On March 1, 2012, the Consumer Financial Protection Bureau (CFPB), a federal government agency, began collecting consumer complaints about bank accounts. Bank accounts and bank services make up the CFPB’s third-largest category of complaints, accounting for 15% of them, or 25,700 complaints. One result of consumers’ ability to easily tell the government how a bank has wronged them is that banks are trying to reach angry customers before they file a complaint to the CFPB. Here’s a look at the actions banks are taking, and whether their behavior is likely to harm or help consumers.
What Consumers Are Complaining About
Almost half of consumers’ complaints about banking services relate to opening, closing or managing their accounts. Another quarter of complaints are about deposits and withdrawals. Problems in this category include transaction holds and unauthorized transactions. Difficulties caused by low funds, such as overdraft fees and bounced checks, are another significant complaint category. About 11% of consumers are frustrated with sending or receiving payments, and 6% have gotten fed up with trying to use their ATM or debit cards.
The CFPB has forwarded 80% of consumers’ complaints to the banks (another 15% have been referred to different government agencies, and the rest were incomplete or require further action by the consumer). Banks have responded to 97% of the complaints they’ve received, and roughly 25% of customers received monetary relief as a result. The median sum consumers have received is $110.
Actions Banks Are Taking
Banks know that if they can keep customers happy and minimize any problems or frustration, they are less likely to take their problems to the CFPB. The more complaints the government receives about a particular financial institution or a particular problem, the more likely banks are to face greater scrutiny and additional regulations. Here’s what banks are doing to improve their customer service:
Monitoring social media - Banks are looking for consumer complaints on Facebook and Twitter, then both responding to the consumer to address the issue and contacting bank staff to prevent the issue from reoccurring.Chris Nichols, chief strategy officer for Florida-based CenterState bank, said his bank monitors social media for both positive and negative comments. “We try to acknowledge both: Solve the complaints as soon as possible and reinforce the positive ones with a thank you,” he said. “By being proactive, particularly in social [media], we find that we can efficiently solve legitimate issues and prove our commitment to the customer's happiness,” he added.
Making it easier to be heard - The CFPB’s website has made it incredibly easy to file a complaint against a bank. Banks such as Bank of America, Key Bank and Ally are making it just as easy to be heard through their own websites. Customers no longer have to call and navigate finicky automated systems. Instead, they can email customer service or even chat instantly. These venues not only make it easier to complain directly to the bank, they also give customers a written record of who said what and when, which might come in handy if the complaint can’t be resolved on the first try.
Anticipating questions - Banks are posting answers to frequently asked questions on their websites to help consumers solve problems on their own. Customers don’t have to call customer service or visit a branch to find out how to check the status of a bill payment or how to make a wire transfer. Some banks, such as Ally, allow customers to instantly rate whether the answer to an FAQ was helpful. Banks can then use this feedback to provide better information.
Implementing strong and clear processes - “Being able to monitor the frequency and types of complaints may cure or change an issue that a consumer is having without the need for regulatory intervention,” says Braden Perry, a partner in the Kansas City-based law firm of Kennyhertz Perry, LLC who has over 10 years of experience in financial services compliance, internal investigations, enforcement matters, and regulatory issues. “For example, the presence of complaints alleging that consumers did not understand certain terms of a product or service may be a red flag to improve the terms and provide additional information.”Not all banks are taking these actions, however, and even those that are can’t reach every dissatisfied consumer. Rozanne Weissman of Washington, DC, had a recent experience with her bank that she called “appalling.” “My bank, JP Morgan Chase, which is my bank for two credit cards and my mortgage, contacted me this year regarding refinancing my mortgage with no closing costs. I moved forward,” she said. “I couldn't believe their sloppy mortgage paperwork that was almost impossible to correct,” she said. It had the wrong birth date and year, wrong condo number and an old phone number, she said. She couldn’t get the bank to correct these errors, and they lost paperwork she sent via FedEx, she added. “No one at the bank was customer-service or marketing oriented, including their social media folks,” Weissman said. “I decried them on Twitter, but they don't seem responsive to serious customer complaints.”
How Bank Intervention Helps Consumers
When banks are proactive about customer satisfaction, consumers have their complaints resolved faster. Instead of involving a middleman, consumers get prompt, direct assistance.
“I don't think that the CFPB needs to be aware of every consumer complaint,” says Perry. It’s inefficient, he says, as banks can easily alleviate most complaints simply by taking them seriously early on.
“Obviously, complaints to the institution should be logged and kept as part of their books and records, and are subject to review by the CFPB, but the majority of complaints don't rise to the level of regulatory intervention,” he says. “Usually, it's a symptom of confusion or vagueness which can be cured by the financial institution on their own and likely in a more efficient manner.”
Also, with less government involvement, banks are less likely to see additional regulations. Less regulation might sound like a bad thing, but new regulations designed to help consumers often have unintended consequences that end up harming consumers.
How CFPB Involvement Aids Consumers
If banks are able to resolve consumer complaints without the CFPB’s involvement, regulators may be less aware of the problems consumers are experiencing with banks. There may be systemic market failures that regulations should address that get overlooked.
“We know that if we hear about a particular problem from 50 consumers, that likely means it looms larger than if we hear about it from two,” said CFPB Director Richard Cordray in his prepared remarks for the Consumer Response Field Hearing in Des Moines on March 28, 2013.
“We know that if we begin to see a disturbing trend among the complaints we receive, that we should consider allocating some of our limited resources to combat that particular problem.”
Corday added that the complaints the CFPB receives “provide leads for our enforcement work of investigating and addressing potential wrongdoing. And they help guide our efforts as we deal with issues of concern through consumer education and engagement.”
In addition, complaints that get resolved between the consumer and the bank remain private. Complaints that go to the CFPB, after being stripped of personally identifying information, go into a public database.
“By sharing these complaints with the public, we are creating greater transparency in consumer financial products and services, which ultimately will lead to a better marketplace for consumers,” Corday said.
The Bottom Line
Not every bank has made it as easy as possible for customers to communicate with them regarding questions or complaints. Many banks still require customers to call or visit a branch for assistance. Taking extra steps like offering 24/7 online chat may cost more to implement, but it may also improve customer satisfaction and decrease complaints to regulators. The savings from increased customer retention and avoidance of further regulation may well be worth it.
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