Public Disclosure and Consumer Financial Protection

Abstract

The U.S. Consumer Financial Protection Bureau has released a database of consumer complaints about banks' financial products to the public since 2013. We find a greater reduction in mortgage applications to banks that receive more mortgage complaints in local markets after the disclosures. The effect is stronger in areas with more sophisticated consumers and higher credit competition, and for banks receiving more severe complaints. The number of monthly mortgage complaints per bank exhibits faster mean reversion after the publication of the database. These findings suggest that the public disclosure of mortgage complaints enhances product market discipline and consumer financial protection.We thank two anonymous reviewers, Mary

The Adoption and Efficacy of Large Language Models: Evidence From Consumer Complaints in the Financial Industry

“…A complaint marked as "Closed" indicates no relief or explanation was given to the consumer. We consider a persuaded outcome to be one where either monetary or non-monetary relief is achieved, which is a definition consistent with the definitions from previous studies (Dou and Roh, 2019;Dou, Hung, She, and Wang, 2023).…”

“…The last category is "Closed," which implies that the company closed the case on the complaint without providing any form of relief or explanations. In the present research, we define the successful persuasion outcome to be receiving either monetary or non-monetary relief, consistent with the definitions used in previous research (Dou and Roh, 2019;Dou, Hung, She, and Wang, 2023). This definition is used to code for the main dependent variable in our analyses.…”