The Bureau of Consumer Financial Protection's database of consumer complaints could vanish from public view, and a coalition of state attorneys general wants to prevent that from happening. Could shielding consumer gripes from the public benefit the auto finance marketplace? Depends on whom you ask.
Discussion of the bureau discontinuing public access to consumer complaints has followed April 24 remarks by Acting Director Mick Mulvaney to the American Bankers Association conference. Reading from the Dodd-Frank Act, which created the bureau, Mulvaney said by law the bureau must collect and track complaints in a manner that must include a single, toll-free telephone number, a website and a database. But retaining a public database that is "not completely vetted," Mulvaney said, may not be consistent with the bureau's mission.
"I don't see anything in here that I have to run a Yelp for financial services sponsored by the federal government," Mulvaney said. "I don't see anything in here that says that I have to make it all public."
Attorneys general from 13 states -- California, Delaware, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Minnesota, North Carolina, Oregon, Pennsylvania, Vermont and Washington -- and the Hawaii Office of Consumer Protection argue that the database enables consumers to educate themselves on the cautionary tales of their peers. The June 4 letter also says the visibility of the database gives companies an incentive to treat customers fairly.
But making the data private could work in auto dealers' favor, giving them less to worry about, said Terry O'Loughlin, director of compliance for the documents unit of Reynolds and Reynolds.
Automotive financing is complicated, and a one-sided view into a transaction sets dealers and lenders up for public shaming, O'Loughlin said.
"This has been a long simmering problem going back to when this all started," he said. "I think there is some giving a business a bad name without providing them an opportunity to explain."
The bureau allows companies to dispute complaints. A disclaimer above the database reads: "We don't verify all the facts alleged in complaints, but we do give companies the opportunity to publicly respond to complaints by selecting responses from a pre-populated list."
When a federal regulator offers a platform for consumers to air grievances, O'Loughlin cautioned, "it gives [the complaint] a degree of credibility it might not deserve," especially compared with a complaint posted on social media or a review website.
But shielding the database from the pubic eye because some complaints stem from spite more than unscrupulous business practices could be a mistake. Bloomberg, in an April editorial, proposed that the bureau display the ratio of complaints to customers, sorted by type of business, in its reports to fix the problems.
"Context is lacking: Larger companies, and companies in businesses such as debt collection and credit reporting, are bound to have more unhappy customers," the editorial said.
Sticking to the law as written is a common refrain by Mulvaney. Maintaining consumer complaints is part of what the bureau was created to do, but as he said, publishing those complaints wasn't part of the agreement.
If other regulators, such as the state attorneys general, say they rely on the database for pursuing consumer protection, the bureau should take that into account. It is difficult to follow trends if you can't see what's happening across the financial sector as a whole.
But consumers now have more than enough outlets to air complaints online, and ways to contact regulators more directly than the bureau's reservoir. Transparency plays a crucial role in auto finance, but if the merit of those complaints is unknown, publishing them could do more harm than good.