An integral part of the overall compliance management reporting requirement for all ARM companies subject to the audit and supervision authority of the CFPB.
For the past three years, nearly 100% of the energy, capital and personnel resources of ARM companies have been laser focused on anticipating what the CFPB would do with respect to regulation and how it would go about implementing these new regulations as well as how they would go about auditing the companies subject to their oversight. Two years and one month since the publication of the CFPB’s Audit and Supervision manual, a cursory glance at many ARM company websites provides clear evidence many have yet to fully implement the regulatory requirements outlined by the CFPB, specifically a consumer complaint system.
The Compliance Management Reporting Review is the benchmark the CFPB will use to determine an organization’s overall adherence to regulatory requirements. This examination and review will extract the documentary evidence through written policies, documented training and monitoring procedures and management’s oversight and corrective actions taken to ensure continued compliance. The CFPB regards compliance as a holistic operational requirement which encompasses all aspects of the product and service delivery lifecycle. Furthermore, the CFPB takes great care to denote the responsibility of regulated entities to attest to the compliance of their third party service providers.
A major requirement of the compliance management reporting system is a Consumer Complaints Management System. The CFPB will be looking closely at how ARM companies are designing, implementing and revising effective complaints management systems as part of the overall compliance management review process. Furthermore, the CFPB will be using complaints as a barometer to determine weaknesses in an organization’s overall compliance, and to measure the responsiveness of management to adjust the entity’s policies, procedures and business practices when complaints demonstrate a need for corrective action. The following excerpt from the CFPB’s audit and supervision manual will provide insight as to how examiners will use complaints data to determine how an organization is demonstrating compliance.
Examiners will consider consumer complaints to determine whether:
- Consumer complaints and inquiries, regardless of where submitted, are appropriately recorded and categorized.
- Complaints and inquiries, whether regarding the entity or its third-party service providers, are addressed and resolved promptly.
- Complaints that raise legal issues involving potential consumer harm from unfair treatment or discrimination, or other regulatory compliance issues, are appropriately escalated.
- Complaint data and individual cases drive adjustments to business practices as appropriate.
- Consumer complaints result in retrospective corrective action to correct the effects of the supervised entity’s actions when appropriate.
- Weaknesses in the compliance management system exist, based on the nature or number of substantive complaints from consumers.
Recommendations for an Effective Complaints Management System
ARM companies should be diligent in gathering and responding to consumer complaints, but moreover, management should be able to document how complaints are driving adjustments to their overall compliance management reporting system. Simply placing a button or form on your website, while certainly a good start, does not demonstrate to regulators the existence of an effective complaints management system. The following should be part of any effective complaints management system:
- Provide for the consumer a clear explanation of how they can file a complaint about your business practices. While you will ultimately want to be the first point of contact with a consumer regarding a complaint, be sure the consumer also understands that they have a right and the ability to file complaints with the appropriate regulatory agencies as well. Provide a clear and obvious way for consumers to file complaints on YOUR website and they may not feel the need to file complaints elsewhere.
- Ensure that your complaints management system is monitoring and gathering complaints from other entities such as the better business bureau, state regulators/attorneys general, the FTC and CFPB, and ensure that someone with management authority in the organization is responsible for monitoring, gathering and escalating complaints.
- Be sure you have a system to internally receive, document, categorize and most importantly to respond to all complaints from any source.
- Ensure that your complaints management system includes an escalation policy for any complaint that could be seen to demonstrate consumer harm from an unfair treatment or discriminatory practice or other potential state or federal regulatory violation.
- Ensure that any complaint related to a third party service provider is escalated to the appropriate department or committee to review potential non-compliance of the service provider.
- Document the internal corrective actions taken on a case by case basis to provide evidence of responsive action to resolve each complaint.
- Management should use the totality of consumer complaint data to retrospectively make adjustments to policies and training procedures in order to demonstrate to regulators how complaint data is being used to drive process improvements in the organization.
While just a small part of the overall Compliance Management Reporting Review process, designing and implementing an effective consumer complaints management system will help your organization demonstrate compliance and help management proactively uncover potential areas of non-compliance as well.
Lighthouse Consulting has been providing solutions to operational compliance challenges for ARM companies for over a decade. Contact Phillip Duff, CEO of Lighthouse Consulting today and let us help you navigate the compliance landscape.
Phillip Duff, CEO | www.LighthouseConsultingInc.com | Phil@LighthouseConsultingInc.com | (904) 687-1687