NAFCU's Comments to CFPB on Credit Card Disclosure Policy

Posted: 2012-01-30 00:00:00

On behalf of the National Association of Federal Credit Unions (NAFCU), I wanted to share my thoughts regarding the Consumer Financial Protection Bureau’s (CFPB) proposed disclosure policy regarding credit card complaint data.  NAFCU is concerned with the proposed policy to disclose all complaints.  First, NAFCU questions the utility in disclosing complaints that are without foundation.  Second, blanket disclosure of all complaints, regardless of their veracity, raises safety and soundness concerns.  Further, these disclosures unduly place a financial institution’s reputation at risk given contemporary viral media.  Finally, NAFCU has some specific thoughts regarding the content of the information to be disclosed. 

First, NAFCU encourages the Bureau to implement systems to distinguish legitimate complaints from those that have no justification.  Only legitimate complaints should be publicly disclosed.  I understand the agency will provide issuers time to determine if they actually issued the card in question, however, that does not fully address our concern.  There seems little reason to publicly disclose unfounded complaints.  The proposed disclosures will only include certain general information about each complaint, without any narrative explanation.  To be clear, as discussed in detail below, NAFCU does not support disclosing narrative information; nonetheless, disclosing every complaint, without any indication of the veracity of the complaint, is inherently misleading.  NAFCU encourages the CFPB to implement a system that distinguishes between legitimate complaints and baseless complaints that are without merit, and to disclose only those complaints that are justified.

Next, disclosing all consumer credit card complaints raises safety and soundness concerns and unduly places financial institutions’ reputation at risk.  Publicized, unfounded complaints regarding a particular institution could create safety and soundness issues for the institution in question.  To be clear, NAFCU, and the entire credit union industry, supports the CFPB in investigating legitimate complaints.  We simply want to ensure that the system does not unfairly penalize institutions that may be the occasional victim of unwarranted complaints.  The issue is significant and it makes clear the differences between the CFPB’s proposed disclosure policy and similar policies at other agencies, such as the Consumer Product Safety Commission (CPSC).  While the CPSC does make public all complaints it receives, the companies in question are not financial institutions and those companies do not need to contend with the unique safety and soundness issues that face insured depository institutions.  Obviously, the CFPB was created out of a desire to focus on consumer issues, nonetheless, that focus should not come at the complete exclusion of system-wide safety and soundness concerns.  For this reason, we request the agency carefully reconsider its proposed policy to disclose all consumer complaints as a matter of course.

These disclosures also create more specific reputational risk concerns in addition to the safety and soundness concerns.  As discussed above, there is no mechanism to ensure the complaints are valid.  Consequently, any release of the raw number of complaints filed against each institution would be misleading and would create reputational risk issues that cannot easily be mitigated.  This is all the more true given the publicity that is likely to surround the disclosures and the speed with which even inaccurate viral media spreads.  The focus will be on the aggregate number of complaints and little, if any, attention will be given to whether the disclosures present a clear and accurate picture of the number of complaints and the institution’s response to those complaints.  Again, NAFCU understands the agency is tasked with protecting consumers; however, system-wide reputational risk issues should be addressed before the agency finalizes the proposed policy.

In addition to these more general policy concerns, NAFCU does have some more specific thoughts regarding the proposed policy and disclosure of narrative information.  First, NAFCU does not support disclosing the narrative fields.  Second, NAFCU does not support any sort of opt-in or an opt-out procedure to allow for disclosure of narrative fields. 

NAFCU opposes disclosing the narrative fields for several reasons.  First, as a practical matter, disclosing narrative fields increases the likelihood that personal information will be inadvertently released.  Even if the CFPB employs methods to scrub the fields of personally identifiable information, such processes are imperfect.  This is all the more problematic for two reasons.  First, the information will be disclosed in large quantities.  Second, the value of the personally identifiable information is, potentially, quite high.  By the same token, the potential harm to the consumer is also quite high.  If the scrubbing methods fail, they will fail in spectacular fashion.  The potential harm seems to significantly outweigh any potential benefits of disclosing the narrative fields.

Further, disclosing the narrative fields will likely confuse the issue as often as it clarifies the reasons behind the complaint.  NAFCU already believes disclosing all complaints as a matter of course is inherently misleading as the agency does not plan to distinguish legitimate complaints from frivolous complaints.  These concerns are exacerbated by the influence, briefly discussed above, of viral media.  Disclosing narrative fields will only compound these problems as the disclosures may have no basis in fact.

Given these concerns, NAFCU does not support an opt-in or opt-out approach to disclosure of narrative fields.  If the agency, however, does consider implementing such a system, it should, at the very least, require an affirmative opt-in from consumers before disclosing narrative information.  Further, if consumers are given the option to disclose narrative fields, issuers should be provided the same option.  To be clear, NAFCU does not support disclosure of narrative fields, nor does it support an opt-in or opt-out approach.  If the agency does implement such a system, however, the above recommendations would, at the least, be helpful.

In closing, we would again ask that the agency implement a system to distinguish between legitimate and frivolous complaints.  As always, I appreciate the opportunity to share NAFCU’s thoughts on this important issue. Should you have any questions or require additional information please feel free to contact Carrie Hunt, NAFCU’s General Counsel and Vice President of Regulatory Affairs, at (703) 842-2234 or me.

Sincerely,

Fred R. Becker, Jr.

President/CEO