CFPB Watch: Complaint Response = Good Business Part 3
This week we continue with the third recap of the CFPB Watch Webinar series titled, Complaint Management: What You Need to Know. Participants heard from chief operating officer of DealerGripe, Dave Sierk on why a customer response program is good business.
A CMS with an integrated consumer complaint response program will help identify, analyze and correct compliance issues across your organization. Complaints become an opportunity to create loyal customers rather than a liability. Thus turning complaints into gains for your bottom line. The following will give you an overview of how to build and effectively utilize a consumer complaint response program.
What’s It To You, CFPB?
Did you know that consumer complaints direct the CFPB’s activity? The CFPB pays attention to any violation in a specific complaints as well as the trend in the types of complaints received. So, complaint management has to do more than detect, analyze and correct isolated complaints, it must be integrated into the CMS and trigger appropriate activity from the board and executive management, training and the independent audit. However, not all complaints are the same.
Unpacking that definition of complaint will help your organization respond appropriately. It is easy to come up with examples of customer dissatisfaction such as when the paperwork is inaccurate, that is a big problem that needs to be addressed. Where auto dealers, finance organizations and vendors need to be equally vigilant are with instances of inquiry or questions that bring to light a trending problem in your organization that can be corrected. If you can spot the trends before the CFPB does, that is great complaint management and good business.
Just a Reminder: We’re not your lawyer (of course, right?) Since we’re not, remember that this article’s for informational purposes and not intended to provide legal advice.
Complaint Defined:
A consumer’s expression of DISSATISFACTION with a product, service, policy, or employee related to a company with which they have a business relationship, or a consumer’s INQUIRY or Question (or pattern of consumer inquiries and questions) that shows a potential issue in communication or implementation of consumer protection policies.
Complaints on Social Media vs Specialized Channel
By now you have read the Federal Financial Institutions Examination Council (FFIEC)’s Guidance on social media and consumer compliance risk management. You know that there is no “one size fits all” approach to compliance and managing risk posed by social media. Assessment of the risk social media poses to individual organization should be appropriate to its size, complexity, activities, and third party relationships.
It is also important to keep in mind that the FFIEC’s Guidance does not require organizations to monitor and respond to all negative communications on social media. With social media it can be very difficult to determine affirmative consent which distinguishes when a consumer on social media wants to communicate with your brand rather than just communicate about your brand.
In today’s hyperconnected world every organization must determine what are the appropriate steps to responding to such negative communications for their organization. The FFIEC Guidance identifies the use of one or more specialized channels as an appropriate approach to monitoring and responding to complaints. When a consumer calls or emails with a complaint you know you have affirmative consent to respond, you are not risking further reputational damage on an open forum, and you can track your own complaint data for trends to help you address systemic issues. More on how to harness data to help you reduce risk coming up.
Building Blocks – The Four R’s
We started out by telling you that a) complaints are a good thing, b) not all complaints require the same resolution and c) each organization must determine its complaint management needs based on its unique characteristics. With that context we will dig deeper into what every organization needs to build a strong consumer complaint response system. Handily, all you need to remember are the Four R’s: Record, Respond, Resolve, and Remediation.
Record
Record complaints – in writing or otherwise. There is no way to address an issue at the appropriate levels unless it is recorded. Take it a little further, you cannot compile the data necessary to spot trends without – you guessed it – recording each complaint.
Data will not hurt you if negative trends and complaints are addressed which brings us to the next building block.
Business cents: Consumers who take the time to express opinions or complaints are twice as likely to purchase products as services as those who do not. Now, consider that research shows 50% of customers with a compliant do not bother to make one. Go further with that finding and consider that Millennials are more loyal to brands that provide information.
Respond
Validating a complaint with a response – a call, text or email – is building brand loyalty. Remember we said that not all complaints are the same. So, not all responses are the same. First you need affirmative consent to communicate with the consumer. Next, you need to make contact with the consumer in mind and that means, quickly with impact.
Business cents: If a customer had been working with customer representative Lila when the issue or misunderstanding occurred that gave rise to the complaint, does it make sense to have the CEO send an email in response to the complaint? A special channel will help with making contact but the messenger also makes an impact on the customer. Research shows that consumers who receive a response to their complaint (even if the response does not meet all of the consumer’s expectations) are more loyal than customers who did not complain at all.
Resolve
When you resolve a complaint you may be addressing a business practice with training or you may simply be offering an explanation to the customer. Consider that 72% of complaints in the CFPB database were resolved with an explanation and of those resolved only 18% were disputed by the customer. A response can be explaining what led to the misunderstanding or clearing up a miscommunication.
Resolving the problem requires transparency on communication of information, the appropriate responder and contact.
Business cents: Customers that have resolved significant issue tell eight people and those with unresolved significant issues tell 18 people about it. Resolving issues swiftly and with transparency increase customer loyalty, especially with Millennials.
Remediation
The goal of a consumer complaint response program is to remove risk to the company. Remediation is the end result that CFPB wants to see. With a CCR you will see the correction in your data.
For example if you have 35 of the same type of customer inquiry three months in a row, you can correct with training, but the test of the effectiveness of that training will be whether or not the inquiries stop. Remediation of the data is an integral part of the root cause analysis conducted by an independent audit.
Remediation of the trending complaints will translate into protecting the company’s bottom line and its reputation.
Business cents: We know that only 50% of consumers make complaints and that means for every one complaint there 19 similar problems that went unreported.
It Makes Good Business Sense
What your organization gains with a consumer complaint response program to gauge the effectiveness of your CMS:
- Being in step with FFIEC’s Guidance on social media and consumer compliance risk management
- Increased customer loyalty from transparent flow of information and the demonstration of a commitment to customers
- Increased sales and referrals from loyal customers
- Protection of your organization’s reputation as the issues no longer get talked about on social media or through customer networks
