Pawlenty-led financial lobby opposes posting details of consumer complaints

WASHINGTON – The digital billboard displayed at the Pentagon Centre shopping mall just outside the nation's capital carries a simple message: Rumors don't equal facts.

The billboard, along with others like it and ads on Facebook, Twitter and the online publication Politico, are all part of a new push by the financial industry's main trade group to stop a government website from posting stories of people aggrieved by the nation's banks, mortgage lenders and credit card companies.

In July, the U.S. Consumer Finance Protection Bureau (CFPB) announced plans to post such stories on its website. It already lists general descriptions of hundreds of thousands of complaints against financial institutions for such things as hidden fees, late charges and misbegotten debt collection.

As a Sept. 22 deadline approaches for public comments on more detailed disclosures, the financial industry has pushed back through its Financial Services Roundtable trade group, which includes two prominent Minnesota-based companies and is led by the state's former governor, Tim Pawlenty.

"The CFPB's plan will feature only one side of the story, and such one-sided accounts will not advance the CFPB's mission of better informing and helping consumers," roundtable CEO Pawlenty said in a news release last week.

In blasting what it calls "rumors," the financial industry ratchets up the political fight over how to regulate the industry and its conduct that contributed to the Great Recession. The industry is confronting a unique use of social media by a government agency, said Don Kettl, dean of the University of Maryland's public policy school.

Kettl called CFPB's tactic a "strategy of outrage" designed to change the behavior of businesses, some of which are now paying the federal government billions of dollars in fines over their lending practices. The CFPB, created by Wall Street reform laws passed in 2010, "is on the bleeding edge of challenging industry in ways that industry doesn't know how to respond," Kettl said.

Still, posting consumer narratives could erode industry cooperation that the nation needs to make its financial system work better, warned Richard Painter, a corporate and securities law specialist at the University of Minnesota.

"There is a lot of hostility toward the Consumer Finance Protection Bureau from the banking industry — a lot of it unjustified," said Painter, a former ethics lawyer in the George W. Bush administration. "But this seems to be an unnecessary stick in the eye."

Consumer advocates generally praise the government's attempt to make more detailed complaints available so the public can identify problematic practices among specific companies.

"Americans are rightly jaundiced about the financial system," said Bart Naylor, a financial policy specialist with the consumer group Public Citizen. Naylor called the Financial Services Roundtable campaign against story posting "a self-interested response that belittles consumers."

"Adding narratives [to the CFPB website] goes a long way to empowering consumers to decide what services to choose," he added.

In an interview, the Financial Services Roundtable's director of consumer financial services, Anne Wallace, said posting narratives of consumer complaints could "mislead and confuse." The government, she said, would be giving credence to information it does not verify.

"There's bound to be a lot of confusion about what happened," Wallace said. "We don't think that will help [other consumers] make sound financial decisions."

The Consumer Finance Protection Bureau has posted bare-bones information about consumer complaints and their resolution since 2011. The agency website shows 3,236 complaints from Minnesotans in general categories such as loans, checking accounts, credit cards and mortgages. The complaints are aimed at dozens of companies. Of these complaints, 2,614 were closed within 30 days without customers disputing the solution; 2,153 were closed with an explanation; and 260 were closed with "monetary relief."

CFPB declined to make anyone available for an interview with the Star Tribune. Agency spokesman Sam Gilford issued a brief e-mail statement that said CFPB would not include names of individuals in consumer complaint narratives and would only publish those narratives that consumers offer to share.

"Companies would be able to publish their own response, which would appear next to the consumer's complaint narrative," Gilford added.

Karen Grandstrand, a financial services regulatory attorney at the Minneapolis law firm of Fredrikson & Byron, says it is against the law for companies to disclose any financial information about consumers, including acknowledging that they are customers.

"In order to ensure that they are not violating the law, companies' responses will have to be generic," said Grandstrand, a former district vice president with the Federal Reserve. "You're not going to get both sides."

The result, according to Wallace, is that people will "get upset and make statements that aren't borne out by the facts," "The issue may get resolved," she said. "But the language is still up on the site."

Public Citizen's Naylor called that worry "disingenuous."

"No industry wants its complaints broadcast," he said. "The Internet does that. But this will make businesses better. The average viewer of this [CFPB] website will look at it just as people look at TripAdvisor. They will see these are unvarnished submissions. They'll also see what happened [to resolve the issues]."

"We're clearly headed in the direction of social media," he said. "And social media is by its nature unvetted."