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MoFo Reenforcement The Enforcement Blog

CFPB Issues Monthly Complaint Snapshot – Failure to Provide Normalization and Other Necessary Comparison Metrics Continues

Posted in CFPB, Credit Reports, Mortgage

On August 15, 2015, the CFPB released its latest “consumer complaint snapshot.” The Bureau’s “snapshots” generally provide updated national complaint information, and further include product and geographic spotlights that look into complaints involving a particular consumer financial product and a particular geographic location. In this month’s installment, the Bureau focused on credit reporting, as well as the Los Angeles, CA metro area.

On the national level, the Bureau’s press release noted that “consumer loan” complaints, which encompass pawn loans, title loans, and general installment loans, showed the greatest year-over-year increase in volume (61%). On the other hand, “bank account or services” complaints showed the greatest year-over-year decrease in volume (-4%). The Bureau noted that there was a sharp increase in credit reporting complaints both on a month-to-month (56%) and year-over-year (45%) basis, and found that the majority of those complaints (77%) were about incorrect information on credit reports. In particular, the Bureau singled out the three nationwide credit reporting agencies (CRAs) – Equifax, Experian, and TransUnion – noting that 97% of the credit reporting complaints involved these three companies.

Digging into the Los Angeles market, the Bureau commented that mortgages are the most complained about product, noting that mortgage-related complaints make up 35% of the volume in LA, compared to 28% across the country. The Bureau also found that credit reporting and debt collection complaints in LA are less than the national averages: 14% vs. 16%, and 22% vs. 25%, respectively. Again, the Bureau saw fit to single out individual institutions, noting that Bank of America and Wells Fargo were the two most complained about institutions in LA.

As a threshold matter, the Bureau does not independently validate the truth of the allegations set forth in the majority of the consumer complaints it receives. Rather, for most complaints, the only validation the Bureau conducts is whether the consumer has an account with the financial institution at all. Accordingly, the relevance of these complaint numbers is questionable at best. Moreover, even if the Bureau did independently validate the truth of the allegations, its complaint reporting is fundamentally flawed by the lack of any normalization metrics that control for the size/market share of an institution. For that reason, the fact that Equifax, Experian, TransUnion, Bank of America, and Wells Fargo are noted among the “most-complained-about-companies” is absolutely meaningless. Such a finding is very likely due to the sheer size and reach of those institutions across the country, rather than any legitimate consumer complaint issue. Similarly, the Bureau’s finding that mortgage complaints are more frequent in LA, whereas credit reporting and debt collection complaints are less common, is also of questionable value, as it provides no information regarding whether the differences are statistically significant.

Finally, it’s important to note that the Bureau’s press release fails to provide relevant countervailing information regarding some of the institutions singled out by the Bureau. Digging further into the actual report reveals that Bank of America and Wells Fargo both saw significant decreases in their overall year-over-year national complaint volume: -5% and -12%, respectively. Moreover, as it pertains to credit reporting, the Bureau’s press release mentions neither the fact that it received a relatively small number of complaints about the CRAs’ investigation processes, nor the robust, legally required dispute management processes maintained by CRAs. In particular, the finding that only 9% of complaints were due to a CRA’s investigation processes is at odds with the relatively large number of complaints regarding allegedly incorrect account information. It suggests that many of those complainants have failed to avail themselves of the dispute resolution procedures maintained by CRAs, and represents a fundamental problem if consumers are bypassing the statutorily mandated regime and instead complaining to the Bureau in the first instance.

These omissions are glaring, particularly where the Bureau singled out these institutions for criticism, and further underscores the fundamental problem with issuing reports that bear the imprimatur of a federal agency despite the lack of substantively validated and normalized complaint data.