Financial institution supervisory agencies view a formal process for managing complaints from bank customers as an important element in an effective compliance management system (CMS). In fact, the latest issue of the “Consumer Compliance Outlook” publication from the Federal Reserve Board (FRB) includes three articles on this subject. The FRB is quoted in one of these articles in an unequivocal statement on this issue: “Consumer complaints are a critical component of the risk‑focused supervisory program. The Federal Reserve uses data on consumer complaint activity in its supervisory processes when monitoring financial institutions, scoping and conducting examinations, and analyzing applications.” The other federal agencies agree with this viewpoint. So, banks and thrifts have found that if they do not handle customer complaints in a formal, consistent manner, their CMS will be viewed with a more critical eye. Benefits of Managing Complaints One positive aspect of proactively managing the customer complaint process is there is no real downside. The only “downside” is that such a process shines a light on the extent of complaints and their underlying causes. But this disadvantage is actually an advantage. What you don’t know really can hurt you. The positive results from complaint management can include: • Uncovering and dealing with shortcomings in product features, bank processes, customer service and other issues at an early stage before they grow to a point that they present real threats to the institution. • Improving customer satisfaction with the bank and enhancing the bank’s efforts to serve the banking needs of its community. • Resolving fair treatment issues at an early stage. • Realigning bank products, processes and services with regulatory requirements and expectations. • Heading off potential UDAAP (unfair, deceptive or abusive acts and practices) issues. • Reducing the institution’s reputation risk. Managing Complaints The bank already has formal processes, with assigned responsibilities, for handling errors/disputes asserted by customers related to electronic banking (Regulation E, EFTA), open‑end credit (Regulation Z, TILA), and mortgage loan servicing (HUD Regulation X, RESPA). Appropriate treatment of complaints in these areas is mandated by the respective regulations. However, a formal process to address customer complaints in other areas — both those received directly from customers and those referred by the regulators — is considered an industry best practice, as well as a necessary component of an effective CMS by regulators. The structure of this program will vary depending on the culture of the bank and other internal factors. But, there are some common elements that form the basis of any sound customer complaint program, including to: • Define what is considered as a “complaint.” This is considered crucial to success in this area, so defining “complaint” broadly is usually seen as a sound practice. • Make sure everyone knows how important it is to respond promptly and accurately to any customer complaints. This is a basis for giving good customer service. • Appoint a central point (an individual or an office) to be in charge of your complaint response program, especially those referred by the regulators — and make sure that all bank staff is aware of how to handle complaints, including where to refer them. Branch managers can be charged with handling customer service issues occurring at their branches that do not involve regulatory issues (fair lending, EFTA, etc.). However, they should report on these complaints and resolutions to the central complaint point for tracking of any trends that may arise. MANAGING CUSTOMER COMPLAINTS IS IMPORTANT TO AN EFFECTIVE CMS BY WILLIAM J. SHOWALTER, CRCM, SENIOR CONSULTANT, YOUNG & ASSOCIATES INC. 15 In Touch
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