Prudential regulators have long expected financial institutions to manage the consumer complaints they receive, but the CFPB has significantly raised the bar for banks.
The CFPB currently discloses certain complaint data it receives regarding consumer financial products and services via its online database. Furthermore, the CFPB recently proposed expanding its disclosure to include narratives of consumer complaints. This should be a valid concern for financial institutions.
Regulators do not provide financial institutions with a formal definition of the word “complaint.” Therefore, a financial institution must define what constitutes a complaint in simple terms, and should not differentiate between consumer and commercial complaints. For example, a general definition used by many banks today is: “Any verbal statement or written correspondence that conveys dissatisfaction with a product or service.”
After identifying a complaint definition, an institution should implement an effective consumer complaint management program that includes, at a minimum, the following four components:
- Established channels for managing complaints. Complaints are submitted in various ways: in person, by phone, via email, through social media … not to mention those that are received through an institution’s prudential regulator or the Better Business Bureau. For a centralized approach, banks should identify one person or specific department to handle all complaints to ensure proper resolution and a consistent response.
- Timely resolution of the complaints. Regulators usually require a written response within a certain amount of time, typically 10 calendar days after receiving the complaint. But keep in mind that reputation risk increases the longer it takes a bank to sufficiently respond to a complaint. If an institution confirms the consumer complaint, it should fully resolve the issue. On the flip side, it should refrain from belittling the consumer should the complaint lack proper validation.
- Proper retention of the complaints. Financial institutions should ensure proper retention and categorization of the complaints received, along with the corresponding resolution. This allows institutions to identify trends or leading indicators of potential issues across the bank. (After all, banks cannot manage what they cannot monitor.) And trending analyses allow senior management to apply resources to identified weaknesses. Management also should develop a reporting mechanism to the board of directors, since the Board is ultimately responsible for the institution’s actions.
- A mechanism for reviewing possible violations of rules and regulations. Regulatory guidance also states that institutions should review for any potential violations of federal consumer financial laws. Regulatory hot topics currently include CRA, fair lending, fees and overdraft complaints. As an institution, it would be prudent to review any complaint for possible reputation and legal risk.
When implemented correctly, a proper consumer complaint management program will improve an institution’s customer experience, but only if senior management makes informed decisions from the evidence acquired.
Keith Monson is vice president of application compliance for CSI.