The Consumer Financial Protection Bureau's consumer complaint database is riddled with errors and distrusted by some of its own employees, according to internal documents and interviews with current and former agency officials.
In one instance, a single complaint was counted as 35 different ones, while in another example a complaint was filed against a bank even though the consumer sending it was actually complaining about an unrelated payday lender.
While the CFPB argues any mistakes are minor and limited in scope, they are worrisome to agency officials because of how much the CFPB is guided by consumer complaints. The agency uses them as a partial basis for industry guidance, rulemaking and enforcement actions. But in interviews with five current and former CFPB officials — most of whom would only speak anonymously due to sensitivity around the issue — they said they are afraid to rely on the data.
"CFPB employees don't trust the system," said one former senior official. "When we were asked to look into a complaint, more than 25% of the time it turned out that the data we were looking at didn't really pan out or it was just incorrect in the way it was reported."
In many cases, the flaws in the system are an unintentional byproduct of the CFPB's internal policies regarding complaints. The CFPB examines a consumer's narrative and creates a new complaint for any entity that is named. As a result, in one instance in which documentation was shown to American Banker, a single complaint that was referred by another agency became 35 different complaints.
Moira Vahey, a CFPB spokeswoman, defended the practice, arguing it was the only way to ensure that each named company had "the opportunity to respond to the consumer."
"When a consumer complains about a complex problem involving more than one company, the bureau brings the complaint to the attention of each company involved and works to get the consumer the timely response they deserve. Consumers often describe complex problems with multiple companies in a single complaint submission," Vahey said. "The idea is to give each company a chance to address their part of the issue and respond to the consumer and to limit the burden on consumers."
The agency maintains that it is not double, triple — or more — counting complaints because each mention of a separate company is technically a new complaint. But the situation feeds into the banking industry's distrust of the CFPB's complaint numbers. Since the agency began taking complaints in 2011, many bankers have argued the overall numbers are misleadingly inflated. The damage goes beyond making individual banks or other institutions look bad, however, considering the CFPB can use complaints as a basis for enforcement actions and policymaking.
"CFPB reports on complaints underscore their interest in complaint numbers, regardless of whether that number is inflated by duplicates or non-complaints," said Virginia O'Neill, senior vice president of the American Bankers Association's Center for Regulatory Compliance. "We get calls from banks about how to get errors off of the public portal."
Still, some said they understand the CFPB's point of view, considering that multiple companies may be at fault in a single complaint.
"Sometimes when a consumer has a dispute that involves a credit between a bank and payday lender, for example, both companies will bounce the customer back and forth," said Nicholas Smyth, a former CFPB enforcement attorney who's now at Reed Smith LLP. "In that case, given the constraints of the CFPB's complaint form, it does make sense to treat a complaint as separate complaints for each company named so everyone has a chance to give both sides of the story."
But multicounting complaints isn't the only problem CFPB officials have seen. In another example, a state banking department referred a complaint to the CFPB in which the consumer explicitly complained about a payday lender. Yet the complaint was instead filed under the consumer's bank — not the payday lender — which was mentioned in passing. (Personal consumer information was scrubbed before being shown to American Banker.)
The bank wrote back to the CFPB saying it spoke with the consumer, who verified that the complaint "in no way concerns" the bank, asking for it to be reassigned to the payday lender. It's unclear what the CFPB did as a result of the bank's concern, but there is no complaint listed in the public portal against the payday lender that the consumer initially wrote about in 2014.
In another case detailed in documents seen by American Banker, a consumer complaint was referred by a state banking department but the CFPB filed the complaint under the name of the general counsel of that agency rather than the consumer's name.
The CFPB's Vahey declined to comment on both examples above unless American Banker sent a copy of the documentation it had obtained. American Banker was unwilling to do so because it did not want to inadvertently reveal its sources.
Overall, the CFPB has put considerable emphasis on the number of complaints it receives. It publishes monthly trend reports on the data and trumpets the sheer number it collects. The agency is careful, however, to note that it does not independently verify the veracity of the complaints.
"The Consumer Complaint Database is a collection of 480,801 complaints, on a range of consumer financial products and services, sent to nearly 3,000 companies for response," the site says. "We don't verify all the facts alleged in these complaints, but we take steps to confirm a commercial relationship between the consumer and the company."
But current and former officials agree the numbers are significantly inflated by duplicate complaints. Even when a company complains that is the case, the agency has strict rules in removing the duplicate, they said.
"There are errors all the time, but the bigger one right now is that the agency is relying on companies to determine whether it's a duplicate complaint and the agency has very stringent requirements that would justify removing a complaints," said a current CFPB official. "So you end up with an inflated number of complaints against a company. And that goes for both complaints submitted by paper and electronically."
Vahey said the agency takes complaints seriously and companies have ample opportunity to report errant complaints.
"Companies have multiple channels for alerting the bureau if there is a situation where they cannot validate a commercial relationship with the complaining consumer, where the complaint is submitted by an unauthorized third party, or where the complaint is a duplicate of one already received by the company and previously responded to through the portal," Vahey said.
She added that complaints are listed publicly after the company either confirms that it has a relationship with the consumer or after it has had the complaint for 15 days, whichever comes first.
A team within the CFPB, called consumer response, screens the complaints based on certain criteria. "These criteria include, for example, whether the complaint falls within the CFPB's primary enforcement authority and whether the complaint is complete," Vahey said. "Screened complaints are sent via a secure web portal to the appropriate company."
However, officials within and outside the agency said there are still significant errors that fall through the cracks.
"Even if the agency has gone back to correct some of these errors, the problem is somebody consumed that public database before they removed it," said Jim McCarthy, a senior CFPB official who helped develop the portal and left the agency in September. "So the problem really is in the lack of a solid, basic compliance management system through the intake process."
The documents seen by American Banker suggest that the errors seem to occur more in complaints that are submitted either by referral from another agency or nonelectronically — by mail or phone, for instance.
That may be because the CFPB outsources its manual complaint intake function to a contractor with call centers in Iowa and New Mexico. Additionally, there are fewer people at the agency vetting those complaints for errors, several sources said.
"The bureau decimated the internal complaints investigation function. If you notice, the CFPB no longer talks about how many complaints they investigate, they talk about how many complaints they've handled," said the current employee. "They have instead ramped up the data analytics team and are pushing toward an automated reporting system. It's the whole idea of garbage in, garbage out."
Vahey confirmed that the bureau has contractors who handle the complaints that are not submitted electronically, but said those are still vetted by the CFPB. She added that complaints submitted by mail, email or fax make up only 9% of the total complaint volume received.
"The CFPB has a robust process to review data entry and complaint routing tasks. All work performed by contractors is reviewed by CFPB staff," Vahey said. "For mail, fax, email, and referrals, the contractor attaches the original submission and then performs the data entry. If we don't have enough information, we reach out to the consumer to get more information before we route it either to a company for response or to another regulator."
Current and former employees said the CFPB has tried to improve the consumer complaint portal and make it more accurate, but has been hampered by staff reductions specifically on the team that investigated complaints, general turnover and an increasing volume of complaints.
"We worked hard to solve as much as we could in order to make the complaint portal work for consumers and the industry. Fairness and transparency were important to me for both company and bureau perspectives," McCarthy said. "But there were very few of us who did that and even fewer now, so the amount of unrouted or misrouted complaints has gone up astronomically."
The level of consumer complaints has risen dramatically each year since the portal began operation, jumping from more than 20,000 in 2012 to more than 70,000 in the third quarter of 2015. That tremendous growth has made it hard for CFPB staff to keep up.
"The reason complaints are increasing is not because they have more issues in the financial industry, it's just that more consumers now know who complain to, there are more products they can complain about and the system makes it easy to complain," said the former senior CFPB official. "For people who know the data, it's really hard for it to be anything other than a mix of information. I just dismissed the trending data immediately, because it's not holding a sample constant over time because the CFPB is always adding new products and customers all the time."
Another concern raised by officials was that when any complaint is submitted to the CFPB, the agency gives it a unique identifier (or number) when it is sent to the company that is being complained about. However, that same complaint is assigned a different number when it's posted in the public portal. The agency is trying to protect the consumer by ensuring no private information ends up in the public portal. But this makes it difficult for a company to retrace the complaint once it's been posted publicly and to determine whether or not the CFPB fixed any errors that were previously raised.
"When they do find a mistake in the public portal, the CFPB takes it off. But it's not easy, because you have to go through the gyration of trying to figure out where the complaint is in the public portal because there's no one unique identifier," the ABA's O'Neill said.
The CFPB officials interviewed for this story agreed that the complaint portal is a vital part of the CFPB's mission. But they question how the data from it is used when a significant portion of the complaints are incorrect.
"The question is what good is the data, especially if the whole point of making it publicly available to consumers is to help them determine who to do business with and who not to," said the current employee. "And simply getting a response back from the company does not mean the response did anything for the consumer."