Consumer Complaints and Third Parties: Determinants of Consumer Satisfaction with Complaint Resolution Efforts

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This paper explores consumers' satisfaction with the complaint process, using a data set of financial service complaints lodged with a federal agency acting as a third party complaint mechanism. Contrary to previous studies, we find that 60 percent of consumers were satisfied with the complaint resolution process and of these, over half were very satisfied. Having the problem resolved in their favor, complaining directly (versus being referred), having higher levels of education, using other third parties, being willing to use the service again, and feeling that the service was responsive were associated with being very satisfied with the complaint process.


The typical advice offered to a consumer with a complaint is to first go to the seller or merchant, or to the manufacturer/provider of the good or service. If the complaint is not resolved between the consumer and the seller, the next step may be to go to a third party. In the United States, these third parties can include private or not-for-profit groups such as trade associations and industry-- based consumer action panels as well as government agencies at the local, county, state, or federal level.

There is some evidence that consumers are less likely to complain to third parties (see, for example, Kolodinsky, 1993 and Tipper, 1997). The costs, in terms of time and effort to involve a third party when resolving a complaint, are higher for consumers. In fact, consumers may not even know who the appropriate third party is in a given complaint situation. For example, when complaining about a financial service, should consumers go to their state's Attorney General, to their state's banking department, or to a federal banking regulator? The implication is that consumers who use third-party complaint mechanisms may be more tenacious and resourceful, and their problems may be more severe or complicated.

Given that it may require greater effort for a consumer to involve a third party in the complaining process, the question arises as to how satisfied consumers are with the results of these third parties. Oliver (1997) referred to this as secondary satisfaction - that is, satisfaction with the complaining process. The purpose of this paper is to explore factors associated with consumer satisfaction with third-party complaint handling. Specifically, we explore complaints in the financial services sector where the third party is a U.S. federal agency.



The Federal Reserve System (the "System") is mandated by federal law to investigate and resolve complaints lodged by consumers against state-member banks (that is, state-chartered banks that are members of the Federal Reserve System). Over the last five years, the number of consumer complaints against state member banks nearly doubled, from 1221 in 1996 to 2408 in 2000 (a 12 percent growth rate per year). During this period, the proportion of complaints about state member banks rose slightly relative to all complaints received, from 41.6 percent to 48.6 percent (see Table 1). In addition, the System receives about 2000 other inquiries and requests for information and materials annually.

Each year, the numbers and types of complaints received are collected and analyzed, and trend reports that summarize complaint activity are produced. Credit cards garner the most complaints; this has been the case for years. In 2000, checking account complaints held the number two spot, and the number three slot involved real estate loans. See Table 1, which shows the top complaint categories for 1996-2000.

Complaints can be lodged with the System at its central headquarters (the Board of Governors), or with any of the twelve Federal Reserve Banks located throughout the country. Complaints are received by mail as well as by telephone. Five of the Reserve Banks have 800-numbers that consumers can use to contact the System. …