5 Key Elements of Effective Complaint Management

1. Where do complaints come from?

“How can [consumers]s complain? What are the channels that they can come through to get a complaint to you? … [Y]ou want to channel complaints into communication methods that ensure that you’re going to get the complaint, or that the complaint is going to go to the right place.”

Consider whether you provide a straightforward way for consumers to file complaints. As Michael told us, “if a customer comes into the bank and they go to the teller line and they make a complaint to the teller, it’s very difficult to manage a complaint process where you’re relying on individual people to deliver complaints, secondhand at this point, to a documentation system or a centralized system.” He mentioned that many institutions offer consumers the option of submitting a complaint through their websites, 800 numbers, and dedicated email addresses.  

2. What counts as a complaint, exactly?

“There’s a lot of disagreement in the financial services world about ‘What’s a complaint, and what’s an inquiry?’ And again, work with your counsel on determining what’s going to be a complaint for your purposes. I tend to err on the side of overinclusion and record any inquiry from a customer, and deal with the seriousness of the inquiry.”

Clarity comes from categorization. For each complaint you receive, consider whether it’s actionable or not; whether it needs to be escalated. Michael mentioned that it helps to label complaints “by topic, by product, by nature of complaint—that sort of thing.”

“As the complaints are coming in,” he said, “it’s very important that they’re organized appropriately. It’s very important that they are directed to the appropriate party. That may mean escalation. That may mean somebody receiving the complaint on the phone can handle that complaint. [There are ] a variety of ways to do it, but your policies and procedures obviously should address the different ways of handling those, and what your policy’s going to be for logging and tracking those complaints.”

How do you know when you need to escalate a complaint? Look out for tangible risks: legal issues, potential harm from unfair or deceptive practices, discrimination claims, concerns about identity theft, regulatory compliance issues, state investigation or Better Business Bureau notices, and so forth.

“Anything that has significant reputational risk to the company is probably something that you wanted to escalate,” Michael cautioned.

3. How do you respond to complaints?

When developing your response process, consider not only what you communicate to consumers, but how and when you communicate it. Timing could be everything, as Michael indicated in a story he shared about working with a lender:

“I had one client that I was working with who had a 15-day response time for any complaint. And you know, 10 or 15 days is probably pretty good to appropriately investigate and respond to a complaint—assuming you have all the information. But they had one policy, which was that if the complaint came in to the CEO’s office, then that complaint had to be resolved within 24 hours. My question was, ‘What difference does a channel make? And why is a complaint that’s directed to the CEO any more important than a complaint that comes through an ordinary channel?’ And that’s a question the CFPB would ask.

So, what we ended up doing with that client is that we adjusted the timing, actually for everything, to have a single response period for those complaints. And your response may be ‘I need more information.’ It’s good to put those responses out sooner or later. It may be ‘We received your complaint. We understand what your question is. Here’s the action we’ve taken or not taken, and here’s the reasons why.’”

4. What are your complaints telling you?

One of the fundamental values of consumer complaints is their ability to give you new insight into your organization—provided you can properly analyze them, that is. Michael explored two kinds of complaint analysis

“The first,” he said, “is a root cause analysis. What is the root cause of that complaint? What are we going to do? We’re going to consider the factors that may be the underlying cause of the complaint.”

Think about what could have prevented the complaint, and what your organization stands to lose from not addressing it. Is it a customer service issue, or is something amiss with employee training or management? Does it signal wide-ranging gaps or weaknesses in your policies and procedures, or internal controls? Does it signal regulatory risk? Regardless of the answers you arrive at, make sure to document your analysis.

The second kind of analysis Michael spoke about is trend analysis: overarching patterns in the complaints you receive. To explain how to look for trends, Michael used a few hypothetical examples:

“[I]f you’re an auto finance company and you’re getting a lot of complaints from customers whose paper originated in a particular dealer, that may be something that you want to investigate more thoroughly. If you’re a lender and you are getting a lot of complaints about your imposition of late fees, that might be a trigger to tell you that maybe there’s something wrong in your system that’s applying late fees at a point when no late fees should be applied—or maybe the complaint is about the amount of the late fee, which is different from what’s in the customer’s contract. … You’re essentially looking for a pattern of the complaints, and then making whatever policy procedure changes you need to do, and whatever remediation you might have to do for the customer.”

5. How are complaints resolved?

Finally, the fifth component of complaint management is resolution. Again, said Michael, consider how and when you communicate with consumers:

“You may resolve the issue on the phone in the initial call. You may resolve it with an email response to a customer who emailed a complaint. You may have to escalate it, and your legal department will have to respond, or your compliance department will respond. The important thing to remember here is that resolution doesn’t necessarily mean the customer got what they wanted. Resolution means that you did all the things that you needed to do to bring the complaint process to a final resolution.”

For example, if a consumer complained about a 10-day late fee that was applied, appropriately, when the consumer paid 12 days after the due date, you don’t need to make sure the consumer’s happy; only that your organization applied its policies correctly and in compliance with state and federal law. You may decide to explain the policy to the consumer, or waive the fee—according to Michael, it doesn’t really matter: “There are no rules about that. But the important thing is that you bring to a final resolution all of your complaints.” And no matter how you decide to bring the complaint to a final resolution, don’t forget to document every step along the way.