Thursday, May 7, 2020

The CFPB Complaint Database Can Help Protect Hoosier Consumers:

Top Complaint Areas Signal Areas in Need of Intervention

As the economic fallout from COVID-19 mounts and Hoosier families scramble to mitigate the damage, consumer complaints can play an important role in pointing to areas of economic distress. Fortunately, the Consumer Financial Protection Bureau, established in the wake of the last financial crisis, provides both an avenue for recourse when consumers struggle with financial products and services as well as  a source of data to illuminate patterns. Our policymakers and leaders need to pay attention to these trends so they can think ahead about the potential long-term impact of this crisis and put measures in place to protect consumers.
Between March 15th of 2020 and April 15th of 2020, Hoosiers filed approximately 200 complaints with the Consumer Financial Protection Bureau. The complaint data signals a potential rising tide of economic woes. Narratives related to debt collection and consumer efforts to negotiate payments plans in the wake of COVID-19 fallout suggest that not all creditors and collectors are making an effort to work with borrowers. One Hoosier borrower wrote, I have attempted to settle and close this account three times, and [the credit card company] refused twice…even though now in the coronavirus climate my wife lost half her work hours.” Another noted, “I requested…based on the coronavirus epidemic, that this company allow me to pay my debt to them electronically as opposed to sending cash…which requires me to physically go to a banking location, withdraw funds, and then take those funds to a XXXX location to send my payment, thus exposing me multiple times to potential illness….My bank provided a letter to them stating my account was open and in good standing; however, the company continues to deny me any other option for payment.” The March-April complaint data shows that 7% of complaints relate to “struggling to pay” a mortgage or other loan – a number that will likely be worth watching in the coming months.

Breaking down these complaints by product type, it is clear that credit reporting and repair is still far and away the leading source of headaches among consumers who filed a complaint, with incorrect information on a credit report the top reason for these complaints. This is troubling, as these reports and scores have far-reaching implications for Hoosiers’ lives: they not only factor into who can get a loan and on what terms, but they also affect insurance coverage and costs, job opportunities, housing, and other essential services. Before the crisis, an estimated one in four unemployed adults reported going through a credit check when applying for a job, and one in ten reported that information on their credit report led to them being denied a job opportunity. Similarly, many landlords run credit checks when evaluating prospective tenants. Insurance companies also use credit report data to determine how likely an individual is to make a claim and set premiums accordingly. Credit reports end up being a gatekeeper for opportunity. 

Potentially compounding the problem, the Consumer Financial Protection Bureau recently issued guidance relaxing expectations for credit reporting agencies, the private entities that collect and use data from creditors to rate consumers’ “creditworthiness.” According to the guidance, credit reporting companies will not be expected to follow requirements and timelines for resolving disputes about credit reports. If the Bureau were truly responding to its data and looking out for consumers, it would hold these entities to higher standards, particularly given the importance of credit reports and scores as individuals strive to rebuild their lives. In the absence of leadership from the Consumer Financial Protection Bureau, we need to see Congressional action to direct creditors and credit reporting agencies to shield Hoosiers from damage. The legislation introduced by Senators Sherrod Brown and Brian Schatz to require a four-month moratorium on all adverse credit reporting would be an excellent place to start.
There’s at least one source of positivity in all the negative – complaining to the Consumer Financial Protection Bureau appears to be producing results for consumers, at least in some cases. One Hoosier wrote in, “After receiving no response to our letters disputing charges to our account stemming from a fraudulent charge, we filed a complaint with CFPB. As a result of this complaint…[a letter from the company said] they were removing the late fees and charges that they had added to our credit card account as a result of a fraudulent charge.” The Consumer Financial Protection Bureau notes that 97%of complaints filed - which are then forwarded on to the company - receive a timely response.
As the crisis continues, we will need responsive government agencies and thoughtful policymaking to ensure that Hoosiers can recover and rebuild. Data – including complaint data from consumers – can provide useful signals to indicate where attention is needed. Hoosiers should continue to use the complaint database, and policymakers and leaders should pay attention.

Do you have a complaint about a financial product or service? File it with the Consumer Financial Protection Bureau here.

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