Disciplining Banks through Disclosure: Evidence from CFPB Consumer Complaints

with Anya Kleymenova (Fed Board), Jeffrey Jou (Wharton), Laszlo Sandor (CFPB), and Rajesh Vijayaraghavan (UBC Sauder)

ABSTRACT: We study the depositors' reaction to the disclosure of consumer complaints about their banks. Using the Consumer Financial Protection Bureau (CFPB) complaints data, we find banks subject to prudential CFPB oversight that receive consumer complaints experience a decline in uninsured deposits and respond by increasing offered deposit rates. We also analyze the content of consumer complaints in several ways. First, we find that complaints relating to bank accounts see a larger decline in deposits. Next, we leverage artificial intelligence (AI) tools to explore additional complaint classifications. Using topics identified by ChatGPT, we find complaints containing information on resolution expectations do not lead to similar deposit declines. Overall, our findings provide new evidence on the role of consumer complaints disclosure as a disciplinary mechanism and underscore the potential of AI tools to enhance the classification of complaints and support regulatory oversight.