Financial institutions are not happy about the CFPB’s announcement that it will begin posting the narratives of some consumer complaints in June. When the CFPB first proposed the idea last summer, banks and industry groups made several arguments against public complaint posting: the content of the complaints is unverified, complaints describe only negative – not positive – customer experiences, and institutions cannot tell their side of the story because they are required to protect their customers’ privacy.
The CFPB’s policy, available here, acknowledges that privacy requirements would prevent companies from providing narratives that meaningfully respond to the customers’ complaints. Therefore, the Bureau will limit what companies can say in the public response by providing a set list of company responses addressing the substance of the consumers’ complaints. The Bureau will also allow companies to recommend additional public-facing responses.
But this is unlikely to satisfy the financial institutions. While consumer complaint narratives have been available online at rogue websites for years, the concern in the industry is that complaints posted on the CFPB’s website will be given more weight because they appear to have the imprimatur of the government.
In its comment letter opposing the CFPB’s policy, the Financial Services Roundtable (FSR) wrote: “We also believe that posting unverified and possibly inaccurate accounts on the CFPB’s website will expose providers of consumer financial services to reputational and financial risk for which there is no effective method of mitigation.”
Institutions Must Focus on Preventing Complaints
Now that the CFPB has finalized its policy, banks and others must adapt to this new paradigm. The FSR says there is no method of mitigation, but many consumer complaints can be prevented. The most effective banks have been focusing on minimizing complaints to government agencies since long before the CFPB came along. And for good reason: complaints lead to enforcement actions. In my four years as an enforcement attorney at the CFPB, any time we were considering opening a new investigation, we always looked at the complaint database. Government enforcement agencies have been reading unverified consumer complaint narratives for years, and that will not change with the new policy. (Of course, before government agencies actually bring enforcement actions, they verify many of the complaints by interviewing the consumers and reviewing the institution’s records.)
Focus on Customer Service
Some institutions do a better job than others at dealing with unhappy customers. What the Bureau’s new policy means is that institutions should double their commitment to customer service. They should closely track consumer complaint data, and they should incentivize their customer service employees to reduce complaints. Banks cannot and should not refund every fee paid by people who complain, but they should strive to ensure that every customer service phone call ends happily. After all, many – if not most – of the consumers who go to the trouble of filing a complaint with the CFPB have already gone directly to the institution and are still unhappy. Banks may wish to consider creating ombudsman programs or special escalation units to ensure that complex customer complaints are dealt with properly and efficiently. Some of our clients use single points of contact to ensure that customers are satisfied.
Find and Solve Recurring Problems
Financial institutions should use consumer complaints as a barometer for what products, offers, or disclosures are sources of legal risk. Sometimes a well-intentioned disclosure just doesn’t give consumers information they need to make the decisions. If consumers are complaining about a particular fee or contract provision, business people should ask themselves what they need to change to prevent those complaints. Sometimes a revised disclosure will do the trick. Other times, a product or an offer may need to be redesigned to ensure consumers understand how it works. Such changes will lead to happier customers and quieter call centers, and government agencies will take their investigations to your competitor.
Nicholas F. B. Smyth is a senior associate in Reed Smith’s Financial Industry Group in Pittsburgh and Washington, D.C. Prior to joining Reed Smith, Nick spent four years as an enforcement attorney at the CFPB, investigating and litigating cases and supporting examinations involving auto lending, student lending, debt collection, credit information furnishing, and military servicemembers. Prior to that, he was at the U.S. Treasury Department, where he helped draft the Consumer Financial Protection Act, which created the CFPB.