Complaints: The Smoke Detector for Your Compliance Management System

Chirp…chirp…chirp…

Being awakened in the middle of the night by a smoke detector’s intermittent and annoying chirp, or a continuous blare, are both disruptive to getting a good night’s sleep. Both require attention, but different levels of response. The same can be said for your institution’s monitoring of consumer complaints. While a singular complaint may not be indicative of a large or systemic problem, multiple complaints on the same issue can more clearly indicate a broader issue. The key to understanding which of these two scenarios you have is maintaining an effective complaints management process.

The Federal Financial Institutions Examination Council (FFIEC) interagency consumer compliance rating system¹ addresses the effectiveness of an institution’s compliance management system. A strong compliance management system can effectively prevent violations of law and support consumer protection in the delivery of financial services. Effective monitoring and management of consumer complaints are an element in assessing the compliance program. During your consumer compliance examination, examiners evaluate the effectiveness of the bank’s complaint management process by determining whether processes and procedures, complaint investigations and responses are appropriate for the size, complexity and risk profile of the institution.

The volume and types of complaints received may influence the scope of examination as noted in CA Letter 13-19, “Community Bank Risk-Focused Consumer Compliance Supervision Program” — Complaints can be an indicator of areas of potentially heightened inherent risk or they may suggest the need for additional focus on specific risk controls. The role complaints will play in the assessment of risk and development of the examination scope and work plan, however, will depend on the particular issue(s) raised in the complaint(s), viewed in the context of all other examination-related information.

Why is it important to monitor complaints? Monitoring can identify risks of potential consumer harm, deficiencies in the compliance program, customer service issues and better position the institution’s ability to take appropriate corrective action. Furthermore, it can determine if there is a specific component or process that needs correcting.

What are the data or trends telling you? Looking at trends will help identify consumer risk and determine if the issue with the product or service is widespread, working as described or if corrective action is needed.

What are some effective ways to manage complaints? Analyzing complaint data, tracking complaints and appropriately addressing issues noted are some methods that can be used to effectively manage the complaints process and enhance the overall compliance management program. Additionally, analyzing the complaints data can help ensure if controls in place are working appropriately.

So just like your smoke detector, it’s important to fully investigate the issue to understand the problem and determine what corrective action is warranted. If you have any questions regarding the consumer compliance program, please reach out to your consumer compliance central point of contact. If you do not know who that is, contact us at supervisionoutreach@rich.frb.org.