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CFPB Complaint Plan Invites Abuses, Assures Higher Costs

JUL 21, 2014 12:49pm ET
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Last week the Consumer Financial Protection Bureau set forth a new proposal to make all complaints public and sort them by subject and lender. In addition, the lender's response would also be public. It would be up to the borrower to control whether the complaint would be publicized or remain confidential.

At first blush it may seem that there should be no hesitation with a public format. After all, why shouldn't consumers be able to communicate publicly about their experiences? Unfortunately, the use of various complaint-oriented websites demonstrates these forums can be abused by consumers, disgruntled employees, and even competitors. Here, however, the mere fact that there are complaints with the CFPB would provide inherent legitimacy such that lenders would need to respond to virtually every public complaint no matter the source. Indeed, one could see lenders spending considerable resources responding to baseless complaints. This would not necessarily improve compliance but will certainly continue to increase the cost of lending operations.

In addition, this will certainly increase the level of documentation lenders need to keep regarding origination activities and customer interactions. As reflected by a prior post a few weeks ago, there is an emerging trend placing increased importance on documenting compliance on the "front line" as opposed to being orchestrated via a compliance management system. Of course, it's nearly impossible to have one without the other. Maybe that is what the CFPB is really trying to accomplish. If so, it would be better simply to dictate such requirements rather than create forums that can be abused and cause lenders to incur unnecessary costs responding to bad faith complaints.

Comments (5)
I just completed a white paper that discusses mortgage servicer damaged reputations - and takes a closer look at CFPB servicing complaints. Did you read the CFPB Consumer Response Annual Report for 2013 that was released this March? It reported that 37% of all consumer complaints received by the CFPB were mortgage related and a full 85% of all the mortgage complaints received were servicing related. It made pretty big news. A link to the full report is included on page #7 the white paper. A much lesser reported fact was that consumers did not dispute the company's initial response in 66% of all CFPB mortgage complaints filed and that just 2% the servicing claims closed with actual monetary relief. Tim Allen, CMB
Posted by Tim Allen, CMB | Monday, July 21 2014 at 2:54PM ET
the complaints should be public. this might change the behavior of the bankers in loss mitigation. maybe they will stop giving people the run around. steven ruza
Posted by steven r | Tuesday, July 22 2014 at 9:22AM ET
An agency with little or no accountability creating what will likely become unfair and harmful accountability standards. The majority of mortgage professionals and banking institutions don't fear accountability but they are leery of the almost certain abuse that will occur within such a lopsided complaint process. It remains an incredible irony in my mind that the drivers of the CFPB are of the legal profession, a profession that inarguably the consumer truly needs protected from. The idea that you are guilty until innocence is proven is much like the CFPB, very Un-American.
Posted by John Deleva | Tuesday, July 22 2014 at 9:23AM ET
Steven

Public is fine once legitimacy of complaint and resolution has been established. Lets hang em with their own rope not that of the CFPB.
Posted by John Deleva | Tuesday, July 22 2014 at 9:39AM ET
No sense in making these public. If a consumer wants to complain about the mortgage company, go to the BBB. The BBB will follow up with LEGITIMATE complaints and if they cannot get a resolution, perhaps THEY Can involve the CFPB. This is not theWIld WEet or the OK corral. All that will be accomplished is providing a platform for a gripe session. Cordrey says they are not trying to regulate thru intimidation. BULL!
Posted by TERESA R | Thursday, July 24 2014 at 5:35PM ET
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