The words “compliance” and “regulation” typically don’t evoke a positive reaction from employees in the financial services industry. Complaints also fall into this category. Generally, they are seen as a hindrance at best, and an enormous thorn at worst. But compliance and regulation are concepts that banks need to understand and internalize to be successful in today’s highly-regulated world, filled with highly-empowered consumers that have more ways than ever to provide and share feedback—negative or positive.
The Consumer Financial Protection Bureau (CFPB) was established in 2010 in the wake of the financial crisis to regulate and oversees financial institutions providing products and services to consumers. To help accomplish these goals, the CFPB has created the Consumer Complaint Database to track consumer complaints. It also captures the responses from financial institutions to address each complaint. From July 21, 2011 through February 2014, the CFPB received approximately 300,00 consumer complaints.* Between 2011 and 2012, those included approximately 36, 300 credit card complaints, 85,200 mortgage complaints, 25, 700 bank accounts and services complaints, 6,000 private student loan complaints, 5,700 consumer loan complaints, 14,200 credit reporting complaints, and 300 money transfer complaints.**The data collected is being used to identify areas for further investigation as the Bureau and a number of other consumer activist organizations launch initiatives to help protect consumers. In addition to the CFPB database, most individual states have their own complaint databases, as well as popular consumer-oriented sites like complaints.com, complaintsboard.com and e-pinions.com. The trend continues globally.
The financial risks to companies are real. The Bureau has aggressively pursued these providers for deceptive practices, resulting in fines and penalties. A large, global credit card company, for example, was found to be in violation of regulations for deceptively marketing credit card “add-on” products. Another major financial institution was found guilty of misleading consumers into paying for extra credit card products. Each of these companies was required to refund around $200 million to settle the charges.
Preserving Reputation in an Age of a Complaining Culture
Another important consideration for organizations today is the financial impact that complaints can have on a company’s reputation. With the growing number of complaint databases being gathered by different agencies and groups, there’s the very real possibility that some complaints—even once addressed and resolved—and the lingering negative perceptions they leave on a bank’s brand could live on forever. That’s enough to make any banker want to run screaming.
But there is a way to get ahead of these types of problems. Banks can get started by routinely surfacing and analyzing consumer complaints using a combination of different technologies like speech analytics and text analytics. Even more important is to establish and maintain a rigorous complaints management process to help financial institutions understand and correct potential problems before they repeat themselves or grow even larger. It’s always better to provide employees with coaching and training when problems are found, rather than leaving them to possibly escalate into investigations and the risk of fines from regulatory agencies. Addressing any problems proactively can enable banks to save themselves from the potential harm these complaints can present to their reputations—and their bottom lines.
During a routine exam or audit, regulatory agencies review companies’ complaints management processes, so having a comprehensive program with supporting data and documentation is strongly recommended. Self-reporting of issues has also been encouraged, although the CFPB has warned banks that doing so will not automatically remove any culpability if serious infractions are discovered.
From a brand reputation perspective, regularly reviewing customer complaints gives companies the information they need to improve customer experiences, identify where problems exist and correct them quickly. Acting on this type of information can significantly improve customer experience and loyalty, leading to an overall competitive advantage. By resolving complaints, the financial institution has taken advantage of the opportunity to show their customers they are listening and truly care about them, and may even turn some of these complaining customers into a loyal brand advocate.
Jenni Palocsik Marketing Director, Retail Financial Services at Verint