Treat Them Right When They Complain!

When keeping your compliance program running while trying to stay up to date on compliance developments, it is easy to overlook general issues that aren't driven by a specific regulatory priority. One such general issue is consumer complaints. However, responding to consumer complaints is becoming important for banks.

Several regulations actually contain requirements for acknowledging and investigating consumer complaints. Others don't contain specific requirements but do imply that a response is appropriate. The newest entry into this arena is the Community Reinvestment Act. The new CRA examination procedures require examiners to evaluate how the institution responded to consumer complaints regarding CRA. This direction raises two concerns. First, someone in the bank needs to determine whether a complaint is a CRA complaint. The person or department having that responsibility needs to have the knowledge to make those determinations.

Second, concepts presented in CRA regulations and examination procedures have historically migrated into other regulatory expectations. For example, examiners first began interviewing directors under CRA to evaluate the involvement of board members in CRA outreach activities and the importance placed on CRA by the bank. Almost faster than we could blink, examiners began asking directors questions about the bank's compliance programs for specific regulations such as Regulation B and Regulation Z. The present emphasis on fair lending, including training requirements, has its roots in CRA.

The emphasis on consumer complaints contained in the new CRA examination procedures is serious and significant. Examiners are now routinely asking for the bank's consumer complaint policy. When they ask for this, they are expecting to find a policy for responding to all complaints. They are beginning to criticize banks that do not have a general policy even though they have complaint handling policies or procedures contained in policies for specific regulations.

At a minimum, the policy should establish a central receiving point for consumer complaints. All complaints received anywhere in the bank should be forwarded to this central point. The compliance department is a logical choice for this role. The policy should provide guidance on what bank departments or staff will be responsible for what types of complaints, how the complaint will be investigated and responded to, and how complaints will be tracked and analyzed.

Specific complaint requirements
Truth in Lending's Regulation Z contains two procedural requirements for consumer complaints: consumer's claims and defenses (?226.12(c)), and fair credit billing (?226.13). Both of these explicit requirements relate to open end credit.

Consumer claims and defenses applies only to situations when the cardholder has a claim or defense against the merchant or service provider and has been unable to resolve the dispute directly. The cardholder may then assert the claim or defense against the card issuer. The amount in dispute must exceed $50 and the disputed transaction must have occurred within the cardholder's state or 100 miles. The rule contains specific requirements for treatment of the disputed balance, investigation, and settling the dispute.

Truth in Lending's billing error resolution provides a more standard complaint handling process. The rule calls for customer notification within 60 days of the statement date, notification of receipt by the creditor within 30 days, and investigation and resolution within two billing cycles. During investigation, the creditor may not try to collect or impose finance charges on the amount in dispute. Much like Truth in Lending, Electronic Funds, Regulation E, establishes a procedure for error resolution. Regulation E requires investigation of a notice of error from a consumer. The consumer must notify the bank of the error within 60 days of the date on which the bank transmitted the information to the consumer. The bank must investigate and make a determination within 10 business days. As an alternative, the bank may investigate and resolve the complaint within 45 days if the bank recredits the amount in dispute during the investigation.

General complaint requirements
There are other laws or regulations that do not contain specific complaint procedure requirements but impose responsibilities on the bank. These range from the Uniform Commercial Code to fair lending laws. Equal Credit Opportunity's Regulation B does not contain specific directives or time limitations for responding to consumer complaints. However, the Act prohibits discrimination against any consumer who has in good faith asserted any right under the Consumer Credit Protection Act. This not only carries into the fair lending arena the consumer complaint protections of Truth in Lending and Electronic Funds; it establishes as a protected right the consumer's ability to obtain correction. Other manifestations of a bank's responsibility to respond to its customers or to the public are contained in the Home Mortgage Disclosure Act and the Community Reinvestment Act. These laws both require the bank to provide information to the public and to notify the public that the information is available. Moreover, the bank must respond to a request from any member of the public for the information.

Reporting
Your complaint policy should include a system for reporting summary information on the number and type of consumer complaints the bank receives in a designated period of time, what was done to investigate and resolve the complaints, and any issues or concerns about the bank's products and services that the complaints identify. These reports, at least in summary form, should find their way to the bank's senior management or to the Board itself.

ACTION STEPS

Review your consumer complaint policy or policies. If you don't have one, develop one. If you do have one, evaluate the extent to which it responds to current regulatory requirements and regulator expectations.
Review the process for handling complaints relating to credit cards and electronic transfers.
Determine whether the process meets the regulatory requirements.
Make sure your compliance audit procedure includes a review of responses to consumer complaints.
Review your reporting system and report formats. If necessary, add a category for consumer complaints to your regular compliance reports.
Remind all bank staff about the complaint policy and procedures. Send a bank-wide memo. Include clear explanations of complaint procedures in employee training.