OCTO

BER2016

RISK SIGNAL REPORT BY

How Companies Respond to theCFPB Consumer Complaint Database

An analysis of trends and key Risk Signals for companies from the CFPB’s Consumer Complaint Database

The CFPB’s Consumer Complaint Database, launched in July 2012, has given American consumers a public platform for expressing their grievances against financial companies. The database is currently a repository of over 610,000 consumer complaints submitted to the CFPB, along with their relevant data, including type of complaint, date of submission, and actions taken by a company in response to a complaint. The database contains complaints in multiple product categories: credit cards, mortgages, bank accounts, student and consumer loans, credit reporting, debt collection, and payday loans.

By analyzing data from the Consumer Complaint Database and CFPB reports from July 2011 to July 31, 2016, PerformLine uncovered a number of observations about the nature of recent complaints and CFPB enforcement actions.

These valuable insights can help financial institutions understand their own internal complaint issues and databases and potentially use the resulting insights to improve their regulatory compliance efforts, customer experience, and operational effectiveness.

© 2016 PerformLine, Inc. All rights reserved. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.

SECTION 1: CONSUMER COMPLAINTS

Consumer Complaints to CFPB

OBSERVATION:The number of consumer complaints continues to rise year over year.

TAKEAWAY:The CFPB is continuing to phase in new industries into their Consumer Complaint Database, increasing the number of consumer complaints received each year. Added into the mix in 2016 are complaints about marketplace lenders.*projected

Complaint Trend by Industry Complaints by Industry

3%3%4%

11%

12%

16% 18%

33%

The number of complaints recorded by the CFPB has increased by an average of 26% year-to-year since 2012.

Debt collection Credit card Bank account or service

Student loanConsumer loan Payday loan Money transfers Other financial servicePrepaid card

Mortgage Credit reporting

SECTION 1: CONSUMER COMPLAINTS

Complaints vs. Probability of Being Fined

Consumer Complaint Scale

100 - 2,000 complaints

2,000 - 10K complaints

10,000+ complaints

Probability of Being Fined 6% *50% 58%

Avg. Fine Plus Restitution $49 Million $116 Million $651 Million

From Dec 2011 – July 2016

OBSERVATION:When a company incurs more then 2,000 consumer complaints, the probability of being fined jumps to 50%!

NOTE: This data reflects complaints through July 2016 and does not include the CFPB’s largest fine levied: $100 million against Wells Fargo in September 2016.

NEW INDUSTRIES WITH CFPB ENFORCEMENT ACTIONS Payment ProcessorsJune 2016: CFPB Sues Intercept Corp and two of their executives

Marketplace LendersSeptember 2016: CFPB Orders LendUp to Pay $3.63M for Failing to Deliver Promised Benefits

EXAMPLES OF TOTAL FINES FOR COMPANIES WITH 2K+ COMPLAINTS

Company # of Complaints Before Date of Enforcement Action Total Fine Amount

Bank of America 50,273 $747,000,000

Capital One 13,347 $390,000,000

GE Capital 7,650 $262,500,000

0 10 20 30 40 50 60 70 80 90 100

63.3%

Percent (%) of submitted complaints handled by the CFPB

were handled and sent to companies for response

SECTION 2: COMPANY RESPONSES

What Happens to Complaints Submitted to the CFPB?

Company Responses to Consumer Complaints

From Dec 2011 – July 2016

5%2.5%.05%

12.5%

7.5%

72%

In 2015, out of 271,600 complaints received by the CFPB

Untimely response

In progress

Closed with non-monetary relief

Closed with monetary relief

Closed with explanation

Closed

SECTION 2: COMPANY RESPONSES

Complaints vs. Probability of Being Fined vs. Company Response

Consumer Complaint Scale

Company Responses to Complaints

100 - 2K complaints

2K - 10K complaints

10K+ complaints

100+ “Untimely”*

100+ Closed w/ Monetary

Relief

Probability of Being

Fined6% *50% 58% 41% 46%

Avg. Fine Plus

Restitution

$49 Million

$116 Million

$651 Million

$534 Million

$169 Million

From Dec 2011 – July 2016 *Company did not respond to complaint within 15 days

Top 10 Companies with Untimely Responses

OBSERVATION:Of the top 10 companies with ”Untimely Responses,” half of them were the target of a CFPB enforcement action.

TAKEAWAY:Companies with untimely responses to consumer complaints are at risk of enforcement actions. They should take care to reply to complaints within 15 days, the CFPB’s time frame for what they consider to be timely responses.

Company Fine Amount ($)

1. 747,000,000

2. O C W E N 2,125,000,000

3. 34,800,000

4. 735,000,000

5. Southwest Credit

6. Mobiloans

7. 1,600,000

8. Premier Recovery Group

9. National Star Mortgages

10. High Point Asset

Out of these 10 companies,5 received fines.

OBSERVATION:Of the companies that failed to respond to 100 or more complaints in a timely manner (i.e. in 15 days or less) or closed over 100 complaints with monetary relief, there was over a 40% probability that company would become the subject of a CFPB enforcement action.

TAKEAWAY:It’s imperative that companies have a streamlined system to respond to consumer complaints in a timely manner in order to avoid CFPB scrutiny.

SECTION 2: COMPANY RESPONSES

Untimely Responses to Consumer ComplaintsRanked by Industry

Complaints Closed with Monetary ReliefRanked by Industry

OBSERVATION:The industries with the highest rates of untimely responses are payday loan, debt collection, and other financial services (including debt settlement, check cashing, credit repair, and money orders).

TAKEAWAY:Companies that do not respond to consumer complaints in a timely manner are more likely to be subject to investigation and an enforcement action.

OBSERVATION:The industries with the highest rates of complaints closed with monetary relief are prepaid cards, credit card, and bank account or services.

TAKEAWAY:The CFPB has carried out enforcement actions against Wells Fargo and Citibank for deceptive banking practices and demanded they provide over $700 million in monetary relief to consumers.

From calendar year 2015

From calendar year 2015

Percentage of Complaints Resulting in Monetary Relief

SECTION 2: COMPANY RESPONSES

Median Amount of Monetary Relief

From calendar year 2015 From calendar year 2015

Total # of Complaints Through July 2016

% Resulting in Untimely Company

Responses

% Resulting in Monetary Relief

1. Mortgage 198,616 2.20% 2.71%

2. Debt collection 112,135 7.17% 1.44%

3. Credit reporting 105,480 0.15% 0.57%

Top 3 Most Complained About Industries

Key TakeawaysBe Timely in Responding to Consumer Complaints. Companies that don’t respond to complaints within the 15 day time frame seem more likely to be subject to an investigation by the CFPB and other regulatory agencies. State AGs also monitor consumer complaints and are more likely to take action if there are numerous consumer complaints about a company. According to Venable LLP, plaintiffs’ attorneys often piggyback on complaints and findings in complaint databases to bring substantively identical private class action lawsuits.

Thresholds Matter. Companies need to be aware of where they reside on the Consumer Complaint Scale for complaints reported to the CFPB. If a company is about cross over the threshold to 2,000, the likelihood they could be fined jumps from 6% to 50%, and therefore they need to be prepared and have a plan to mitigate risk.

Be Proactive. Marketing and advertising messages are many times the first interaction with consumers. Stopping potentially misleading or deceptive marketing is a critical first step in lowering consumer complaints. Monitor all marketing and advertising, including your affiliates and sub-affiliates, to remediate any potentially harmful content.

Abide by the CFPB Bulletin on Responsible Business Conduct. “Self-Monitoring, Self-Reporting, Remediation, and Cooperation.” These are activities a company can engage in that may be considered favorably by the CFPB when exercising their enforcement discretion. Specifically, a company should proactively self-monitor for potential violations, promptly self-report potential violations to the CFPB, quickly and completely remediate the harm resulting from violations, and affirmatively cooperate with any Bureau investigation.

PerformLine is a leading RegTech company.We deliver automated compliance solutions to companies

looking to mitigate regulatory risk and ensure brand safety.

To learn more about how the PerformLine platform empowers compliance functions with the intelligence, insights and tools needed to mitigate regulatory risks across all consumer

interactions channels—including web, contact centers, chat and mobile—reach us here:

sales@performline.com www.PerformLine.com/contact973-986-5007

APPENDIX: COMPLAINTS BY INDUSTRY

Mortgage

First CFPB enforcement: April 4, 2013 against Genworth Mortgage Insurance, United Guaranty, Radian Guaranty, Mortgage Guaranty Insurance Corp for $15.4 M

Latest CFPB enforcement: June 29, 2016 against BancorpSouth Bank for $10.6 M

Debt Collection

First CFPB enforcement: August 24, 2014 against Global Client Solutions for $7 M

Latest CFPB enforcement: April 25, 2016 against Pressler & Pressler, LLP and New Century Financial Services for $2.5 M

Credit Reporting

First CFPB enforcement: December 3, 2015 against Clarity Services, Inc. for $8 M

Credit Card

First CFPB enforcement: July 18, 2012 against Capital One Bank for $165 M

Latest CFPB enforcement: August 25, 2016 against First National Bank of Omaha for $32.5 M

Bank Account or Service

First CFPB enforcement: September 25, 2014 against U.S. Bank for $57 M

Latest CFPB enforcement: September 8, 2016 against Wells Fargo for $100 M

Consumer Loan

First CFPB enforcement: June 27, 2013 against U.S. Bank and DFS for $6.5 M

Latest CFPB enforcement: February 2, 2016 against Toyota Motor Credit Corp. for $21.9 M

Student Loan

First CFPB enforcement: February 26, 2014 against ITT Education Services

Latest CFPB enforcement: August 22, 2016 against Wells Fargo

Payday Loan

First CFPB enforcement: November 20, 2013 against Cash America International for $19 M

Latest CFPB enforcement: May 11, 2016 against All American Check Cashing

Discover and mitigate risk with the leading RegTech platform for

REGULATORY COMPLIANCE REGULATORY COMPLIANCEREGULATORY COMPLIANCE

CREDIT CARD MONITORING CREDIT CARD MONITORINGCREDIT CARD MONITORING

BRAND COMPLIANCEBRAND COMPLIANCE BRAND COMPLIANCEBRAND COMPLIANCEBRAND COMPLIANCE

CARD NETWORK COMPLIANCE CARD NETWORK COMPLIANCECARD NETWORK COMPLIANCE

REPUTATION MANAGEMENT REPUTATION MANAGEMENTREPUTATION MANAGEMENT

MERCHANT MONITORING MERCHANT MONITORINGMERCHANT MONITORING

One platform to monitor for compliance across all your consumer interactions

WEB CONTACT CENTER CHAT MOBILE

Contact david@performline.com for a demo or to learn more

PerformLine, Inc.58 South Street

Morristown, NJ 07960

www.PerformLine.com

Twitter: @PerformLineBlog: blog.PerformLine.com

PerformLine is the leading RegTech company delivering automated compliance solutions for enterprises looking to mitigate regulatory risk and ensure brand safety. Its cloud-based platform

empowers compliance functions with the intelligence, insights and tools needed to mitigate risk across all consumer interactions channelsincluding web, voice, chat and mobile.

PerformLine saves clients money by automating compliance activities across channels and departments, creating significant cost-savings.

For more information about PerformLine visit performline.com, email sales@performline.com or follow on twitter @PerformLine.