Thursday, October 25, 2018

BCFP Complaint Snapshot - Complaints, Complainers and Compliance

The BCFP (formerly CFPB) has a complaint database where consumers can register complaints about financial products and financial institutions can respond. This month the BCFP (formerly CFPB) released its 50 State Complaint Snapshot, an interesting compilation of complaints the BCFP received for the period January 1, 2017 through June 30, 2018.   The nature of the complaints is broken down into fairly broad categories: debt collection, credit or consumer reporting, checking or savings, and credit card. For each category there is a comparison between the percentage of complaints for the top issue in 2016 and the percentage for 2017. So for debt collection, the top issue is attempts to collect debt not owed, and a bar graph is given comparing the percent of the total in 2016 and 2017.

There is a section for the top 5 loan products (car loans, mortgages, credit cards, etc.) and the percentage change in  complaints from 2015 to 2018 for each loan product. The data is massaged into different groups: the total number of complaints, complaints per month, change in complaint volume for the given period, timely company responses and my favorite, complaints per 100,000 population.

By employing such broad categories, and using a small number of compilations, the BCFP makes the report easy to review and compare states. There is a one page of figures for each state.

For financial institutions, the big number is the percentage of 'timely' responses to complaints, over 95% in all states ('timely' is not defined). Similarly with the percent change in complaint volume from Q1 to Q2 2018, which in almost all states shows a decrease, as does the percentage change in complaints from 2017 to 2018.

Like many such reports, the 50 state snapshot may mask more than it illuminates. The snapshot only reports on complaints through the BCFP, not complaints directly to the financial institutions, to state or local advocacy groups, or to state attorneys general. In a given state those complaints could be many more or many fewer than those to the BCFP. So, for example, reduced complaint volume between Q1 and Q2 2018 is only useful if the total number of complaints to all sources is known. Indeed, in states with fewer complaints overall to the BCFP, this may only mean: 1) the local financial institutions, local or state consumer resources are doing a better job of making consumers aware of their services or 2) doing a better job of serving them, or 3) that there are fewer people in that state. It may mean that the given state's debt collection regulation is better, or that debt collection regulation is worse but that local financial institutions do a better job serving consumers, or that most if not all financial institutions receive few complaints and one receives a lot of complaints.

It would seem the best apples to apples comparison among states is the number of complaints per 100,000 population, but once again, this is subject to speculation. The fewest complaints per 100,000 was Iowa, with 63. The highest was the District of Columbia, with a whopping 358 per 100,000. Georgia was second with 270 per 100,000, Delaware third with 228.

Questions abound. Are financial institutions in D.C. and Georgia really that much worse than Iowa, or do Iowa consumers use other complaint portals? Are Iowa consumers smarter about their money so they don't need to avail themselves of BCFP help, or are they uninformed about the BCFP complaint portal? D.C. consumers likely use the BCFP complaint portal because D.C. is where the BCFP is located, but perhaps all that means is that D.C. local consumer resources are not adequate. Or, maybe D.C. consumers are chronic complainers who actually fare better with financial institutions than Iowa consumers, and Iowa consumers fare worse but never say anything about it?

 In the early years of the CFPB, financial institutions likely deservedly received criticism for their slow, inadequate, or non-existent response to CFPB complaints, and for their claims that the 'complaints' were so abbreviated they were impossible to respond to. The sky-high percentage 'timely' responses suggests financial institutions have now chosen to respond rapidly to complaints received through the BCFP portal, certainly to better serve their customers but possibly to burnish their image with the BCFP. Similarly with the change in complaint volume from Q1 to Q2 2018. Why was that period chosen? These two numbers, percent timely response to complaints, and reduction in claim volume from Q1 to Q2 2018, are very positive for the financial industry. Did financial institutions have any say in these figures being included in the snapshot?

The BCFP's figures are also open to speculation because the number of financial products used by consumers is not given. If D.C. consumers, who have the highest complaint rate, have a high number per capita mortgages, credit cards, car loans or other financial products, 358 complaints per 100,000 may not be high at all.  Conversely, if Iowans, with the lowest complaint rate, have few such financial products, their 65 complaints per 100,000 rate may be very high.

Compilations like the 50-state snapshot unquestionably serve a useful purpose and certainly have value. A reduction overall in complaints, whether through the BCFP complaint portal or not, cannot be a bad thing. My father dealt with market and other behavioral studies for his entire career. He never got tired of telling me there are lies, damned lies, and statistics. Boy did I get tired of hearing it. But he was right.

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