Consumers will be able to rate how an institution resolves their complaint
On August 1, 2016, the Consumer Financial Protection Bureau (CFPB) published1 a notice and request for comment in the Federal Register on a proposal to enhance its consumer complaint database. The change would allow consumers to rate an institution’s performance in handling and responding to a consumer’s complaint. The proposed enhancement, which could impact an organization’s reputational risk, is intended to give consumers the option to highlight an institution’s positive behavior when resolving a consumer complaint by using a one to five rating scale with an option to provide a narrative to support the consumer’s rating. Comments must be submitted on or before September 30, 2016.
According to the notice, the CFPB would use the feedback from consumers—including both the rating and the narrative description in support of the rating—to inform its work to supervise companies, enforce federal consumer financial laws, issue rules and regulations, and monitor the market for consumer financial products and services. Depending on how financial institutions’ business practices are perceived in the marketplace, the proposed enhancement could have both a positive and adverse effect to their marketplace reputation. One implication of this development is that financial institutions that are improving the level of transparency incorporated within their consumer-related processes, products, and people may be better positioned to succeed in the marketplace relative to the CFPB’s latest proposed update to its consumer complaint database.
To help prepare for the proposed enhancement, it may be a good time for supervised banks and non-bank financial institutions to consider thoroughly assessing their complaint management program to ensure appropriate controls are in place to resolve consumer complaints in a timely manner, while also aiming to provide excellent service to consumers. Financial institutions should also consider evaluating their overall UDAAP risk management strategy, as consumer complaints can provide valuable insights concerning product, service, or third-party risks. The proposed enhancement to consumer’s ability to rate complaint handling and resolution could have serious implications for the level of regulatory scrutiny and exposure to UDAAP risk.
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1Consumer Financial Protection Bureau, “Agency Information Collection Activities: Comment Request,” 81. Fed. Reg. 50484, (August 1, 2016), available at https://www.gpo.gov/fdsys/pkg/FR-2016-08-01/pdf/2016-18128.pdf.