Effective Compliance Management Program Should Include Complaint Tracking

While member complaints are nothing new, they are in the spotlight now more than ever. Managing complaints is becoming a key factor for credit unions to succeed.

But why would a credit union want to establish complaint-tracking and management processes? Is there a specific regulatory requirement that spells out what needs to be in a policy? And how would a credit union go about developing an effective process? These are questions that credit unions are asking.

To put it simply, a credit union would want to establish a complaint-tracking and management process because regulators are looking at your complaints. Complaint data contains valuable information that can help credit unions understand compliance risks and other issues. Complaints can be used to identify UDAAP or Fair Lending issues, since complaints are often red flags for potential violations.

There is no specific regulatory requirement for credit unions to have a compliant policy. A number of regulations, such as RESPA and Regulation E, have requirements for error-resolution procedures, but these regulatory requirements do not address the best-practice expectations for complaint policies and procedures.

However, the Consumer Financial Protection Bureau does provide some insight in its Supervision and Examination Manual.  According to the CFPB, examiners will determine whether:

  1. Consumer complaints and inquiries, regardless of where submitted, are appropriately recorded and categorized;
  2. Complaints and inquiries, whether regarding the entity or its service providers, are addressed and resolved promptly;
  3. Complaints that raise legal issues involving potential consumer harm from unfair treatment or discrimination, or other regulatory compliance issues, are appropriately escalated;
  4. Complaint data and individual cases drive adjustments to business practices as appropriate;
  5. Consumer complaints result in retrospective corrective action to correct the effects of the supervised entity’s actions when appropriate; and
  6. Weaknesses in the compliance management system exist, based on the nature or number of substantive complaints from consumers.

The 2012 Federal Reserve Board Consumer Compliance Outlook article, “Enhancing the Compliance Management Program with Complaint Data,”alsoprovides insight on incorporating complaint data into a credit union’s compliance management program. The article breaks down the integration of complaint data into several key areas:

  • Board and Senior Management Oversight;
  • Policies, Procedures, and Training;
  • Monitoring and Testing; and
  • Reporting.

Complaint data can be used to prepare a credit union for compliance examinations, since examiners are using the data to determine which areas should be their focus during the examination process. Credit unions can use the same complaint data to anticipate areas of potential examination focus.

The article’s conclusion also demonstrates the value of having a robust complaint-management process:

Analyzing consumer complaint data and appropriately addressing issues noted in complaints will enhance and strengthen a financial institution’s compliance management program. A wealth of information can be found in consumer complaint data, and one complaint could be the catalyst for an examination or further review. By analyzing complaint data, a financial institution can use the findings to regularly assess its compliance risk, validate its compliance controls, and provide a comprehensive compliance assessment to its board. A financial institution can also leverage its complaints to proactively prepare for regulatory examinations and to anticipate potential areas of congressional focus for future regulation.

While it is a best practice to have a complaint-tracking process, there is no formal guidance on what each credit union should have in its process. Due to the differences in size and complexity of credit unions, there really is no one-size-fits-all policy. But there are a number of things to consider when creating a policy and procedure for your credit union.

First, define a member complaint. There really is a difference between inquiries, feedback, and a complaint. A credit union’s complaint-management program should provide clear definitions of a complaint, how it is recognized and appropriately escalated, and employee training necessary to ensure an effective program.

Regulation AA does provide some insight credit unions can use when defining a complaint:

“Consumer complaint” means an allegation by or on behalf of an individual, group of individuals, or other entity that a particular act or practice of a State member bank is unfair or deceptive, or in violation of a regulation issued by the Board pursuant to a Federal statute, or in violation of any other act or regulation under which the bank must operate. Unless the context indicates otherwise, “complaint” shall be construed to mean a “consumer complaint” for purposes of this section.

You may wish to incorporate other complaint factors in your process:

  • FCRA complaints (Credit Reporting);
  • Regulation E error resolution (unauthorized transactions);
  • RESPA error resolution and information requests;
  • Fair Lending complaints; and
  • Other general member complaints.

You will also want to take into consideration how the complaints are received:

  • In person;
  • An online submission or email;
  • By telephone;
  • By mail (direct to the credit union or through the Supervisory Committee mailbox); or
  • Via social media (if applicable).

In addition, you may wish to categorize your complaint data. This will provide you with a meaningful tool for analysis and reporting. Categorizing will also help you develop a process for tracking and reporting of complaint data.

Complaints will be received in various areas of operation within your credit union. In developing a tracking process, you will want to determine what information is needed to properly track complaints and also serve as an early warning for potential regulatory violations.

And finally, you will want to incorporate complaint resolution into your process. Tracking member complaints has benefits, but at the end of the day, it really is about resolving the issue.

Question of the Week

If a member wants to purchase a cashier’s check for $9,975 with a service fee of $50 and pays in cash, is the credit union required to file a Currency Transaction Report (CTR)?

Yes. The credit union must look at the amount of the physical deposit, withdrawal, exchange or transfer of currency. In this scenario, the member is paying more than $10,000 in cash, even though the cashier’s check itself is for less than $10,000.

Related Links:

31 CFR 1010.311

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Consumer Financial Protection Bureau (CFPB)

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The CFPB released a report that focuses on mortgage debt challenges that are faced by older Americans.

The CFPB released a proposed rule aimed at reducing the burden imposed by Regulation P’s annual privacy policy notice requirements. While the proposed rule doesn’t eliminate the need for consumers to receive this notice, it does ease the burden by allowing credit unions to post their notices online rather than mailing one to each member, if certain conditions are met.

The CFPB issued a proposed rule that would amend certain parts of Regulation X and Z. The proposed rule would provide an alternative small-servicer definition for nonprofit entities, amend the existing exemption from the ability-to-repay rule for nonprofit entities, and provide a cure for points and fees that apply to qualified mortgages. 

Government Accountability Office (GAO)

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Federal Reserve Board (FRB)

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The May edition of FedFocus is now available.

Federal Financial Institutions Examination Council (FFIEC)

Last week, the FFIEC hosted a webinar on cyber security aimed at helping CEOs and their senior management teams understand the threats that exist and different ways to help manage and mitigate these risks. The FFIEC has made these slides available for people who were unable to attend the webinar.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of May 8. The last update prior to this was May 7.

Questions? Contact the Compliance Hotline: 1.800.546.4465, compliance@nwcua.org.

Posted in Compliance News.