Customer Complaints: Manage Them or the Whole World Will Know! Part One of a Two-Part Series

A Complaint System is a Regulatory Duty

One area often overlooked by financial institutions is the need to establish and manage a comprehensive complaint system. Believe it or not, this isn’t just a matter of good customer service but also a regulatory compliance requirement in several areas.

The Dodd-Frank Financial Regulation Act introduced sweeping changes to bank regulations, including some lesser-known provisions. Among these is Section 1034, which directs the Consumer Financial Protection Bureau (CFPB) to develop a national complaint system. This system is designed to track complaints from consumers of financial products and the responses of the institutions that offer these products.

The CFPB’s complaint system first went live in 2011, initially accepting only credit card complaints. Since then, it has expanded to cover complaints about mortgages, bank accounts and services, private student loans, other consumer loans, credit reporting, money transfers, debt collection, and payday loans.

Did you know complaints made against your institution can be made public? As of July 2015, not only can complaints be publicized, but at the customer’s request, the complaint narrative can also be published! While many banking industry groups find this troubling, this transparency can also present an opportunity for improvement.

Defining a Complaint

Unfortunately, there is no official regulatory definition for complaints. While it can be helpful to track feedback on issues like long wait times, slow responses, or even branding choices, these types of complaints are typically best handled by customer service.

For regulatory purposes, an official complaint generally includes concerns related to:

• Products and services offered, such as complaints that products do not serve the community’s needs or are difficult to understand.
• Product terms.
• Advertising content.
• Inconsistencies between disclosures and advertising.

It’s also essential to consider how complaints can be received. All means of communication, including social media, should be factored into the complaint-receiving process.

The Complaint Process

The complaint process is outlined in the CFPB’s Company Portal Manual and generally follows these steps:

1. Consumers submit complaints to the CFPB by web, phone, mail, or fax, or another agency forwards the complaint to the CFPB.
2. Consumer Response reviews the complaint for completeness and alignment with the CFPB’s authority and schedule.
3. Consumer Response forwards the complaint to the company identified by the consumer via the secure company portal, typically within 24–48 hours.
4. The company reviews the complaint, communicates with the consumer as appropriate, and determines its response and any necessary actions.
5. The company responds to Consumer Response via the portal.
6. Consumer Response invites the consumer to review and evaluate the company’s response through a secure portal or by calling the CFPB’s toll-free number.
7. Consumer Response prioritizes complaints for investigation if the company fails to respond within the requested timeframe or if the consumer disputes the company’s response.

For banks and financial institutions, responding to complaints in a complete and timely manner is crucial. The CFPB’s system tracks complaints and flags delayed responses. Ensure your institution’s complaint response policies and procedures are current!

When a Response is a Response

The requirements for a proper response are detailed in guidance published in June 2013. While each institution decides how best to respond to a customer, responses are expected to be fully documented. For instance, in the case of a credit card account closing, documentation should include:

• An adverse action notice, specifying reasons.
• The account closure date.
• The date the notice was sent.
• The method of delivery (postal mail or electronic).
• If sent by postal mail, the address used.

A response missing any of these details could lead to further inquiries from the CFPB. Thorough documentation is key.

Your Complaint May Become Public

The CFPB allows consumer complaints to be made public if the customer consents. Financial institutions may also request that their responses be made public. While groups like the American Bankers Association have expressed concern about potential reputational harm, the CFPB believes this transparency serves the public interest. Knowing that a complaint against your company may be published underscores the importance of robust response procedures. Complete and accurate documentation is essential—remember, there’s a chance the whole world will be watching!