If you don’t have a formal consumer complaint management program, your bank, credit union, or mortgage company is missing out on opportunities to protect consumers from harm and correct problems before examiners or attorneys get involved.
Don’t believe me? Ask yourself these three questions:
Question 1: Do people at your financial institution say ‘we never get complaints’?
Examiners are not impressed when an institution without a formal program makes this statement. No FI is perfect. Chances are your FI has made some kind of operational mistake that resulted in a consumer complaint—you just don’t know about it.
While there is data out there that supports that some parts of the country are more likely to complain to their institutions than others (we see you FL, CA, and TX), customers across the country are getting more vocal about voicing their dissatisfaction online, in customer satisfaction surveys, or to their friends and families.
Give your customers a channel to express their concerns so you can reach out, investigate the issue, and identify the source of the problem to more effectively nip it in the bud.
Remember: zero complaints is not a good metric. You can’t fix something if you don’t know it’s broken.
Related: Managing Complaints: The Role of the Three Lines of Defense
Question 2: Are you in the business of issuing refunds?
Financial institutions without a formal complaint management process are more likely to issue refunds. An in an environment with thin margins that can be the difference between profitability and reporting a loss.
FIs with no formal complaint program rarely identify problems early enough to correct and prevent them from continuing to harm additional customers. This causes more consumer harm, more requests for reimbursements, and harms your frontline’s ability to explain that a fee was properly assessed. By having a complaint process, you can easily identify problems and ineffective controls, ensuring your customers receive proper disclosures, timely information about the institution’s fee practices, while lessening the likelihood they will complain or request a fee waiver or refund.
Related: 4 Ways to Use Complaint Data To Improve Risk Management
Question 3: Are you in the business of paying for enforcement actions?
A common theme when an institution does not have a formal complaint program is that issues are allowed to fester and multiply. When customers do not feel heard, they may turn to a law firm or to regulators to help them solve the perceived issue.
Whenever regulators receive complaints from consumers directly, they investigate them and keep them in mind during their next examination of the FI. If the regulator starts to see trends related to consumer complaints pertaining to the theme of your customers’ complaints, they will dig even deeper and may issue findings or initiate enforcement actions depending on the severity of the behavior.
If your customer seeks legal assistance, this can spell even more trouble for your institution. Defending a lawsuit is difficult enough, but if the law firm finds enough other customers with the same issue, they may even launch a class action lawsuit that can cost the institution hundreds of thousands of dollars in legal fees and staff time. In addition, a lot of these class actions are public, creating a blot on your FI’s reputation that can be very difficult and costly to clean up.
Conclusion: Regulators like to see institutions engaging in corrective action. If you put in the time to develop an effective complaint management program, your customers are more likely to see your FI in a positive light. Fewer complaints will be sent to your regulators and you’ll be less likely to have to defend your FI against class action lawsuits or enforcement actions because of operational mistakes.
Discover even more about Regulatory Compliance Management Systems, including why your FI needs one!
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