Mulvaney to Move CFPB's Consumer Response; ACA Puts Complaints in Perspective

According to a release by Americans for Financial Reform, Consumer Action and U.S. PIRG, CFPB Acting Director Mick Mulvaney has announced to employees that he is planning to transfer the bureau's Office of Consumer Response into the Consumer Education and Engagement division. insideARM was not able to separately identify the source of the announcement.

The trio of consumer advocates posed this question:

While Mulvaney’s statement expressed his intention for efficiency we must ask:

• Consumer Response has essentially been an independent office housed in the Operations Division. As such, its research on consumer complaint trends has been equally available to all divisions and offices, including, for example, Supervision, Enforcement and Fair Lending; Research, Markets and Regulations; and Consumer Education and Engagement. Is this transfer designed to diminish the Consumer Response unit’s important role in helping all units of the agency collect and understand the ongoing complaints that consumers raise?
• What benefit does this transfer provide consumers and will this relocation affect the Complaint unit’s budget?

The Consumer Response (Complaints) unit of the CFPB is an integral part of the bureau. It empowers consumers and the consumer agency with firsthand information to help individuals make wise financial decisions, helps the Bureau prioritize its efforts to focus on patterns of harmful practices and helps to hold companies accountable. We plan to examine the effects of this change closely.

This activity coincides with a few other related initiatives:

One, Acting Director Mulvaney's now famous January 23 'We are no longer going to push the envelope' memo to staff referenced complaints, and the fact that he plans to use the CFPB's complaint data to guide rulemaking priorities.

Two, ACA International released a whitepaper last week summarizing its analysis of 2017 debt collection complaints. You can download that full report here. The research concludes,

"Similar to ACA’s previous research, the findings suggest that while the overall raw number of complaint submissions appears high for the debt collection industry, once the data has been properly contextualized, the number of consumer complaints is remarkably low. This finding remains consistent despite the CFPB’s overly broad characterization of what constitutes a complaint."

Significant among the findings are these two points:

• The total number of debt collection complaints received by the CFPB represents an incredibly small number of consumers (0.005%) who had contact with the debt collection industry during 2017 and are remarkably consistent with other financial services industries. Further, the complaints account for only .06% of all Americans estimated to have a debt in collection.
   
• Response options that measure the most negative stereotypes about the debt collection industry, such as harassment or illegal practices, were the categories consumers selected the least and represent an exceptionally small number of responses. Additionally, these categories saw declines from 2016 to 2017. These data suggest that consumers are not complaining about harassing or harsh debt collection practices and that the majority of debt collectors are adhering to legal requirements and ethical guidelines. 

insideARM Perspective

The second point noted above regarding debt collection complaints is important to note, and the detail behind this data should be an important guide in any related rulemaking. 

There continue to be complaints of illegal collection tactics such as threats, profane language, or calling outside the hours allowed by the FDCPA. All legitimate firms would agree these practices should not be allowed. But the relatively small number of complaints about these tactics suggest that more rules are not needed in that area. 

By far the most common complaint category is "attempts to collect debt not owed." The most common sub-categories within this area are "debt was paid," "debt is not yours," and "didn't receive enough information to verify debt." These are all symptoms of a need to close the communication gap between third party collection agencies and their creditor clients. As noted in the ACA report, "These types of complaints underscore the need for accurate data, clarity of communication with lenders, and continually updated and maintained records and record keeping processes."

Demanding that one party single-handedly fix a system that requires two parties -- especially when you are demanding the fix from the one with the least leverage in the relationship -- is unlikely to be successful. Improving the consumer experience in debt collection must involve all stakeholders.

As for the matter of where Consumer Response sits within the CFPB, it does seem to me that it's an operations function. The skills required to manage a large scale call center and data processing organization are vastly different than those required to produce educational content. Of course, the connection with consumers ought to guide the content development. I can't comment on whether the move would diminish the importance of the group, as charged by the consumer advocates. I can, however, say that I'd love to see a much bigger allocation of resources to financial education, and to helping consumers to avoid debt collection in the first place.

Educating all Americans is a monumental task. It requires more than pamphlets, targeted workshops, and FAQs on a website (although there's nothing wrong with these). I'd love to see the CFPB partner with the Department of Education to bring true required financial literacy education to students beginning in elementary schools -- and every year thereafter at an age appropriate level.