When Congress passed the Dodd-Frank Act in 2010, it created the Consumer Financial Protection Bureau to enforce rules for financial institutions, monitor and report on markets, and track consumer complaints. The CFPB has oversight over institutions with more than $10 billion in assets, including Navy Federal Credit Union, North Carolina’s State Employees’ Credit Union, Pentagon Federal Credit Union, and BECU. However, the bureau also has indirect oversight and examination authority to respond to consumer complaints about any financial institution, so even credit unions that fall under the $10 billion cutoff can benefit from implementing best practices for the gathering and analysis of consumer complaints.
Here, BECU’s ($11.7B, Seattle, WA) vice president of compliance Mark Thompson and public relations manager Todd Pietzch discuss the complaint resolution expectation under the CFPB.
What is the new expectation of financial institutions under the Consumer Financial Protection Bureau?
Mark Thompson: The expectation is that we capture member complaints and monitor and ensure that those complaints are responded to in a timely way. It’s about data collection and documentation.
To do this, we capture data and analyze it, both in terms of trends over time and the root cause of complaints. CFPB wants to make sure when we look at data, we’re taking an institution-wide view. This means not just solving an individual member's complaint, but determining whether it is a systematic problem that also affects other members. If it is a systematic problem, they want to see that when we're fixing it for the one member, we're also fixing it for all members. They want us to examine our business process, understand what caused the problem, and fix it. Maybe the problem occured because we didn’t adequately train, maybe we missed a step in our process. They want us to really identify the root cause of the problem and fix it at that level.
The expectation also is that we collect complaints on third-party vendors where there are compliance-related issues. For example, our mortgage servicer now provides a list of complaints and we input those into our new complaint database.
How did the CFPB expectation come about?
MT: It came about in the context of coming up with its examination procedures and the expectation that financial institutions have in place a compliance management system — an overarching, documented set of policies, procedures, and management practices. This includes policies and procedures to effectively track, resolve, and analyze member complaints. My understanding is larger national banks have been subject to this kind of expectation for a while. I think the CFPB borrowed this idea of having a complaint processing system in place from that.
How has the CFPB’s expectation changed your process?
MT:Let me explain to you a little about the way we did it in the past. We have software called Member Interaction Tracking (MIT). Anytime anyone in the organization has an interaction with a member, they’re required to input it in the MIT system. There is a workflow built in so it gets assigned to the appropriate person, notes are kept about what is happening, and the issue is resolved. Our institution has a pretty effective way of addressing member issues, but it wasn’t necessarily documented, nor was it written down in policies and procedures, and it wasn’t necessarily centrally managed.
What we didn’t have was a definition that identified a subset of those interactions, which were complaints. And we didn’t have a way to categorize those complaints upfront. Now we’ve built a front end to that system that provides a definition of a complaint to our employees. They can go to a drop down list and select the nature of the complaint from a list of previously identified complaint tags. Say, this is a complaint about discrimination, or here’s the product type and here’s the type of complaint, it was about the application process or discrimination in an underwriting process, or servicing, or collections. Then those tags allow the person on the back end to capture information about complaints. The categories allow us to say, “Gee, we have a 15% jump in mortgage servicing complaints, let’s go look at what’s happening.”
What resources went into creating the new system and process?
MT: There was a team of business unit and IT folks that finished it in a short amount of time. I think that is indicative of the importance management attached to it.
We built the front end and the back end over the summer (2013), and we implemented it at the end of August or early part of September. So we’re just starting to get the back end information out and doing some of that analysis.
We haven’t added any FTEs to run the system. The responsibility has been absorbed into our current staff.
Why is it important for an institution of BECU’s size to have a system to organize complaints?
MT: It’s important to get the information to management where they can focus on it and resolve issues at the root cause for members. So in that sense, I think the expectation the CFPB set for us makes a lot of sense.
It’s record keeping, data collection, and documentation, more than process. I think we had a good process for resolving a member’s complaint in the past. And we had good workflows in place. The CFPB complaint resolution expectation is more about monitoring and making sure it happens for all members and getting third-party complaints integrated into the system, and then looking at the data to do root cause analysis.
What role does the CFPB play in governing credit unions?
MT: I think credit unions do the right thing, we don’t have arbitration clauses in our agreements, we don’t have late payment penalties, we don’t do things that are often thought of as negatives; but often we manage these things in a decentralized way. What the CFPB wants is a centralized approach that involves a lot of policy and procedure, documentation and data analysis.
Is BECU taking complaints across all channels? In the branch? Online?
MT: As long as we can identify the member, our definition of a complaint is very broad and simple: If it’s from a member, involving a product or service we offer or someone offers on our behalf, and there’s an allegation of damage, we consider it a complaint. So people throughout the organization have access to the system, and they’re used to going in and documenting these member interactions.
Todd Pietzch: We monitor the social media space as well and we have software to help us do that. We directly monitor Yelp! And Facebook, that’s typically where we identify most of our complaints from the social space. Then we can narrow down the location, the branch, and the member with that experience or complaint. We reach out and 90+% of the time we’re able to turn them around and we’re able to get a positive comment or recommendation on Yelp!
What advice would you give other credit unions about managing complaint resolution?
MT: For smaller institutions, there might be fewer complaints, you might need less policy and procedure, and you might not need software. But resolving complaints is still important. We already had MIT in place, so it was somewhat easier for us to just build a front end and back end to a system that our employees were already used to.
There are off-the-shelf software programs for this kind of thing, and for a smaller institution, even an Excel spreadsheet would work. The importance of it is learning from the data. It’s new information you can use to manage your business.