Consumer complaints have played a significant role in shaping the regulatory environment for consumer financial products. Federal statutes and regulations have been driven largely by consumer feedback, often in the form of complaints. Federal regulatory agencies, including the Federal Reserve Board (FRB), Federal Trade Commission (FTC) and the Financial Industry Regulatory Authority (FINRA), have viewed consumer complaints as important indicators of potential regulatory issues and noncompliance.
The emphasis on consumer complaints has only increased with the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, in which Congress directed the newly formed Consumer Financial Protection Bureau (CFPB) to collect, monitor and respond to consumer complaints. The CFPB has launched a portal on its website to collect consumer complaints specific to consumer financial products (e.g., credit cards, mortgages, deposit accounts, student loans, etc.). The CFPB has indicated it will actively evaluate consumer complaints for potentially unfair, deceptive or abusive acts or practices (UDAAP) and other regulatory deficiencies, and utilize this information to focus its regular compliance examinations as well as conduct targeted examinations of its supervised entities.
As a result, financial institutions (banks and nonbanks alike) must establish reasonable procedures and processes to identify, track and respond to consumer complaints in a complete and timely manner, addressing not only the concerns of a specific customer but also the broader trends and processes giving rise to the complaint.
Challenges and Opportunities
Organizations experience multiple challenges in addressing consumer complaints and harnessing their value as part of their compliance management systems in their efforts to address the following:
- What exactly is a “consumer complaint”? – While some regulations and rules provide guidance as to what constitutes a complaint, the plain meaning of the word “complaint” suggests a relatively broad interpretation and can be difficult to define in practice.
- Data, data, data – Detecting trends and patterns, conducting root cause analyses and furnishing reports to management can be tedious, if not impossible, if complaints received are not tracked or categorized in a meaningful manner.
- The sum of many parts – Managing complaints data can be particularly burdensome for larger institutions since complaints may be received from various sources and in different places within the institution.
- Is social media the future of complaints? – Technology continues to evolve quickly. Institutions are realizing that social media has become a way for consumers to express and share with a broad audience their discontent.
- What risks do our vendors pose? – Organizations with a significant number of customer-facing vendors are particularly at risk for reputational and compliance concerns and attendant complaints.
Our Point of View
Institutions should take the following steps in order to strengthen the effectiveness of their consumer complaints management programs:
- Define roles and responsibilities for complaint resolution and design processes and controls that drive consistency throughout the enterprise.
- Develop enterprisewide consumer complaints standards and ensure consistency among procedures utilized by various lines of businesses.
- Define roles and responsibilities and ensure that employees are sufficiently trained to identify and respond to consumer complaints, including those received through social media and other third-party sources, in accordance with internal standards.
- Utilize robust technology to capture all relevant data points to facilitate trending and meaningful reporting.
- Establish processes to identify the root cause of consumer complaints and trends to determine potential regulatory issues arising from business activities, particularly related to UDAAP.
- Consider using social media as a tool to manage consumer complaints. A public response, where appropriate, may enhance customer goodwill by improving transparency and providing useful information to other customers with similar problems. However, firms should remember that responding publicly can pose risks such as prolonging the problem and elevating consumer privacy concerns.
- Identify and track consumer complaints related to vendor activities to enhance vendor oversight.
How We Help Companies Succeed
Our Risk and Compliance professionals can help your institution develop and maintain an effective consumer complaints management program. Our professionals have deep experience in the following areas:
- Evaluating and assisting with the design and implementation of compliance governance programs generally and consumer complaints response frameworks specifically
- Developing policies and procedures for addressing consumer complaints, and conducting related monitoring and testing
- Designing the infrastructure by which consumer complaints activity and data are captured and trends or patterns are detected and evaluated
- Creating and delivering consumer complaints training and awareness materials
- Conducting independent reviews or internal audits of the consumer complaints processes, including evaluation of how a firm addresses potential UDAAP and other regulatory deficiencies
A prominent retail brokerage firm sought our assistance to evaluate the design effectiveness of key customer complaints processes managed or supported by its compliance department. We evaluated the manner in which the firm:
- Tracked, responded to and evaluated trends apparent from customer complaints
- Supported retail branch and customer service personnel in resolving escalated customer issues and provided guidance on compliance issues raised by these personnel
We performed a detailed review of the institution’s customer complaints and correspondence processes, evaluating the maturity of the firm’s policies, procedures, training, monitoring and technology processes using our proprietary governance evaluation methodologies. We provided tactical and strategic recommendations on how to improve correspondence and phone responses to both external and internal customers, identifying opportunities to automate the customer complaints tracking process and enhance the metrics by which the institution reported on and monitored complaints for trends.