Consumers Living in Low-Income Neighborhoods Less Likely to Receive Financial Restitution When Complaining to CFPB: Study

During the past four years, coincidentally linked with the start of the Trump administration, complaints filed by individuals with the Consumer Financial Protection Bureau that were resolved with the consumer receiving some form of financial restitution declined in neighborhoods where the majority of residents were minorities, according to a research report that was released last week. The change in restitution patterns is evidence that the companies were anticipating a “more industry-friendly CFPB” because the financial restitution gap can not be explained in any other way, according to the researchers — a pair of professors from Boston College.

A copy of the research report — The Financial Restitution Gap in Consumer Finance: Insights from Complaints Filed with the CFPB can be accessed by clicking here.

“Under the Obama administration, consumers from all backgrounds were equally likely to benefit from the CFPB’s program to give consumers restitution for the issues they had with financial services providers,” said Rawley Heimer, the study’s lead author, in a published report. “That changed dramatically under the Trump administration. Consumers became less likely to receive restitution, with the effects felt especially hard among consumers from low socioeconomic backgrounds and Black Americans.” 

On average, about 5% of complaints filed with the CFPB are closed with some form of restitution being paid to the consumer, according to the report. Because each complaint includes the ZIP code of the individual filing it, the researchers could match the consumer with geographic demographic information from the U.S. Census. What the researchers found was that regardless of where consumers live, it has no bearing on their likelihood of complaining to the CFPB. Individuals from regions deemed to be high-socioeconomic were just as likely to complain as those from regions deemed to be low-socioeconomic. But the complaints filed by individuals in low-socioeconomic regions were 30% less likely to be closed with financial restitution than those filed in high-socioeconomic regions.

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