How Can Credit Card Issuers Keep the CFPB at Bay?

With the Consumer Financial Protection Bureau expanding oversight beyond credit cards into other areas of financial services such as Mortgages, a reasonable question arises as to what bankers can do to keep the CFPB from becoming involved with a bank’s customers. The bureau represents an alternative to which over 9,000 consumers have already turned with complaints or problems, based on a co-presentation I gave with Marla Blow of the CFPB at last week’s Card Payments Forum. Ms. Blow described how the Bureau operates in expeditiously cataloguing, communicating and tracking problems in coordination with credit card issuers.

It is a laudable objective on behalf of cardholders, but what if anything can the issuers be doing themselves to avoid the involvement of the CFPB in the first place? In the work I did preparing the presentation for the Forum and the findings from J.D. Power’s 2011 Credit Card Satisfaction Study, issuers can and should do three things to help keep the regulators at the CFPB at bay when addressing cardholders’ complaints.

1.  Educate customers to avoid problems in the first place

Customer education through transparent communication is one of the best ways to reduce a problem or complaint from arising in the first place! J.D. Power’s 2011 Card Study showed that both Transactors (who pay off balances each month) and Revolvers (those who carry balances) benefit from better understanding of their credit card terms. When these card holders completely understand their terms, only 8-9% report having had a problem or issue over the last 12 months. Compare that incidence rate to cardholders who do not understand their terms, where 12% of Transactors and a whopping 21% of Revolvers had problems when they lack understanding of their terms.

2.  Empower frontline staff to enable First Contact Resolution

The ability to address and resolve customer issues at the initial point of contact goes great strides to satisfying customers and keeping questions from becoming problems in the first place. Customers who report same day resolution of a problem had and average Problem Resolution Satisfaction Score almost 100 index points higher than those who reported 1-3 day resolution (on J.D. Power’s 1,000 point scale). Furthermore, Overall Satisfaction for same day resolution came in at 771 versus 721 for 1-3 day resolution. Faster resolution of a customer’s question or issue clearly leads to higher satisfaction, thereby reducing the need for third party intervention from an agency like CFPB.

FCR can be achieved by empowering frontline agents with greater access to information, more decision-making capability, and better understanding of the company’s own policies and procedures. Better employee education and ongoing communication goes great strides in achieving higher levels of resolution either at the point of contact or within the same day.

3.  Ensure customer issues are resolved in the customer’s mind

The rate of customers reporting unresolved problems declined in 2011, dropping from 22.2% (2010) to 17.9% of customers with problems. For customers who still report their problems unresolved, more than half indicate they were told their problem simply “could not be resolved” while another 1-out-of-3 said they just gave up. These are the customers most at risk of pursuing other channels of redress like the CFPB.

In some instances, an outside arbiter might be what the situation requires to help arrive at a solution satisfactory to both cardholder and issuer. However, in many instances, proper follow-up with the customer by the issuer might identify situations where the problem fell through the cracks, the customer misunderstood the answers they were given, or simply wanted someone to listen. Case Tracking software can help ensure that all steps are followed. Furthermore, a policy of contacting customers who have specific types of high risk problems within days of problem closure can also assist issuers in identifying better ways to achieve resolution in the customer’s mind. This can be a critical step in enabling issuers to fix problems themselves, thereby keeping regulatory agencies like the CFPB at bay.

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