Managing customer complaints

Actively tracking, reporting and managing complaints offers benefits not only in terms of compliance, but also for a bank’s reputation and bottom line.

By Mary Thorson Wright

What is a complaint? If you ask Merriam-Webster, you will find a familiar preponderance of negative terms such as “expression of grief, pain, or dissatisfaction,” “something that is the cause or subject of protest or outcry.” But from a bank compliance perspective, complaints are more than that.

Many financial institutions use complaint data in a limited way, by performing the perfunctory resolution process and tracking and reporting merely the complaint volumes. However, complaint data are a treasure trove of feedback about internal controls and potential regulatory risk, and a glimpse into the minds of customers.

“Banks that can get really good at capturing all of the written and verbal complaint data available, conducting solid trend analysis and translating it into actions to improve their compliance management system and business practices reap the greatest benefits,” notes Barbara Boccia, a senior director who manages the advisory services and regulatory relations team at Wolters Kluwer.

Why actively manage complaints? “First, they are a priority of the bank regulatory agencies,” says Boccia. “There is no better evidence of that than the Consumer Financial Protection Bureau’s [CFPB] detailed system to capture, track and report on complaints. The CFPB is conducting trend analysis ongoing and year over year, and the analyses help inform and drive the priorities for the regulators in terms of what is coming in examination and supervision focus, and in future regulatory changes.”

Compliance examination guidance offers insight into the value of the consumer complaint and inquiry process. It emphasizes that an effective compliance management system (CMS) includes a responsive and responsible process for handling consumer complaints and inquiries. Regulatory agencies expect the intelligence gathered from consumer complaints to be organized, retained and used as part of an institution’s CMS.

“Complaints can really be the ‘canary in the coal mine.’ A complaint is often the first indicator that there is something wrong somewhere.”
—Barbara Boccia, Wolters Kluwer

A quick look at the examination procedures reveals that every aspect of the regulators’ evaluation of a bank’s CMS is at least in part evaluated from the financial institution’s ability to effectively manage the complaint process, including data from third-party vendors. Complaints received by or through third parties for accounts, products or practices conducted for or provided on behalf of a financial institution are the responsibility of the financial institution.

The bigger picture
Another good reason to be proactive about tracking and managing complaints is that it just makes good business sense. “Sometimes we get caught up in the compliance silo of meeting regulatory process technicalities, and we miss the bigger picture of the internal strategic value,” says Boccia. “It’s important for each community bank to come back to its core strategy and to integrate compliance throughout the institution at every level, as opposed to treating compliance as a separate dynamic.

“Complaint management really is the business of everyone in the organization and facilitated by the compliance officer, from the top to the bottom, throughout every department,” she continues. “A community bank’s business is based on interaction with consumers and small businesses, and its basic core strategy is to attend to those customers’ needs. Paying attention to the feedback they are giving you, which might likely come in the form of a complaint, just makes good business sense.”

Organic complaint data are valuable tools to help guide and improve the CMS and business practices. Banks can go a step further by using publicly available data and trend analysis, like that portrayed in the CFPB’s Consumer Response Annual Report, published in March 2017 for calendar year 2016.

Of the complaints the CFPB handled in 2016, the top category was debt collection. More detailed data underlying each complaint category, like the types of debt and types of debt collection activities, are also reported. Ask yourself: How similar are the complaints and inquiries your bank receives to those of other financial institutions and, if they are similar, have you employed appropriate, effective measures to meet regulatory scrutiny? What types of complaints and inquiries are other financial institutions receiving that are not reflected in your bank’s complaint records, and do you need to evaluate those areas to address any gaps or other risks? Could there be a breakdown in the process preventing your bank from identifying or recording those types of complaints?

Through the grapevine
While complaint data may be introduced in writing, many times they come from customer-facing employees. Written complaints are easier to capture and track than the more elusive verbal ones, so community banks must clearly define for employees what will be considered complaints. Will they be written, or both written and verbal? Will they include inquiries and reports of errors? Banks must clearly communicate the steps that employees are expected to take when presented with written or verbal complaints and inquiries.

“Community banks must solidify an overall method to define complaints, organize them, respond to them, retain the information and analyze it,” Boccia advises. “It is critical to consistently and accurately categorize the buckets complaints fall into.”

A complaint about fees and categorized as a “fee complaint” could be founded in the amount of the fee relative to the product or market, but it could also originate from a glitch in the system causing double charging of fees or not removing fees when required. Analysis may show that the issue appears to more frequently affect customers of protected classes or vulnerable populations, such as senior citizens or students, and could indicate a fair-lending problem or an issue of the Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) Act for vulnerable populations. Handling the complaint process appropriately requires robust analysis of the complaints and their elements to accurately determine the scope and impact.

“Complaints can really be the ‘canary in the coal mine,’” Boccia says. “A complaint is often the first indicator that there is something wrong somewhere. It could be a system error, training shortfall, breakdown in procedures or an indicator that more or different human resources are needed.

“By looking at the bigger picture, management may ‘connect the dots’ and effectuate a more meaningful process that benefits the bank dynamically.

Mary Thorson Wright, a former Federal Reserve examiner, is a financial writer in Virginia.