How financial companies handle angry customers

Register now

(Bloomberg View) -- If Donald Trump satisfies Republicans’ demands to defang the Consumer Financial Protection Bureau, it will be unfortunate for the regular folk whose interests the president promised to defend. It might be sweet, though, for the banks and other companies on whose customer-service practices the bureau has shed unwelcome light.

The financial industry has long opposed one of the CFPB's most notable innovations: a public database that registers and tracks complaints about services such as mortgages and credit reporting. The bureau receives grievances and passes them on to companies, giving them 15 days to respond before the outcome is published. This has created pressure to be more responsive, and provided recourse for consumers who previously had nowhere to go.

The companies’ lobbyists argue that publishing the data isn’t fair. For one, the CFPB verifies only the consumer’s relationship to the company, not the substance of the complaint. Also, the news media don’t always put the data into the proper context: Companies that are bigger, deal with more retail consumers or engage in contentious lines of business (debt collectors, for example) will inevitably receive more complaints. In any case, disgruntled customers represent a small fraction of the total.

That’s all worth keeping in mind. Still, the database provides a valuable resource. It can reveal significant differences in customer service among companies in the same line of business. Across industries, outsize complaint rates can be indicative of deeper problems -- particularly in areas such as debt collection, where people typically don’t choose to become a company’s customers.

So, before the database gets shut down, let’s see what it tells us about how companies treat their customers.

Since the beginning of 2015, the CFPB has processed more than half a million complaints. I’ll look at the period before April 24, 2017, (when the bureau changed its data fields) and at six types of services: bank accounts, credit cards, credit reporting, debt collection, mortgages and student loans.

Which produced the most disgruntled consumers? Taken together, the three big credit reporting companies -- Equifax, Experian and Transunion -- generated by far the most complaints (more than 90,000). But that can be misleading: They operate in a very big market, collecting information on some 220 million U.S. consumers.

To put things in perspective, I estimated the number of people each service touches, and calculated how many complaints they receive annually for every 100,000 people. By this measure, the debt collectors took first place, followed by mortgages (which includes both lending and servicing). Here’s a chart:

And how well do companies handle those complaints? The database offers them several response options, such as “closed with monetary relief” or “closed with explanation,” and also records whether the consumer disputed the response (up to April 24, when the CFPB moved to a different system). To gauge performance, I calculated the percent of complaints that ended in dispute.

As a whole, the companies did an impressive job -- a reflection of either good will or the salutary effect of having the CFPB watching over the process. The overall dispute rate was about 18 percent, which means that more than four-fifths of complaints were resolved to consumers’ satisfaction. That said, different types of services fared differently. Here’s a ranking:

Some companies also did better than others. I focused on those that received at least 1,000 complaints over the whole period. In credit reporting, Equifax had by far the highest dispute rate (and this was before it announced its big data breach in September):

Big universal banks had pretty similar dispute rates, though JPMorgan Chase led the group:

And here are the top three among credit-card issuers, debt collectors, and regional and midsize banks:

Representatives for Experian, Wells Fargo, Discover, Encore Capital, BB&T, HSBC and Keycorp all stressed their companies’ commitments to resolving complaints (fuller statements below). Equifax pointed out that complaints often involve credit information provided to it by other companies, and may involve fraudulent attempts to remove information. Synchrony stressed that its dispute rate for credit-card complaints was actually lower than those of all the universal banks (which are also large credit-card issuers). Encore added that it had investigated the disputed outcomes and “confirmed that each account was valid, with an accurate balance, and appropriately placed in collections.” HSBC noted that its dispute rate decreased over the period examined. The other companies either declined to comment or didn’t respond to requests for comment.

For anyone who wants to dig deeper, the database is still available on the CFPB’s website, along with a useful search function. You might want to hurry, though.

For reprint and licensing requests for this article, click here.