useful data on year-over-year changes in each case. In the inaugural report, debt collection was the topic most consumers complained about, and credit report provider Equifax received the most complaints of any company mentioned. It had a three-month average of 946 complaints, up eight percent over the previous three months. With 47,832 records, Bank of America has received the most total complaints since the CFPB began collecting data in 2011, though its complaint frequency has dropped 14 percent in the most recent three months.
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The nation's newest government agency, the Consumer Financial Protection Bureau (CFPB), is also one of the most responsive to the changing needs of Americans. Born in the aftermath of the Great Recession, the CFPB is using citizen complaints as a powerful enforcement tool to crack down on abusive banking practices.
Since it was founded in 2011, the CFPB has received more than 650,000 complaints about the policies and practices of the nation's financial institutions. CFPB employees are trained to spot trends among these complaints and use them to direct the agency's enforcement actions. To date, those enforcement actions have resulted in $10 billion in relief and refunds to customers. In addition, dozens of banks and other financial institutions have been sanctioned with fines, and the most abusive institutions have been shut down.
Sharing Personal Stories Helps Americans Avoid Bad Banks and Abusive Lenders
The CFPB began sharing the number and type of complaints against individual financial institutions in 2012. In June, the agency once again demonstrated its commitment to transparency by posting the first 7,700 complaints in the citizens' own words in its Consumer Complaint Database. For the first time, financial service customers can read about the experiences of their fellow citizens before they make decisions to enter a relationship with a particular bank.
The CFPB began collecting stories of abusive practices shortly after it opened its doors. When consumers file a complaint with the CFPB, they are offered a choice of whether they want their complaint publicly shared; 59 percent of those submitting stories have chosen public disclosure.
The agency's decision to make the complaints public was bolstered by about 30,000 citizen comments on a proposed rule last year. Americans for Financial Reform, U.S. PIRG, and many other consumer advocacy groups helped organize citizen pressure. Overwhelming public support for the measure allowed the agency to reject industry objections to allowing consumer comments to be posted directly on the agency's website.
Banking regulators have fined the nation's top banks billions of dollars to settle charges of illegal and abusive practices. Too often, these steep fines have been written off as a cost of doing business, and little else changes. The CFPB's database of consumer experiences takes aim at the financial industry's market-tested brand messaging, creating a potentially potent tool for eliciting changes in real bank practices that fines alone often fail to accomplish. This kind of exposure can affect a bank's ongoing bottom line in a way a one-time fine rarely does – hence, their concerns about a consumer database.
In an effort to also reward good behavior by financial institutions, the CFPB has just concluded a public comment period concerning the establishment of a consumer compliment database, providing positive stories of consumer experiences with the financial services industry.
The CFPB Is Not the Only Agency That Uses Citizen Reports to Bolster Enforcement
The CFPB is not the first federal agency to collect and organize citizen complaints. For more than three decades, the U.S. Department of Transportation's Aviation Consumer Protection Division has collected complaints from airline customers. It compiles these complaints and reports monthly by issue and by airline. Citizens can compare the relative number of complaints filed against the nation's air carriers, but they know nothing of the specifics of the incidents involved.
Similarly the Consumer Product Safety Commission gathers consumer complaints about defective or dangerous products through its SaferProducts.Gov website. It uses this information to inform and direct its investigative resources. The National Highway Traffic Safety Administration also collects information from consumers, auto mechanics, and insurance companies about vehicle safety concerns, with this data serving as the basis for vehicle recalls and other enforcement actions.
In addition, the Occupational Safety and Health Administration collects citizen reports of unsafe workplaces and uses them to guide inspection and enforcement efforts.
Increased Disclosure of Citizen Complaints Would Help Improve Corporate Performance
Each of these important government agencies should consider following the CFPB's actions and give citizens with product safety concerns the option of sharing their complaints with their fellow citizens. The real-time sharing of information could save lives and speed up industry responses when problems arise.
Share Your Story. Become a Citizen-Enforcer
Exercise your voice as a concerned citizen and consumer and let the appropriate government agencies know when you've had a problem with a business that they regulate. Your stories help direct government inspectors toward the most glaring problems and abusive practices. And if more agencies follow the lead of the CFPB in facilitating information sharing among citizens, the quality of products available to American consumers will steadily improve.
Here's a list of select agencies eager to hear your concerns and complaints about companies they oversee:
Consumer Financial Protection Bureau's Tell Your Story Form (the public database of narratives about consumer experiences with a company) or Complaint Form (CFPB forwards your complaint to the company and asks for its response on your behalf)
Consumer Product Safety Commission's SaferProducts.Gov Reporting Form
Department of Transportation's Aviation Consumer Protection Division Comment Form
National Highway Traffic Safety Administration's SaferCars.Gov Complaint Form
Occupational Safety and Health Administration's (OSHA) Complaint Form