What Doesn't Kill You Makes You Stronger: Leveraging the CFPB Database

Beyond the Arc, Inc. © 2014 Beyond the Arc, Inc.

Customer Experience & Data Science

Presentation Date here

What Doesn’t Kill You Makes You

Stronger:

Best Practices for Leveraging

the CFPB Database

to Manage Customer Complaints

Steven RamirezBeyond the Arc

Beyond the Arc, Inc.

Leveraging Complaint Data to

Strengthen the Customer Experience

• Introductions

• Setting the context: what is a complaint?

• Why focus on consumer complaints?

• What can you learn by tracking and analyzing complaints?

• How can you prevent complaints?

• Best practices for an enterprise complaint management system

• Key takeaways

• Predictions for 2015

AGENDA


Nothing you don’t already know…

the financial industry faces a challenging future

• Regulatory reform is reshaping how banks interact with the customer

• Consumer trust is slowly recovering

• “Non-bank” options like Square, WalMart, PayPal, and others covet the relationship with bank customers

The entire industry is in a state of flux, and winners will need to be agile and increasingly customer-centered


Being compliant is no longer just about following the

alphabet soup (Reg B, Z, E, etc…)

• Our perspective is changing and we must continue to evolve to be successful in this new environment

• Traditionally: No appetite for compliance failures, but allowance for a certain error rate

• Evolving: No appetite for compliance failures, and dramatically lower tolerance for operational errors in general, especially those with customer impact…. It feels like we need to be perfect!

• Operational Excellence will evolve to focus on value and delivery of products and services. It will be about the customer experience

SUCCESS WILL REQUIRE A NEW MINDSET


Why focus on complaints?

•The shareholder value connection to customer experience is within reach, given that the value of a company is ultimately based on the amount of money customers are willing to spend with it.

--Peppers & Rogers Group 2012

•Customer experience leaders have more than a 16% advantage over laggards in consumers' willingness to buy more, their reluctance to switch business away, and their likelihood to recommend

-Tempkin Group


Why focus on complaints?

Consumer complaints are central to how the CFPB approaches its job


The CFPB and complaints

• It’s all about the customer

• Heavy focus on UDAAP

• The CFPB starts with complaints and then work their way backwards

• Compliance management is kind of the last stop – versus with the Fed/OCC it’s the first stop

• When putting together your materials for them, focus on the customer experience

• Good idea to involve your Customer Experience partners

• Therefore, it is important to emphasize programs, processes, and policies that focus on customer advocacy, complaint management, call monitoring, Voice of the Customer, etc.

WHAT CAN YOU LEARN BY TRACKING AND ANALYZING COMPLAINTS?


For the CFPB, It’s all about the data, data, data……

• Initial request

• Many follow up questions

• Oftentimes it feels like they don’t even look at the data – feels like they’re stockpiling it for later…

• Need to establish process for managing data requests

• Request letters are very comprehensive and responses require a tremendous amount of data

• Recommendation: Establish a process so that all requests are funneled through one person in order to manage expectations and ensure some level of control.

THE CFPB HAS A HUGE FOCUS ON DATA


• Bank accounts

• Bank services

• Credit cards

• Credit reporting

• Debt collection

• Money transfers

• Mortgages

• Payday loans

• Student loans

• Vehicle or consumer loans

9

The jurisdiction of the CFPB has grown to include

many products and services


Many companies have voiced their concern about the

CFPB and the complaint database

• Complaints are not verified for accuracy

• Not representative of the population as whole

• Cannot determine if complaints are related todissatisfaction or misunderstanding terms of service

• However, analysis of issues in the CFPB can help you determine where the customer experience is falling short

10


Across the credit card industry: 13,000 complaints and

~$500M in fines in 2013

0

200

400

600

800

1000

1200

1400

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

Credit card complaints by month

JPMorgan Chase

fined $389 million

for unfair billing

practices

GE Capital Retail

fined $34 million

for deceptive

practices

American Express

fined $69.1 million

for illegal practices

What can companies due to avoid complaints, and the fines?

http://www.consumerfinance.gov/newsroom/cfpb-orders-chase-and-jpmorgan-chase-to-pay-309-million-refund-for-illegal-credit-card-practices/

http://www.consumerfinance.gov/newsroom/cfpb-orders-american-express-to-pay-59-5-million-for-illegal-credit-card-practices/


CFPB fines and penalties are getting larger

0

50

100

150

200

250

300

2012 2013 2014

Average amount of CFPB enforcement

(in $ millions)


This further increases the value of improving customer

experience

Total revenue potential

Churn reduced

Additionalpurchases

Word of mouth

Temkin $246M $91.8M $82.3M $72M

Forrester $307M $83M $213M $12M

• Incremental purchases from existing customers in the same year

• Revenue saved by lower churn

• New sales driven by word of mouth

13


• Capital One had the most complaints overall and the most when scaled by cards in circulation

The card industry has struggled with complaints

14


But, now some of those institutions have successfully

reduced complaints

GE Capital Retail 48%Barclays 31%Wells Fargo 10%Amex 7%JPMorgan Chase 6%U.S. Bancorp 3%

Capital One -15%Bank of America -12%Citibank -7%Discover -6%

% change 2014 vs 2013

Beyond the Arc, Inc. 16

Capital One and Discover were both fined for deceptive

marketing of add-on products

• Together, the two companies were fined over $400 million

• Capital One and Discover account for a disproportionate number of complaints of this type

Source: CFPB, Beyond the Arc

0%

5%

10%

15%

20%

25%

30%

35%

Capital One Citibank Bank ofAmerica

JPMorganChase

GE CapitalRetail

Amex Discover Wells Fargo Barclays U.S. Bancorp

Percent of all complaints versus percent of marketingand add-on complaints resulting in monetary relief

% of all complaints

% of marketing and cardprotection servicescomplaints resulting inmonetary relief

Capital One was fined

$210 million on 7/18/12

Discover was fined

$214 million on 9/26/12


Billing disputes most prevalent overall, and in terms of

monetary relief

• The CFPB is likely paying attention to billing disputes since they account for the highest level of monetary relief


0%

5%

10%

15%

20%

25%

30%

Billing disputes APR or interest rate Late fee Identity theft / Fraud /Embezzlement

Other fee

Top 5 issues that result in monetary relief


Complaint data suggests Citi and GE Capital should

focus on billing disputes

• The two companies account for a disproportionate number of billing disputes that result in monetary relief

• The CFPB is making investigative decisions based on this data


0%

5%

10%

15%

20%

25%

Capital One Citibank Bank of AmericaJPMorgan ChaseGE Capital Retail Amex Discover Wells Fargo Barclays U.S. Bancorp

Percent of all complaints versus percentof billing disputes resulting in monetary relief

% of all complaints

% of billing dispute compliantsresulting in monetary relief


InternalData from across the enterprise

o Customer feedback

o Frontline notes

o Transactional data

o Behavioral data

o Net Promoter

o Employee surveys

SocialSocial media about you and your competitors

o Twitter

o Facebook

o Blogs

RegulatoryCustomer complaints

o Federal

o State

o CFPB

Include social data to create an integrated view of

the customer


Social media can be an “early warning

system” for regulatory complaints

FOR THIS BANK, NEGATIVE SOCIAL MEDIA SPIKED JUST BEFORE COMPLAINTS


Customer feedback paints a vivid picture

“How's this for cynical capitalism. Rang up <my bank> to pay-off and close my credit card. The lovely lady in the Philippines asked me why, and I said: your interest rate is far too High (21%)…

and she said: Well I'm now willing to lower your rate because you are such a valuable customer ...

Well if that's the case, why didn't you drop it earlier?”


Social media and complaints

A financial institution that has chosen not to use social media should still be prepared to address the potential for negative comments or complaints that may arise within the many social media platforms...

FFIEC, January 22, 2013


Can you prevent complaints?

It is important to create a culture that fosters operational excellence


Monitoring calls is critical

• The CFPB will listen to many calls

• Presumptive sales

• Pace of speech

• “Risk free for 90 days”

• “Only 69 cents”

• “FREE!”

• Need to have calls recorded – the full call

REVIEW YOUR CALL LISTENING PRACTICES TO SPOT POTENTIAL RISK


You can prevent complaints


Voice of the Customer analysis is the key to preventing

feedback from escalating

• Identify customer pain points to improve the customer experience and drive retention

• Detect regulatory risks and address them before the CFPB takes punitive action

• Tie VOC feedback to transactions, complaints, and other data sources, with Big Data and analytics

VOICE OF THE CUSTOMER (VOC) ANALYSIS ALLOWS YOU TO:


What is VOC?

A Voice of the Customer program uses text analytics to turn your unstructured data into structured data…

so you can quantify what your customers are talking about for analysis and take action


Develop a process for managing complaints

• Approach it as an enterprise-wide program for overseeing the customer complaint process

◦ Resources

◦ Authority

• Compile, analyze, and summarize customer complaints across the enterprise

• Use a range of data sources, including internal and social data

◦ Improving customer experience is a critical goal

• Establish robust governance

A FEW KEY STEPS


Example complaint decision tree

FROM UMPQUA BANK

Written

(By letter, email, or website)

Determine if Non-Regulatory

Follow Business Unit Complaint Procedures

Resolve and retain documentation per Business Unit Complaint Procedures

Determine if Regulatory

Log and indicate which regulation(s) apply, if

known

Compliance will facilitate a response within 15

calendar days of receipt of complaint

Verbal

(In person or over the phone)

Handle on the Spot/ Escalate as Necessary

Resolve per BU procedures on verbal complaints


Training elements for success

• Communicate bank’s attitude toward customer complaints

• Provide real life examples of what is and what isn’t a complaint

• Define the types of complaints

• Provide examples of regulatory complaints

• Show how to submit a regulatory complaint

• Test knowledge

• Consider customizing for each business area

TRAINING ENSURES LONG TERM ADOPTION


Barriers to a successful complaint program

• Lack of Standards (definitions, categories, etc.)

• Lack of, or different processes, to receive, track, report

• Lack of responsibility and accountability at business unit level

• Program separate from the company’s customer experience standards/culture

• Program’s scope too narrow or too broad

WHAT YOU’LL NEED TO SOLVE FOR


What technologies are needed?

• Collecting the data (APIs, frontline data entry)

• Integrating the data sources (data warehouse)

• Reporting (Business Intelligence tools)

• Deeper analysis to generate actionable insights (text analytics, predictive analytics, social analytics)

• Routing feedback to the appropriate departments (enterprise feedback, CRM, case management)

• Archiving (data warehouse, cloud storage)

POSSIBLE TOOLS TO MANAGE COMPLAINTS ACROSS CHANNELS:


The bottom line:

Continuously improve… or lose

Important principles:

− Manage regulatory complaints systematically

− Resolve customer “problems” promptly

− Prevent irritations before they become complaints

Why?

− Mitigating regulatory risk

− Customer retention, satisfaction, loyalty

How?

− Enterprise approach to complaint management

− Advanced analytics: predictive analytics, text analytics, VOC and social media

− Customer experience focus, including journey mapping across the lifecycle


Key takeaways

1. Regulators today are much more customer focused than they were in the past. Put yourself in the customer's shoes when reviewing your business to have a stronger exam process.

2. To only look at complaints in the official sense is somewhat limited. Pay attention to social media and other more proactive areas to get at the root of customer concerns earlier.

3. Keep good reporting and tracking of your processes and your responses to customers to demonstrate you have a strong complaints management program. You should have metrics and reporting for every claim you make in a program document.


Contact info

Steven J. Ramirez


Office 1.877.676.3743

Email [email protected]

Digital beyondthearc.com

@beyondthearc

Facebook.com/beyondthearc

Slideshare.net/beyondthearc

What Doesn't Kill You Makes You Stronger: Leveraging the CFPB Database

Data & Analytics

Transcript of What Doesn't Kill You Makes You Stronger: Leveraging the CFPB Database