Does the Disclosure of Consumer Complaints Reduce Racial Disparities in the Mortgage Lending Market?

Abstract

The Consumer Financial Protection Bureau (CFPB) publicly disclosed consumer complaint narratives in 2015. Utilizing a difference-in-differences design, I discover that, following disclosure, CFPB-supervised banks whose complaint narratives are disclosed are less prone to discriminate against minority borrowers in the mortgage lending market, thereby reducing racial disparities in interest rates, default rates, and rejection rates. My findings reveal that disclosure saves $102 million for minority borrowers in interest rate payments and assists over 14,000 minority households in obtaining loans yearly. Furthermore, other stakeholders, such as peer banks and stock market investors, facilitate the disclosure’s effects on reducing discrimination.