Academic journal article ABA Banking Journal

Science of the Complaint: Handling Consumer Complaints in the Age of CFPB, UDAAP, and Twitter

Academic journal article ABA Banking Journal

Science of the Complaint: Handling Consumer Complaints in the Age of CFPB, UDAAP, and Twitter

Article excerpt

No matter from who, where, or when a complaint arises at Cambridge Trust Co., it lands on Ana Foster's desk. And she's not happy.


Not because she minds handling the few formal complaints the Massachusetts bank receives, but because she wants to develop a system that is more proactive, less reactive.

Foster, vice-president, risk and compliance, for the $1.3 billion-assets bank, very much feels the looming shadow of the Consumer Financial Protection Bureau, which encourages complaints through its rhetoric and through multiple portals on its website. She and every bank compliance officer likewise anticipate the growing influence of UDAAP--the regulatory gauge standing for Unfair, Deceptive and Abusive Acts and Practices, and increasingly the government's consumer regulatory tool of choice.

Foster simply wants to get ahead of the curve, spotting more quickly anything that indicates dissatisfaction, lack of smoothness, or the seeds of future trouble that can be contained and fixed before they become a headache, or worse.

As an example, Foster points to fee waivers. They're a fact of life in every bank, but if a bank finds it frequently waives a particular fee, that may mean something's not working right. Foster believes improved documentation and reporting of factors beyond actual complaints may be part of the evolution she seeks.

"I want to do this before an examiner or an attorney from the government tells me to," says Foster.

Consultant Jo Ann Barefoot believes such concerns are very valid today, when complaints can surface instantly in social media, like dirty laundry. "A lot of banks' legacy complaint systems," she says, "don't have the ability to capture root causes of complaints." That, she adds, is where solutions and preventative measures must begin. A 2011 Ernst & Young survey among large bank executives, Effectively Leveraging Consumer Complaints For Competitive Advantage, found that many weren't satisfied with how well their complaints systems drove process improvements.

CFPB, says Barefoot, "is very interested in the quality of systems and their control of complaints."

Foster, a veteran compliance officer, talks frequently with colleagues at other institutions, and the complaints issue is very much on all their minds.

"No one is at the same place," she says.

It's fascinating how "complaint" and "compliant" share the same letters. But that's not all. Lack of one can trigger the other, and managing complaints often involves the Compliance Department. Indeed, sometimes Compliance owns, or at least oversees, complaints.

Yet, ultimately, every banker--not just compliance officers--has a stake. A business driven by trust relies on customer faith that their bank will get it right, or get it fixed.

Better systems expected

In the UDAAP age, focusing on complaints ranks high. "Consumer complaints can be a good early warning system that something may be unfair," says Virginia O'Neill, senior counsel in ABA's Center for Regulatory Compliance.

"Complaints are an opportunity," says Craig Stone, managing director at Alvarez & Marsal Financial Industry Advisory Services. "They are a huge competitive advantage if you leverage them. What separates one bank from another? The quality of the institution's service." Stone was formerly Deputy Ombudsman at the Comptroller's Office and handled day-to-day management of the Customer Assistance Group.

Tracking and monitoring complaints in some fashion is important for all institutions, but especially for larger ones that fall under CFPB examinations.

"The bureau is empirical, and they feel tracking complaints is something a bank can do that is proactive," explains Barefoot, co-chair at Treliant Risk Advisors. The bureau expects to see a good complaint system in place (she knows of one major bank that's spending $20 million on a new system), and Barefoot says that, in general, these systems "need a lot more work. …

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