The Dodd-Frank Act requires the Consumer Financial Protection Bureau (CFPB) to collect, investigate and respond to consumer complaints as part of its work in protecting consumers of financial products and services.  Over the past year, CFPB’s Consumer Response team has gradually begun taking complaints on credit cards, mortgages, private student loans, other consumer loans, and other bank products and services.  Because the complaint process could result in investigation or enforcement actions, financial services companies should be sure they understand the system and are prepared to respond promptly to complaints.  Below is a list of recommendations for financial service companies to deal with the complaint system.

Know How to Use the Complaint System

CFPB’s website now prominently includes a “Submit a Complaint” portal.  Consumers wishing to make a complaint in one of the above categories can simply click on the “Submit a Complaint” icon and follow the directions provided.  In addition, CFPB accepts complaints by telephone, mail, email, and fax.  The portal is the primary means of communication between CFPB and financial service companies, so companies should be familiar with the portal and establish procedures for fielding any complaints in a timely manner.  CFPB has provided a Company Portal Manual explaining how the portal and the complaint process works.

Once a complaint is submitted, CFPB screens it to determine whether it falls within the agency’s primary enforcement authority, whether it is complete, and whether it is a duplicate submission.  If the complaint passes these tests, it is then forwarded to the company for response.  The company is notified of the complaint and can log into the portal to view all active cases.  Upon receipt of the complaint, the company must communicate with the consumer to determine the appropriate response.  The company’s response is submitted via the portal, and the consumer is invited to review the response.  The consumer can log onto the secure portal or call a toll-free number to receive status updates and review responses.  The consumer is then given an opportunity to dispute the response. 

Be Prepared to Respond Quickly

CFPB requests that companies respond to complaints within 15 calendar days and resolve complaints within 60 days.  Failure to provide a timely response may trigger an investigation of the complaint by CFPB.  Since a complete response requires that the company correspond with the complaining consumer, companies should pursue a response quickly to ensure they meet CFPB deadlines.

Understand that Complaints May Result in Investigations or Enforcement Actions by CFPB

The Consumer Response Team prioritizes review and investigation of complaints where a consumer disputes the response or the company fails to provide a timely response.  In addition, the team analyzes groups of complaints to identify issue-specific trends.  In some cases, complaints are referred to CFPB’s Division of Supervision, Enforcement, and Fair Lending and Equal Opportunity for further action.  Financial services companies should thus be vigilant on the same matters, paying greater attention to disputed responses, ensuring that responses are timely, and monitoring for trends in the complaints received so that underlying problems are addressed before they are raised by the agency.

Understand that cCmplaints May Also Result in Investigations By Other Agencies

If a complaint is outside CFPB’s jurisdiction, it may be forwarded to the appropriate regulator (for example, while CFPB handles complaints on private student loans, it forwards complaints received about federal student loans to the Department of Education).

In addition, the Dodd-Frank Act requires CFPB to share consumer complaint information with the Federal Trade Commission (FTC) and other state and federal agencies.  For example, if CFPB receives a complaint about identity theft, it may share that with the FTC, which is the agency that has historically investigated such complaints.  As a result, financial services companies may need to anticipate receiving questions from the FTC about the effectiveness of their Red Flags program, which companies should have fully implemented in response to applicable FTC and other federal agency rules.  In addition, CFPB currently shares its complaints with the FTC’s Consumer Sentinel system, an online database of consumer complaints maintained by the FTC that is accessible by law enforcement.

Be Prepared for an Increase in the Volume of Complaints

Consumer use of the complaint system is off to a strong start.  CFPB recently issued a Consumer Response Annual Report summarizing the use of the complaint system from its launch in July 2011 through December 31, 2011.  The report indicates that CFPB received 13,210 consumer complaints during that time, including 9,307 credit card complaints and 2,326 mortgage complaints.  The most common credit card complaints involved billing disputes, identity theft, and APR or interest rates.  The most common mortgage complaints involved situations in which the consumer was unable to pay (loan modification, collection, foreclosure).  The complaint systems for bank products and services, private student loans, and other consumer loans only began in 2012, so the report did not cover those categories.  By the end of 2012, the CFPB expects that the complaint system will cover all consumer financial products and services. 

Financial services companies should monitor these trends to identify issues that may affect their business.  They also should anticipate a significant increase in complaint volume as CFPB adds additional products to the complaint system and more consumers become aware of it.  By comparison, the FTC Consumer Sentinel fielded 1.8 million complaints in 2011.