Consumer complaints about financial products and services such as home loans are more than just statistics. They indicate the real and difficult challenges people face as they try to navigate the financial seas.
So, as of last month, the Consumer Financial Protection Bureau began allowing aggrieved customers to share their stories with the public, not just the bureau, which is the federal watchdog agency established as a result of the mortgage meltdown.
Since the CFPB hit the ground running in July 2011, it has taken nearly 600,000 complaints, mostly about mortgages and debt collection. It also fields grievances about many other financial products, including credit reports, payday lending and credit cards.
The complaints have helped the CFPB understand the issues consumers face when dealing with lenders and collection companies, and have led to dozens of new regulations to protect people from further abuses. Now, by allowing disgruntled consumers to publicly share their versions of what went down, the agency will help other consumers avoid becoming just another number in a statistical database.
The decision to publish customer narratives "will serve to empower consumers by helping them make informed decisions and helping track trends in the consumer financial market," said CFPB Director Richard Cordray in announcing the new policy. "Narratives help humanize the problems consumers face...They shed light on the full consumer perspective."
Over the CFPB's short life, its database has become the nation's largest public collection of complaints against financial institutions. As of March 1, a whopping 30% of the beefs had to do with mortgages, and 14% dealt with credit reporting, which is central to obtaining financing. An additional 24% involved debt collection.
Typical complaints might deal with loan modification scams, credit decisions, incorrect credit information, problems with escrow distributions and excessive settlement charges.
Worth noting: Over the last few years, gripes about mortgages have steadily declined, which means either one of two things: Lenders and servicers have cleaned up their acts, rather than risk being outed in a high-profile database; or consumers have simply given up in their quests for justice.
But Garth Graham of Stratmor Group, a mortgage industry consulting firm, says that even a small number of dissatisfied borrowers "can really hurt your business."
In surveys for various clients covering a total of 24,000 borrowers, Stratmor found that when people aren't happy, they tell others about it. While the vast majority of the surveyed borrowers were highly satisfied, 8% rated their satisfaction at 6 or below on a 10-point scale.
However, 80% of that small, dissatisfied minority are likely to post a negative comment somewhere, Graham said. And "if they don't think they are being heard, they are likely to complain to the CFPB. That can really be damaging."
Until now, when the agency heard a complaint, it forwarded it to the company involved to obtain a response. After 15 days, the complaint was entered into the database and filtered by product, issue, company and state. The database also showed whether the company responded in a timely manner, how the company responded, and whether the consumer disputed that response.
Under the new policy, consumers have the option to share their versions of what happened, good or bad. Their stories, the CFPB believes, will offer others first-person accounts of their experiences, greatly enhancing the utility of the database.
"The narratives will provide context to complaints, spotlight specific trends and help consumers make informed decisions," the agency said in its announcement. "The narratives may encourage companies to improve the overall quality of their products and services, and more vigorously compete over good customer service."
To mollify objections to the expanded online complaint portal by businesses and their trade groups, which mainly worried than it would permit the publication of unsubstantiated details, the CFPB included several caveats and laid out specific procedures and safeguards.
First, consumers have to opt-in to share their stories when submitting their complaints, and can opt-out at any time. Personal information such as name, address and identifying numbers will be scrubbed from the narratives to protect consumers.
As always, companies are allowed to address grievances about them. They will be under no obligation to offer a public response, telling their side of the problem, but can do so if they like. Complaints make it into the database only after a company responds or after the company has had it for 15 days, whichever comes first. Consumer narratives won't be published until the company provides a public-facing response or until after it has had the complaint for 60 calendar days, whichever comes first.
Graham is telling his clients and other lenders to get in front of their customers' grievances by reaching out to borrowers shortly after closing, and addressing any issues they have before they broadcast their gripes publically.
"We think that's a better approach than to wait until an unhappy consumer tells his story to the CFPB," he said. "There is little doubt that if the CFPB makes it possible for dissatisfied customers to tell their stories in public, they will do so."
Lew Sichelman is an independent journalist who has been covering the housing and mortgage markets for more than 40 years.