"The point of banking supervision is to get the system working properly, not to air dirty laundry and scare capital away from banks," Richard Riese, senior vice president at the bankers association’s Center for Regulatory Compliance, said in an interview.

There's a fundamental aspect of consumer financial protection that the banks just don't seem to be grasping, as is apparent in this statement about the banks efforts to keep us in the dark about fraud. At issue here is a complaint line for consumers to be created by the Consumer Financial Protection Bureau, and whether these complaints should be available in a public database.

The point of banking supervision is to make the banks comply with the law and to protect consumers from unnecessary financial risk in the form of shady practices by banks.



Nonprofit groups such as Consumers Union and the Sunlight Foundation are pushing for an open system that would allow anyone to scan the raw submissions. Industry groups including the American Bankers Association argue that making them public could allow frivolous complaints to damage reputable brands.... The hotline has become a focal point of a philosophical debate about the bureau’s role—whether it should aim to improve consumer financial products primarily by working directly with companies or by bringing public attention to unfair practices.

One could argue that if the banks and financial institutions were complying with the law and providing good customer service and fair products, then they wouldn't have to worry about even having any dirty laundry to air. Public exposure of bad bank and financial institution practices has two key goals: providing information to consumers so they can make educated decisions about where to put their money, and keeping pressure on institutions to keep their noses clean.

In setting up the bureau, Elizabeth Warren has argued for a very 21st century, public approach: crowd sourcing.

Warren has said that a public database would allow consumers to look for patterns—a process known as "crowd- sourcing"—and make their decisions accordingly. "Through crowd-sourcing technology, consumers can deal collectively with those who would take advantage of them—and can reward those who provide excellent products and services," Warren said in a speech on Oct. 28.... Warren addressed the consumer complaint system at an April 6 meeting with groups that campaign for more open government, according to a blog post on the agency’s website. The groups urged Warren to make the complaints public despite bank objections, said Angela Canterbury, director of public policy at the Project on Government Oversight, a watchdog group. "These concerns about consumer complaints on the part of industry reflect an old-fashioned sensibility," Tom Lee, director of Sunlight Labs at the Sunlight Foundation, said in an interview. Lee, who attended the meeting, pointed out that Amazon.com Inc. (AMZN) publishes unedited consumer complaints about products on its website "and global capitalism has not ground to a halt."

The whole point of the Consumer Financial Protection Bureau is just that: consumer protection. It's worked for the automobile industry, which has been subject to a similar system since 1966. The National Highway Transportation Safety Administration maintains a public database. It's been fine for them, says Wade Newton, a Wade Newton, a spokesman for the Alliance of Automobile Manufacturers. "We compete on consumer satisfaction.... The idea that we have a channel to get feedback from our customers is a good thing."