Watching the Watchdogs: Open Data and the CFPB

January 14, 2016 by Tyler Patterson

One of the most important promises of open data from government agencies is the potential for greater transparency.

As Jeni Tennison, technical director of the Open Data Institute, puts it:

Publishing open data is one way of being more transparent about what you’re doing. More transparency can help with being more accountable for your decisions [and] help engender trust.

Trust and transparency are central to the Consumer Financial Protection Bureau (“CFPB“). Among U.S. Federal agencies, it certainly has attracted a large share of controversy since starting out as the brainchild of Massachusetts Senator Elizabeth Warren. Its stated role is to “protect consumers by carrying out federal consumer financial laws,” which includes enforcing laws, educating consumers, and studying trends in the industry.

One of the CFPB’s main tasks is coordinating consumer complaints against financial institutions and their resolutions. Luckily for open data aficionados, the CFPB has opened its database of 150,000+ complaints to the general public. That’s a lot of data, and it’s a quite useful piece of the puzzle for evaluating the CFPB’s effectiveness. What does this data tell us?

Consumer issues the CFPB addresses

Starting out, here we have an overview of the areas that the CFPB handles:

Sheet 1

In this visualization, size represents the proportion of all complaints and color represents percentage of resolution (monetary or otherwise). One of the key takeaways is that credit card companies make up a relatively large proportion of the CFPB’s complaints and very often give relief, while payday loan institutions account for few CFPB complaints and seldom provide relief as a result.

However, in order to really understand the effectiveness of CFPB’s complaint system, we’ll need to see the trends over time. Are more consumers realizing that the CFPB is a good option for handling mistreatment? Are financial institutions getting better at quickly (and satisfactorily) responding to complaints?

If the CFPB is working the way it ought to, the answers to these questions should be “yes”. Let’s take a look:

CFPB trends

Complaint volume

Here we see the annual volume of complaints since the program’s beginnings in 2011 through October 2015 (latest data available), with consistent growth each year. This suggests that an increasing number of people view the CFBP as a viable resource. This counts as a win, as their programs, no matter how well-run, would be ineffective if no one knew about them.

Let’s see what’s happening with the financial institutions:

CFPB issue resolution

Complaint outcomes

Here we’re plotting the percentage of businesses that responded promptly, the percentage of consumers who received relief and the percentage of consumers who disputed the company’s response. As we can see, the proportion of prompt responses has mostly risen despite a slight decline from 2014 to 2015.

Interestingly, although the likelihood of companies giving out relief has fallen, the probability of consumers disputing the company’s response has consistently fallen as well (though both appear to be leveling off).

Evaluating the CFPB

This quick look at the data reflects well on the CFPB’s consumer complaint program. To me, it certainly seems as though banks are adjusting to the new system – they’re more punctual now, and they don’t have to give relief quite as much. Further, the decline in responses disputed by consumers seems to imply that banks’ responses have been more reasonable, strengthening the hypothesis that consumers everywhere are benefiting from the complaint system.

Of course, the trends don’t necessarily tell the whole story without digging into the details (e.g., types of complaints). However, the trend still seems to be a positive one, and as such it seems prudent to be cautiously optimistic about the CFPB’s effects on consumer welfare.

It’s also pretty fantastic that anyone can access the data for this without any red tape, isn’t it? Typically, it’s difficult to have any idea at all how well a given policy or government program is working, since the results are often kept behind closed doors. Fortunately, thanks to the CFPB opening some of its data, we have a much clearer picture on how it interacts with consumers, and whether its system is actually effective.

Image by: E Palen