CFPB Ramping Up Consumer Outreach Through Complaint System

WASHINGTON — The Consumer Financial Protection Bureau has hit its stride on consumer complaints.

In the past week, the bureau has begun taking complaints in two major consumer markets — deposit accounts and student loans — and has quietly begun beta testing to integrate complaints on auto loans and other consumer installment loans.

While the addition of new markets was not surprising, industry observers said the speed with which CFPB is ramping up its complaint portal shows they are dedicating significant resources to hearing directly from consumers, and using new tools to do it.

"The use of technology and innovation in different ways is a fulfillment of what [Elizabeth] Warren had in mind from the earliest days," said Don Lampe, a partner with Dykema law firm. "I think it's a helpful reminder for us as we try to understand this in terms of a historical context that the CFPB has had its eye on and had its resources behind using these 21st century technology tools from the very beginning."

The CFPB sent a letter to more than 6,000 universities across the country on Monday notifying them that students and alumni will now be able to seek help with their loans through the bureau's complaint system.

"Getting a higher education can mean taking on significant debt — a big decision with a lot of consequences," Director Richard Cordray said in a press release. "The CFPB is now the one-stop federal agency where all private student loan borrowers can ask questions, get information, and file a complaint about this important market."

The letter and corresponding announcement came on the heels of another last week that CFPB has begun taking complaints on checking and savings accounts, opening the door for the agency to receive feedback on controversial overdraft fees.

Although there was no public announcement, CFPB also added vehicle loans and consumer loans — including installment loans, such as medical, vacation and funeral loans — to its complaint portal last week. The system is only taking complaints for such loans for banks for now; complaints for nonbanks will be redirected to the Federal Trade Commission's Consumer Sentinel Network.

Until last week, the CFPB had only processed two kinds of complaints. It started taking complaints on credit cards on July 21, the same day it became an independent agency, and it started processing mortgage complaints in December.

Bureau officials have emphasized that they intend to rely on research to inform their policies and rulemaking agenda, and observers said the complaint portal is an important way for them to lay that foundation.

"It goes right in line with them wanting to be data driven," Isaac Boltansky, a research analyst with Compass Point Research & Trading LLC, said of the recent expansion of the complaint portal. "And it's pivotal for them to be data driven. They're starting to regulate worlds that have never been regulated, and they have to develop a base to do so."

But Barbara Mishkin, a lawyer with the law firm Ballard Spahr, said it's still unclear how the bureau intends to use information gathered from the complaint process, including how it will be shared with the public, and what its role should be in the rulemaking process.

"This kind of data they're going to get through this …is not the typical data that's used in rulemaking," Mishkin said. "This is a fairly unique process, I don't think any of the banking agencies ever had a complaint process like this."

Boltansky said it's not surprising that the bureau chose to announce the student loan complaint component on its own.

The issue is one of just a handful that legislators directed the CFPB to focus on under the Dodd-Frank Act. The announcement also follows a handful of related initiatives on student lending, including a joint report with the Department of Education, and a new financial aid disclosure form to help students compare financial aid packages from different colleges and universities.

Student loans have surpassed credit cards as the largest source of unsecured consumer debt, according to the CFPB. Unlike federal student loans, private loans generally don't have the same borrower protections — such as deferments or repayment plans — and lenders have only been regulated by a patchwork of state and federal officials until recently, the bureau said in a press release.

The issue is also at the forefront of the American psyche, Boltansky said. Case in point: Federal Reserve Chairman Ben Bernanke testified last week before a House panel that his own son will be burdened with more than $400,000 in student debt when he graduates from medical school.

"While I think that they've focused on this because of its structural importance to the economy, because of the mandate that was handed down in the Dodd-Frank Act, I also believe that they are very aware of the political ramifications of this issue and how it will play in November," Boltansky said.

Given that the complaint portal has dovetailed with the agency's policy priorities, Lampe said he expects CFPB will begin taking complaints about payday loans and other unsecured installment loans, particularly from nonbank lenders.

Although the bureau has publicized its efforts to widen its consumer complaint system, observers said they expect a broader rollout some time this year.

"So far the sheer number of complaints has not been all that great," Lampe said, "and that could be because the CFPB has not initiated what we believe it intends to initiate, which is a public outreach campaign so that Americans other than just web-savvy Americans are aware that the CFPB is ready to receive and presumably act on their complaints."