Should consumer complaints against banks be published online the same way complaints against vacuum cleaners and hair curlers are now? That's a question the Consumer Financial Protection Bureau will decide as it inches toward going fully operational July 21.
A coalition of consumer groups is pushing for a searchable online database of consumer complaints against financial institutions. From a Consumer Action press release:
Members of Americans for Financial Reform, or AFR, have told the CFPB that a publicly accessible, user-friendly searchable system benefits consumers and companies alike.
A consumer complaint database that allows individuals access to complaint data empowers consumers to make wise pre-purchase decisions, while saving the agency time and money. It also allows researchers to assist the agency in detecting risky trends and unfair practices before they reach epidemic proportions.
Public access to consumer complaint data achieves both transparency and accountability, and encourages industry to operate at its best, the groups told the CFPB in a letter today.
"Even before it opens its doors the CFPB has presented itself as a new breed of regulator. We strongly support the agency's efforts to blend public input and transparency with its new mortgage disclosure forms," says Consumer Action's Ruth Susswein. "A publicly searchable database fits seamlessly into the bureau's efforts, while providing consumers with firsthand information that helps them avoid trouble."
Consumer advocates envision a database similar to the one created by the Consumer Product Safety Commission. I checked out the database, which is definitely worth a look if you've never seen it, and it seems to me a similar database for financial products would be a pretty big win for consumers.
Basically, every time someone files a complaint over the phone, online or by mail, it's recorded in a public, searchable database. Businesses that register with the CPSC then get notification of the complaint against them and are given a chance to respond before the complaint becomes public 10 days later.
It seems like a no-brainer that if we think a relatively minor purchase like a vacuum cleaner or a pair of sneakers is important enough to provide this kind of information about, then a mortgage or a checking account, products that can cost many hundreds or even thousands of dollars, should get similar treatment. The ability to check database for consumer complaints against a financial services provider before signing on the dotted line for a mortgage or credit card could potentially save people a lot of misery by helping them avoid problem providers.
On the other hand, I'm not sure how likely this is to happen right now. Banks are putting a lot of pressure on Congress to water down the CFPB as it is, and the bureau will probably end up less powerful than what was originally set forth in Dodd-Frank, not more. Also, I can see banks having a legitimate fear of competitors planting bogus complaints against them on a forum like this, although the CPSC database does have a process for businesses to dispute reports they think contain inaccurate information.
What do you think? Should consumer complaints about financial products be published online?