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Compliance Corner: Fourth Quarter 2002

Stop the Complaining! How to Establish and Maintain an Effective Consumer Complaint Resolution Process

The Federal Reserve System has instituted formal procedures for receiving and responding to consumer complaints regarding state member banks. Consumer complaints about state nonmember banks, national banks, credit unions, and other financial institutions are referred to the appropriate regulatory agency.

This article discusses some of the major consumer complaints received by the Federal Reserve Bank of Philadelphia during 2001. The article also provides information that can enhance a bank's complaint resolution process.

Checking Accounts
The primary complaints regarding checking accounts concern (i) increasing the amount of and/or imposing service charges and overdraft fees and (ii) check truncation policies and procedures.

  • To minimize complaints regarding bank fees and service charges, it is recommended that changes to charges be mailed promptly to all depositors and be prominently displayed in the customer service and teller areas of the bank.
  • To reduce check processing and record keeping costs, some banks have implemented a check truncation policy. Since these policies represent a major shift in a bank's procedures, it is recommended that any advertisements or brochures that are used to describe changes to the bank's policies include a set of detailed instructions for the customer. The instructions should fully describe the procedures that a customer must follow in order to obtain copies of paid checks and any fees that may be charged.

Credit Cards
The primary consumer complaints regarding credit cards concern (i) changes in the bank's interest rate, late fees or other terms and conditions and (ii) lack of adequate or timely resolution to complaints regarding incorrect charges or other billing errors.

  • Typically, as required by Regulation Z, a bank sends a written notice to consumers detailing changes in the interest rate or terms of its credit card products. In addition to the required notice, management often issues a letter explaining any major change(s) to its credit products. It is recommended that this information be reviewed for accuracy as to the amount of the increase in the interest rate and the effective date for the change in the interest rate or other terms. Bank correspondence that is poorly worded or that lacks key information exposes the institution to legal, reputation, and compliance risks.
  • Consumers who contact this Reserve Bank regarding billing errors related to their credit cards complain about a lack of effective customer service when attempting to resolve the complaint with their bank. It is recommended that management review the following items to improve customer service:

    • Ensure that customers are not subjected to excessive delays when using toll-free numbers.

    • Ensure that the bank has effective procedures and policies to accept, process, respond to, and document consumer calls and correspondence.

Electronic Fund Transfers
The primary consumer complaints regarding electronic funds transfers concern (i) incorrect electronic fund transfers from an account and (ii) computational or bookkeeping errors by the bank.

Regulation E, which implements the Electronic Funds Transfer Act, describes specific procedures for resolving errors regarding electronic funds transfers. Within specific time periods, the bank must investigate the alleged error and provide notice to the consumer of the results of the investigation. To comply with the provisions of the Act, the following procedures are recommended:

  • Establish specific timeframes for bank employees to respond to and resolve complaints.
  • Maintain ongoing contact with the complainant to report the status of the investigation.
  • Maintain documentation of the analysis, investigation, and correspondence regarding the complaint.

Complaint Resolution Best Practices
Bank management must continue to develop effective and comprehensive procedures for accepting, reviewing, and resolving consumer complaints. The following recommendations and suggestions are offered as best practices to improve a bank's overall complaint resolution process:

  • Identify and assess the legal, compliance, and reputation risks associated with consumer complaints.
  • Develop a self-assessment and review process for the consumer complaint function that includes:

    • Analyzing complaints to obtain information that will improve customer service or enhance existing policies, procedures, or internal controls.


    • Compiling statistics and other information regarding complaints by branch office, type, volume, or frequency of occurrence.


    • Utilizing information from complaints to improve customer service training for departmental or branch office personnel.
  • Identifying key bank personnel from the lending, deposit, and operations departments of the bank who can be contacted to assist in the resolution of consumer complaints.
  • Developing a consolidated approach to the resolution of consumer complaints that involves a coordinated effort between the legal, compliance, and operating departments of the bank.
  • Developing an ongoing relationship with the primary bank regulator that includes regular contact with the regulatory staff responsible for the review and investigation of consumer complaints.

For information regarding the consumer complaint function at the Federal Reserve Bank of Philadelphia, contact one of the following staff in the Consumer Compliance and Community Reinvestment Act Examinations Unit:

Connie H. Wallgren, Manager
(215) 574-6217

John D. Fields, Supervising Examiner
(215) 574-6217

Denise E. Mosley, Consumer Complaint Specialist
(215) 574-3729

The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.

Contact Us

Federal Reserve Bank
of Philadelphia
Supervision, Regulation & Credit
Ten Independence Mall
Philadelphia, PA 19106-1574

phil.src.admin@phil.frb.org