Banking in the Ninth

Reducing Common Complaints

Consumer Affairs Update - March 2013

Published March 11, 2013  | March 2013 issue

Federal regulators receive and investigate thousands of consumer complaints against financial institutions annually. The majority of complaints involve checking accounts, credit cards and real estate loans. We discuss the most common complaints and steps that banks can take to reduce their prevalence.

Based on data collected, we can identify common consumer complaints, which we summarize below. (While this information is from publicly available Consumer Financial Protection Bureau data, we find these complaints generally similar to our experience.)

  • Checking accounts. Typical complaints concern insufficient funds, overdraft charges and unauthorized transactions. Consumers are frustrated when banks process larger account withdrawals before smaller ones, which may cause an overdraft and resulting fee.
  • Credit cards. Most commonly, consumers complain about credit card billing error disputes. Generally, consumers express confusion with and frustration about processes and limitations they encounter when challenging inaccuracies on their billing statements. Consumers are often unaware that in most cases they have 60 days to notify a bank of an account error; they may learn of this limitation after the bank denies an error request because the deadline has passed. Consumers also express concern about inaccurate credit reporting and fraudulent activity, such as potential identity theft.
  • Real estate loans. Not surprising, many real estate loan complaints concern problems surrounding delinquent accounts, including collection, loan modification and foreclosure processes. Confusion exists regarding the process and requirements for obtaining a loan modification as well as frustration over the lack of alternatives to help a consumer avoid foreclosure.

What can banks do to help limit these types of complaints? We recognize that banks already take many steps to anticipate potential concerns of consumers. Bank management understands the many costs associated with dissatisfied consumers. That said, we receive and follow up on relevant consumer complaints as part of our key consumer responsibilities. Based on that experience, we highlight the following steps we believe would reduce the number of complaints.

First, banks should examine the consumer complaints they receive. Banks are in the best position to identify steps they can take to avoid future complaints, recognizing that some complaints may arise given the types of decisions (e.g., denying loans or charging fees) that banks must make.

Second and more generally, banks should evaluate their products, services and practices from the consumer’s perspective. Compliance with consumer protection laws and regulations is no longer just about having accurate disclosures and technically following the rules. Rather, it is also being able to see products and services from the consumer’s perspective to help ensure the bank engages in fair and non-deceptive practices.

Third, we find that many complaints arise out of confusion or misunderstood communication. Again, while some of these complaints may prove unavoidable, banks should ensure they explain fees, terms, rates and billing error practices as clearly as possible. Bank staff should clearly explain product terms and bank processes to consumers at account opening or during loan application processing or loan closing.

Finally, banks should have procedures that ensure bank staff responds to consumer questions and concerns promptly and thoroughly, particularly for serious matters such as foreclosure, billing errors or possible identify theft or fraud. We find that consumers are more likely to lodge a complaint when they believe banks do not take their concerns seriously and respond promptly.

For a more comprehensive discussion of complaints, we suggest a recent Consumer Compliance Outlook article related to complaints and compliance management.