As we have discussed in a previous post, a successful compliance management system needs to include four components: (1) board and management oversight, (2) a written compliance program, (3) response to complaints, and (4) a compliance audit. Today, we review component three—the importance of having strong consumer complaint response procedures.
Finance companies cannot ignore consumer complaints. Responding to certain complaints and disputes is the law, no matter how voluminous or annoying the complaints may be. But even beyond that, addressing complaints is necessary to manage a company’s compliance management system because consumer complaints are a primary indicator of compliance problems. And, of course, responding to complaints is just good business.
The CFPB agrees. One of the central themes throughout the CFPB Supervision and Examination Manual is the importance of responding to and learning from consumer complaints. Many times over, the Manual emphasizes that CFPB examiners are to review consumer complaints. The Manual explains, “[E]xaminers should consider both the volume and the nature of consumer complaints received by the entity or by regulatory bodies including the CFPB. In addition to shedding important light on the extent and types of concerns of consumers utilizing the entity’s consumer financial products or services, complaints may provide indications of potential regulatory violations, including unfair, deceptive, or abusive acts or practices (UDAAPs).”
An effective complaint response system should be tailored so that the company, in the words of the CFPB, “is responsive and responsible in handling consumer complaints and inquiries.” At a minimum, a company should record and categorize complaints, address and resolve complaints in a timely manner, escalate complaints to upper management or legal counsel as appropriate, and, in some circumstances, take corrective action. From time to time, companies also need to review and evaluate complaint logs to determine if there are compliance weaknesses that demand a change in company practices and procedures.
In 2012, the CFPB launched its Consumer Complaint Database, a public, searchable online system that collects and catalogs consumer complaints. Over the last few years, the CFPB has expanded the Database to accept complaints on credit cards, credit reporting, debt collection, payday loans, mortgages, bank accounts, student loans, and other consumer loans. Companies that have enrolled in the Database Company Portal are forwarded complaints and must respond to the consumer and the CFPB within a specific period of time (typically 15 days). The benefit to participating is that a company can show the CFPB that it is sufficiently addressing consumer complaints. However, if a company does not respond or receives a high number of complaints, the CFPB may take note and prioritize the company for an investigation. Earlier this year, the CFPB published A Snapshot of Complaints Received.
The bottom line is that consumer finance companies need to have a complaint response procedure to address consumer complaints. The CFPB will be paying attention to your customer’s complaints, so shouldn’t you?