Should your beef with your credit card issuer be a matter of public record? Or should the details be hidden?
Those are the questions regulators from a federal financial watchdog agency are grappling with as they craft a policy on how best to disclose the details of thousands of credit card complaints they receive each year.
Getting the word out about credit card complaints -- minus personal information that could identify the complainer -- could potentially help someone else avoid the same mistakes or help lawmakers draft measures to prevent future problems, says the Consumer Financial Protection Bureau (CFPB).
Open and closed debate
"By enabling more informed decisions about credit card use, the CFPB intends for its complaint data disclosures to improve the transparency and efficiency of the credit card market," the agency stated. Earlier this year, the bureau sent out requests for comments on a proposed policy for handling public release of details of credit card complaints. Regulators have not yet issued a final policy, but are expected to do so in the coming months.
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Under the CFPB proposal, the public would have online access to a database maintained by the agency. Users would be able to search by type of complaint filed, the ZIP code, date, the issuer involved and how that bank or credit union responded. Sensitive personal information, such as the name and address of the person filing the complaint, Social Security numbers or credit card numbers, would remain confidential.
Banks, consumer groups clash
Not surprisingly, the CFPB's plan has proved controversial. Banks and credit unions are squaring off against consumer advocacy groups on opposite sides of the disclosure debate.
Banks want to keep a lid on details of complaints, especially if they are unfounded. Anyone could file a complaint, legitimate or not, that could damage a lender's reputation, the bankers say.
"The complaint data are incomplete, unrepresentative and unverified, and therefore, if released according to specific categories as proposed, an unreliable and misleading source of information about customer experience and satisfaction ..." the American Bankers Association (ABA) stated in a 20-page letter to the CFPB opposing release of the detailed complaint data. The complaint database would be "publicly outing" banks and their customers' experiences with them, the ABA states.
The bankers said the plan has "serious flaws" and should not go forward without significant changes. In the meantime, the bankers group wants to make public only the type and total number of complaints -- as the CFPB did in November 2011 when it published its first interim complaint report.
Consumer groups, meanwhile, are pushing hard to open as much of the records up as possible. A coalition of nearly two dozen consumer and civil rights groups filed a joint response applauding the bureau's stance on openness. "We believe the system works best when people can use other consumers' firsthand experience as a tool to make wise financial decisions," the groups wrote.
"Public access to the proposed database of credit card complaints would help consumers make better-informed decisions about financial products," according to OMB Watch, a Washington, D.C., nonprofit organization that advocates transparency in government, including the White House's Office of Management and Budget (OMB). "As a result, consumers would be better equipped to avoid bad actors or disliked practices. At the same time, we believe that the proposed safeguards would appropriately protect submitters' privacy by excluding their personal information from the database."
The group noted that the database would give academic researchers, journalists and consumers the ability to access information that could uncover patterns of abuse in banking practices.
Banks would be more accountable, according the OMB Watch, if more eyes were on their operations. "With consumers informed of a company's complaint record, companies that implement abusive practices or are unresponsive to customer concerns could stand to lose business. Companies with strong records, however, could highlight their good performance. Ultimately, transparency could foster competition by encouraging companies to change disliked practices or become more responsive to their customers."
Both banks and consumer advocates want to protect account holders' privacy and stress the importance of maintaining anonymity for people who file complaints to prevent Social Security numbers and credit card account information from falling into the wrong hands.
Complainers aren't representative of industry experience
The bureau began accepting consumer complaints in July 2011 when it opened for business as the nation's financial watchdog. It selected credit cards as the first product on which to collect consumer complaints because cards are so ubiquitous in American households and because the confusing terms and gotcha-clauses had caused such angst among consumers. Gradually, the CFPB complaint system expanded to include mortgages, private student loans, bank accounts, car loans and other types of consumer loans.
The Financial Services Roundtable, a financial services industry group, expressed concern that the CFPB would expand the proposed public database beyond just credit cards to the other financial products -- a real possibility given the other types of complaints that are being collected. They recommended getting input from other stakeholders that might be impacted, such as mortgage brokers or auto lenders.
During its first three months, the complaint system logged more than 5,000 credit card complaints with the vast majority (74%) fully or partially resolved. Banking industry representatives say that's a small number of people when you consider the millions of credit card accounts in the United States.
The CFPB acknowledges that the database is skewed and doesn't represent the typical credit card user's interaction with an issuer: "The credit card complaints submitted to the CFPB represent the experience of a nonrandom subset of credit card consumers: Those who view themselves as aggrieved by an action or inaction of an issuer, who were unable to obtain satisfactory relief from the issuer (or who elected not to seek such relief), and who have chosen to appeal to the CFPB for assistance," according to the CFPB.
William Baynard, assistant vice president of compliance for Denali Alaskan Federal Credit Union, says customers should be required to attempt to resolve problems with issuers first before filing complaints that might be publicized. Thus, giving lenders a chance to "fix mistakes made in good faith before the CFPB attaches complaints to their names," Baynard argues.
The National Association of Federal Credit Unions (NAFCU) President and CEO Fred Becker Jr. urged the bureau to publish only "legitimate complaints" and weed out those that may have no merit. "Disclosing every complaint, without any indication of the veracity of the complaint, is inherently misleading," the group said.
The financial roundtable group urged the CFPB to launch a more comprehensive rule-making process to obtain more detailed input from the public. If helping consumers making more informed credit card choices is the purpose of the database, the group states, "it is not clear how anecdotal and unvalidated complaints will help consumers make informed financial decisions."
Proponents argue even a nonrandom database can help regulators, researchers, journalists and consumer advocates identify trends or patterns of abuse.
The OMB Watch group acknowledged that complaints in and of themselves don't signal unsafe or abusive practices. As the CFPB data already show, many complaints are lodged because consumers are dissatisfied or confused about the terms or features of credit cards and other products. OMB Watch says these complaints can reveal patterns that can prompt investigations that uncover illegal practices.
The narrative debate
Some commenters want to block disclosure of "narrative fields" in which consumers would describe what happened to them or the reason they are complaining. There is a danger that personally identifiable details -- a credit card number or Social Security number, for instance -- could be revealed. Trying to black out or scrub the narratives of these details would be too time-consuming for the large volume of complaints that are expected. NAFCU also objects to the bureau's proposal to allow consumers to opt in or opt out of making the narratives public.
Consumer groups want the narratives included in the database to give readers "a fuller understanding of the problem and of the company's response."
The advocates suggest including two different boxes on the complaint form -- one clearly labeled to indicate the contents will be shared with the public and should not include personal information, and one labeled for the bureau use only which can contain such things are account numbers. They argue the bureau can create a computer program that will search the text of what consumers submit and -- if there are phone, credit card or Social Security numbers -- prompt an error message warning that this information could be disclosed publicly.
Says the consumer coalition: "We believe that it is possible to inform the public of complaint details without putting an individual's personally identifiable information at risk."