Living with credit, Protecting yourself

Missing banks undermine complaint website

Fred Williams

Say a bank just sent you a come-on for a credit card. Or maybe you’re shopping for a checking account, a car loan or a home loan. You could see what the lender’s customers are saying about it on the U.S. government’s complaint website.

If, that is, the bank has more than $10 billion in assets. Less than that, and its complaints are cloaked from public scrutiny.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, only the largest banks are supervised by the U.S. Consumer Financial Protection Bureau. When the agency gets a complaint about a smaller bank, it forwards the gripe to other regulators and doesn’t publish it on the complaint website. The other bank regulators don’t make complaint information public at all.

If $10 billion sounds like a lot of money, it is. Only about 140 of the nation’s 6,500-some-odd banks are that big, or about 2 percent of the total.

Smaller debt collectors, payday lenders and other companies do not get a pass from the complaint data — just deposit-taking institutions, meaning banks and credit unions.

There’s a brouhaha going on now about the complaint database. Banks say it’s besmirching their reputations. Consumer advocates say customers deserve a public forum to share their experiences. The gaping hole in the data isn’t even part of the discussion — but it should be.

The exemption designed to avoid over-regulating “Main Street” community lenders is undermining the complaint database. For example, if you’re looking for a lender in Minnesota, Wisconsin or North Dakota, St. Paul-based Bremer Bank is a likely candidate. It is owned partly by a foundation and partly by employees, making it very different from larger competitors. But you won’t see its complaint record — good or bad — in the complaint data. How does its customer track record compare to US Bank or Wells Fargo? As its assets fall just short of $10 billion, we don’t know.

The complaint database, which began taking gripes in 2011 and started publishing them in 2012, is the nation’s largest public collection of consumer financial complaints, the CFPB says. About 463,000 complaints were published online as of October 2015. While it is still little-known, the website has the potential to be a powerful resource as the searchable trove of consumer experience continues to pile up, at a rate of about 500 complaints per day.

“Consumers often go online to do their homework before deciding what to buy,” CFPB Director Richard Cordray said during a 2014 hearing about the complaint database.

Banks can check up on consumers via the credit reporting system. Don’t consumers deserve a way to check banks’ track record as well? No database like this is perfect — yes, we are still in the credit report analogy here. But the CFPB gives companies a chance to respond to complaints, and tracks the outcome. People looking at complaints on the government website can evaluate both sides of the gripe, and use their own judgment.

The CFPB says the banks it supervises make up 80 percent of all banking business. However, that’s in dollar terms, not numbers of customers. In terms of people, smaller banks are still very important.

If you go to the complaint website now, you won’t even know that 98 percent of banks are missing. This should be corrected with a disclaimer, and soon. People should know up front that finding no mention of a bank in search results does not necessarily mean that the bank’s complaint record is spotless.

In the longer run, the complaint trove should expand to include sub-$10 billion lenders. The bank regulators that handle their complaints — the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency — should relay the outcome of complaints back to the CFPB for publication. The bank regulators are already handling the complaints. Providing data on them does not increase banks’ regulatory burden one bit. The banks still have to deal with the complaints.

Making the complaint information public, including the outcomes, will empower consumers to choose lenders carefully. It should also provide a deterrent against gouging practices, as banks seek to reduce the size and severity of their public complaints.

Whatever its shortcomings, the complaint database is more reliable than the anonymous, unfiltered reviews found elsewhere on the Internet. On free-for-all sites it is difficult to tell legitimate beefs from anger-fueled rants — or corporate propaganda. New York’s Attorney General fined 19 companies in 2013 for writing fake online reviews on behalf of client businesses.

“This database I think is a huge step forward when it comes to transparency,” said Ruth Susswein, deputy director of Consumer Action, an advocacy group that has championed the CFPB complaint website. “That said, let’s make this tool even sharper by making sure all data is included even for community banks and other lenders.”

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