Complaint handling is a reputation risk

We all know that the Consumer Financial Protection Bureau is all about the data.

The bureau collects data and uses it to promote its mission of protecting consumers and showing how the financial industry is performing (or not performing). That’s what “data driven” is all about, right?

And, speaking of data, CFPB doesn’t miss an opportunity to promote itself with statistics like 309,700 consumer complaints handled since it began to accept complaints and over $3 billion returned to consumers so far.

But what do numbers really mean?

When I read headlines from CFPB along the lines of “CFPB Recovers More Than $1 Million for Servicemembers, Veterans, and their Families,” I want to look more closely at that number.

I can’t help wondering if it reflects the actual consumer impact.

In March, CFPB announced that servicemembers, veterans, and their dependents who had complained to the agency had recovered more than $1 million. CFPB had received more than 14,000 complaints from that group relating to financial products and services since the bureau started accepting such complaints in 2011.

The report that goes along with this announcement summarizes complaints by product type and general category of complaint and source of complaint.

But, there is no discussion about validity of complaints.

CFPB doesn’t focus on this aspect of complaints. It’s not something that is readily quantifiable. And it doesn’t make for eye-popping headlines.

Complaints from inside banks

When I am visiting financial institutions and reviewing their complaint management processes, I see a large percentage of complaints that are “resolved” in the consumer’s favor. I says “resolved” because it is easier and quicker to do so than to take the time and effort to work the complaint and prepare an explanation and possibly have to do some research.

That’s especially true when a regulatory agency gets involved.

If a consumer complaint is referred from a regulatory agency like CFPB, the bank may be more likely to decide to acquiesce to the consumer’s complaint and give them what they are asking for without determining the merits of the complaint.

Suspicious timing?

A good example of this was highlighted by Director Richard Cordray in a speech to the National Association of State Treasurers in March. He gave a specific example of a consumer named “Joanna” from Texas who had $400 in credit card fees returned to her after she contacted CFPB.

After Joanna’s complaint was resolved, she wrote to CFPB and told them, “My credit card company’s treatment of me before and after being contacted by CFPB was like night and day.”

There’s no way of knowing whether this credit card company did or did not make an error in this consumer’s account. However, the timing of the resolution following CFPB involvement is a little suspicious.

Did the company finally research the consumer’s complaint, find the error, and rightfully refund Joanna’s $400? 

Or, did the company decide it was better to give in to the consumer’s demands than battle with the CFPB? 

Giving in has broader implications

Certainly, a legitimate complaint, a definite mistake … such things should be fixed.

However …

When meritless consumer complaints are resolved in the consumer’s favor, it does a disservice to the industry.

Why? Because of how the statistics are represented to the public. There is no effort to explain the circumstances behind the complaints or the legitimacy of the complaints.

I’m not advocating bad customer service.

Who among us (count me in) hasn’t complained to his or her bank about a fee that he was charged knowing perfectly well it was a valid fee, but since it was the first time, it shouldn’t count against you?

Those kinds of customer service situations can be handled before they become complaints filed with the regulatory agencies.

Let’s not be so quick to make that easy resolution to get the regulator off our backs. In the end, the score is apparently what counts, not how you played the game.