Those who work in the financial industry are likely aware of the Consumer Financial Protection Bureau (CFPB), the federal agency tasked with protecting consumers in the financial industry.

The CFPB, which receives direct funding from the Federal Reserve, is not an organization to be taken lightly. “Frankly, it’s a much more powerful agency than many other federal agencies,” says Perry.

In its quest to eradicate potential unfair, deceptive or abusive acts or practices (UDAAP) that violate the Consumer Financial Protection Act, the CFPB has broad power to examine the practices of both banks and non-banks.

Case management software helps companies comply with CFPB by making it easier to record, address and manage customer complaints. Learn more here.

And while banks with more than $10 billion in assets fall directly under CFPB regulations, any provider of consumer financial products and services, or their service providers, are within its reach.

So What Does the CFPB Do?

The CFPB administers the following federal statutes:

It also takes on new responsibilities for consumer financial protection, mandated by the Dodd-Frank Act, including:

• Helping consumers make informed and responsible financial decisions
• Protecting consumers from harmful practices
• Eliminating outdated and unnecessary regulations
• Promoting fair competition through consistent law enforcement
• Increasing market transparency

How Much Power does the CFPB Have?

“The CFPB may investigate, issue subpoenas and civil investigative demands, compel testimony, and conduct hearings and adjudications to enforce compliance, including fines and issuing cease-and-desist orders,” says Perry.

In addition, the CFPB may initiate actions for civil penalties or an injunction and it may refer potential criminal issues to the Department of Justice.

The CFPB's Requirements

Complying with CFPB regulations has become an important activity for financial service providers and their vendors. The CFPB has created a database so that consumers can file a complaint with the bureau directly and know that something will be done.

Financial institutions, both banks and non-banks, are required to comply with the regulations of the CFPB, including those for customer complaint handling. Their guidelines include that financial institutes handle customer service complaints by:

• Recording every complaint that is received
• Categorizing each complaint so it's easier to track and assess areas of risk
• Addressing each complaint and escalating those which involve legal issues

Complaints Database & Response Time

In addition, the Bureau has set up its own complaints database that any consumer can access to file a complaint against a financial service provider. So service providers need to ensure their own complaints management systems are serving the needs of customers to avoid becoming a line item in the CFPB’s complaints database.

When consumers file a financial customer complaint with the CFPB, whether it’s regarding late fees, interest, collection practices, or something else, there are additional regulations that apply. The CFPB will communicate with the financial institution that has received the complaint.

The company in question then has 15 days to respond and let the CFPB know how it will address the complaint. Of all the complaints that the CFPB receives, 80 per cent are sent to the financial service provider in question for an appropriate response within the 15-day deadline.

Sallie Mae's Practices Made Headlines

With the CFPB stepping in to help protect consumers, some companies’ customer complaint handling records have made headlines.

One such company to come under scrutiny for their poor handling of customer complaints is Sallie Mae, about which a CFPB official said: “Sallie Mae ranks the worst in borrower, school, and federal personnel satisfaction.”

Ensuring your customer complaint handling systems and policies are strong and fair will go a long way to keep you out of the headlines and the sights of the CFPB.

If you need more advice on how to better handle feedback, this cheat sheet shares several Best Practices for Handling Complaints.

Complying with CFPB Regulations

With so much power, it’s not surprising that both banks and non-banks are scrambling to ensure they comply with CFPB regulations before they become the subject of an audit.

Not only is customer complaint handling important from a business stand-point, but it is also important from a legal one. Companies in the financial sector will want to ensure that they follow the customer complaint handling regulations set forth by the CFPB in order to avoid problems.

It is important that those who handle the customer complaints within the company be up to speed on the regulations, have the system in place, and act on it accordingly. Once this happens your customer service will not only be addressing your customer needs, but it will also ensure you are compliant with the government.

The resulting changes in customer service and complaints management will provide the banking industry an opportunity to improve their relationships with consumers on every level.

Step One: Devote Resources

“First, company leadership should devote adequate resources to the compliance program, which will greatly increase the chance of catching and fixing any errors that may occur,” says Braden Perry, a partner in the Kansas City-based law firm of Kennyhertz Perry, LLC.

Step Two: Appoint CCO

Once the resources are established, a senior management level Chief Compliance Officer should be appointed, says Perry. Having a CCO who gives regular reports to top-level staff is vital to ensure the proper oversight of the CFPB compliance functions.

Step Three: Create a Complaint System

“Third, a robust customer complaint system to handle any complaints that consumers may have about your business will alleviate issues before they arise,” says Perry. The customer complaint system can take many forms, but it should provide a clear and simple way for customers to reach the company and for complaints to be heard, tracked and resolved.

Step Four: Arrange Independent Compliance Audits

And finally, Perry recommends arranging independent compliance audits of the company either by a third party or someone who is not actively involved in the CFPB compliance management system. This vital step allows management to get a third-party view of the compliance landscape and adds credibility to the program.

The Benefits of Compliance

Although some in the financial sector may not be jumping up and down about complying with CFPB rules, they can take advantage of the situation.

Rather than see this third party as an intrusion, change your thinking and welcome the ways that the CFPB rules can help to improve relationships with your customers. Take a deeper look and notice the ways the CFPB can help to actually create a better relationship between financial institutions and their customers.

The fact that it will help to streamline complaints and ensure they are investigated and addressed means a better experience for the customer. Rather than sweeping customer complaints under the rug, or ignoring them, financial service providers have extra incentive to ensure customer complaints are addressed.

When the customer has a better experience it also works to the advantage of the businesses. They will be more likely to do business with them again, as well as help them maintain a favorable reputation.

Here are several ways complying with CFPB rules can help to improve these relationships:

Ensure Focus

The CFPB has created a system that gets financial institutions to focus on the customer complaint at hand. None can be overlooked. Every complaint that is received will be addressed. This is good for both the customer and the business because it means that the issue will have to be addressed and in a timely manner.

Provide Mediation

Since the CFPB provides an ombudsman to the public, it means there will be a neutral party. This means there will always be a third-party to hear the details of any issue between a customer and a business. Plus, this third-party can help create a solution that will make both parties comfortable.

Strive for Efficiency

It is always important to investigate and address customer complaints in a timely and efficient manner. The CFPB helps to make sure this happens. When a complaint is logged, they provide the financial institution with a limited amount of time to respond.

Offer Guidance

The CFPB provides information on their site that will help to answer consumer questions. These include financial related questions for those needing info regarding credit cards, mortgages, school loans and more. This can provide consumers the info they need that may even help to prevent an official complaint.