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The Benefits of Consumer Complaints: Improve Processes and Achieve Business Goals
Complaints are a crucial component of any business’s integrity. But all too often complaints are overlooked because of the very nature of them. The rise of grievances being aired across social media platforms has desensitized many financial institution compliance professionals from identifying a problem that may exist. Many complaints are general grievances of dissatisfaction with a product or service that simply did not meet the customer’s expected level of satisfaction. But upon closer look, as a financial institution subject to many consumer compliance rules and regulations, there may be a direct link to an error, oversight, or operational weakness on the institution’s part. Although unintended, inadequate complaint management processes can result in significant consumer monetary harm, increased regulatory scrutiny, and negative reputational effect or loss of customer growth.
Is anyone listening?
While it may appear that consumer complaints are going unheard, the Consumer Financial Protection Bureau (CFPB) and other regulating bodies are absolutely listening. The CFPB, who generally oversees depository institutions and non-depository financial institutions, encourages consumers to report complaints regarding financial products and services through their website.[1] Complaints submitted to the CFPB are not just limited to those reported by the general public, the CFPB may receive complaint referrals from the White House, congressional officers, and other federal and state agencies.
Each year the CFPB publishes an annual report of complaints received throughout the year. The CFPB accepts, responds to, and monitors complaint activity deriving from all 50 states, the District of Columbia, Puerto Rico, and other U.S. territories. The report encompasses a detailed breakdown of all consumer complaints reported to the CFPB between January and December.
The 2023 report shows approximately 1,657,600 complaints were reported to the CFPB from consumers.[2] The majority of complaints (81%) were sent to the companies for review and response, and only 13% were found to be non-actionable complaints. Other highlights include:
- Complaints from Georgic, Florida, District of Columbia, Delaware, and Nevada are the highest per capita.
- Complaints concerning consumer or credit reporting were the highest by volume; consumers are increasingly facing issues with information contained in credit reports and credit scores; the most frequently reported problem was due to “incorrect information on your report.”
- Consumer or credit reporting, debt collection, checking/savings accounts, and mortgage related complaints represented approximately 96% of all complaints.
- Issues relating to various financial products like credit cards, mortgages, and personal loans were often reported due to a lack of transparency or fairness in transactions.
- Complaints are categorically summarized in the following table:
|
Complaint Volume |
||
|
Financial Product or Service |
By # |
By % |
|
Credit or Consumer Reporting |
1,309,800.00 |
79% |
|
Debt Collection |
109,900.00 |
7% |
|
Credit Cards |
70,000.00 |
4% |
|
Checking or Savings Accounts |
64,500.00 |
4% |
|
Mortgages |
27,900.00 |
2% |
|
Money transfer or service, virtual currency |
21,800.00 |
1% |
|
Vehicle Loans or Leases |
17,700.00 |
1% |
|
Student Loans |
12,000.00 |
0.70% |
|
Personal Lons |
8,300.00 |
0.50% |
|
Prepaid Cards |
8,200.00 |
0.50% |
|
Debt or Credit Management |
3,500.00 |
0.20% |
|
Payday Loans |
2,100.00 |
0.10% |
|
Title Loans |
800.00 |
0.10% |
|
Deposit Advances |
700.00 |
0% |
|
Total |
1,657,200.00 |
100% |
Effective Complaint Management
The best way to truly understand your customers’ concerns is to track all complaints. Complaints are often indicators of other underlying issues, including systemic and compliance management weaknesses. It is important to develop a complaint response system that provides a clear process of what must be done when a complaint is received. For example, customers across different branches may be reporting the inclusion of a miscellaneous fee on their monthly statement. Although the representative intaking this complaint may be able to quickly resolve the issue on the individual’s account and issue a refund, the underlying issue may be a result of system upgrades or other changes that had unintended consequences affecting every costumer in that account type. When a complaint tracking process does not exist, a domino effect can be created causing additional operational burden that may go on for months before true detection.
The basis of a clear policy, procedure, or process should:
- Emphasize the importance of collecting all pertinent information surrounding the compliant
- Provide categorical definitions of complaint types (e.g.: written, verbal, product related, personnel related, etc…) to ensure proper handling and timely resolution
- Outline an expected resolution timeframe and follow-up, as necessary
- Provide clear guidance to enable employees to detect complaints related to escalated consumer compliance issues, including any potentially discriminating factors
Investing in an effective complaint management process does not have to be costly. While financial software and technology companies offer advanced customer relationship systems that efficiently manage complaints by automating certain steps, financial institutions can achieve similar results with basic tools already at their disposal. Existing database or project management software can be used to manage complaints effectively.
Regulatory Expectations:
Federal and state financial regulatory agencies have adopted and utilize the Federal Financial Institutions Examination Council Uniform Interagency Consumer Compliance Rating System to analyze compliance with state and federal consumer compliance rules and regulations in connection with consumer compliance examinations. The “responsiveness and effectiveness” of the consumer complaint resolution process is an assessment factor consideration analyzed under the Compliance Program component of an effective Compliance Management System.
It is important to understand that the volume of complaints received by a financial institution may not be a significant consideration when regulators conduct their analysis. Rather, examiners may be more concerned with the process by which financial institutions manage complaints received. For example, when repeat or similar complaints are received, does the financial institution conduct research to determine a potential root cause? Is there a process of reporting complaints to upper levels of management? Additionally, financial institutions should create an environment where employees are encouraged to report complaints without fear of disciplinary action or blame.
The Bottom Line
The complaint management process should be viewed as a benefit rather than a burden. Adopting a proactive approach presents an opportunity to increase customer satisfaction while also improving processes and controls. By identifying gaps, institutions can better achieve business goals and potentially increase profitability.
Remember:
- Consumer voices matter – Prompt response and appropriate resolution to the complainant is encouraged by the CFPB and other regulators. In addition, compliance examinations by state and federal regulators may consider the complaint resolution process a vital component in evaluating the potential risk of consumer harm with potential impact on the overall examination outcome.
- Tracking complaints – Tracking complaints allows the organization to better support its customers by understanding where systemic issues may exist so they can be corrected resulting in better customer satisfaction.
- Clear communication – Ensure your organization has a well-defined policy and process for timely complaint resolution is in place and that all employees are aware of their responsibilities in the process.
- Regulatory implications – Certain regulations require specific disclosures and actions when a complaint is reported, and within prescribed timeframes. Whether or not the complaint falls into a regulatory category, complaints can be indicative of other compliance vulnerabilities.
Still consider this too much of a burden? Consider partnering with a third-party consultant like Guidepost Solutions, who has experience assessing current processes to handle complaints, identifying gaps, and implementing effective processes and controls to help financial institutions achieve their business goals.
[1] Depository institutions are banks, thrifts and credit unions with assets over $10 billion and their affiliates. Non-depository institutions are businesses such as mortgage originators, payday lenders and private student lenders.
[2] Consumer Response Annual Report | Consumer Financial Protection Bureau (consumerfinance.gov)
Andrea Perez
Associate Director
Andrea Perez has more than 15 years of experience as a senior regulatory examiner analyzing the effectiveness of compliance programs within state-chartered financial institutions. She is highly proficient in state and federal compliance banking regulations; collaborating with federal agencies; and providing detailed written analysis of compliance-oriented evaluations. Ms. Perez is well-versed in lending regulations including the Homeowner’s Protection Act, Truth-in-Lending Act, and the Community Reinvestment Act; as well as deposit and retail regulations; privacy laws; and Dodd-Frank.
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