Use them as an early warning system and a suggestion box
By Lucy Griffin, contributing editor, and president, Compliance Resources, Inc., Reston, Va.,
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Think of customer complaints as an early warning system. Unheeded, they will morph into tomorrow’s regulations. And tomorrow can come right quick
It is so easy to ignore a customer complaint. After all, customers make so many mistakes, isn’t their problem really their own fault? Why waste precious bank time fixing something the customer did wrong?
But the truth is, customer complaints come in for many reasons.
Some may be based on the customer’s mistake or misunderstanding, but even in that case, we should understand why that mistake or misunderstanding happened. Their mistake may be the result of confusing or incomplete information. Other complaints, based on our products, services, or communications, can tell us a great deal. It’s a coincidence, but a good reminder, nonetheless, that “complaint” and “compliant” differ by only the arrangement of two letters.
Where complaints meet compliance
At the moment, banks and other lenders are under heavy fire from consumers, Congress, and regulators. Consumers have been unhappy with many aspects of bank products and services. When consumers fail to get what they consider to be an adequate response from their bank, they turn to the “heavies” to get a result. And when the heavies—regulators and Congress—get involved, things happen—like more regulatory burden.
Compliance with new regulations is tedious and expensive. But it is too easy to blame consumers and Congress for generating unnecessary rules. Banks must realize that most regulatory burden is the result of specific practices that have frustrated or angered consumers. A voluntary self-diagnosis to complaints can prevent more regulatory burden by removing the need for legislative action. Voluntary responses can also increase customer loyalty. The rest of this article looks at how to accomplish both goals.
See it coming. The past several years have seen heavy activity in new and revised regulations. These affect both deposits and loans. There have also been a significant number of guidances issued by the regulatory agencies.
This legislative and regulatory activity has been generated in large part by consumer complaints. Since consumers usually try complaining first to their bank, banks are in a position to do something about it first—before Congress and the regulators step in. (See the box, opposite.) Trying to sit it out only results in more regulations.
Banks always have an opportunity to see it coming. For example, consumers complained about unexpected fees when the bank paid an overdraft. While some bankers were busy pointing out that they were doing the consumer a favor—sparing them embarrassment and costs related to returned checks—the affected consumers complained about the fees for the overdraft service. To many consumers, the cost of the “service” was simply not worth it. And they raised particularly persuasive arguments by pointing out that if they had known that there was a daily fee involved—which added up quickly—they could have minimized the costs. For example, had they known the transaction would overdraw the account, they would not have made that ATM withdrawal. When banks didn’t respond, consumers turned to the heavies for help. Now we have revisions to Regulation DD.
Consumers also raised many complaints about credit card practices. They objected to facing a late fee, a finance charge, and an increase in their APR as the result of a single mistake. They also questioned the adjustments made to their credit limit that were based, not on transactions with the credit account in question, but because of the creditor’s repricing and rescoring practices.
Consumers believe that any evaluation of their account should be based on their relationship with the bank in question. They manage that relationship. They are naturally surprised and angered when the bank changes their relationship because of the consumer’s relationship with a third party.
Consumers complained urgently about these and other bank practices. Unfortunately, banks failed to respond to these consumer concerns. Now we have regulations dealing with overdraft protection programs, new laws and regulations relating to credit card practices, and more laws and regulations coming.
We saw it coming. We didn’t take action to prevent more regulations.
Conflicting messages. Customer complaints can also alert you to conflicts that result from perfectly sound business decisions. In isolation, each decision is logical; but in combination, there can be problems.
FDIC recently took enforcement action against American Express Centura Bank based on customer complaints. The bank implemented two practices, both of which were legal but which, in combination, created a problem. The bank issued convenience checks for customer use. At the same time, the bank reduced credit limits. There was no warning to customers that credit limits were reduced or that the lower credit limits would be applied to the convenience checks. The first hint of a problem was consumer complaints that their checks had been returned.
When decisions are made in a silo, it is easy to implement two changes, each of which seems sound. The customers who received the convenience checks and used them only to find them returned are not going to blame themselves. They are going to blame you.
Quick and constructive responses to complaints can prevent harm to customers, and also the cost of an enforcement action, complete with civil money penalties.
Idea inbox. Consumer complaints serve as an early warning system for what concerns your customers. The inbox for consumer complaints should serve as an idea box for finding and fixing problems. It is also a valuable idea resource for giving your bank a competitive edge. Sometimes a very small thing can give you that edge.
Marketing and product development can be inspired by customer comments. A consumer’s wish list—“Why can’t all my statements be together?”—can generate new ideas that help you compete with other institutions. Responding to what consumers want is always a positive selling point.
Consumer complaints typically cover a wide variety of topics, from service quality to practices that could become subject to regulation. For example, customer communications, both complaints and suggestions, have provided useful information that banks have used to meet the Community Reinvestment Act’s Service Test. Customer comments have given banks information on the hours of service that customers needed, so that they could use banking services without taking time away from their job.
Customer input has also provided information about locations for branching or for limited service branches.
Staff monitor. Service is more than hours and location. Customer complaints can identify where there may be problems with the attitude of staff or the knowledge and skill level of staff. It can be a pattern of customer complaints that identifies a need for training or increased staffing. It may even reveal a need for improved systems that support branch staff as they serve customers.
Customers will also let you know how willing bank staff is to help with problems.
Granted, the customer who wants help balancing his or her checkbook every month is not a customer whose complaint is useful when they object that staff was too busy to help them. But the customer who just wanted to ask a loan officer some questions should never be turned away. If that is their complaint, it may be time to talk with the lending staff. If the customer waited too long to see a teller, the branch may need additional staff.
There are also likely to be complaints alleging discrimination. Often, consumers believe they have been unfairly treated but a thorough investigation shows that all customers are treated in the same way. That finding is not one of discrimination—but it could reveal a service problem.
Fee monitor. Then there are the messages that consumers don’t like something. Fees, for instance, are a common source of complaints. Fees can serve a purpose. They cover the cost of a service, such as a stop payment or a returned check. Fees also provide a source of discipline for consumers. Late-payment fees on loans motivate the consumer to make payments on time. They also compensate the lender for loss.
However, when a credit card customer is hit three times—late payment fee, finance charge, and rate increase—for a late payment on a credit card plan, the cumulative cost paid by the consumer seems unjustified. They complain. And when they get no adequate response—except a higher late payment fee—they turn to the heavies for help.
Vendor evaluator. Sometimes, the complaint is really about a service provider. If a complaint is about an error in a credit card bill, it may be the vendor that made the error. When there is only one mistake, the goal should be to correct it. But consumer complaints can reveal a pattern of errors. When this happens, it is your reputation, not the vendor’s, that is harmed. It is also up to you to correct the problem leading to the errors.
Setting up a complaint policy
As stated, the smart bank learns from customer complaints. It uses complaints to target and repair problems and to generate ideas for its business practices.
To make constructive use of customer complaints, the bank should have a policy and procedure for managing complaints.
1. The policy should establish responsibility for receiving, investigating and responding to consumer complaints. Everyone in the bank should know where customer complaints should go. They should also know that complaints must be put into process promptly. Some, such as those involving billing errors, are subject to statutory deadlines for investigation and response.
2. The policy should also establish that all staff are responsible for providing the information that is needed for the investigation and response. A good policy is no good unless the job actually gets done.
3. The policy should set time frames for receiving, investigating, and responding. This is critical to ensuring that responding to customer complaints has an appropriate priority in the day’s work.
4. The policy should establish a mechanism for tracking complaints. Tracking reports should include information on the number of complaints received in a specific time period—such as monthly or quarterly, as appropriate. Tracking reports should also contain information on the length of time for investigating and responding to the customer. These reports become a tool in ensuring that the complaint policy is working.
5. The policy should encourage the bank to use complaints as a resource. An additional example to add to those mentioned earlier: Complaints about safe-deposit boxes may indicate a need for more boxes to serve customer demand.
Remember, complaints about products and services should trigger consideration of the best way to design and deliver services. Be the smartest bank on the block, and listen to your customers. BJ
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj0909/index.php?startid=42
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