Posted on: February 10, 2022
The Forgotten Pillar
In our previous blog “The Importance of Ongoing Monitoring,” we discussed what we often describe as the forgotten pillar of third-party risk management: ongoing monitoring. We highlighted the importance of continuous monitoring throughout the entire lifecycle of the relationship with the third party.
It may seem relatively simplistic, so how can it be a forgotten pillar? Tracking and managing complaints can be challenging. Rarely will you hear customers expressing frustrations first-hand. Third-party risk management is one step removed – you’ve outsourced an activity, and you’re now relying on your third party to manage the complaints. If you’re passively tracking complaints, it’s often far too late by the time you hear of a situation. In an era of social media where anyone can publicly share and discuss experiences and opinions, it can be tough to keep up, especially when you’re managing hundreds of third parties. So, what’s the solution?
The Ongoing Monitoring of Complaints
Some people turn to social media monitoring tools. They are readily available but can often be ineffective in sorting through the noise to find out if there are real issues or simply someone yelling loudly. The Consumer Financial Protection Bureau (CFPB), whose domain of authority spans well beyond the financial sector into many service industries, uses its consumer complaint database as a goldmine for its investigations and enforcement actions. Fortunately, the consumer complaint database is open to the public for review. Companies can access the database, look up companies they are considering doing business with, and evaluate the level of consumer complaints and types of complaints: Consumer Complaint Database | Consumer Financial Protection Bureau (consumerfinance.gov). That is a great leading indicator of how you should approach the relationship.
Leveraging Complaints Data Beyond Ongoing Monitoring
Understanding your vendor’s reputation extends beyond ongoing monitoring. During due diligence, a company can evaluate adverse news reports, Better Business Bureau reports, and internet resources like Yelp and RipOff Report in addition to the CFPB database. From a risk assessment software standpoint, reputation risk is one of the key focus areas from a regulatory perspective. In contracting, complaint management is a key focus – who is responsible for handling the complaints, do they all get reported back to the company, who does the forensic root cause analysis, and who handles the reporting aspects? All of these are essential considerations to identify.
So, why is the tracking of consumer complaints so important? A quick review of recent unfair or deceptive acts or practices (UDAAP) violations enforced by the CFPB can often be tied back to consumer complaints. For example, let’s evaluate UniRush’s processor conversion. Significant testing was done and documented when converting from one core processor to another. But, over the course of the final stages of the transformation, many customers on the prepaid program could no longer access their accounts. These customers began calling customer service, and consumer complaints began to mount. Eventually, it came to the attention of the CFPB and other agencies and led to a multi-million dollar enforcement action. Read about the case here: CFPB Orders Mastercard and UniRush to Pay $13 Million for RushCard Breakdowns That Cut Off Consumers’ Access to Funds | Consumer Financial Protection Bureau (consumerfinance.gov).
Complaints can be the modern-day “canary in the coal mine” in terms of signaling danger. Identifying what constitutes a complaint and how that complaint should be handled, escalated, and reported needs to be spelled out and enforced. Leveraging technology can help build an organized and scalable approach to effective complaint monitoring.