Consumer Financial Protection Bureau (CFPB), Dodd-Frank Act Section 1034
In the wake of the credit crisis, financial institutions are finding themselves impacted by an unprecedented level of government and regulatory scrutiny, driven most extensively by the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law in the United States on July 21, 2010.
The Dodd-Frank Act Section 1034 has resulted in the creation of the Consumer Financial Protection Bureau (CFPB), “whose sole mission is making sure that consumer financial markets work for” Americans, according to Director Richard Cordray.1 The CFPB is responsible for educating consumers, monitoring financial institutions and enforcing fairness in financial markets, and establishing complaint channels for consumers to escalate issues. The CFPB will effectively consolidate many of the consumer protection responsibilities historically owned by state regulators and federal agencies: Commodity Futures Trading Commission (CFTC), Federal Deposit Insurance Corporation (FDIC), Federal Trade Commission (FTC), Housing and Urban Development (HUD), National Credit Union Administration (NCUA), Office of Thrift Supervision (OTS), and the Securities and Exchange Commission (SEC).
In fulfilling its mission, the CFPB has created a centralized Web portal where consumers can log complaints directly to the agency, making it easier for consumers to voice their concerns and for the agency to enforce policy. Since July 2011, the CFPB has launched complaint channels for many types of financial products and, to date, consumers can use the portal to file complaints related to mortgages, credit cards, bank accounts or services, vehicle or consumer loans, and student loans. In the future, the agency plans to offer similar escalation processes for all other financial products, and these processes will be rolled-out as the needs of consumers and the operational constraints of financial companies are more fully understood.
The diagram below displays the process by which the CFPB will interact with consumers and companies:
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Figure 1: CFPB Complaint Process
The simplicity with which consumers can escalate issues to the CFPB has had the effect of driving leading financial institutions to re-evaluate and transform their own complaint management processes. They are implementing robust complaint management tools, streamlined and collaborative processes, and centralized firm-wide governance. But this is no easy transformation. From working with our clients, Accenture understands that the combination of more stringent regulation, stronger government surveillance, and increased consumer awareness has changed the compliance landscape for financial institutions, which are challenged to bring operational and compliance processes up to speed with limited resources.
Financial institutions are faced with a number of organizational and operational challenges that are forcing them to take a fresh look at their processes for managing customer complaints. They are finding that the decentralized approaches that worked in the past are now less effective as there are many stakeholders, disjointed external communication models to customers and regulators, and inconsistent internal reporting and knowledge sharing. All in all, companies need to formally address these issues in order to enhance their market performance and their responses to CFPB examiners.
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Figure 2: Typical Complaint Management Process
Key Challenge: Multiple Complaint Channels—Financial institutions struggle to define ownership and respond to issues in a timely manner due to an increasing volume of complaints and several complaint channels.
Complaint management is commonly approached in one of two ways: 1) Individual complaints are received, addressed, and communicated in silos by the identifying function or team, or 2) Complaints are collected and reviewed individually as well as in aggregate to determine appropriate action and identify underlying patterns. The former approach takes too partial a view, and introduces several challenges to meeting the demands of regulators and consumers. However, systemic standardization of complaints to achieve the latter approach is easier said than done.
At large financial institutions, with millions or customers, hundreds of customer-impacting processes and systems, and multiple communication vehicles such as phone, e-mail, fax, and even social media, complaints seem to come from an endless number of sources. We have found that many banks identify, on average, thousands of issues every day that potentially cause customer harm. Because significant damage (for example, loss of customers, regulatory penalties, or operational failures) could result by ignoring just one serious complaint, it is critical to give complaint management its due focus. Companies should have the right processes and tools in place to collect, synthesize, and address issues en masse in order to be able to meet throughput requirements and not let impactful issues go unaddressed.
Key Challenge: De-centralized response teams—Financial institutions have a difficult time remediating and responding to complaints in a streamlined, coordinated manner, which leads to disharmonized messaging and increased risk of non-compliance.
Historically, large financial institutions have assigned complaint management to individual business functions as operational activities, rationalizing that business teams owned the requisite expertise to most effectively handle responses, with Internal Audit and Compliance functioning as a safety net. However, as a result of new regulation, a spotlight is being shined on the need for timely and comprehensive information about complaints, and in the aforementioned structure, the lack of enterprise-wide governance means that companies are reaching their customers and regulators through siloed processes and inconsistent reporting. It is rapidly becoming a necessity to develop robust coordination and collaboration across stakeholder functions.
In complex businesses, issues can take many shapes and forms and often require the attention of several functional units for resolution. Consider a system error that causes customer’s billing addresses to be updated incorrectly when changed. This ubiquitous issue may stem from a number of processes (for example, customer service, customer management system, or customer database) and may impact a wide array of functions (for example, compliance, customer service, data privacy, billing and statements, or credit reporting). Companies struggle to determine who should own such an issue, which frequently leads to ineffective resolution plans, inconsistent external messaging, and downstream process failures.
Accenture’s Approach to Consumer Complaint Management
Accenture combines risk management, customer relationship management, and talent and operational performance capabilities to help clients develop and implement comprehensive consumer complaint management strategies and put themselves in the best position to achieve regulatory compliance, process consistency and scalability, and, most importantly, connect effectively with customers. We look at complaint management not solely as a compliance mandate, but as a value-enhancing capability that provides a company with unique insights to uncover issues and identify opportunities.
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Figure 3: Best Practices Complaint Management Process
Enhancement: Implement a Complaint Management System
Financial institutions looking to take control of their complaint management process are leveraging mature technologies in the governance, risk, and compliance (GRC) market. These tools feature proven out-of-the-box functionality allowing companies to realize significant business benefits, as described below, that enhance communication and coordination across the enterprise:
- Single input channel—A consolidated complaint input portal and centralized database enables the integration of issue identification, management, and response within a single system.
- Process consistency—Automated workflows enable the design of robust, streamlined processes that formally align all key stakeholders and drive process efficiency.
- Automatic identification of issue patterns—Continuous controls monitoring functionality enables the scanning and analysis of complaint data to proactively identify issue patterns (for example, consistent failure of a key system or quality issues impacting several systems) before they lead to significant damage.
- Consistent issue response—Project management and status tracking of complaint resolution activities enables the whole organization to understand progress and to communicate with customers and regulators uniformly.
- Executive/regulatory reporting—Leading business intelligence solutions are integrated in many GRC tools to enable rapid generation of executive-level reports based on real-time complaint management data, which can be used for streamlined communication with regulators.
Through implementation of complaint management systems, companies can ease the challenges of managing multiple identification channels, sharing and reporting complaint status inconsistently, and overseeing siloed customer service and compliance processes by providing a single version of the truth.
Enhancement: Create a Centralized Response Program Management Office (PMO)
Disjointed complaint response processes lead to inconsistent internal and external communication, which significantly increases the risk of non-compliance and customer loss. By creating a centralized PMO for complaints management that acts as the gatekeeper, companies can ensure appropriate attention is paid to resolving issues in a timely manner. The good news is that this change does not have to be cost-prohibitive, and can actually lead to long-term savings:
- The centralized PMO for complaints can be created by realigning existing management resources and teams.
- As the centralized PMO gains proficiency in identifying patterns and proactively resolving future failures, operational issues and their associated costs should decrease.
As the importance of complaint management continues to grow, financial institutions must re-examine their existing practices and ensure the right organizational structure, processes, and systems are in place to satisfy regulators and optimize operational efficiency.
References and Further Reading
Testimony of Richard Cordray before the Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs
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