Effective complaint management is an essential part of providing quality financial services and an important component of an effective, comprehensive compliance program. Complaints – and compliments – are valuable sources of information that organizations can use to improve program delivery and service. Some segments of the financial services industry must adhere to structured requirements regarding complaint investigation, response, and recordkeeping, and, other segments are silent on guidelines, relying on the tenets of good business practices to guide organizations in complaint management.
Financial service providers may receive complaints or comments directly from customers or the public, and, in that case, have the opportunity to address the issue(s) brought to the table addressing only internal issues. However, thousands of complaints from customers and consumers funnel through third-parties to financial service providers each year. In fact, according to the Consumer Complaint Data: 2011, published on the Comptroller of the Currency’s Internet website, that agency’s Consumer Assistance Group (CAG) alone received 87,027 consumer complaints in 2011. Financial regulatory agencies, State Attorneys General, and Congressional offices routinely receive and forward complaint correspondence which must be investigated and addressed, not only with the complainant, but, also with the forwarding office or agency. The Federal Trade Commission and other consumer-friendly agencies also receive numbers of complaints and inquiries annually, and, whenever possible, those agencies forward the correspondence for action to the office or agency with direct jurisdiction over the subject company.
The federal bank regulatory agencies (Consumer Financial Protection Bureau, Federal Reserve System, Federal Deposit Insurance Corporation, National Credit Union Administration, and Office of the Comptroller of the Currency) act as facilitators for consumer or customer complaints regarding their respective jurisdictions in the banking industry. The Consumer Financial Protection Bureau (“CFPB”) is addressed separately below. The Federal Financial Institution Examination Council (“FFIEC”), a formal interagency body empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions, also sponsors a web-based Consumer Help Center, through which complainants can research a financial institution’s name to derive the appropriate Federal regulatory agency to which a complaint may be submitted, and, the site provides the links to directly access the desired agency website.
Similarly, state agencies with financial institution oversight also regularly receive and monitor the disposition of complaints from citizens residing in their geography, or, complaints about financial institutions under their jurisdiction that are submitted from customers or the public located outside their geography. Each state has processes independent from each other and from federal complaint processes. More about State supervision and complaint processing is addressed in the section about non-bank financial institutions and complaints, below.
In their capacity as financial institution regulators, these agencies act as gatekeepers to monitor complaints submitted by customers and the general public for trends in issues, activity volume, and the content and timeliness of responses provided by the financial institution. This oversight provides valuable information about public understanding of policy issues and the potential need to either revise regulatory guidance or implement changes in enforcement initiatives. The interagency bank consumer compliance examination procedures include a review of a bank’s consumer complaint management process, the complaint activity during the examination period, and may include targeted reviews of specific issues that have come to light through customer or public comment.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (“Dodd-Frank Act”) established the consumer bureau. The central mission of the Consumer Financial Protection Bureau (”Bureau”) is to make markets for consumer financial products and services work for Americans — whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.
The three overarching activities of the Bureau are:
Like the other federal bank regulators, the Bureau is receptive to complaints about financial services products and services. It has established a segment of its Internet website, seen below, for members of the public to submit complaints about mortgage products, credit cards, bank accounts and services, vehicle/consumer loans, and student loans. The Bureau tracks the complaints submitted and complainants are able to view the status of a pending complaint through the site.
The Bureau has also implemented the Consumer Complaint Database on the website. The database contains consumer credit card complaints received by the Consumer Financial Protection Bureau. The Bureau presents the text of the complaints, but does not verify their accuracy. Data has been available and is refreshed daily, beginning June 1, 2012. Although the complaints are not vetted for their accuracy, they do indicate issues or trends in consumer opinions on regulatory requirements, the acceptability of products and services related to credit cards, and consumer understanding of the information that is provided in disclosures and public guidance. Beginning January 2012, money transmitters are required to add the CFPB and state complaint contact information on remittance receipts.
A money services business (“MSB”) is a non-bank financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. MSBs include money transmitters, sellers of money orders, check cashing locations, and currency exchanges. Definitions vary across state and territorial jurisdictions.
For the purposes of federal anti-money laundering and anti-terrorist financing oversight under the Bank Secrecy Act, USA PATRIOT Act of 2001, Office of Foreign Assets Control regulations, and related federal requirements, the Financial Crimes Enforcement Network (“FinCEN”) exercises oversight of MSBs. FinCEN does not currently designate a specific consumer complaint channel; however, the FinCEN website provides methods to contact the agency with regard to any inquiries or comments.
In most U.S. states and territories, MSBs must apply for and maintain licenses issued by the state/territorial government to conduct financial services activities. The requirements for licensing and the scope of products covered vary across the jurisdictions. However, those states and territories generally retain the authority to regulate, license, examine, and investigate MSBs conducting business in their geographies. Incumbent with the authority to regulate, license, examine, and investigate, the licensing authorities maintain channels through which constituents can submit complaints against MSBs operating within the area of jurisdiction. Links to each of the state and territorial licensing jurisdictions can be found at www.mtraweb.org/links.shtm. For many jurisdictions, the designated office or agency is the bank regulator, as well.
Complaint Management as Quality Management
A lot has been said and written over the past 20 years or so about techniques to evaluate processes in organizations and the tools available to manage processes to be more effective and productive. Complaints and the investigations to resolve them are tools to use to improve organizational effectiveness.
Internal Complaint Management Process and Best Practices
The potential for high visibility of complaints lodged against a financial institution requires a management process to ensure timeliness, accuracy, and consistency in addressing the concerns of customers and the public. To that end, an organization benefits from a formal, centralized system to respond to complaints and inquiries. For covered financial institutions, Regulation E – Electronic Fund Transfers Act and Regulation Z – Truth in Lending establish required procedures for electronic fund transfer, debit card, and credit card error resolution. The Community Reinvestment Act (“CRA”) requires pertinent documents to be placed in a bank’s CRA Public File which may be accessed by anyone requesting the information, and the Department of Housing and Urban Development’s Real Estate Settlement and Procedures Act (“RESPA”) establishes requirements for handling complaints regarding mortgage servicing. Guidelines for other types of complaints received by banks are subject to interagency consumer compliance examination guidelines, and, as previously described, complaints submitted regarding the activities of MSBs are typically overseen by state or territorial licensing authorities.
The following best practices will facilitate timely, consistent complaint resolution and response, and increase the likelihood that the cause of a problem prompting the complaint is identified and corrected.
When a customer or consumer who may not yet be a customer complains about a product or service offered, it can be a blessing in disguise. For every person who complains, there can be hundreds who do not bother to complain but who also spread negative comments about the organization. The benefit of dealing with complaints is the opportunity to identify weaknesses in processes or products that can be rectified. This helps prevent possible future complaints or problems down the line. It is an effective form of customer feedback, although most managers would hope to eliminate complaints, if possible.
Mary Thorson has over 28 years of experience in bank and non-bank regulatory compliance, training, and financial institution program reviews and examinations, Ms. Thorson has developed a broad and deep portfolio of technical expertise that spans consumer protection, lending, deposits, operations, privacy, third-party management, collections, and anti-money laundering/anti-terrorist financing laws and regulations. For additional guidance please contact Mary Thorson.