Voice of the Customers: Local Trust Culture and Consumer Complaints to the CFPB

57 Pages Posted: 6 Nov 2017 Last revised: 21 Jan 2020

See all articles by Rachel M. Hayes

Rachel M. Hayes

University of Utah - David Eccles School of Business

Feng Jiang

University at Buffalo - School of Management

Yihui Pan

University of Utah - Department of Finance

Date Written: January 1, 2019

Abstract

We use complaints filed with the Consumer Financial Protection Bureau to study the interplay between social norms and the effectiveness of consumer protection laws. We find that a higher level of trust in a given location is associated with a lower number of complaints filed against financial institutions in that location. Employing a difference-in-differences approach, we further find that, after the establishment of the CFPB, banks in low-trust areas reduce fees charged to consumers more compared to banks in high-trust areas. Our results suggest that the threat of consumer complaints to a government agency affects how banks treat their customers, and they shed light on the interaction between informal culture and formal institutions, as well as on stakeholders’ influence in corporate policies.

Keywords: Culture; Trust; Consumer Financial Protection Bureau

JEL Classification: G21; G32

Suggested Citation

Hayes, Rachel M. and Jiang, Feng and Pan, Yihui, Voice of the Customers: Local Trust Culture and Consumer Complaints to the CFPB (January 1, 2019). Available at SSRN: https://ssrn.com/abstract=3064809 or http://dx.doi.org/10.2139/ssrn.3064809

Rachel M. Hayes

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

Feng Jiang

University at Buffalo - School of Management ( email )

344 Jacobs Management Center
Buffalo, NY 14260
United States
716-645-3225 (Phone)

Yihui Pan (Contact Author)

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

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