Academic journal article ABA Banking Journal

When Customers Complain, Banks Must Get the Message: Think of Customer Complaints as an Early Warning System. Unheeded, They Will Morph into Tomorrow's Regulations. and Tomorrow Can Come Right Quick

Academic journal article ABA Banking Journal

When Customers Complain, Banks Must Get the Message: Think of Customer Complaints as an Early Warning System. Unheeded, They Will Morph into Tomorrow's Regulations. and Tomorrow Can Come Right Quick

Article excerpt

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It is so easy to ignore a customer complaint. After all, customers make so many mistakes, isn't their problem really their own fault? Why waste precious bank time fixing something the customer did wrong?

But the truth is, customer complaints come in for many reasons.

Some may be based on the customer's mistake or misunderstanding, but even in that case, we should understand why that mistake or misunderstanding happened. Their mistake may be the result of confusing or incomplete information. Other complaints, based on our products, services, or communications, can tell us a great deal. It's a coincidence, but a good reminder, nonetheless, that "complaint" and "compliant" differ by only the arrangement of two letters.

Where complaints meet compliance

At the moment, banks and other lenders are under heavy fire from consumers, Congress, and regulators. Consumers have been unhappy with many aspects of bank products and services. When consumers fail to get what they consider to be an adequate response from their bank, they turn to the "heavies" to get a result. And when the heavies-regulators and Congress-get involved, things happen-like more regulatory burden.

Compliance with new regulations is tedious and expensive. But it is too easy to blame consumers and Congress for generating unnecessary rules. Banks must realize that most regulatory burden is the result of specific practices that have frustrated or angered consumers. A voluntary self-diagnosis to complaints can prevent more regulatory burden by removing the need for legislative action. Voluntary responses can also increase customer loyalty. The rest of this article looks at how to accomplish both goals.

See it coming. The past several years have seen heavy activity in new and revised regulations. These affect both deposits and loans. There have also been a significant number of guidances issued by the regulatory agencies. This legislative and regulatory activity has been generated in large part by consumer complaints. Since consumers usually try complaining first to their bank, banks are in a position to do something about it first--before Congress and the regulators step in. (See the box, opposite.) Trying to sit it out only results in more regulations.

Banks always have an opportunity to see it coming. For example, consumers complained about unexpected fees when the bank paid an overdraft. While some bankers were busy pointing out that they were doing the consumer a favor--sparing them embarrassment and costs related to returned checks--the affected consumers complained about the fees for the overdraft service. To many consumers, the cost of the "service" was simply not worth it. And they raised particularly persuasive arguments by pointing out that if they had known that there was a daily fee involved--which added up quickly--they could have minimized the costs. For example, had they known the transaction would overdraw the account, they would not have made that ATM withdrawal. When banks didn't respond, consumers turned to the heavies for help. Now we have revisions to Regulation DD.

Consumers also raised many complaints about credit card practices. They objected to facing a late fee, a finance charge, and an increase in their APR as the result of a single mistake. They also questioned the adjustments made to their credit limit that were based, not on transactions with the credit account in question, but because of the creditor's repricing and rescoring practices.

Consumers believe that any evaluation of their account should be based on their relationship with the bank in question. They manage that relationship. They are naturally surprised and angered when the bank changes their relationship because of the consumer's relationship with a third party.

Consumers complained urgently about these and other bank practices. Unfortunately, banks failed to respond to these consumer concerns. …

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