Harry from Massachusetts thought his son Ari, a 21-year-old infantry soldier, had been bilked by the company that financed his purchase of a truck. Besides paying an 18 percent interest despite his good credit, Ari was talked into a package of dubious extras, including a "comprehensive" insurance plan that didn't cover several major components. Every month he was hit with monthly processing fees that weren't even listed on his statements.
Ari was left with a monthly payment of $700 – more than 70 percent of his take-home pay. To add insult to injury, the lender that put him in this fix had the nerve to promote itself as a "proud" provider of "educational services" as well as credit to "our active duty customers."
Harry reported his son's plight to the Consumer Financial Protection Bureau. It looked into things, and ultimately saw a problem affecting not just Ari, but other borrowers as well. Last week, the Bureau ordered the lender's two parent companies, U.S. Bank and Dealers' Financial Services, to return $6.5 million in what it characterized as ill-gotten gains generated by hidden fees and overpriced add-on services targeted at service members. The order also stops U.S. Bank from requiring borrowers to repay their auto-loans through the military allotment system, the source of some of the undisclosed fees.
The CFPB was created after the financial crisis to bring basic rules of fairness and transparency to the world of lending and consumer finance. The Dodd-Frank financial reform law that created it also specifically required the bureau to receive consumer complaints, and doing so is an important part of its work. More than 120,000 people have communicated with the Bureau by submitting formal complaints through its online Complaint System, reporting, among other things, their unhappy experiences with loans and other financial products. And others have, like Harry, used the "Tell Your Story" feature on their web site.
Here is the bureau's process for dealing with complaints, which can be submitted online or by phone: Once the bureau receives a complaint, it contacts the relevant company. The company has two weeks to acknowledge the complaint and a limit of two months to respond to all but the most complicated issues. Companies may provide monetary or non-monetary relief (by fixing a credit score, for example), give an explanation or they can deny that there was a problem that needs fixing. Consumers can follow the progress of their complaints online and offer comments throughout. They can also let the bureau, and the public, know if they think the company's response was reasonable or not good enough.
Meanwhile, the bureau puts data on the complaints it receives into a public database that includes tools for filtering and sorting by categories, such as product type, company, resolution status and whether or not the consumer was satisfied with the response. We think they should also make consumers' actual descriptions of the problems they run into public (with the complainers' consent, and without personal information), and are urging them to do that in the future.
In any case, anyone can go to the database and see what problems others have encountered with particular products or institutions, and how problems have been resolved. They can learn from bad experiences and take note of good ones. Researchers can look for patterns of problems and solutions. And, as they did with Harry and Ari, the CFPB can use the complaints as one of its tools for understanding the consumer financial marketplace, spotting and investigating problems and taking action to make the market function more fairly and transparently.
The more people are aware of and use the complaint system, the more useful it will become. At the start, the system could only take credit card-related complaints, but now it has been expanded to include a variety of financial products including car loans, bank accounts, mortgages and student loans. More categories are on the way and the "Tell Your Story" feature remains a more free-form alternative for sharing all kinds of consumer experiences.
The good news about Harry and Ari's story, and about the complaint system as a whole, is that someone in Washington is finally starting to pay attention to what citizens and consumers have to say about what it's like to navigate the consumer financial system – and is taking steps to improve it. That is exactly what the Consumer Financial Protection Bureau was created to do.
The bad news is that too many in the financial services industry and their lobbyists and allies on Capitol Hill liked things just the way they were before, and continue to do everything in their power to keep the Bureau from succeeding at its job, including preventing the confirmation of a director to lead it. That needs to change.
Mitch Margolis is an intern with Americans for Financial Reform, a coalition of more than 250 civil rights, consumer, labor, business, investor and other groups working for a strong, stable and ethical financial system.