Forty years ago, William Whitford and Spencer Kimball published Why Process Consumer Complaints? Their article uses the Office of Commission of Insurance of Wisconsin (the Office) as a case study to explore the reasons why government agencies process consumer complaints and whether these reasons justify the resources that complaint processing entails. Four years ago, the creation of the Consumer Financial Protection Bureau (“CFPB” or “the Bureau”) increased the stakes riding on these questions. The CFPB is the most important recent development in consumer law. Its effectiveness, or lack thereof, will influence the financial experiences of millions of consumers for years to come. And processing consumer complaints is one of its core functions. The CFPB not only expends significant resources on this task, but also uses complaints to inform supervision and examination, rulemaking, enforcement actions, and consumer education. In addition, the CFPB publishes a database of most of the consumer complaints it processes, albeit one with significant limitations. This presents an ideal opportunity to apply some time-tested wisdom to a new issue of pressing concern.
As I began this project, it immediately became clear that Whitford and Kimball’s insights are comprehensive and relevant today. The framework they develop applies directly to the CFPB complaint process and provides a productive way to analyze it. The authors propose three “obvious” reasons to process consumer complaints: to settle consumer disputes, to inform the agency’s regulatory activities, and to generate good will for the agency.
The most fundamental of these reasons is dispute settlement: providing a way for consumers to resolve issues that might otherwise lack a forum. Consumer complaints against companies usually have damages too low to justify hiring an attorney. For low-income or even middle-income consumers, an attorney may be out of financial reach regardless. And few consumers possess the sophistication to file lawsuits on their own. So when Whitford and Kimball used the Office of Insurance as a case study, they were examining whether a government agency complaint process could serve as a low-cost, low-barriers alternative to litigation. I explore this same question with the CFPB.
Next is the regulatory reason to process complaints. An agency that opens itself up to consumer complaints will likely receive enough of them that the complaints can constitute a valuable data source. These data can inform the agency’s rulemaking and enforcement objectives, as well as any informal negotiations the agency undertakes with companies. This reason is subject to the caveats that complaint data are not random and thus may not be representative of the consumer population the agency serves.
Finally, good will is not a public policy reason to adopt a complaint process but it is a reason why an agency would want to do so. Generating good will can make it easier for the agency to fulfill the other two functions by creating “buy in” among the constituencies with which the agency works. The authors identify three such constituencies: the public who would see the agency as a source of help, elected officials who would be impressed by the agency’s usefulness to consumers, and the companies who were the subject of the complaints. The companies might find that the agency’s complaint process had a legitimizing effect. For example, if the agency obtained no more relief for the consumer than the company had granted, that might validate the company’s original stance.
I find that the CFPB has mixed success in providing an alternative dispute resolution forum, although I am missing significant key information for this evaluation. I do find one instance in which the CFPB’s complaint data may contradict a rosy dispute settlement narrative that has been developing. The CFPB is particularly strong on the regulatory function. It makes significant use of complaint data in its regulatory roles and evinces a commitment to ensuring that companies are handling complaints well.
Finally, there is good will. Even though one would expect an agency with “consumer” in its title to have an important commitment to public good will, I was unable to find much evidence one way or the other. As for good will among government actors, the CFPB created a portal that enables congressional officials to monitor the progress of complaints they have submitted on behalf of their constituents and another portal that enables state and federal regulators to use complaint information to inform their work. However, the CFPB appropriately appears not to apply different treatment to complaints referred by government entities or officials. Finally, the CFPB’s complaint data reveal an intriguing possibility that the process may provide some legitimization of companies’ complaint resolutions.
This Article proceeds in six Sections. Section II provides an overview of the two complaint systems as well as brief descriptions of the two case studies’ methodologies. The next three Sections each analyze one of the three Whitford and Kimball complaint functions. Section VI concludes.