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.