4/22/2016. Complainers change their complaints, but they never reduce the amount of time spent complaining. -Mason Cooley

Transcription

1 4/22/2016 Consumer Complaint Management GBA Compliance School Athens, GA Thomas Williams, CRCM, CCBIA SVP, Senior Compliance Manager United Bank May 3, 2016 Agenda Evolution of Complaint Management Definitions Key Elements of Consumer Complaint Management Program Complaints and the Compliance Management System (CMS) Complaints and the Examination Process Best Practices 2 Quote Complainers change their complaints, but they never reduce the amount of time spent complaining. -Mason Cooley 3 1

2 4/22/2016 Evolution of Complaint Management Federal Trade Commission Improvement Act of 1975 required federal banking agencies to receive and process complaints of unfair or deceptive acts or practices by financial institutions. The FDIC, Federal Reserve, and OCC all have programs in place to respond to and investigate complaints and inquiries pertaining to the following: Consumer Protection Laws and Regulations Consumer Concerns Deposit Insurance Fair Lending Matters 4 Evolution of Complaint Management Consumer Financial Protection Bureau (CFPB) Financial service providers should be responsive to complaints and inquires received from consumers. Entities should monitor and analyze complaints to understand and correct weaknesses in the programs that could lead to consumer risks and violations of the law. 5 Evolution of Complaint Management...regulators, legislators, and consumer advocates have voiced their concern that consumer interests were not adequately protected during the mortgage meltdown and its precursor events, including that consumer complaints were not timely rectified, were not comprehensively addressed, and in some instances, were simply ignored. 6 2

3 4/22/2016 Definitions INQUIRY A request sent to one of the prudential regulators (CFPB, FDIC, Federal Reserve, or OCC) from a consumer, financial institution, or others for information and assistance. 7 Definitions COMPLAINT An allegation by, or on behalf of, an individual, group of individuals or another entity that a particular act or practice of a financial institution is unfair, deceptive, incorrect or violates a federal regulation or statute under which the financial institution must operate. 8 Key Elements of Consumer Complaint Management Program Establishment of channels through which the entity can receive consumer complaints and inquiries; The proper and timely resolution of all complaints; The recordation, categorization, and analysis of complaints and inquiries; and Reviews for possible violations of Federal consumer financial laws. 9 3

4 4/22/2016 Key Elements of Consumer Complaint Management Program Entities should organize, retain, and analyze complaint data to identify trends, isolate areas of risk, and identify program weaknesses in their lines of business and overall Compliance Management System (CMS). 10 Key Elements of Consumer Complaint Management Program Centralized Complaint Management Creates consistency in how complaints are handled throughout the organization. Allows for complaints to be solved quicker and more efficiently. Size of the department should be commensurate with the size of the organization. 11 Key Elements of Consumer Complaint Management Program Policy Outline the process for receiving, acknowledging, addressing, and resolving the complaint. Define what constitutes a complaint versus an inquiry. Establish responsibilities for resolving the complaints. Identify what types of complaints represent the highest risk or create the highest potential for customer harm. Document investigative and resolution guidelines. Establish retention guidelines. 12 4

5 4/22/2016 Key Elements of Consumer Complaint Management Program Procedures Define a process for how complaints will be logged, monitored, and tracked. Establish deadlines for investigation completion and final resolution of the complaint. Document how the complaint data will be analyzed. 13 Key Elements of Consumer Complaint Management Program Analysis of the Complaint Review to determine whether the complaint represents a situation unique to the customer or one that could be systematic failure that has impacted multiple customers. o UDAAP o Fair Lending o Process Failure 14 Key Elements of Consumer Complaint Management Program Monitoring, Tracking, & Testing Monitor for consistent and/or repeated trends. o Product o Employee Formally document the resolution in the file. Track resolution of complaint to ensure it is truly resolved. Perform quality review checks to ensure that the remediation efforts are effective. 15 5

6 4/22/2016 Key Elements of Consumer Complaint Management Program Training No policy can be effective without training. o Create awareness. o Establish organization specific guidelines. Develop reports and communicate them the results regularly. o Monthly, Quarterly, etc. 16 Key Elements of Consumer Complaint Management Program Due Diligence Be proactive. Review for public data related to complaints on your organization. o o o o o o Monthly Complaint Report Monthly Complaint Snapshot Complaint Database 17 Complaints & the Compliance Management System (CMS) Consumer complaint identification and resolution are key factors. Complaint resolution process should be part of an institution s CMS. 18 6

7 4/22/2016 Complaints & the Examination Process Complaints to and about the institution are reviewed. Complaint information used to identify the most potential significant risks to an institution. Consumer complaints may signal management or structural deficiencies in financial institutions. Complaints about particular practices indicative of a heightened risk are also considered for on-site review. 19 Complaints & the Examination Process Complaint Related Examination Questions: Has the institution implemented policies and procedures to process and resolve consumer complaints about the institution, including third party providers? Does the institution comply with all regulatory requirements regarding complaints, such as timeliness or documentation requirements? Have consumer complaints been resolved satisfactorily? 20 Complaints & the Examination Process Complaint Related Examination Questions (Cont.): Does the institution cross-reference complaints to other areas of the Compliance Management System (CMS)? Does the institution review complaints to determine whether improvements to products or services are needed? 21 7

8 4/22/2016 Complaints & the Examination Process Third Party Relationships Banks remain ultimately responsible for monitoring the activities of their third party providers. Policies or practices of third parties could result in consumer complaints. Consumer complaints could identify red flags with a third party vendor and indicate that the bank needs to provide increased attention to the relationship. Failure to manage third party risk could expose the institution to risks. 22 Best Practices Tone at the Top. Established policies and procedures. Implement a tracking and review system. Audit the complaint log regularly. Cross-reference complaints. Monitor third party relationships. 23 Questions 24 8

9 4/22/2016 Contact Information Thomas Williams, CRCM, CCBIA SVP, Senior Compliance Manager United Bank (770) Office (678) Cell 25 9

10 Vol. 28 No. 10 October 2012 CONSUMER COMPLAINT MANAGEMENT: MEETING REGULATORY EXPECTATIONS The CFPB has identified consumer complaint data as a valuable tool in informing its consumer protection duties. It is taking steps to collect such data from various sources and has identified effective complaint management as a key component of a sound compliance program. This focus on consumer complaint management is shared by other government regulators who have, among other things, emphasized practices related to resolution of consumer concerns in several major consent decrees reached with mortgage servicers during the last 18 months. The authors review the heightened emphasis on this aspect of consumer protection and discuss, in detail, the key elements of an effective consumer complaint management program. By Jonice Gray Tucker, Lori J. Sommerfield, and C. Adam Nunziato * The recent financial crisis has unleashed unprecedented focus on the business operations of financial institutions, particularly on their interactions with consumers. During the past three years, regulators, legislators, and consumer advocates have voiced concern that consumer interests were not adequately protected during the mortgage meltdown and its precursor events, including concerns that customer complaints were not timely rectified, were not comprehensively addressed, and, in some instances, were simply ignored. These perceptions, whether founded or unfounded, have triggered a variety of actions aimed at enhancing transparency, clarity, and fairness for consumers in connection with financial products and the delivery of related services. Among the most significant developments have been the establishment of the Consumer Financial Protection Bureau ( CFPB or Bureau ), a fledgling federal agency with broad supervisory, investigative, and enforcement powers over financial institutions 1 and their relationships with consumers. Established pursuant to the Dodd-Frank Act, the CFPB has a broad mandate, which includes, among other things, regulation of the mechanisms by which supervised entities manage consumer complaints. Consistent with this mission, the year-old Bureau has placed significant emphasis on 1 The CFPB has supervisory jurisdiction over banks with $10 billion or more in assets and non-banks. JONICE GRAY TUCKER is a partner, LORI J. SOMMERFIELD is counsel, and ADAM NUNZIATO is a former associate with BuckleySandler LLP. The authors represent financial institutions in litigation, enforcement, regulatory, and compliance matters. They can be reached at jtucker@buckleysandler.com and lsommerfield@buckleysandler.com. IN THIS ISSUE CONSUMER COMPLAINT MANAGEMENT: MEETING REGULATORY EXPECTATIONS October 2012 Page 123

11 RSCR Publications LLC Published 12 times a year by RSCR Publications LLC. Executive and Editorial Offices, 2628 Broadway, Suite 29A, New York, NY Subscription rates: $650 per year in U.S., Canada, and Mexico; $695 elsewhere (air mail delivered). A 15% discount is available for qualified academic libraries and full-time teachers. For subscription information and customer service call (866) or visit our Web site at General Editor: Michael O. Finkelstein; tel ; mofinkelstein@hotmail.com. Associate Editor: Sarah Strauss Himmelfarb; tel ; shimmelfarb@comcast.net. To submit a manuscript for publication contact Ms. Himmelfarb. Copyright 2012 by RSCR Publications LLC. ISSN: Reproduction in whole or in part prohibited except by permission. All rights reserved. Information has been obtained by The Review of Banking & Financial Services from sources believed to be reliable. However, because of the possibility of human or mechanical error by our sources, The Review of Banking & Financial Services does not guarantee the accuracy, adequacy, or completeness of any information and is not responsible for any errors or omissions, or for the results obtained from the use of such information. consumer complaints, identifying consumer complaint management as one of the four pillars of an effective compliance management system. Moving from theory to action over the past year, the CFPB has implemented comprehensive and varied processes for directly receiving and addressing consumer complaints. Even more significant, the Bureau has prioritized top-down regulation of complaint management by incorporating consumer complaint management program reviews as a key part of its compliance examination process. Consumer complaint management remains an area of focus for other federal and state regulators as well. The federal prudential banking regulators, 2 historically concerned with safety and soundness of depository institutions, are continuing to emphasize proper and timely management of consumer complaints. Likewise, state attorneys general and state banking departments, whose investigatory work is often triggered by consumer complaints, are placing more emphasis than ever before on ensuring that consumer voices are heard. In this regulatory environment, it is critical that financial institutions develop and implement robust, effective, and efficient programs for managing consumer complaints, especially those organizations that now fall under the CFPB s jurisdiction. This article discusses regulatory expectations regarding consumer complaint management and explores the regulatory risks that can result from ineffective management of consumer complaints. 3 The article then explains the key elements of an effective consumer complaint management program and how those elements may be designed and implemented in order to demonstrate that the institution comprehensively manages complaints and promptly addresses issues of concern to consumers. 2 The prudential banking regulators include the Office of the Comptroller of the Currency ( OCC ), the Board of Governors of the Federal Reserve System ( Federal Reserve Board ), and the Federal Deposit Insurance Corporation ( FDIC ). 3 An ineffective consumer complaint management program can lead to other risks beyond those triggered by regulatory expectations. These include operational, litigation, and reputational risks, among others, as noted later in this article. REGULATORY RISKS POSED BY AN INEFFECTIVE CONSUMER COMPLAINT MANAGEMENT PROGRAM FTC Enforcement Actions An inefficient consumer complaint management program can produce significant regulatory risk. Historically, oversight of consumer complaint resolution has been an integral function of the Federal Trade Commission ( FTC ), the federal agency charged with protecting consumers by preventing fraud, deception, and unfair business practices in the marketplace. 4 Generally speaking, the FTC exercises this power by enforcing Section 5 of the Federal Trade Commission Act, which prohibits unfair or deceptive acts or practices ( UDAP ). Historically, high volumes of consumer complaints have been a driver for the initiation of FTC investigations which, in many instances, have led to enforcement actions. In fact, the FTC has specifically stated that consumer complaints are critical to its work and often a first indication of a problem in the marketplace and may provide the initial evidence to begin an investigation. 5 Furthermore, the FTC has expressly stated that consumer complaints can help [it] detect patterns of wrong-doing, and lead to investigations and prosecutions. 6 The FTC has brought several landmark enforcement actions against non-bank mortgage servicers and debt collection entities. For example, the FTC obtained settlements with debt collector Academy Collection Service, Inc. in 2008 and individual employees of Academy in 2010, resulting in a $2.25 million civil money penalty against the company and its owner, the largest civil money penalty imposed to date on a debt 4 The FTC enters complaints it receives into Consumer Sentinel Network, an online database that is accessible by more than 1,500 domestic and international civil and criminal law enforcement authorities. 5 FTC, Where to Go for More Information, /ftc/moreinfo.shtm (last visited July 19, 2012). 6 FTC Complaint Assistant, (last visited July 19, 2012). October 2012 Page 124

12 collection business. 7 Key FTC allegations in the matter included that more than 1,000 complaints against Academy were filed with the FTC, and that Academy inadequately investigated complaints about its business practices. Likewise, spikes in complaints against mortgage servicers sparked numerous non-public FTC investigations during the past decade, some of which resulted in enforcement actions. The CFPB and Its Powers In 2010, Congress passed the Dodd-Frank Act, which, among other things, established the CFPB as the first federal regulator solely dedicated to regulating and overseeing consumer financial markets. The CFPB has more expansive powers and oversight over bank and non-bank financial institutions than those previously possessed by the FTC and the prudential banking regulators. In particular, the Dodd-Frank Act heightened protections afforded to consumers, gave the CFPB supervisory authority for banks with greater than $10 billion in assets, and greatly expanded the scope of federal supervision of financial institutions. The CFPB has jurisdiction over a wide range of non-banks, including state-licensed mortgage companies, student lenders, payday lenders, and larger participants in other financial markets (to be defined by regulation). Therefore, financial institutions of all kinds are faced with greater risks for failing to implement effective compliance programs, including consumer complaint management programs. In terms of new consumer protections, the Dodd- Frank Act most notably established a prohibition on abusive acts or practices to complement the traditional prohibition on UDAP under Section 5 of the FTC Act. Section 1031(d) of the Dodd-Frank Act broadly defines the abusive prong of the new unfair, deceptive, or abusive acts or practices ( UDAAP ) standard and gives the CFPB authority to further define the term by regulation. CFPB Director Richard Cordray, however, has indicated in Congressional testimony that the Bureau does not intend to use such authority in the near-term, but will instead define abusive practices through individual enforcement actions. This approach in and of itself suggests that unresolved consumer complaints can mushroom into investigations and enforcement actions, particularly because the concept of UDAAP likely is elastic enough to cover many types of consumer complaints. The prohibition on UDAAP thus provides 7 See, e.g., Consent Judgment, United States v. Academy Collection Serv., Inc., No. 2:08-cv-1576 (D. Nev. Nov. 14, 2008). the CFPB with a powerful supervisory tool and wide latitude to initiate investigations or enforcement actions. In addition to creating the CFPB and new consumer protections, the Dodd-Frank Act has made consumer complaints a primary focus of the Bureau, designating the collection, investigation, and response to consumer complaints as one of the CFPB s six primary functions. 8 In many ways, the CFPB is an analogue to the FTC for bank and non-bank financial institutions, with the noteworthy caveat that the power of the Bureau is significantly broader because it has examination authority in addition to its investigatory and enforcement power. Consistent with its statutory mission, the Bureau has placed significant emphasis on consumer complaints as a foundational component of its consumer financial protection supervisory duties. 9 During a recent press briefing on the CFPB s consumer complaint database, Director Cordray said as part of his prepared remarks that the information gathered through consumer complaints has been very valuable, as it helps to inform our supervisory exams, enforcement actions, and rulemaking. Indeed, Congress authorized us to develop our priorities out of this data, which reinforces its potential value to the broader public. 10 These statements suggest that, similar to the FTC, consumer complaints will be a primary driver of CFPB investigations and enforcement actions. Examination Authority and Outcomes The existence, robustness, and effectiveness of a financial institution s consumer complaint management program are critical in satisfying the CFPB s expectations for a compliance management system. In its Supervision and Examination Manual, the CFPB expressly defined an institution s consumer complaint resolution process as a principal component necessary in establishing an effective compliance management system. 11 The Manual further provides that an initial 8 12 U.S.C. 5511(c)(2). 9 See, e.g., CFPB Press Release, Consumer Financial Protection Bureau Ready to Help Consumers on Day One (July 21, 2011), available at pressreleases/consumer-financial-protection-bureau-ready-tohelp-consumers-on-day-one/ and CFPB Complaint Portal, available at 10 See, e.g., Remarks by Richard Cordray on the Consumer Complaint Database (June 19, 2012). 11 CFPB, Supervision and Examination Manual 33 (2011), available at content/ October 2012 Page 125

13 review of an institution s compliance management system is a significant factor in determining the scope and intensity of the CFPB s examination, and an institution s consumer complaint resolution process is a key component of the full-scope consumer compliance examination of the institution. 12 In connection with compliance examinations, the Bureau may review all complaints submitted to a financial institution, not just those submitted directly to the CFPB. 13 If the Bureau determines during the examination process that consumer complaints are not being resolved effectively or expeditiously, it may render an adverse examination finding. Such a determination also could trigger an investigation which, in turn, could form the basis for an enforcement action depending on the nature of the information revealed during the investigation. Independent Complaint Gathering The CFPB is also gathering and analyzing complaintrelated information through a variety of other channels. It is prominently promoting its website as a portal for consumers to submit product-specific complaints. The CFPB s Consumer Response Annual Report, issued March 31, 2012, indicates that between July 21, 2011 and December 31, 2011, it received 13,210 consumer complaints, including 9,307 credit card complaints and 2,326 mortgage complaints. The Bureau began receiving complaints about checking accounts and other bank products, private student loans, and other consumer loans on March 1, 2012, and will begin receiving complaints about non-depository institutions later this year. The CFPB s website portal is designed to make it easier for consumers to submit complaints. It is likely that this portal may increase the volume of invalid or frivolous complaints that are submitted by consumers because minimal information is required. Regardless of the perceived merit of individual complaints, however, financial institutions must take all complaints seriously and address them using the same procedures. In addition to its website, the CFPB is actively using other methods to collect complaints by soliciting s footnote continued from previous page themes/cfpb_theme/images/supervision_examination_ manual_11211.pdf. 12 Id. at Id. at 41. and phone calls from consumers and accepting referrals from other regulators. Moreover, the CFPB is creatively using non-traditional forums for collecting complaints and consumer perspectives, including holding town hall meetings and conducting field hearings. The CFPB held its first field hearing in Birmingham, Alabama on January 19, 2012, at which it invited representatives from government, consumer advocacy groups, and industry to discuss and examine payday lending practices. The CFPB also entered into a memorandum of understanding with the FTC to share consumer complaint information, and the Bureau has also executed information sharing agreements with state attorneys general. 14 The Prudential Banking Regulators, State Attorneys General, and State Regulators Depository institutions with assets of less than $10 billion, which are not within the CFPB s examination and enforcement jurisdiction, still face heightened scrutiny in the new environment. Each of the prudential banking regulators has an existing consumer assistance group and program to receive consumer complaints and conducts compliance examinations of banks within its jurisdiction. In light of the new focus on consumer protection and the standards to be set by the CFPB, the prudential banking regulators are likely to be aggressive and to increase scrutiny of banks. This proactive posture has been demonstrated by their recent consumer protection activities. For example, in 2011, the Federal Reserve Board, the OCC, and the former Office of Thrift Supervision 15 executed consent orders with 14 of the largest mortgage servicers. A key component of these orders is the requirement that each servicer adopt and implement policies and procedures to enable borrowers 14 The memorandum of understanding with the FTC ensures that the CFPB and FTC each have access to complaints regarding institutions within their respective jurisdictions. The agreements with the state attorneys general facilitate the states ability to bring enforcement actions against banks and nonbanks. Therefore, the failure to implement an effective consumer complaint management program and to properly address complaints creates regulatory and enforcement risks beyond just those posed by the CFPB. 15 Section 312 of the Dodd-Frank Act required that all functions of the Office of Thrift Supervision be transferred to the OCC on July 21, As a result, the OCC now has supervisory authority over thrifts. Pursuant to Section 313 of the Dodd- Frank Act, the OTS was abolished effective 90 days after the transfer date. October 2012 Page 126

14 to submit consumer complaints, and ensure that the complaints are promptly reviewed and resolved. 16 In keeping with this theme of increased focus on consumers, federal and state attorneys general also have stepped up enforcement of consumer financial protection laws. For example, in April 2012, the U.S. Department of Justice, 49 state attorneys general, and the U.S. Department of Housing and Urban Development executed a $25 billion settlement with the nation s five largest mortgage servicers. 17 Among other things, the settlement requires each servicer to develop and implement rigorous consumer complaint management processes that include many of the program elements discussed below, including adequate staffing, written policies and procedures, specific timelines for acknowledging and responding to complaints, and tracking and escalating complaints, when needed. Other Risks complaints, which may serve as an early risk indicator of problematic trends and systemic defects. Litigation risk can arise when unaddressed consumer complaints are an indicator of violations of a host of consumer protection laws that provide for a private right of action. Reputation risk can arise from a number of sources such as critical postings or reviews on consumer feedback websites, and negative media coverage. Therefore, a successful consumer complaint program can serve as an early warning system for emerging regulatory, operational, compliance, legal, and reputational risks by detecting institutional weaknesses or deficiencies. KEY ELEMENTS OF AN EFFECTIVE PROGRAM In our experience, a number of elements are pivotal in crafting a strong, effective, and efficient consumer complaint management program, including the following: An ineffective consumer complaint management program can lead to a variety of additional risks beyond those triggered by regulatory expectations. These include risks related to business operations, private litigation, and reputation, among others. centralized complaint management; written policies and procedures; root cause analysis; An ineffective complaint management program can present operational risks by failing to resolve individual 16 See, e.g., Consent Order,Citibank, N.A., No. AA-EC (OCC Apr. 13, 2012), news-releases/2011/nr-occ c.pdf. The Federal Reserve System recently published an article on using complaint data to strengthen a compliance management program, demonstrating the prudential banking regulators emphasis on consumer complaint management. See Andrea Sovich, Enhancing the Compliance Management Program with Complaint Data, CONSUMER COMPLIANCE OUTLOOK (Fed. Reserve Bank of Phila.) 2d Qtr. 2012, at 2. As this article states, consumer complaints contain valuable information that can help an organization better understand its compliance risks and issues... [,]validate and strengthen controls[, and]... identify highfrequency trends or individual complaints that may indicate significant compliance risk. Id. at 2. The article added that [t]he Board of Governors of the Federal Reserve System (Board) considers complaint data to be a critical component of its risk-focused supervisory program and uses it as a risk factor to assess a financial institution s compliance with consumer regulations. Id. at See, e.g., Consent Judgment, United States v. Bank of America Corp., No. 1:12-cv RMC (D.D.C. Apr. 4, 2012) available at scra_boa_settle.pdf. monitoring and tracking of complaints and issue escalation; testing; internal communications and training; publication of the consumer complaint management program to the public; and partnering with consumer advocacy groups and regulators. Each of these elements is discussed in detail below. Centralized Complaint Management Creating a centralized consumer complaint management department is critical. Centralization creates consistency in the way complaints are handled through utilization of a single set of policies and procedures, and a common reporting structure. In addition, employees, customers, regulators, and outside parties can better understand and communicate with one consolidated department, which allows complaints to be resolved more effectively. To ensure independence, regulators likely will view it preferable to place the October 2012 Page 127

15 consumer complaint management function in a department separate from a business line. Options include reporting to the Office of the President, Legal Department or Compliance Department to reduce the possibility or perception of improper business line influence on the complaint resolution process. Independence can be maintained in a business line relationship, but regulators may adopt a show me how attitude with such a structure. In general, the consumer complaint management department s staff size should be commensurate with the size of the institution, the size of its consumer base, and the number and complexity of its products. As a financial institution grows, it may need to consider expansion of the complaint management staff. All consumer complaints should be routed to the complaint management department, regardless of which division, business line, or channel initially receives the complaint. A financial institution may consider implementing a formal process for coordinating complaint resolution between the consumer complaint management department and various other departments, including the Legal Department, the Compliance Department, and affected business lines. Each department should consider designating a key contact person with whom the consumer complaint management department works. Such a process helps ensure effective and efficient resolution of complaints. In mortgage servicing, there has been significant support for the appointment of a single point of contact ( SPOC ) for consumers under certain circumstances. The SPOC concept, first introduced in connection with the consent orders issued by the prudential banking regulators in April 2011, may have utility for resolving complaints about other financial services and products. An SPOC can help ensure that a consistent approach is taken with a consumer, facilitate an efficient resolution since the contact will be familiar with the facts and the consumer s concerns, and can further effective application of policies and procedures by holding a particular person accountable and responsible for effective resolutions. An SPOC also comforts the consumer, putting a human face on the institution and notifying the consumer that he or she can contact and rely upon the same representative. Some institutions might consider appointing a consumer ombudsman to act as an escalation point for consumers dissatisfied with complaint resolution efforts. An ombudsman with greater experience, expertise, and training in dealing with consumers than front-line customer service representatives should be skilled in the objectivity necessary to address a consumer s dissatisfaction with the outcome of his or her complaint. Policies and Procedures Formal, written, consumer complaint management policies and procedures are fundamental; they should be updated routinely to incorporate new developments in law and regulatory expectations. Policies and procedures communicate the importance of promptly addressing and resolving complaints, make employees aware of the institution s general approach to consumer complaint management, and provide the step-by-step guidance necessary for successful complaint resolution efforts. Policies should address, at a high level, the process for receiving, acknowledging, addressing, and resolving consumer complaints. Policies may also define the types of inquiries that qualify as complaints; discuss the types of complaints that present particularly high risks, such as those implicating potential fair lending concerns or involving vulnerable populations, such as minorities, senior citizens, students, and military servicemembers; discuss how high-risk complaints are prioritized in the organization; explain how complaints are directed to the consumer complaint management department and generally resolved; and communicate the need to act on complaints quickly. Complaint management procedures should comprehensively describe, in detail, the process for receiving, acknowledging, addressing, and resolving consumer complaints. Procedural elements may include the following: logging complaints into a centralized database designed to monitor and track complaints to resolution; recording target resolution dates that comply with resolution deadlines imposed by federal or state laws. The CFPB requires resolution within 15 October 2012 Page 128

16 calendar days, for example. 18 Financial institutions should strive to resolve complaints by these deadlines, but whenever possible, try to complete the resolution process more expeditiously than required; providing guidance on escalating unresolved complaints or complaints in which the consumer is dissatisfied with the resolution, such as by referring the matter to the legal department or consumer ombudsman; and assigning the complaint to one employee within the consumer complaint management department who is ultimately responsible for researching and resolving the complaint; acknowledging the complaint and documenting the acknowledgment, preferably in a manner consistent with customer preferences about how they prefer to be contacted; providing guidelines for outreach to customers to confirm the issues that need to be addressed and to obtain necessary additional information. recording all external and internal communications, actions taken, research conducted, and any other developments during the complaint resolution process; defining mechanisms and expectations for communicating with other departments, as needed, to conduct research or fact-finding, such as with the legal department to obtain legal advice, the credit risk management department to discuss underwriting decisions, or the business line that relates to the product or service about which the customer is complaining; identifying and approving final action to be taken on the complaint. If the resolution requires an action to be taken by a department other than the complaint management department, such as reimbursement of a fee, then the complaint management department may consider confirming in writing that the remedial action was taken. The complaint management department may consider waiting until the confirmation has been obtained before sending a letter or to the consumer stating that the problem was addressed; following up with the consumer after the advice is communicated, to determine if the consumer is satisfied with the resolution; 18 CFPB, Company Portal Manual 1 (2011), available at talmanualv2.pdf. retaining all records related to the complaint for at least seven years or such other period required by law. Policies and procedures may be tailored to accommodate complaints from vulnerable or high-risk populations, as these may be associated with higher risks to the institution. The provision of financial services to these groups has received significant media coverage, public scrutiny, and regulatory attention, and many of these groups receive special legal protections. For example, the U.S. Department of Justice obtained two high-profile settlements with large mortgage servicers for alleged violations of the Servicemembers Civil Relief Act in 2011, 19 and recent legislation has added new protections to credit card applicants under the age of Regulators and federal and state attorneys general also have initiated investigations based on a single complaint related to the mishandling of concerns by a consumer in a high-risk population. Accordingly, a financial institution may consider adding options that permit consumers to communicate in other languages, in particular Spanish, when filing complaints through its online complaint site or by telephone. Similarly, the complaint management program can be tailored to senior citizens and those with certain disabilities by including a large print link for the online system and a telecommunication device for the deaf ( TDD ) option for the call center. For servicemembers, the online portal can include a link that will take them to a platform specifically designed to explain and address issues that arise out of legal protections afforded to military personnel; servicemembers calling into the call center can be directed to representatives trained to be aware of and handle issues being confronted by members of our military. Similar options can be designed for other vulnerable or high-risk populations. 19 Consent Judgment, United States v. BAC Home Loans Servicing, LP f/k/a Countrywide Home Loans Servicing, LP, No. 2:11-cv PA-MRW (C.D. Cal. May 30, 2011); Consent Judgment, United States v. Saxon Mortgage Services, Inc., No. 3:11-cv-1111-F (N.D. Tex. May 26, 2011). 20 Credit Card Accountability Responsibility and Disclosure Act of 2009, Pub. L.No , 123 Stat October 2012 Page 129

17 Policies and procedures should also address customer complaints about an institution s third-party service providers or vendors. The prudential banking regulators have long required bank oversight over third-party vendors, 21 and on April 13, 2012, the CFPB issued Bulletin , which specifically addresses the need for banks and non-banks to exercise oversight over their third-party vendors. Accordingly, financial institutions may consider exercising significant due diligence when selecting and retaining third-party vendors. They should make meaningful efforts to understand vendors operations, compliance management programs, and policies, procedures, and processes for consumer complaint resolution. 22 Ongoing monitoring of third parties can be helpful in evaluating whether they effectively implement and comply with their own consumer complaint policies and procedures, and whether these policies are updated regularly as supervisory and legal requirements change. Application of Root Cause Analysis An essential component of investigating a consumer complaint is to identify the root cause or causes of the complaint. Root cause analysis helps determine whether a complaint represents an issue unique to the consumer or a systemic failure that may impact multiple consumers. For example, a consumer might complain that she was turned down for credit without explanation. A root cause analysis might reveal either that, in the particular case, an adverse action notice was sent to the customer's former address (a unique issue to the customer who changed residences after application), or that an adverse action notice was not sent at all, as required by FCRA and ECOA. The analysis might further determine that if the notice was not sent, the reason was that an employee did not follow the relevant denial notice procedures or misunderstood the circumstances requiring the notice. Alternatively, the analysis might determine that an adverse action notice was not issued because the institution s computer systems did not properly process a request to issue such a notice. This last case is an example of how root cause analysis assists in uncovering systemic problems that could result in compliance failures. 21 See, e.g., FDIC, Fin. Inst. Letter : Guidance for Managing Third-Party Risk (2008), and OCC Bulletin : Third-Party Relationships (2001). 22 See Jonice Gray Tucker, Khalid R. Jones, and Kendra Kinnaird, Will Vendors Create New Liability for Servicers? MORTGAGE BANKING, July 2012, at 52. Monitoring, Tracking, and Issue Escalation Successful consumer complaint management programs should incorporate periodic quality control checks and routine internal audits. Quality control, internal audit, and monitoring activities may include tracking of complaints to identify systemic problems. Multiple complaints on a specific topic, or about a specific product or product feature, or about a product or service originated at a specific office or branch may be red flags for systemic weaknesses. For example, a close-in-time series of complaints about data security breaches involving customers with addresses from the same provider might reveal weaknesses in information security controls or non-compliance with privacy laws. In addition to these formal tools, financial institutions may gain useful information from consumer-focused websites, including general complaint websites and websites created to complain about specific institutions. These websites, and social media feedback (the thumbs down icon on Facebook, for example), may highlight specific types of consumer grievances even before they give rise to specific complaints. The CFPB routinely monitors and therefore, financial institutions should consider monitoring these websites to detect complaints that the CFPB itself will be reviewing. With social media emerging as a new frontier for how consumers express complaints, financial institutions should look for and review Facebook pages and Twitter handles that are general complaint vehicles or that are dedicated to complaints about the specific institution. A financial institution may consider tracking complaints by complaint type, as well as by product or service, branch, geographic region, and other categories in order to determine if there are systemic problems within any such area. An institution should particularly look for trends implicating high-risk issues that are subject to intense public and regulatory scrutiny, including fair lending, UDAAP, treatment of vulnerable populations (such as minorities, senior citizens, students, and servicemembers), data breaches, and fraud. Finally, monitoring and tracking complaints may lead to issue escalation. Complaint handling procedures should identify situations where it is appropriate for the consumer complaint management department to escalate complaints to senior and executive management or the company s attorneys. For escalated complaints, it is important that senior and executive management be accountable for follow up and for communicating how the problematic issues were resolved. October 2012 Page 130

18 Testing A rigorous compliance testing and analytics program particularly back-end testing of corrective action is essential to confirm that non-compliance issues detected through analysis of consumer complaints are remediated. The scope and frequency of testing should be commensurate to the size and risks of the institution. A large financial institution with many products and services, several operations centers, and a wider geographical footprint may wish to consider implementing a sophisticated compliance testing program that tests multiple areas for compliance on a frequent basis. Conversely, smaller institutions may need a less robust testing program that tests for compliance less frequently. Internal Communication and Training Internal communications from executive and senior management concerning the importance of resolving consumer complaints proactively and expeditiously can help foster an institutional culture of customer-centric awareness and understanding. Using periodic communications such as s and newsletters, and including consumer complaint resolution as a topic in a Customer Bill of Rights can help build this cultural awareness. It is critical that the message come from the top to convey the importance of the communications and the commitment to the message. Executive management and, as appropriate, the board of directors may consider being actively involved in setting the message, defining expectations, and including their names in the communications. Comprehensive employee training is also key to effective implementation of a consumer complaint management program. First, all employees should receive general awareness training on the consumer complaint management process at the time of hire. Financial institutions may also consider requiring all employees to be trained on the institution s complaint management policy, including the importance of handling complaints quickly and instructions on how to direct complaints to the appropriate person embedded in their business line or to the complaint management department. Second, an institution may consider developing in-depth training for employees who directly manage consumer complaints or have customer contact for example, the complaint management department, personnel designated within the business to work with the complaint management department, and customer service representatives and other employees who have direct consumer contact. A mix of general and jobspecific training meets current regulatory expectations to ensure that employees are appropriately knowledgeable about the consumer complaint management process. Publication In an age of public transparency, it has come to be expected that financial institutions will make their consumer complaint management programs visible and accessible. Visibility and accessibility communicate that the institution is proactive in dealing with consumer complaints. Visibility and accessibility are promoted through features such as publicly available addresses for complaints and comments, easy-to-find toll-free numbers, mailing addresses, website pages, and, if applicable, Facebook pages and Twitter handles. Publication of the institution s complaint management program also is key to managing reputational risks and consumer relations, and identifies the institution as a consumer-friendly provider of financial products and services. Partnering Partnering with consumer advocacy groups may help financial institutions create and maintain a strong public image and minimize regulatory, reputational, and litigation risks. Many consumers submit complaints to relevant consumer advocacy groups rather than (or in addition to) to the financial institution itself. Working relationships with these groups can open the door to cooperative complaint-resolution efforts, or reduce the adversarial tone involved in the complaint process. Moreover, advocacy groups can have powerful voices and have been known to praise institutions with sound consumer-oriented practices. For these reasons, some financial institutions may find it worthwhile to nurture cordial working relationships with consumer advocacy groups, even permitting them to refer complaints to the institution in a spirit of cooperation. A financial institution also should develop and maintain an effective relationship with its regulators, particularly the CFPB, given its consumer protection mission and recent consumer complaint focus. Communicating to regulators that the institution has a strong consumer complaint management program designed to address consumers needs will help develop this relationship, and make it more likely that the regulator will work with the institution to resolve a complaint rather than take an adversarial approach On the issue of regulatory relationship management, see Lori Sommerfield and Jo Ann Barefoot, Regulatory Relationship Management: Building Trust, Credibility with Regulators, October 2012 Page 131

19 CONCLUSION In today's new regulatory environment, a strong consumer complaint management program is critical to successfully managing the regulatory risks faced by financial institutions. The CFPB has made it clear that it views a robust consumer complaint management program as essential to an institution s overall consumer compliance efforts, and unresolved consumer complaints can lead to adverse examination findings or enforcement actions. Accordingly, effective consumer complaint management programs are necessary to satisfy regulatory expectations and achieve satisfactory examination ratings. In addition to their role in managing regulatory risks, effective consumer complaint management programs can alleviate other risks because, if appropriately deployed, they are useful tools for detecting and remediating systemic issues or trends in non-compliance that could result in private litigation, compliance deficiencies, or adverse media coverage. Furthermore, effective consumer complaint management programs can demonstrate to regulators, consumers, and the larger public that the financial institution cares about consumer concerns and is committed to resolving problems. footnote continued from previous page BNA BANKING REPORT, May 3, 2011, available at f25-925d-4631-b51c-42e30f07f42b; and Lori Sommerfield and Jo Ann Barefoot, Regulatory Relationship Management: Planning, Organizing and Managing Examinations, BNA BANKING REPORT, May 10, 2011, available at October 2012 Page 132

20 National Banker Teleconference Consumer Complaints December 18, For Internal FDIC Use Only

21 Presenters Luke Brown - Associate Director, DCP Susan Boenau - Acting Associate Director, DCP Joni Creamean - Chief, Consumer Response Center Patience Singleton - Senior Policy Analyst, DCP Holly Heaton-Sommer - Review Examiner, DCP Cassandra Duhaney - Senior Policy Analyst, DCP 2 For Internal FDIC Use Only

22 Introduction The vast majority of FDIC-supervised institutions are well-run and provide good customer service Some institutions have expressed an interest in receiving additional information about consumer complaints Accordingly, this teleconference discusses the FDIC s consumer complaint process and how consumer complaints should be considered a part of a bank s Compliance Management System 3 For Internal FDIC Use Only

23 Agenda Overview of the FDIC s Consumer Complaint Response Function Review of Consumer Complaint Data Metrics Consumer Complaints as an Important Part of the CMS 4 For Internal FDIC Use Only

24 Additional Questions We will be accepting additional questions by during this call. If you have questions please them to 5 For Internal FDIC Use Only

25 Overview of the FDIC s Consumer Complaint Response Function 6 For Internal FDIC Use Only

26 Establishment of the Consumer Affairs Program Federal Trade Commission Improvement Act of 1975 required federal banking agencies to receive and process complaints of unfair or deceptive acts or practices by financial institutions FDIC responds to and investigates complaints and inquiries pertaining to consumer protection laws and regulations, consumer concerns, deposit insurance and fair lending matters The FDIC established a consumer complaint function within the agency to oversee consumer complaints and inquiries 7 For Internal FDIC Use Only

27 Complaints and Inquiries Defined Complaint: an allegation by, or on behalf of, an individual, group of individuals or another entity that a particular act or practice of a financial institution is unfair, deceptive, incorrect or violates a federal regulation or statute under which the financial institution must operate. Inquiry: a request to the FDIC from consumers, financial institutions or others for information and assistance. 8 For Internal FDIC Use Only

28 Role of Complaints and Inquiries Address consumer concerns Respond to inquiries on a wide range of consumer protection related issues Identify potential areas of focus for supervisory program Inform decision making on consumer education, consumer protection policy, supervisory priorities and emerging issues 9 For Internal FDIC Use Only

29 Intake of Consumer Complaints and Inquiries Strong commitment to outstanding customer service Intake and processing covered by formal policies and procedures Consistent and constructive approach to investigating and responding to complaints and inquiries Specially trained staff throughout the FDIC 10 For Internal FDIC Use Only

30 Receipt of Complaints and Inquiries The CRC receives complaints and inquiries through multiple access points: Internet: Fax: (703) Phone: ASK-FDIC Mail: Federal Deposit Insurance Corporation Consumer Response Center 1100 Walnut St, Box #11 Kansas City, MO Written , fax or letter is required to initiate a formal investigation of a complaint matter 11 For Internal FDIC Use Only

31 Processing Complaints and Inquiries Correspondence entered and tracked in a secure, electronic system Reviewed to determine time frame for a response and appropriate handling Redirected if necessary If the CRC receives a complaint or inquiry about an FDIC exam or the exam process, it is forwarded to the appropriate Regional Office for resolution Deposit insurance related inquiries assigned to Deposit Insurance section to handle 12 For Internal FDIC Use Only

32 Analyzing and Investigating Correspondence Compliance with applicable consumer protection laws and regulations Address consumer concerns Educate consumers 13 For Internal FDIC Use Only

33 Investigation Process FDIC receives written communication about a financial institution CRC forwards communication to the institution for review and response via secured website exchange Bank investigates all allegations by the consumer and responds to the FDIC within specified time frames Correspondence exchanged via FDICconnect 14 For Internal FDIC Use Only

34 Investigation Process CRC investigation specialists analyze and review the bank s response CRC staff respond to consumer after analysis completed Bank is notified of the FDIC s conclusion Examination staff are notified about cases with significant supervisory concerns 15 For Internal FDIC Use Only

35 Collaboration on Consumer Complaint Data Complaint data supports the FDIC s supervisory functions Complaint information can inform banks about potential risks and alert examiners about issues or potential supervisory concerns The complaint investigation process has led to the identification of consumer harm 16 For Internal FDIC Use Only

36 Review of Consumer Response Center Data Metrics For Internal FDIC Use Only

37 CRC Data Metrics 18 For Internal FDIC Use Only

38 CRC Data Metrics 19 For Internal FDIC Use Only

39 CRC Data Metrics 20 For Internal FDIC Use Only

40 CRC Data Metrics Commonly Identified Areas of Concern Error Resolution Procedures (Regulation E) Unauthorized Release of Customer Information (Part 332-Privacy) Inaccurate Adverse Action Notices (Regulation B) and FCRA 21 For Internal FDIC Use Only

41 Error Resolution Review Bank errors occur that may not violate consumer protection laws Errors include failure to respond to a customer s request or providing a customer with inaccurate information Although not technical violations of law, errors can cause consumer harm and once identified, banks typically take steps to correct errors 22 For Internal FDIC Use Only

42 Error Resolution Review Regulation E implements the Electronic Fund Transfer Act (EFTA) EFTA/Regulation E outlines specific procedures pursuant to electronic fund transfers where consumers allege unauthorized, fraudulent or otherwise erroneous account activity Banks should remain mindful of EFTA/Regulation E requirements pertaining to electronic fund transfers 23 For Internal FDIC Use Only

43 Consumer Complaints as an Important Part of the CMS For Internal FDIC Use Only

44 Compliance Management System (CMS) Part of an institution s overall risk management strategy How an institution: Learns about compliance responsibilities Ensures employees understand these responsibilities Ensures compliance requirements are incorporated into business processes Reviews operations to ensure responsibilities are met Takes corrective action 25 For Internal FDIC Use Only

45 Components of an Effective CMS Effective CMS comprised of: Board and management oversight Compliance Program Compliance Audit Consumer complaint identification and resolution are key factors Complaint resolution process should be a part of an institution s CMS 26 For Internal FDIC Use Only

46 Elements of an Effective CMS Board and management oversight Compliance program Compliance audit 27 For Internal FDIC Use Only

47 Bank s Consumer Complaint Policy Three Essential Issues: Establish a centralized process for complaints Identify risks regarding automated or manual systems on complaints received Identify risks associated with product or service offerings 28 For Internal FDIC Use Only

48 Consumer Complaints in the FDIC s Examination Process Evaluation and analysis of an institution s CMS is a key part of the overall compliance examination Complaints to and about the institution are reviewed Complaint information used to identify the most significant potential risks to an institution Consumer complaints may signal management or structural deficiencies in financial institutions 29 For Internal FDIC Use Only

49 Compliance Examination Overview Three primary stages of the compliance review: Pre-examination planning Review and analysis Communication of findings to institution management 30 For Internal FDIC Use Only

50 Pre-Examination Planning Stage Purpose of the pre-examination planning stage is to ensure that examiners are aware of any possible consumer protection concerns or recurring issues Examiners review complaints and correspondence files regarding a particular institution Examiners request compliance-related documents from a bank prior to the on-site review 31 For Internal FDIC Use Only

51 Review and Analysis Stage Purpose is to ensure that examiners have sufficient information to assess the financial institution s risk and develop a risk profile Examiners review complaints received by the institution during the examination review period Complaints about particular practices indicative of a heightened risk are also considered for on-site review 32 For Internal FDIC Use Only

52 Examples of Complaint Related Examination Questions Has the institution implemented policies and procedures to process and resolve consumer complaints about the institution, including third party providers? Does the institution comply with all regulatory requirements regarding complaints, such as timeliness or documentation requirements? Have consumer complaints been resolved satisfactorily? Does the institution cross-reference complaints to other areas of the CMS? Does the institution review complaints to determine whether improvements to products or services are needed? 33 For Internal FDIC Use Only

53 Third Party Relationships and Consumer Complaints Banks remain responsible for the activities of third party providers Policies or practices of third parties could result in consumer complaints Consumer complaints could identify concerns about third parties and indicate that the bank needs to provide increased attention to the third party relationship Failure to appropriately manage third party relationships can expose the institution to risks 34 For Internal FDIC Use Only

54 Best Practices Commitment from the Board and senior management Proper documentation Consistent policies and procedures Tracking system Regular audits Cross-reference complaints Monitor third-party relationships 35 For Internal FDIC Use Only

55 Contact Information To submit a complaint or inquiry: Internet: Fax: (703) Phone: ASK-FDIC Mail: Federal Deposit Insurance Corporation Consumer Response Center 1100 Walnut St, Box #11 Kansas City, MO Questions regarding FDICconnect: FDICconnect@fdic.gov Phone: ASK-FDIC, Select option 4 Ask the Operator to transfer you to the FDICconnect Helpdesk Call the FDICconnect Helpdesk directly at (703) For Internal FDIC Use Only

56 Questions and Answers For Internal FDIC Use Only

57 Thank You The information contained in this presentation is for informational purposes only and is provided as a public service and in an effort to enhance understanding of the statutes and regulations administered by the FDIC. It expresses the views and opinions of FDIC staff and is not binding on the FDIC, its Board of Directors, or any board member, and any representation to the contrary is expressly disclaimed. 38 For Internal FDIC Use Only

58 Page 1 of 3 4/21/2016 March 01, 2012 Carl G. Pry: "Consumer Complaints - The Ground Floor" ABA Bank Compliance March-April 2012 Carl G. Pry As seen in ABA Bank Compliance Consumer complaints play a key role in the detection of unfair, deceptive, or abusive practices. Consumer complaints have been an essential source of information for examinations, enforcement, and rule-making for regulators. So says the CFPB s Supervision and Examination Manual in its section on UDAAP. Complaints are taking center stage in the new exam environment. Consumers can lodge complaints directly with the CFPB on credit card, student loans, and mortgages, and soon the Bureau will take complaints on any financial product or service. The manual also states that Bureau examiners will look at complaints filed at a number of other government agencies, the Better Business Bureau, and even commercial web sites such as ripoffreport.com and complaints.com. This is a very clear sign to banks to ensure their own complaint management systems are attuned to potential compliance issues. Even if your bank is not supervised directly by the Bureau, rest assured the other agencies will be looking at complaints much more closely than ever before. Here are a few pointers on formulating an effective program: Make sure your bank has a formalized complaint management program Almost all banks have some sort of process to deal with complaints, but often they re not formalized. Banks may empower employees to deal with and resolve issues on the spot, or perhaps contact a manager for assistance. Others may only raise concerns when the complaint is sufficiently critical (in the eyes of the bank). Not to say any of these methods are wrong, but in practice they tend to operate inconsistently and more importantly the bank is not able to identify similar complaints. Banks clearly need a formalized customer complaint program, if for no other reason but to demonstrate that the bank takes such concerns seriously. But there are additional benefits to dedicating appropriate attention to complaints. How are complaints received? Traditionally banks think about complaints in terms of a customer complaining over the phone or during an in-person transaction, but increasingly these are the exception rather than the rule. Banks should certainly monitor and track complaints received through traditional channels (mail, phone, inperson), but the explosion in technology has provided new and interesting ways to complain about banks.

59 Page 2 of 3 4/21/2016 It s expected your bank would treat an ed complaint as one received any other way, but how about those posted in social media? It s sometimes difficult to identify who s complaining in social media (unless your bank collects screen names), but does that mean your bank should just ignore it? No even if you can t identify who is unhappy you should still pay attention to what the concern is; sometimes anonymity breeds brutal honesty. What about those that aren t delivered to your bank at all? Many banks undertake efforts to see how people are talking about their bank in cyberspace. This can be done through search engines, of course (looking for combinations of your bank s name and certain key words), and there are sophisticated programs and third parties who troll the web for mentions of the bank, positive or negative. It s also worthwhile to consider complaints made to third party sites about your bank, and not just because it s in the CFPB Exam Manual. It s all about getting a firm handle on what customers think of your bank and its treatment of customers. Broaden your horizons consider who out there is unhappy with your bank and why, whether you re meant to hear it or not. Categorize complaints mistakes, bad service, regulatory, and so forth It s essential to track complaints, but this requires organization. How should complaints be grouped: by business unit, product, rule or regulation, how many swear words the person used, or something else? Tracking by rule or regulation is very compliance-centric, but it shouldn t be the only way, since it s not likely useful to the bank as a whole. Make it easy for those employees who receive and are made aware of complaints to record them. The particular method of organization is not as important as having a sustainable system to be able to spot patterns and trends. Merely recording complaints isn t good enough; take a good look at what s being said. Identifying patterns in complaints is mentioned in the CFPB s procedures: When consumers repeatedly complain about an institution s product or service examiners should flag the issue for possible further review. In particular, the CFPB is looking for UDAAP in complaint data. For example, the presence of complaints alleging that consumers did not understand the terms of a product or service may be a red flag indicating that examiners should conduct a detailed review of the relevant practice. This is especially true when numerous consumers make similar complaints about the same product or service. The point here is to know whether you have any of these issues before examiners point them out to you. Escalation process Certain complaints should always be escalated: those coming from a government agency or regulator, those arriving in the form of lawsuits, and the like. Banks should have a methodology to escalate appropriate complaints (including any mentioning discrimination or abuse), as well as those that are identified as resulting from improper disclosure, for instance. The goal is consistency, where the bank can demonstrate that it takes all complaints seriously and in situations where legitimate problems are found, they will be dealt with in an equitable manner for any

60 Page 3 of 3 4/21/2016 and all customers involved. What are your responses, how are they provided, and are they recorded? Who is empowered at the bank to fix the problem? Some take have a philosophy of allowing anyone at all in the bank to make things right, on the spot. Others have a specific protocol to follow in order to make changes. Again neither method is wrong, but a risk in allowing anyone to make the customer happy is the bank may not be aware of everything going on, meaning patterns are more difficult to recognize. For the same reasons as above, it s just as important to categorize and track responses. Examiners will look at which complaints were ignored and which were responded to. They ll also look to see which complaints were valid, whether because of a mistake, violation, or otherwise, as well as whether any form of reimbursement was provided. Carve out a special category for fair lending and UDAAP As complaints are analyzed, those that have any allegations of discrimination or any unfair, deceptive, or abusive practice should be treated with special care. Fair lending and UDAAP have a special place in the hearts of the CFPB (see the Exam Procedure again), so any complaints having any hint of these should immediately raise red flags, regardless of how ridiculous or far-fetched the allegations seem (we ve all had the kitchen sink complaint, which lists a litany of grievances against the bank and at the end says something to the effect of, and I think the bank discriminated against me ). The bank should pay special attention to these types of complaints (it s guaranteed the examiners will) even if it s to conclude there is no basis to the claim. Consider a consumer advocate Some banks have even taken the extra step of even appointing someone in the bank as a customer advocate, whose duties include watching out for the interests of the customer. Think of it as having an in-house watchdog for service issues, or even fair lending or UDAAP concerns. While this approach is not at all required by any regulator, it does show how important monitoring customer complaints has become.

61 The Route to Real-Time Risk Management throughcustomer By Elizabeth Clarkson, CRCM, CAMS What does your bank do with customer complaints? Because we all aim to provide excellent service, compliance officers at most banks would probably say they handle them with a sense of urgency. Why wouldn t they? Bankers want to keep existing customers and expand their clientele. If they don t manage complaints, that can be hard to do. So, if it seems banks are already on top of complaints, why are the regulators, especially the Consumer Financial Protection Bureau (CFPB), so concerned about the banking industry s handling of customer complaints? The clue is in the phrase doing, rather than handling. While the CFPB and prudential regulators are concerned consumer complaints are handled appropriately, their bigger focus is on what banks do with information from reports of dissatisfaction. It s not enough that a bank provides a timely and appropriate response to a complaint; it must also ensure that someone is looking at the complaint to determine if it was an isolated service issue or an indication of a bigger problem, specifically a regulatory violation or an indication of unfair, deceptive, or abusive acts or practices (UDAAP). The regulators also want banks to go beyond individual customer complaints and look at customer concerns in aggregate to determine if there is a trend. For instance, there could have been several complaints received through various channels, but they are all related to the same issue. If all complaints were handled in a decentralized manner, a trend might never be recognized. No one expects an error-free environment and perfect compliance all of the time, but there needs to be a mechanism in place to recognize when an error is isolated and when there is a bigger issue to be addressed. Enter the Compliance Management System (CMS), which offers the ability to identify (and resolve) issues that might be or might lead to regulatory violations. Monitoring customer complaints at the individual and aggregate levels will give a bank the power to identify potential issues. It is real-time risk management. Instead of waiting for the results of quality-control reviews, compliance monitoring, or internal audits to know the bank s state of compliance, closely monitoring customer complaints can be the canary in the coal mine. They can give a bank the opportunity to catch problems in real time and correct them before bigger problems emerge. But catching problems before they grow is often easier said than done. How does a bank achieve real-time risk management through its customer complaint handling and monitoring? It starts with a formal complaint management program, which is a required element in any bank s CMS. A detailed, documented, socialized program can provide the real-time risk management every bank needs to have in place. While the complexity of the program will depend on the size and makeup of the institution, every bank needs one. A customer complaint management program should define how the bank identifies, investigates, and responds to complaints. It should also track, analyze, report, and take corrective action when appropriate. To work, the system should include formal policies that are well documented and communicated across the company. Elements of Complaint Management Regardless of bank size, there are key elements or standards of a complaint management program, which include:: Definitions: The definition of a customer complaint lies at the core of a complaint management program, driving what needs to happen and who needs to be involved in the program. Taking it a step further and defining the program into levels of risk allows flexibility in how complaints are handled. For instance, does the bank want every complaint to go to a centralized area? Or does it just want to focus on certain highrisk or regulatory complaints? Just as important is defining when a customer or consumer interaction is not a complaint. Recognizing differences with high-risk complaints, inquiries, or error-resolution requests, and verbal-versus-written complaints, etc., can help a bank target risk management. It also allows frontline customer service to avoid getting bogged down with the complex process of documenting and submitting every customer inquiry or complaint. Shutterstock 10 ABa BANK compliance March-April 2013

62 Complaints A customer complaint management program should define how the bank identifies, investigates, and responds to complaints. March-April 2013 ABa BANK compliance 11

63 The route to real-time risk management through customer complaints Origin: A complaint can come through various channels. It can go directly to a frontline employee, through executive management, from a regulatory or consumer protection agency, or even from Facebook or Twitter (if the bank does have a social media presence, be sure to acknowledge that channel in the complaint management program). A program s definitions should help shrink the gray area so that employees know when and how to appropriately handle and/or escalate a complaint or inquiry. Roles and Responsibilities: A complaint management program will not function unless everyone understands her or his role and is held accountable. The program must define who responds to a complaint, when a complaint should be escalated, who it is escalated to, and what steps should be taken when it is received. Strict Submission and Response Timelines: After a bank decides what complaints need to be escalated and whether they are handled in the field or No one expects an error-free environment and perfect compliance all of the time, but there needs to be a mechanism in place to recognize when an error is isolated or when there is a bigger issue to be addressed. by the individual business unit, it must set standards about how quickly they are escalated, when research or investigation is initiated, and what the timeframes are for responses to the consumer. A bank should have a standard response time for complaints, even if it has different levels of complaints. This response time should mirror the bank s strictest regulatory timeline or a consumer protection agency s timeline. For example, if X Bank s response timeline is within 10 days and that is the shortest timeframe out of all outside parties processing complaints against it, then the bank s standard response time for all complaints should be within 10 days. System to Receive Complaints from across the Bank: Even if a bank doesn t send every complaint to a centralized area, a system must be set up to escalate high-risk complaints in a repeatable manner. Because complaints can come through many different channels, a system to funnel them to one place is also important. Depending on its size and diversity of business units, a bank can implement a simple online survey tool or complex interfacing database to log complaints. If some complaints aren t escalated and submitted to a centralized area, each business unit should have a way to capture them for more general oversight. Centralized Tracking, Trend Analysis, and Reporting: After complaints are recorded, investigated, and handled, there needs to be a process for analyzing and monitoring them to determine trends. Banks must determine whether complaints revolved around the same issue, how they stacked up year over year, how they were received, whether they were fault or no-fault, and whether they were of the service or regulatory variety. Timely and ongoing reporting to management and the board is critical. No one group should be the only keeper of complaint information. It needs to be shared. Record Retention: Banks need to look at who s retaining the complaints, what is being retained, and how long it s held. Those issues should be addressed in the program s record retention standards for all complaints, including complaints that might be handled in the field or by a business unit and not be escalated to a centralized area. Training, Tools, and Resources: A program can t be rolled out with the expectation that it will just work and be understood by everyone. The bank needs to continually train employees and provide ongoing tools and resources to ensure that standards are continually met. Monitoring: Just as the complaint activity must be monitored, so does the program. A bank must annually review the effectiveness of the program and make adjustments as needed. Monitoring should include a review of a business unit s nonescalated complaints to ensure they were categorized correctly and that red flags or trends were not missed. 12 ABa BANK compliance March-April 2013

64 Internal Alignment: A crucial standard in a complaint management program is alignment between the way customer complaints are handled and the bank s customer service standards. If the bank s standards empower frontline employees to provide the highest standard of customer service, always act in the best interest of the customer, and act with a sense of urgency in responding to customer needs, complaint handling must align with that standard. Don t attempt to centralize complaint handling because it will likely impact the level of customer service a bank s frontline employees can provide. But try to centralize complaint management program standards to ensure that handling is consistent and appropriate. In addition, centralize the oversight of responses, tracking, monitoring, and reporting of at least the high-risk consumer complaints to allow for real-time risk management. Make sure each of these complaints are thoroughly researched and investigated to determine root cause, and, just as important, take action if root cause points to a bigger issue than just the individual problem. Document the results of complaint investigations and the corrective action, when applicable. Dealing with the Exam Will the establishment of a formal complaint management program give the bank a pass in its next exam? It won t by itself. The bank will need to prove the program is working. If the bank is not tracking all complaints, then the definition of what complaints should be escalated for formal investigation, resolution, tracking, and monitoring should demonstrate that a sufficient number of complaints are escalated and submitted for centralized oversight. The bank should be able to demonstrate that the handling of the complaint led to an appropriate resolution for the customer and, when applicable, the information from the complaint was used to improve or fix a process, system, product, or service. For instance, a bank might have fixed a loan payment problem for a customer who submitted a written complaint. At the same time, the bank uncovered that loan payments for other customers were also not being appropriately processed as a result of a breakdown in part of the loan payment process. Or the bank could have replied to the customer who complained that he did not understand why he was being charged an account service fee when he thought he had enough in his account to meet the minimum balance requirement. That experience let the bank revisit its Truth in Savings disclosures and provide more clarity about minimum balances and fees. Of course, the nuts and bolts of a complaint management program can only do so much. The real value of a formal program is employee awareness of how it works and why it s so important. Frontline employees who receive complaints should be included in the complaint management process, investigations, and corrective actions. Knowing how one complaint led to a fix or improvement in a process, system, product, or service can have an impact on how that employee handles the next complaint. Linking complaint management with social media monitoring is also key. Just as a formally submitted customer complaint can be the canary in the coal mine to a bigger issue, so can comments made by customers or consumers in social media. Because these comments are not necessarily confined to bank-sponsored social media sites, monitoring comments in the broader social media arena is advisable. Even small banks should have a monitoring system in place to know what people are saying, whether it s good and bad. Social media monitoring can enhance a bank s real-time risk management because potential problems can be recognized before formal complaints are submitted. The regulators expectations for how banks manage customer feedback and complaints are increasing. Because regulators clearly view it as an effective way to identify potential UDAAP issues, a bank must be prepared to demonstrate that it has a strong culture of customer service and compliance. It must have the ability to manage its risks in real time to meet regulator expectations or, at the very least, be in a strong position to defend its practices. Robust complaint management is an important element in placing the bank in that position. About the Author Elizabeth Clarkson, CRCM, CAMS, is senior vice president and chief compliance officer for Portland, Ore.-based Umpqua Bank. Clarkson has more 18 years in banking and broker-dealer regulatory compliance risk management and training. She currently holds the Anti-Money Laundering Specialist designation, as well as, series 7, 63, 24, 65, 53, 4 FINRA licenses. Clarkson currently manages a team of compliance professionals in a centralized and decentralized compliance management system model for Umpqua Bank and Umpqua Investments. Clarkson works, lives, and plays in Vancouver, Wash., just outside of Portland, Ore. Reach her by at lizclarkson@umpquabank.com. March-April 2013 ABa BANK compliance 13

65 Consumer Complaint Policy BANK CONSUMER COMPLAINT POLICY Page 1

66 Consumer Complaint Policy PURPOSE AND CONTENTS This policy provides guidelines for the reporting and handling of customer or non-customer complaints to ensure prompt, courteous and fair attention formalized by the Board of Directors and Executive Management of Bank. The topics in the policy are; Policy Statement Compliance Procedures Regulation E Regulation Z RESPA Reference Community Reinvestment Act Reference Regulation P Fair Lending Reference Deposit Account Reference Web Site Reference Retention of Documents All of the employees of Bank, herein referred to as the Bank, must comply with the terms of this policy. Managers, employees and technical staff must modify system configurations and procedures, if necessary, to comply with the terms of this policy upon approval of the Board of Directors and according to the Consumer Complaint Guidelines. POLICY STATEMENT It is the policy of the Bank to provide a mechanism by which all complaints from customers and non-customers are given prompt, courteous and fair attention. All branches and departments of the Bank are to handle complaints (defined below) within a reasonable length of time. A complaint is defined as an issue raised that cannot be resolved at the branch or department level, or issues raised with Bank management or a third party (i.e., regulatory agencies) for resolution. Written and signed complaints are to be submitted to the department manager or supervisor for action and/or resolution, and a response is to be made to the customer or non-customer as soon as practical but in no event later than one week from receipt. The promotion of a complaint processing system is intended to encourage consumers to come to the Bank with problems before involving third parties. The Bank s Compliance Officer is responsible for monitoring investigations and ensuring that responses are made in a timely manner. Serious allegations will always warrant special attention by the Compliance Officer, the Chief Credit Officer, CFO, and/or Senior Management. Page 2

67 Consumer Complaint Policy Changes to this policy require approval by the Board of Directors of the Bank. Changes in operating procedures, standards, guidelines and technologies, provided they are consistent with this policy, may be authorized by the Compliance Officer or CFO. The Board of Directors has the responsibility to approve this policy, and to review it annually thereafter. Senior/Executive Management is responsible for ensuring the directives are implemented and administered in compliance with the approved policy. The primary responsibility for enforcement of this policy and its operating procedures rests with the Compliance Officer with assistance from the Chief Credit Officer and the CFO, as well as the Bank s employees. No part of this policy or its supporting operating procedures should be interpreted as contravening or superseding any other legal and regulatory requirements placed upon the Bank. Protective measures should not impede other legally mandated processes such as records retention or subpoenas. Any conflicts should be submitted immediately to the Compliance Officer for further evaluation and/or subsequent submission to the Bank s Compliance Committees. Requests for exceptions to this policy must be very specific and may only be granted on specific items, rather than to entire sections. Bank personnel with exceptions are to communicate their requests by submitting an internal memorandum to the Compliance Officer for presentation to the Management Compliance Committee. COMPLIANCE PROCEDURES Customer and non-customer complaints may come in many forms. Complaints may be oral or in writing, and they may come directly from the customer or non-customer, his or her attorney, or a regulatory agency. All complaints will be entered onto the Bank Complaint Log by the Compliance Officer. The attached Complaint Procedure Form sample is to be used for any complaint, whether oral or written, by the staff member who initially takes the complaint. The appropriate procedure to follow for handling a customer s complaint depends upon whether it was received orally or in written form. Oral Customer Complaint The employee who talks to the customer or non-customer is primarily responsible for assuring that a response is provided. If that employee believes that they are not the appropriate person to handle the complaint, they are to inform the customer or noncustomer to whom the matter will be referred and advise the customer or non-customer that the person will contact them no later than the next business day. If the complaint is referred to another, the employee is to ensure the person knows that you have advised the customer or non-customer that he or she is to contact the customer or non-customer no later than the next business day. Page 3

68 Consumer Complaint Policy An employee that has identified the wrong person to handle the problem is responsible to identify the correct person and provide the name to the customer or non-customer. Complaints that are not presented in written form may be handled verbally, but must still have a form completed and forwarded to the Compliance Officer and be entered into the Bank s Complaint Log. Written Customer Complaint All written complaints must be logged into the Bank s Complaint Log located and maintained by the Bank s Compliance Officer. A Bank Complaint Form must initially be completed by the staff member taking the original complaint. This form can be used for both Consumer and non-consumer Complaints. Though the regulatory requirements deal specifically with Consumer complaints, the State Regulations cover all nonconsumer accounts with the same protective requirements. The Compliance Officer will delegate in most cases the complaint to the proper bank department supervisor or manager who will then complete a thorough and prompt investigation of each written complaint. The Bank also has a separate set of step by step procedures in place for handling any complaints 1. Complaints Received From Customers or Non-Customers. The Compliance Officer is to respond to all written complaints as soon as possible but in no event later than one week from receipt. A letter is to be sent to the customer or non-customer advising when a response can be expected if a response cannot be made within that time. In no event should this delay be more than one additional week. All written complaints are to receive a written response to ensure proper documentation is maintained. Department managers and supervisors are responsible for: A. Reviewing the complaint to determine the department affected, the alleged problem or issue, and whether a violation of law or Bank policy may exist. B. Forwarding the original Complaint form and customer s written complaint to the Bank s Compliance Officer along with any other supporting documentation within one business day after receipt of the complaint. The Compliance Officer is responsible for: A. Logging the complaint in the Bank s Complaint Log. B. Reviewing the complaint to determine the correct action. (Any complaint that alleges fair lending violations, discriminatory actions, violations of law or Page 4

69 Consumer Complaint Policy regulation must be immediately referred to the CFO and/or the CCO of the Bank.) C. Investigating the complaint promptly and documenting the investigation. D. Resolving the problem, if possible. E. Preparing a reply letter. F. Forwarding the reply letter to the complaining party within one week after receiving the complaint. A letter is to be sent to the customer or non-customer advising when a response can be expected if a response cannot be made within that time. In no event should this delay be more than one additional week. G. Retaining the complaint, Complaint Form, documentation of the investigation, and a copy of the reply letter in the complaint file. H. Referring it to the Management Compliance Committee for further discussion. 2. Written Complaint from an Attorney. All complaint letters received from attorneys must be forwarded to the Chief Executive Officer of the Bank or in his absence the CFO no later than the day after it is received. A written chronology, where appropriate, and a summary along with supporting documents is to be forwarded with the compliant letter to the Chief Executive Officer. The correspondence is to be addressed to the Chief Executive Officer and indicated that it is privileged and confidential. The Chief Executive Officer, or in his/her absence the CFO, is to respond no later than one week from the date of receipt. 3. Written Complaint from Regulatory Agencies. All complaint letters received from regulatory agencies are to be forwarded to the Bank s Compliance Officer within two business days of the receipt date along with any attachments necessary for accurate, complete and clear response. The Compliance Office, along with the CFO, will respond no later than three days before the due date. REGULATION E REFERENCE Regulation E (Electronic Funds Transfer) requires the Bank to follow specific guidelines when a consumer complains that an error has occurred on an EFT access device or preauthorized transfer. Errors or disputes should be referred to the Operations Officer/Electronic Banking Department and the Bank s Electronic Funds Transfer Act Policy and Procedures for detailed policies, procedures and compliance initiatives. Regulation E error resolution requirements are considerably different from those contained in this policy; therefore it is important to know which error resolution procedures to follow in any given transaction. Page 5

70 Consumer Complaint Policy REGULATION Z REFERENCE Regulation Z (Truth in Lending) requires the Bank to follow specific guidelines when a consumer complains that an error has occurred on an open-end credit. Errors or disputes are to be referred to the Credit Department and the Bank s internal Credit Policy specifically to sections dealing with Regulation Z where there will be more detailed policies, procedures and compliance initiatives. Regulation Z error resolution requirements are considerably different from those contained in this policy, therefore it is important to know which error resolution procedures to follow in any given transaction. RESPA REFERENCE The Real Estate Settlement Procedures Act (RESPA) requires a loan servicer to follow specific guidelines when a borrower inquires relating to servicing of RESPA covered mortgage loans and refinancing. Errors or disputes are to be referred to the Credit Department and those sections of the Bank s Credit Policy dealing with RESPA and that area s detailed policies, procedures and compliance initiatives. RESPA error resolution requirements are considerably different from those contained in this policy; therefore it is important to know which error resolution procedures to follow in any given transaction. COMMUNITY REINVESTMENT ACT REFERENCE The Community Reinvestment Act was passed in an effort to encourage banks to meet the credit needs of their communities, including low and moderate income neighborhoods. The Bank s performance in meeting those credit needs is assessed by the Federal Deposit Insurance Corporation (FDIC). Whenever a complaint is received, either verbal or written, impacting (or suspected to impact) the Bank s CRA performance, it is to be referred immediately to the Bank s Chief Credit Officer or the CRA Officer who is to handle resolution of, and response to, the complaint. Any complaint affecting the Bank s CRA performance is a serious matter and must be provided immediate attention until the problem is resolved to the satisfaction of all parties to the extent practicable. It is the Bank s policy to respond in writing to any written CRA complaint. A copy of any written complaint regarding the Bank s CRA performance, along with any supporting documentation and a copy of the Bank s response, is to be routed to the CRA public file located in the Main Branch ( a copy is also in the Compliance Officer s office) located at 5000 California Ave., Bakersfield, CA Refer to the Bank s CRA Policy for detailed policies, procedures and compliance initiatives. Page 6

71 Consumer Complaint Policy REGULATION P (PRIVACY) REFERENCE Privacy complaints are to be directed to the Bank s Compliance Officer. Refer to the Bank s Privacy Policy (Reg P) and the Information Security Policy (Breach of Security Section), if appropriate for detailed policies, procedures and compliance initiatives. FAIR LENDING REFERENCE Complaints related to fair lending are to be directed to the Bank s Chief Credit Officer. Refer to the Bank s Credit Policy and the Fair Credit Lending Section for policies, procedures and compliance initiatives. DEPOSIT/OPERATIONS REFERENCE Deposit product complaints are to be directed to the Operations Officer with assistance from the Electronic Banking Officer if related to Cash Management services. Refer to the Bank s policy and procedure manual for detailed procedures and compliance initiatives. WEB SITE/ REFERENCE Complaints related to the Bank s web site submitted via are to be directed to the Bank s Compliance Officer with the assistance from the CFO. Refer to the Bank s Internet Banking Policy and Electronic Mail Policy sections and the Bank s Privacy Policy and Information Security Policy for detailed policies, procedures and compliance initiatives. RETENTION OF DOCUMENTS Documentation relating to complaints is to be retained by the Compliance Officer in an appropriate file for five years from the receipt of the complaint. Page 7

72 Consumer Complaint Policy COMPLIANCE DEPARTMENT COMPLAINT FORM Name of Complainant: Name of Regulatory Agency: Due Date of Response: Departments Affected: Employee Handling Complaint: Description of Complaint: REMINDERS AND PROCEDURES Respond by due date-unless an extension has been arranged. Be sure to address all issues raised in the complaint. Provide all pertinent information from our files. Photocopies should be as distinct as possible. Responses must be prepared by the Compliance Officer with assistance from department manager, etc. Never try to cloud any issue, particularly when a Bank error may be involved. Just state the facts. Incomplete or confusing responses will not be acceptable and may result in an in-depth investigation. Pull all file documents pertaining to complaint. Make at least 2 copies of any policy/procedure from appropriate manual to present the Bank s position on the issue. Obtain statement in writing from employees who are mentioned in the complaint, or who have dealt with the customer on the matter. Prepared By Date Received By Date Page 8

73 CONSUMER COMPLAINT POLICY DATE

74 TABLE OF CONTENTS I. STATEMENT OF POLICY... 1 II. DEFINITIONS... 1 III. GUIDELINES... 1 IV. WRITTEN COMPLAINTS... 1 A. Receipt... 1 B. Recording... 2 C. Investigating... 2 D. Resolution... 3 E. Written Response... 3 F. Follow-Up... 3 V. VERBAL COMPLAINTS... 3 VI. REVIEW... 4 A. Consumer Complaint Log... 4 B. Policy... 4 VII. RECORD RETENTION... 4

75 Consumer Complaint Policy I. STATEMENT OF POLICY Consumer complaints are an essential source of feedback with which to obtain an accurate assessment of the level and quality of service the Bank offers in order to ensure a process of consistent service delivery in accordance with the Bank s mission statement. Therefore, it is the policy of Bank to investigate all consumer complaints promptly, appropriately and thoroughly, and in compliance with all State and Federal laws and regulations. II. III. DEFINITIONS "Consumer" means any person, including Bank customers. Customer means a person that has an account with Bank. Account means a continuing relationship established by a person with Bank to obtain a product or service for personal, family, household or business purposes. Complaint means an expression of dissatisfaction with a product or service, either orally or in writing, from a consumer or customer. GUIDELINES A. Bank customers are routinely encouraged to contact staff directly with any questions, concerns and/or comments in an effort to maintain open communication and maximize customer satisfaction. B. All complaints will be treated with fairness, integrity and respect. Investigations will be objective, evidence-based and driven by facts and established circumstances. C. A consumer may have a genuine cause for complaint, although some complaints may be made as a result of a misunderstanding or an unreasonable expectation of a product or service. Bank staff will make every reasonable effort to explain the reasons for what may be perceived by a consumer as a negative response. D. Many regulations, for instance, Regulation E, Regulation Z and the Fair Credit Reporting Act, contain specific obligations and require action be taken within specific timeframes. Such consumer complaints that have regulatory mandated response requirements will be entered into the Consumer Complaint Log, however, the response will be in accordance with the respective regulation. E. Consumer complaint information will be available in all Bank locations and on the Bank s website. IV. WRITTEN COMPLAINTS A. Receipt Written consumer complaints are generally received through one of three sources: Addressed to the President of the Bank; From the MA Division of Banks addressed to the President of the Bank Through the FDIC Connect Consumer Response Center The responsibility of recording, tracking, responding to and following through on all written consumer complaints is delegated to the EVP, Retail & Administration, or in her absence, In- House Legal Counsel. Any other written complaints received by the Bank are to be forwarded CONSUMER COMPLAINT POLICY Page 1

76 accordingly. All written complaints received by the Bank will be responded to in writing provided a proper return address (for written complaints received directly from a consumer) has been supplied or can be identified with reasonable effort. B. Recording Upon receipt, but not longer than one business day, the complaint will be recorded on the Consumer Complaint Log (see Exhibit A Tab 1 Summary) and in Synapsis, then it and all accompanying documentation will be scanned and saved electronically to the Bank s network. All complaints will be categorized as appropriate: Retail Banking Residential Lending Deposit Operations Personnel Regulatory/Compliance CRA Legal Once recorded, the electronic complaint file will be forwarded to the appropriate department head(s)/branch manager, depending on the nature of the complaint, with initial feedback due to the EVP, Retail & Administration within two (2) business days, unless otherwise noted. C. Investigating The following factors will be considered when determining the scope of an investigation of a complaint (neither inclusive nor exhaustive): Regulatory requirement(s), Bank Policy or other matter(s) at issue, and possible and/or most likely final resolution; What is the potential risk/exposure to the Bank; Bank personnel/department(s) involved (who was involved; who needs to be involved, does any external vendor/agency need to be contacted for information, what resolution level authority is appropriate, etc.); What actions need to be taken (what system resources are in question, etc.); Documentation (what is needed, what is the source, who will gather, etc.); Timing considerations (documentation availability, how long should the investigation take, do we need an extension, when should the consumer be contacted, when action will be taken, etc.) During the course of the investigation, the Complaint Log (Exhibit A Tab 2 Detail) will be used to document status updates regarding the complaint (i.e., chronology of events, documents received, people contacted, etc.). At all times, the department head must be able to report on the status of all complaints within his/her area. If final resolution is not identified within two to three business days, the customer will be contacted to let them know the matter is under investigation. If final resolution is not identified within 10 business days, the customer will be contacted and informed of the progress of the investigation. Ongoing communication with the customer will be maintained with periodic updates, upon customer account-related action being taken, and upon final resolution being identified and/or implemented. CONSUMER COMPLAINT POLICY Page 2

77 D. Resolution Once all of the data has been collected, the department head(s) will report his/her findings to the EVP, Retail & Administration with recommendations, if any, for corrective and/or immediate action(s) and a final resolution. The EVP, Retail & Administration, along with other members of Sr. Management/department head(s) as necessary or appropriate, will evaluate the circumstances and determine the final resolution. Potential resolutions and/or outcomes initiated by the Bank as a result of a consumer complaint may include, but not be limited to: Transaction reversal(s); Fee waive(s); Bank policy and/or procedure update(s); and/or Employee training and/or disciplinary action(s) Not every complaint will produce an agreeable outcome. For example, after acknowledging and investigating a complaint about a loan decline, the result may be that the loan is still declined. E. Written Response The EVP, Retail & Administration will draft the Bank s written response, which will be forwarded, along with supporting documentation if any, for review by the department head(s) and In-House Legal Counsel. All written responses will: be professional, courteous and respectful; thank the consumer for his or her feedback; address all issues raised in the complaint; explain what happened and why; inform the consumer as to the final resolution and expected completion date (if not already passed); state the business reason(s) why the consumer s desired resolution was or was not the final outcome; address any other issues raised indirectly as a result of the complaint; apologize for any inconvenience; invite the consumer to contact the Bank with any additional questions, comments or concerns. F. Follow-Up Once the written response has been sent/submitted, the EVP, Retail & Administration will update the Consumer Complaint Log, scan and electronically file any outstanding documentation, and ensure any additional action items are being/have been addressed, documenting the Log as appropriate. V. VERBAL COMPLAINTS In general, verbal complaints are received in person at the branches or via telephone directly by the intended department and are typically minor in nature. Department heads/branch management are authorized to handle/resolve consumer complaints within the same operating guidelines, levels of authority, etc. as they would any other matter during the normal course of business. Verbal complaints are documented in Synapsis by department staff. CONSUMER COMPLAINT POLICY Page 3

78 If the department head determines that escalation is warranted and/or the consumer is not satisfied with the department head s decision, the complaint will be forwarded to the EVP, Retail & Administration and handled in the manner described in Section IV, Part B. VI. REVIEW A. Consumer Complaint Log The Log will be reviewed quarterly by the Legal/Regulatory Department in order to ensure that no systematic issues are present within Bank policy/procedure and to ensure that the Bank is not involved in any unfair, deceptive, or abusive acts or practices. B. Policy The Policy will be reviewed annually and presented to the Board of Trustees for its consideration and approval. VII. RECORD RETENTION All documentation will be scanned and maintained electronically in accordance with the Bank s Record Retention Policy. CONSUMER COMPLAINT POLICY Page 4

79 CONSUMER COMPLAINT LOG Ref # Last Name First Name Date Rec'd Received from Consumer Resp/Final Resoln Who Rec'd Acct # Category Description of Complaint Associated Regulation What Customer Wants Done Bank Policy/Procedure What Really Happened Date(s) of Contact & Context Final Resolution/Outcome Date Final Contact w/ Direct DOB FDIC Other Req'd By Date (employee name) (if applicable) (brief summary) (if applicable) (brief statement) (brief summary) (brief summary) of Contact w/customer (brief summary) Date Action Taken Customer/FDIC/DOB CONSUMER COMPLAINT POLICY Page 5

80 CONSUMER COMPLAINT LOG Ref # Last Name First Name Updated Date By Notes CONSUMER COMPLAINT POLICY Page 6

81 YOUR BANK LOGO CONSUMER COMPLAINT POLICY Board Approved: October 20, 2015 Policy Created: November 20, 2013 Policy Reviewed: October 7, 2015 Dept. Accountability: Administration Individual Accountability: COO I. PURPOSE This policy establishes YOUR Bank s (the Bank ) formal and centralized system of response to complaints and inquiries which may have compliance consequences. It is the Bank s policy to respond to all complaints and inquiries as quickly as possible and to take each complaint seriously. II. AUTHORITY AND RESPONSIBILITY The Board of Directors shall assign supervisory responsibility to the Bank s Compliance Officer to oversee the Consumer Complaint program. The Bank will use its resources to investigate and satisfy all complaints and inquiries in as timely a manner as possible. All complaints and inquiries regarding compliance and regulatory issues will be sent through one central point either after it is resolved or for the resolution process. The Compliance Officer will be responsible for logging all complaints, disputes and inquiries and will be granted the authority to assign complaints or inquiries to the proper department manager to investigate, and/or implement corrective actions, as deemed necessary. However, the Compliance Officer has the option of resolving the complaint directly. Once the investigation has been finalized, the department manager and/or Compliance Officer will draft a response letter to the consumer and/or regulator. A draft response letter and any supporting documentation should be submitted to the President or Chief Operating Officer and Compliance Officer for their review and approval before a response letter is sent to the consumer and/or regulator. III. POLICY It shall be the policy of YOUR Bank to handle all consumer complaints with care and to resolve these matters promptly and within regulatory requirements. Consumer complaints may come in many forms. Complaints may be in writing, thru , or verbal, they may come directly from consumers, attorneys, or a regulatory agency. KS Bank understands that certain specific complaint procedures are required by regulatory policies such as: Privacy (Reg P), Identity Theft Prevention(S-ID), Electronic Funds Transfer Act (Reg E), Unfair or Deceptive Acts or Practices (Reg AA), Community Reinvestment Act (CRA-Reg BB), Real Estate Settlement and Procedures Act (RESPA-Reg X), Truth-in-Lending, Reg Z It is the policy of the Bank to first adhere to procedures prescribed by regulations for all complaints and inquiries in the ordinary course of business. When not prescribed, the Bank will use its resources to investigate and satisfy all complaints and inquiries in as timely a manner as possible. Page 1

82 The Compliance Officer will maintain a Consumer Complaint Log (see Appendix A) and a central file of all formal complaints, disputes, inquiries, along with responses and will monitor response deadlines. IV. CONSUMER COMPLAINT REPORTING The Bank s Compliance Officer will submit a written memo to the Board of Directors monthly that summarizes material matters relating to consumer complaints received by the Bank. No report is necessary if there are no complaints to report. This memo will be used as a tool to assess the need for additional training, possible form or document revision, amendments to audit scope, and/or the need for new or revised procedures. The findings and recommended actions will be shared and discussed with the Compliance Committee to ensure appropriate actions are taken, as needed. V. STAFF TRAINING It is the responsibility of the Compliance Officer to ensure annual training of appropriate staff on YOUR Bank s Consumer Complaint Policy and Procedures. Evidence of this training will be retained in the employees compliance training file and made available upon request. VI. RECORD RETENTION The Compliance Officer will keep a central file of complaints, disputes, inquiries, along with responses and will monitor response deadlines. All complaints and supporting documentation will be maintained for a period of five years or until the next regulatory examination. Page 2

83 APPENDIX A YOUR Bank, Inc. Consumer Complaint Log 2016 Record # Date Received Source Type Nature/Description of Complaint Response Deadline Date Date Response Sent Status Resolved Consumer Complaint Policy - Rv. 11/2013 Page 1 of 1

84 YOUR LOGO HERE CONSUMER COMPLAINT PROCEDURES Board Approved: October 20, 2015 Policy Created: November 20, 2013 Dept. Accountability: Administration Individual Accountability: COO I. INTRODUCTION The following procedures have been developed in conjunction with the Bank s established Consumer Complaint Policy. II. III. COMPLIANCE OFFICER PROCEDURES A. The Compliance Officer will review the inquiry to determine: The customer's name, address, telephone number and account number(s); The nature of the complaint; If a regulation requires a specific response time; Whether it was directed to or came from a regulatory agency (which automatically requires notification to the Bank s CEO); Required research; Resolution requested by the customer; If legal counsel should be involved due to potential liability/litigation; Whether it is transactional or operational in nature. B. The Compliance Officer will establish an internal time frame for the Bank s response considering the following: Research; Minimum time frames established by regulation; If needed, review by Management and/or legal counsel. C. The Compliance Officer will determine if a verbal, written or combination response is required. Written responses will be composed as though they will be read in court or by a regulator. Responses should be stand-alone documents summarizing the facts or circumstances of the inquiry, our investigation and resolution. Verbal responses are less desirable than written. If a response is verbal, it should be completely documented and notes retained with the original complaint. D. The Compliance Officer will need to determine if this problem could recur. If so, what can be done to avoid it and what training may be necessary. E. The Compliance Officer will ensure that all complaints and inquiries and responses are retained in accordance with applicable procedures and are properly maintained. A central file will be maintained for regulatory review that will contain all records related to a complaint or inquiry. COMPLAINT RESPONSE TIME LINES A. Written Complaint from Regulatory Agency or Attorney. Typically a complaint letter from a regulatory agency or an attorney would be sent directly to the Bank President, who will refer it to the Compliance Officer. However, if a letter of this nature is directed to someone other than the Bank President, the letter is to be date stamped and forwarded along with any supporting documentation to the Compliance Officer immediately. Page 1

85 The Compliance Officer will identify the appropriate department manager to handle investigation, resolution and response. The complaint and final resolution is to be handled according to the guidelines set forth for written complaints as outlined below. B. Written Consumer Complaint. All general written complaints should be forwarded to the Compliance Officer. Upon receipt the Compliance Officer will assign to the proper department manager to perform an investigation to determine the facts surrounding the complaint, and/or implement corrective actions, as deemed necessary. In addition, the Compliance Officer may choose to handle the complaint themselves. The following resolution steps are to be taken: 1. The complaint must be reviewed to determine the department affected, the alleged problem or issue, and whether a violation of law or Bank policy may exist. 2. In general, a complete investigation should be performed within ten (10) days of receipt of the complaint. 3. If it is anticipated that the complaint cannot be resolved and responded to within ten (10) days, the Compliance officer will communicate with the complainant advising them that their concerns are being addressed, the steps being taken to resolve the issue and a time line for the final resolution. 4. A draft of the final response letter, which should include a summary of the facts or circumstances of the complaint/inquiry, the scope of the investigation and the bank s position relating to the complaint, should be sent to the President or Chief Operating Officer and Compliance Officer for review prior to being sent to the complaining party. Once approved the response letter will be mailed accordingly. 5. When resolved, the original complaint letter or correspondence along with all supporting documentation and a copy of the response letter is to be added to the centralized complaint file and the status of the complaint is to be updated on the complaint log. C. Verbal/ Consumer Complaints. An employee who receives a complaint verbally from a customer or non-customer (the Complainant) is primarily responsible for assuring that a response is provided. If that employee believes that they are not the appropriate person to handle the complaint, they should refer the matter to an appropriate supervisor. In most cases, complaints that are not presented in written form may be handled verbally and not entered into the Bank s complaint log. 1. Verbal: In the event that a supervisor feels that the situation may not be resolved satisfactorily, and may in fact escalate, the Compliance Officer should be notified immediately. The individual receiving the complaint is responsible for documenting the situation on the Consumer Verbal Complaint Form (see Attachment I). If a response to an oral complaint results in written correspondence to the complainant, the complaint should be treated as a written complaint and written complaint procedures should be followed Any complaint received via that is not in the ordinary course of business should be immediately forward to the Compliance Officer for review and action. Complaints received via will be treated as a written complaint and documented by the Compliance Officer. Page 2

86 ATTACHMENT I CONSUMER VERBAL COMPLAINT FORM Date: Verbal Complaint Receiv ed Time: AM PM Complaint taken by: Department: Compliant received by: Phone In- Person: Verbal Complaint Reported Consumer s Name: Consumer s Phone#: Account number affected, (if applicable): What was the product or services the consumer complained about, (if applicable): What was the consumer s complaint? What was the resolution? Verbal Complaint Resolution To Be Completed by the Compliance Officer Date Received: Record Number: Complaint Assigned to: Was the complaint resolved? YES NO How was the resolution communicated to consumer? By: Letter/Mail Verbal Letter/E- Mail Date Complaint Resolved: REV: 11/13 - by: dwe

87 2013 Customer Complaints Summary Category Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Account Closure 2 2 Agreement 0 Deposit Funding-Deposit Return Payment Hold 0 Product 0 Security Deposit Timing 1 1 Phone Service-Other Service 3 3 Payment Collection-Billing Dispute Credit Reporting 2 2 Interest, Fees, etc Bank Did Not Do What It Said It Would Do 0 Privacy Breach/Concern 0 Online Banking Issue 2 2 Elder Abuse 0 ATM 1 1 Website 0 Other 0 Totals

88 2013 Customer Complaints Summary Other Website ATM Elder Abuse Online Banking Issue Privacy Breach/Concern Bank Did Not Do What It Said It Would Do Interest, Fees, etc. Credit Reporting Payment Collection-Billing Dispute Phone Service-Other Service Security Deposit Timing Product Payment Hold Deposit Funding-Deposit Return Agreement Account Closure 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

89 Complaint Source-External Q1 Q2 Q3 Q4 Customer 17 BBB 6 FDIC/OCC 4 Atty Gen 1 Total Customer BBB FDIC/OCC Atty Gen Q1 Q2 Q3 Q4

90 # Complaints By Dept. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Bank Secured Credit Card Mortgage % Complaints by Dept. to # of Accts. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total Bank 0.018% 0.017% 0.017% 0.122% Secured Credit Card 0.016% 0.018% 0.018% 0.332% Mortgage 0.000% 0.200% 0.000% 1.961% Complaints by Department - % of Complaints to Total # of Accounts* 0.200% 0.180% 0.160% 0.140% 0.120% 0.100% 0.080% Bank Secured Credit Card Mortgage 0.060% 0.040% 0.020% *Includes Active & Inactive Accounts 0.000% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec