Managing Complaints

In September, both the Consumer Financial Protection Bureau and the National Credit Union Administration issued public reports touting the reach and improvements in their consumer complaint portals.

CFPB reported its latest tally of complaints across all consumer products now exceeds 702,900 (up 144,900 since February). At the same time, NCUA unveiled a new and improved online complaint portal for handling credit union member complaints. These would be impressive developments if these were real member service results rather than brighter government red tape.

This article discusses member complaints from two standpoints: first, the basic structure and effectiveness of the CFPB and NCUA complaint machines and, second, a broader view of effective member response management for credit unions.

CFPB and NCUA Consumer Complaint Systems

The Dodd-Frank Act , which created CFPB, established consumer complaint handling as a integral part of the agency’s work. CFPB began accepting complaints on day one in July 2011. Its portal now invites and accepts complaints on many financial products, including credit cards, mortgages, deposit accounts, student loans, credit reports, consumer and payday loans, and debt collection. NCUA followed the CFPB with an online complaint portal and NCUA guidance (Letter 11-CU-17) to manage federal credit union member complaints.

CFPB’s system handles complaints for banks and for credit unions over $10 billion in assets. To date, the most complained-about companies include: Wells Fargo, Bank of America, Equifax and Experian.

NCUA’s complaint system, the Consumer Assistance Center, handles complaints about federal credit unions, and channels state-chartered credit union complaints to state regulators.  Members can file complaints online as a guest or set up an “account” for online secure viewing (and future complaints).

Complaints and related documentation are forwarded to the relevant FCU supervisory committee and CEO with 60 days to review and resolve the matter. If the FCU notifies CAC in writing that a matter is resolved, then the case is closed. However, if the FCU fails to resolve a matter in a timely fashion, or when a member disputes the resolution, a formal investigation is commenced with an escalated resolution, CAC determination and appeal.

Effective Systems?

CFPB has proved that “if you build it, they will come.” However, the effectiveness of these government complaint generation systems seems dubious. In one CFPB report on its consumer complaint database, the CFPB acknowledged for most complaints:

• Consumers simply misunderstood the product or service information.
• Complaints did not involve institution errors.
• 69 percent of consumers did not dispute the institution’s resolution response.

More recently, in September, the Office of the Inspector General issued its audit report on the effectiveness of CFPB’s controls over the accuracy and completeness of its consumer complaint database. The report includes numerous recommendations for improvement in the four-year-old system.

CU Member Response Management

For credit unions, member response management is far more than tracking and responding to complaints channeled through the NCUA or CFPB portals and following new procedures. Credit union member response programs must address a broad universe of member inquiries and disputes, and provide processes and procedures to satisfy resolution requirements of more than a dozen federal regulations, from Reg E to Reg Z.

Classifying Complaints. The starting point for a comprehensive program is a classification system for the broad universe of complaints, inquiries and notices. After all, the type of complaint will dictate who will be responsible and the requirements for responding and resolving the issue. The classes would include:

• board and executive governance complaints,
• legal complaints,
• regulatory complaints,
• product and service complaints,
• member service error notices,
• fair lending compliance,
• statement and credit report error notices, and
• card fraud notices.

Processing Complaints. Member complaints should be processed throughout the credit union with uniform standards for screening, documentation, acknowledgment to members, investigation, written response and a final resolution. To organize effective and timely complaint investigations and resolution tracking, the credit union should maintain a central member response tracking schedule. Credit union staff handling member complaints, inquiries and notices should regularly provide management with member response status reports. Last, the board should be regularly informed about legal and regulatory complaint reports.

Procedures. The requirements and timing for complaint investigation and resolution will vary depending on the product or service involved and an overlay of federal consumer protection requirements that apply.

Best Practices. An effective member response program should include such best practices as:

• board and management commitment,
• documentation and a tracking system,
• front-line staff communication before a complaint arises,
• analyzing and using your data for compliance management, and
• regular audits and improvements.

While the effectiveness of the complaint systems of CFPB and NCUA is questionable, the effectiveness of credit union member response programs cannot be. Effective member response management goes well beyond these government programs and should be member service oriented.

Brian Witt is a shareholder in the law firm of Farleigh Wada Witt, Portland, Ore., which specializes in serving the financial service industry and financial institutions nationwide. Witt represents credit unions on corporate, operational, compliance, and financial service delivery matters. Practicing law for over 30 years, he has presented education and training for national and state trade associations and has developed extensive compliance resources for: member response management; vendor management and contract reviews; information security programs; security response guidelines; online delivery of financial services; advertising compliance; and credit union consumer and business lending. Additionally, Witt is an active member of the credit union, consumer finance and cyberspace law committees of the business section of the American Bar Association.