Public Disclosure and Consumer Financial Protection

Abstract

The U.S. Consumer Financial Protection Bureau has accepted complaints about banks’ financial products and services since 2011 and has released the complaint database to the public since 2013. We analyze the effectiveness of this public disclosure in protecting mortgage borrowers. We find a greater reduction in mortgage applications to banks that receive more mortgage complaints in local markets after the disclosure. 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. Our findings suggest that the public disclosure of banks’ provision of inferior products and services enhances product market discipline and consumer financial protection.

Keywords: Public Disclosure, Mortgages, Complaints, Applications

JEL Classification: D18, G20, G51, O30