Charlotte Haendler of Southern Methodist University (SMU) – SMU Cox School of Business and Rawley Heimer of Arizona State University (ASU) – W.P. Carey School of Business have written The Hidden Costs of Financial Services: Consumer Complaints and Financial Restitution. Here’s the abstract:
Financial disputes are a widespread but understudied feature of consumer financial markets. Using confidential data from the Consumer Financial Protection Bureau (CFPB), we analyze nearly two million consumer complaints filed since 2014, which have led to an average payout of $1,470 per successful complaint. The volume of complaints and total restitution have increased substantially over time, suggesting significant scope for additional compensation. When understanding who secures restitution–and why–we find little evidence that differences across firms systematically drive restitution outcomes. Instead, product complexity and consumer engagement play key roles–consumers with higher income and education (high-SES) are more likely to explicitly request refunds, claim fraud, and submit supporting documentation, making firms more responsive. Leveraging previously unexamined CFPB monitoring reviews, where the agency systematically screens company responses and issues confidential reports highlighting deficiencies, we show that regulatory scrutiny increases restitution but disproportionately benefits high-SES consumers, reinforcing individual-specific mechanisms. Our results highlight the complementary nature of regulatory interventions and suggest that financial sophistication and self-advocacy are critical determinants of consumer redress.
