The new U.S. consumer agency, which has yet to begin formal operations or write a rule, is already being squeezed between banks and advocacy groups over how to set up a complaint hotline.
Under the Dodd-Frank regulatory overhaul, the Consumer Financial Protection Bureau must establish a way for banking customers to submit reports about their problems with products and services. At issue is what happens after they’re filed.
Nonprofit groups such as Consumers Union and the Sunlight Foundation are pushing for an open system that would allow anyone to scan the raw submissions. Industry groups including the American Bankers Association argue that making them public could allow frivolous complaints to damage reputable brands.
“The point of banking supervision is to get the system working properly, not to air dirty laundry and scare capital away from banks,” Richard Riese, senior vice president at the bankers association’s Center for Regulatory Compliance, said in an interview.
The hotline has become a focal point of a philosophical debate about the bureau’s role -- whether it should aim to improve consumer financial products primarily by working directly with companies or by bringing public attention to unfair practices.
Bureau officials plan to open the hotline by accepting consumer complaints about credit cards starting on July 21, according to a person involved in the work.
Dodd-Frank requires the bureau to log complaints in a database and route them to the appropriate federal or state agency. A separate provision says the bureau and other regulators must create procedures to ensure that financial firms provide “a timely response” to consumers.
The agency is working with five of the largest credit-card issuers -- JPMorgan Chase & Co., American Express Co., Discover Financial Services, Capital One Financial Corp. and Bank of America Corp. -- to make certain they can begin receiving complaint referrals in July, said the person, who spoke on condition of anonymity because the process isn’t public.
Credit-card complaints will be accepted first because they deal with the most common form of consumer finance, the person said. The complaints could also inform the bureau’s enforcement actions, and its supervision of banks and non-bank lenders, another person involved in the process said.
While the bureau has not decided what information related to consumer complaints will be public, previous comments by Elizabeth Warren, the White House and Treasury adviser who is setting up the agency, suggest a preference for wide distribution.
Warren has said that a public database would allow consumers to look for patterns -- a process known as “crowd-sourcing” -- and make their decisions accordingly.
“Through crowd-sourcing technology, consumers can deal collectively with those who would take advantage of them -- and can reward those who provide excellent products and services,” Warren said in a speech on Oct. 28.
The debate over the hotline echoes one involving the U.S. Consumer Product Safety Commission. In November that agency approved the creation of a public consumer complaint database over objections from business groups. The web-based system, which also accepts complaints via phone, fax or letter, went live on March 11.
Banking lobbyists are asking the consumer financial bureau to limit the information in the database to other banking regulators and the consumer who made the complaint, according to a Feb. 8 letter from the ABA and four other finance groups.
“Any expansion of the use of or access to the database should be determined through a formal rulemaking process that involves a suitable notice and comment period,” the ABA said in the letter, which was also signed by The Clearing House, the Consumer Bankers Association, the Financial Services Roundtable and the Housing Policy Council.
Consumers Union, which publishes Consumer Reports magazine, wrote the bureau in a Sept. 3 memo that the new agency should make public “all complaints from receipt” and not a subset that has been vetted by the bureau.
“Consumers can benefit from learning that a financial services provider is doing something that makes its customers unhappy even if that activity is not illegal,” Consumers Union and 15 other groups wrote.
A contact person for the letter was Gail Hillebrand, a former senior attorney with Consumers Union. She has since been hired as the consumer bureau’s associate director of consumer education and engagement.
The creation of the complaint system is being overseen by Catherine West, the chief operating officer at the consumer bureau. West is a former COO at J.C. Penney Co. Inc. and former senior executive at Capital One, one of the banks cooperating with the system test.
Warren addressed the consumer complaint system at an April 6 meeting with groups that campaign for more open government, according to a blog post on the agency’s website. The groups urged Warren to make the complaints public despite bank objections, said Angela Canterbury, director of public policy at the Project on Government Oversight, a watchdog group.
“These concerns about consumer complaints on the part of industry reflect an old-fashioned sensibility,” Tom Lee, director of Sunlight Labs at the Sunlight Foundation, said in an interview.
Lee, who attended the meeting, pointed out that Amazon.com Inc. publishes unedited consumer complaints about products on its website “and global capitalism has not ground to a halt.”
The consumer bureau plans to accept complaints through a form on its website, by e-mail, by telephone or by letter. To test the system, officials have been passing along simulated complaints to the credit-card issuers.
“We want to be a part of any opportunity that helps us better understand the concerns of our customers,” Paul Hartwick, a spokesman for Chase Card Services, said in an e-mail. “We believe we can help the CFPB develop a robust process for capturing, cataloguing and analyzing complaints, questions and inquiries that come from American consumers and their families.”
Leslie Sutton, a spokeswoman for Discover, and Leah Gerstner, a spokeswoman for American Express, said they welcomed the chance to work with the consumer bureau. Spokesmen for Bank of America and Capital One did not respond to requests for comment.
The history of another government complaint database, at the National Highway Transportation Safety Administration, shows industry concerns may eventually recede. Since 1966, the agency has collected reports of possible safety defects in automobiles. The database is public and searchable by model year and make on the agency’s website.
“The only way you can persuade the agency to do an investigation and get a potential recall is if you show examples of the problem,” Joan Claybrook, a former director of the agency, said in an interview.
Wade Newton, a spokesman for the Alliance of Automobile Manufacturers, said the companies have few complaints about the system.
“We compete on consumer satisfaction,” Newton said in an interview. “The idea that we have a channel to get feedback from our customers is a good thing.”