The Financial Restitution Gap in Consumer Finance: Insights from Complaints Filed with the CFPB

63 Pages Posted: 9 Feb 2021

See all articles by Charlotte Haendler

Charlotte Haendler

Boston College - Department of Finance

Rawley Heimer

Boston College - Department of Finance

Date Written: January 14, 2021

Abstract

Consumers seek restitution for disputed financial services by filing complaints with the Consumer Financial Protection Bureau (CFPB). We find that filings from low-socioeconomic (i.e., low-income and African American) zip codes were 30% less likely to be resolved with the consumer receiving financial restitution. At the same time, low- and high-socioeconomic zip codes submitted an equal share of the CFPB complaints. The socioeconomic gap in financial restitution was scarcely present under the Obama administration, but grew substantially under the Trump administration. We attribute the change in financial restitution under different political regimes to companies anticipating a more industry-friendly CFPB, as well as to the more industry-friendly leadership of the CFPB achieving less financial restitution for low-socioeconomic filers. The financial restitution gap cannot be explained by differences in product usage nor the quality of complaints, which we measure using textual analysis.

Keywords: Consumer Finance, Financial Regulation, Financial Disputes, Discrimination, Textual Analysis

JEL Classification: G28, G50, G53, J15, G18, G28, D12, D14

Suggested Citation

Haendler, Charlotte and Heimer, Rawley, The Financial Restitution Gap in Consumer Finance: Insights from Complaints Filed with the CFPB (January 14, 2021). Available at SSRN: https://ssrn.com/abstract=3766485 or http://dx.doi.org/10.2139/ssrn.3766485

Charlotte Haendler

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Rawley Heimer (Contact Author)

Boston College - Department of Finance ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
250
Abstract Views
1,016
rank
143,223
PlumX Metrics