By Branan Cooper, Chief Risk Officer, Venminder
In third party risk management, monitoring vendor complaints is a critical component of your due diligence. Institutions are held accountable for their third parties’ actions. Therefore, it’s up to your institution to keep a watchful eye on complaints and practices that could be deemed as violating UDAAP, which is an acronym for unfair, deceptive or abusive acts or practices.
Unfortunately, if you let third party vendor complaints slip under the radar, especially regarding your critical or high-risk customer facing vendors, it can cause a negative ripple effect on your own institution. Let’s delve further into why and some best practices to establish effective complaint monitoring.
Why Complaints Matter?
- Vendor complaints can impact your reputation risk. Doing business with a company that has a high complaints volume virtually assures that you could have reputation risk problems. No one wants to do business with a bad actor as it only leads to problems down the road. In most cases, no one remembers the name of the sneaky marketing company or the company you outsourced to who had the misleading set of disclosures; however, you can be certain your customers and shareholders expect you to stay out of the headlines and will remember your name should enforcement actions/fines and media attention arise.
- The Consumer Financial Protection Bureau (CFPB) is mining data looking for patterns in complaints. They’ve made consumer complaints their number one mantra, it seems, ever since the creation of the bureau.
- Customer expectations are evolving. Anyone can complain – whether it’s to the CFPB, the Better Business Bureaus (BBBs), your primary regulator or a state agency – with today’s explosion of social media, the complaints are skyrocketing and you can bet your regulator is paying attention.
Watch for Vendor Complaints – How You Can Do It
- Social media such as Twitter, Facebook, LinkedIn
- The Consumer Financial Protection Bureau (CFPB) complaint database
- The Better Business Bureaus (BBBs)
- Set up Google News alerts
- Scan complaint websites like ripoffreport.com
All of these resources can greatly assist with finding customer complaints that are being shared.
Remember, things like add-on products, products that are of questionable customer value, products or services that are difficult to understand, heavily fee laden or difficult to cancel products can all cause customer complaints, or worse, a regulatory investigation.
Develop a Complaint Management System
- Utilize your staff to create a response team who is dedicated to reviewing and escalating complaints.
- Log every complaint with a date and time stamp.
- Log the interaction your front line, aka business unit, had with the customer.
- Address every customer complaint, every time. No matter how big or small. You don’t want to miss anyone.
- Develop and set expectations on complaint turnaround time and determining the root cause analysis.
- Set aside time to listen to your customers. Really listen to them (e.g., call center monitoring, mail monitoring, a social media watchdog).
- Develop a social media policy.
- Always compare and contrast potential third party vendors with complaints in mind.
- Never assume a complaint is an isolated incident or just one unhappy customer. Dig deeper.
