What You Need to Know About Consumer Complaints and the CFPB

Transcription

1 What You Need to Know About Consumer Complaints and the CFPB TUESDAY, DECEMBER 3, :30 p.m. - 2:45 p.m. EST 1

2 Presented by: Allyson B. Baker, Partner Venable LLP t Dennis Kiefer, Director Deloitte Financial Advisory Services LLP t

3 IMPORTANT INFORMATION ABOUT THIS PRESENTATION This presentation is for general informational purposes only and does not represent and is not intended to provide legal advice or opinion and should not be relied on as such. Legal advice can only be provided in response to specific fact situations. This presentation does not represent any undertaking to keep recipients advised as to all or any relevant legal developments. To view Venable s index of articles and presentations on related legal topics, see 3

4 This presentation contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this presentation, rendering business, financial, investment, or other professional advice or services. This presentation is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this presentation. About Deloitte Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. 4

5 Agenda Overview of Consumer Complaint Database The consumer complaint process How the CFPB uses complaints Observations about the Consumer Complaint Database Leading practices for complaint management 5

6 Overview of Complaint Database Housed in Consumer Response Unit Created by the Dodd-Frank Act Consumer complaint intake (Internet) Tell Your Story Work of the Consumer Response Unit 6

7 Growth of Complaint Database 180, , , , ,000 80,000 60,000 40,000 Credit Cards Mortgages: Bank Accounts/Services Consumer Loans Student Loans Money Transfers Debt Collection: 20,000 0 Source: www. Consumerfinance.gov 7

8 The Complaint Process Complaint submitted Review and route Company response Consumer review Review and investigate 8

9 How CFPB Uses Complaints CFPB s Supervisory Process Looking at consumer complaints as part of the examination process CFPB Consumer Complaint Database/Consumer Sentinel Database Nature of consumer complaints Number of consumer complaints Do a certain number or type of consumer complaint indicate a problem with a practice? 9

10 How CFPB Uses Complaints (cont d.) Considering how an examined entity addresses consumer complaints: Process of intake for these complaints Process for addressing complaints Process for revisiting certain practices Process for responding to complaints and making any necessary changes 10

11 How CFPB Uses Complaints (cont d.) Use in CFPB investigations: Office of Enforcement reviews consumer complaints received from Consumer Response Review of complaints might be first step in any investigation or pre-investigation Might drive the scope of a Civil Investigative Demand (CID) 11

12 How CFPB Uses Complaints (cont d.) Use in CFPB litigation: Consumer complaints driving causes of action Consumer complainants as witnesses Statements from consumer complainants in court filings 12

13 Observation #1: Mortgages have driven complaint volumes. About ½ of all complaints received Growing % in 2012 Shrinking % in 2013 new debt collection complaints 6000 Monthly Mortgage Complaint Volume Source: CFPB Complaint database and Deloitte FAS analysis

14 Observation #2: Troubled mortgages drive mortgage complaints. 6,000 Mortgage complaints per month 5,000 4,000 3,000 2,000 Settlement process and costs Other Loan servicing, payments, escrow account Loan modification,collection,foreclosure Credit decision / underwriting Application, originator, mortgage broker 1, Source: CFPB Complaint database and Deloitte FAS analysis

15 Observation #3: Customer misunderstanding may create more complaints than errors. Over time, fewer complaints resolved in favor of consumer Customer dispute rates have also dropped over time Complaints closed in favor of consumer have lower dispute rates Resolving mortgage complaints present unique challenges 15

16 Observation #4: Affluent, established neighborhoods were more likely sources of complaints. % of Mortgage Complaints 35% By median household income 35% By median age 30% 25% 20% 21% 23% 26% 30% 30% 25% 20% 18% 25% 28% 29% 15% 15% 10% 10% 5% 5% 0% Complaints 0% Complaints Bottom 25% Second 25% Third 25% Top 25% Bottom 25% Second 25% Third 25% Top 25% Source: CFPB Complaint database and Deloitte FAS analysis 16

17 Observation #5: Companies are getting better at responding. Untimely response rate: 9.9% (12/2011) to 1.1% (4/2013) Firms with few complaints had higher untimely response rates 25% 23% 21% 23% 20% 15% 10% 8% Avg. Dispute Rate Untimely Response Rate 5% 3% 2% 0% At least 5, ,999 Under 100 Top 6 Next 51 Other Source: CFPB Complaint database and Deloitte FAS analysis 17

18 Leading practices for complaints Establish comprehensive written policies, procedures, and processes that cover: Definition of complaint Roles and responsibilities across business lines Categorization of complaints Response time Aggregation of complaint data Escalation of significant issues Employee training and awareness On-going monitoring Board, Management, Regulatory Reporting Independent testing of the program 18

19 Questions? 19