ARLINGTON, Va. -

A George Mason University researcher and Yale School of Law graduate found three significant issues with the Consumer Financial Protection Bureau wanting to publish consumer complaint narratives online — including the CFPB lacking the authority to make such a move.

Hester Peirce sent a nine-page letter to the CFPB articulating the position, stressing the bureau’s plan to expand the database to include consumer complaint narratives is outside its statutory authority. Despite the CFPB’s contentions to the contrary, Peirce also stated the strategy is also inconsistent with open government directives such as Office of Management and Budget’s Open Government Directive.

“The other government databases that the bureau cites as parallels to its own are not appropriate models for the bureau to follow,” said Peirce, a senior research fellow within the financial markets working group at George Mason’s Mercatus Center.

Peirce along with research assistant Vera Soliman told the CFPB in the letter sent last week that Congress did not authorize the bureau to launch a public consumer complaint database. They recapped that the CFPB makes a case for the database because of its goals to ensure that “consumers are provided with timely and understandable information to make responsible decisions about financial transactions” and “markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.”

However, Peirce contends that publicizing complaint narratives as the bureau intends would work counter to both of these objectives, creating the possibility of even more dire consequences.

“The consumer complaint database invites consumers to rely on incomplete and potentially inaccurate anecdotal information in their financial decision-making. By potentially harming the reputations of high-quality providers of consumer financial products and services, the consumer complaint database could adversely affect markets,” she said.

Before tackling the question of authority, Peirce also informed the CFPB in this letter that “the expanded database is a solution in search of a problem,” and “costs of the proposed database expansion outweigh the benefits.”

To back up her position, Peirce explained services such as Yelp and Amazon.com collect and publish feedback on numerous consumer products and services. But Peirce noted these sites contain more balanced and complete information for consumers than a government website designed solely to collect complaints.

“In addition, both companies have developed systems to empower readers to assess reviews for accuracy and usefulness,” she said.

Devoid of what she contends is the proper context, Peirce also projected that every complaint will carry equal weight, regardless of the facts and circumstances and the complainant’s motivation.

“Because of their location in a government database, the complaints will carry an air of official gravity,” she said.

“Given that the database collects only complaints, it is an intentionally one-sided marketplace,” Peirce continued. “Even for companies with many satisfied customers, positive comments will not be included in the database to offset negative comments. Consumers, relying on the database as a relevant input in their financial decision-making, will not get an accurate picture.”

Peirce also touched on how much this database might impact the compliance costs finance companies face — expenses already on an upward trajectory because of the CFPB and other regulators.

“Because of the public and permanent nature of the database and the inclusion of a field related to company responsiveness, companies are likely to feel compelled to resolve even meritless complaints,” she said. “Doing so will decrease the attention they can devote to customers whose complaints have merit. Complainants may end up with preferable treatment to people who deal directly with the company.

Peirce closes her letter to the CFPB with a simple recommendation — return to the drawing board.

“Once back at the drawing board, the bureau should analyze whether there is a market failure, whether the bureau is well suited to solve that market failure, whether Congress has given the bureau the authority to create a public complaint database, and the potential costs and benefits of creating a responsible (i.e., not misleading) public complaint database,” she said.

The CFPB first made its complaint database proposal back in August.