Steven J. Ramirez Apr 23, 2014

Heading Off Complaints at the Database

Throughout the past two years, the Consumer Financial Protection Bureau (CFPB) has actively collected customer complaints and stored them in a publicly available database in an effort to provide increased transparency for consumers. At the time the database was made public in July 2012, it consisted of more than 14,000 complaints focused solely on one product, credit cards. Today, the database contains more than 200,000 complaints on eight different product verticals, spanning the full consumer financial spectrum.

With the continued increase in complaint volumes, the data has become an invaluable source of first-hand customer feedback, which organizations can use to measure how they compare to their competitors, and more importantly, to actively identify their customers’ main pain points in order to take necessary actions. Without addressing these customer issues, companies put themselves at serious risk for a larger problem to emerge.

In 2013 alone, the CFPB issued nearly $2.8 billion in fines and restitutions touching a wide range of verticals within the financial industry, including credit card issuers, debt collectors, loan providers and mortgage servicers. The agency’s largest fine to date, $2.1 billion, went to Ocwen Financial Corp., the largest non-bank mortgage servicing provider in the U.S. Had these companies proactively analyzed customer feedback channels, such as the CFPB complaint database, ahead of time, they could have uncovered and resolved significant customer problems and potentially avoided regulatory action.

Growth in Complaints

Just as the companies represented in the database have changed since the CFPB first introduced it, the number of companies included has as well, growing from 97 in December 2011 to 1,457 by December 2013, with new ones added each month. The number of companies receiving complaints in 2013 alone rose from 200 in January to more than 700 by December.

In 2014, the CFPB will closely monitor even more areas governed by federal consumer financial laws, such as payday lenders and student loan servicers. With customers now having the ability to easily report complaints about nearly every facet of their financial lives, institutions need to significantly amplify their efforts to improve the customer experience.

Of all the lessons uncovered through the CFPB’s enforcement actions in 2013, one stands out above the rest: effective complaint management is vital to a company’s regulatory well-being. However, rather than waiting on negative customer experiences to turn into complaints filed with regulators, financial institutions can proactively identify issues early on and take action. The key is understanding how a customer problem becomes a complaint and stopping it before it festers.

Consumer complaints tend to follow a distinct lifecycle. First, the customer has a problem with their financial service provider and contacts the company to give feedback on the issue. At this point, the company could address the problem and resolve it. However, all too often, the customer’s voice goes unheard even after multiple attempts to resolve the issue. The combination of frustration and inaction on the part of their service provider leads the customer to either take their business elsewhere or file a formal complaint with the CFPB.

Consistent analysis of the CFPB complaint database can significantly help financial institutions identify customer experience problems early on and point to the actions necessary to help prevent a full-fledged regulatory complaint. Organizations can leverage additional data sources, such as internal customer feedback, surveys, social media comments and call center transcripts, to actively identify customer pain points before the CFPB is notified about them.

The key to unlocking the hidden value of this data lies in strategically developing a data science program supported by multiple analytical tools and processes. For example, enterprise-wide Voice of the Customer (VOC) programs can be developed to integrate data across multiple channels, products and lines of business. By leveraging customized text analytics tools to consistently analyze VOC data, customer pain points can easily be identified well before they escalate into a more substantial problem.

Businesses that actively show customers that they are listening by directly addressing concerns will be the ones that mitigate regulatory risks and gain an edge over their competitors.  

Mr. Ramirez is CEO of Berkeley, Calif.-based Beyond the Arc, Inc., a customer experience and advanced analytics firm. He can be reached at web@beyondthearc.net.

 

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