Grievances and Grumblings

Effectively managing consumer complaints as an elevated compliance requirement

By Mary Thorson

Customer complaints—and customer compliments—have always been valuable sources of feedback, allowing businesses to improve their products and service. With the Consumer Financial Protection Bureau’s emphasis on ensuring that financial service providers respond swiftly and fairly to customer complaints, complaint management has become a more prominent component of every bank’s compliance program.

All federal banking agencies monitor complaints from bank consumers and the public. The Federal Financial Institution Examinations Council’s interagency consumer compliance examination procedures require reviews of banks’ consumer complaint management processes and their complaint records. Similarly, each state banking agency has its own independent process to handle consumer complaints.

Meanwhile, the Electronic Fund Transfers Act (Regulation E) and the Truth in Lending Act (Regulation Z) establish procedures for electronic fund transfer debit card and credit card error resolutions. The Community Reinvestment Act requires pertinent documents to be placed in a bank’s CRA Public File, and those documents may be accessed by anyone requesting the information. The Real Estate Settlement Procedures Act also contains requirements for handling mortgage servicing complaints. Guidelines for other types of complaints received by banks are subject to the FFIEC’s compliance examination guidelines. New regulatory emphasis on violations of the Unfair, Deceptive or Abusive Acts or Practices Act, or UDAAP, highlights the importance of banks resolving consumer complaints.

Today, however, the CFPB has superseding authority to oversee consumer complaints. The bureau’s examination manual asks its examiners to evaluate financial institutions on whether:

– consumer complaints and inquiries, regardless of where submitted, are appropriately recorded and categorized;

– complaints and inquiries, whether regarding the entity or its third-party service providers, are addressed and resolved promptly;

– complaints that raise legal issues involving potential consumer harm from unfair treatment or discrimination, or other regulatory compliance issues, are appropriately escalated;

– complaint data and individual cases drive adjustments to business practices as appropriate;

– consumer complaints result in retrospective corrective action to correct the effects of the supervised entity’s actions when appropriate; and

– weaknesses in a compliance management system exist, based on the nature or number of substantive complaints from consumers.

The potential for highly visible complaints requires your community bank to have a management process that will ensure timeliness, accuracy and consistency in addressing any concerns raised by customers and the public. The following eight best practices will help your community bank develop a timely and consistent complaint resolution and response, and will increase the likelihood that the cause of a problem prompting a complaint is identified and corrected.

– Establish a statement of policy for complaints and inquiries. Adhere to regulatory requirements if prescribed, and, if not prescribed, establish internal guidelines to investigate, resolve and respond to complaints in a timely manner.

– Establish a centralized “choke point” through which all complaints must pass, regardless of the location at which they are received in the organization. Your bank’s compliance officer is often a good person for the job, but another member of management could also provide this oversight. Central documentation, tracking and recordkeeping are critical to establishing and maintaining a sound complaint management program. Tracking should include, at a minimum, the dates of receipt, transmittal to functional areas for investigation and the response to the complainant. The file documentation should include copies of the complaint, information supporting the results of the investigation and the response document(s).

– Designate responsible persons to manage the process and identify responsible managers across the organization to conduct investigations of complaints pertaining to their functional areas and provide the supporting background story and documentation.

– Identify the available channels that will be used to convey complaints. Certainly, mail is often used; however, don’t ignore social media channels.

– Use data mined from any pattern or practice to update your bank’s compliance risk assessment; guide revisions to training, policies, procedures or processes; and dictate internal review or audit scope to check for effectiveness.

– Ensure any third parties involved in the complaint transmission (for example, a federal regulatory agency, state or other government office or agency) are kept informed and are made a party to the response, as required.

– Maintain the same consistent process to investigate, respond and keep records for complaints for which the customer is found to be in error. Consider the short and long-term implications of appeasing misguided or misinformed customers.

– Conduct training periodically to raise awareness among all employees with regard to the importance of complaint handling and what steps to take if a complaint is received. Customers with complaints should reach the appropriate person to receive accurate information and receive a timely resolution to their question or problem.

Remember that for every person who complains, there can be hundreds who do not but instead are spreading negative, damaging comments to others. Receiving complaints is an opportunity to rectify flaws to prevent future problems. endmark


Mary Thorson is vice president of Chartwell Compliance, a service provider for ICBA Compliance & Risk Management.