How to get from ‘Now what?!’ to ‘We hear you and heed what you are saying.’
Sponsored by Kaufman and Canoles
Complaints. Every credit union receives them. While no one enjoys dealing with member complaints, they can provide a wealth of information and give a credit union a heads-up to areas of concern that may not have been previously on its radar. As a member-owned cooperative, credit unions always need to remember that, in addressing member complaints, they are responding to the credit union’s owners and core constituents.
During an examination, regulators, such as those from the National Credit Union Administration if you are federally chartered or your state’s supervisory authority if you are state-chartered (or both!), may examine the complaints received by your credit union and the process you have implemented to address complaints. This makes a periodic review of the complaint process within a credit union a worthwhile exercise.
Laying the Groundwork
Every credit union realizes the importance of managing its compliance and reputation risk. As part of doing so, a credit union should have a robust compliance management system in place with written policies and procedures to record, categorize, analyze, investigate, resolve and appropriately respond to complaints promptly. Having an efficient compliance management system assists a credit union with identifying areas where improvements can be made in processes and procedures as well as in system enhancements. It is also always possible that a member complaint may lead to information about a previously unknown regulatory risk. A crucial component of a robust compliance management system is promptly managing member complaints.
Members of management and all credit union employees are responsible for maintaining a sound compliance management system, however, the NCUA identifies supervisory committee members for federal credit unions and audit committee members or their equivalents for some federally insured credit unions as the people formally responsible for the oversight of the member complaint process.
A credit union’s supervisory or audit committee plays an essential role in reviewing member complaints, which should be handled in an impartial and independent manner. Supervisory (and audit) committee members should be prepared to delegate investigation of minor complaints to responsible members of management and devote their own energies to addressing complaints about major or systemic regulatory issues. At the same time, they should take care to avoid having the supervisory or audit committee become a “supreme court of review” for such everyday appropriate management decisions as employee discipline or enforcement by line employees of required policies (for example, relating to account opening requirements).
Receiving and Responding to Member Complaints
No complaint should be ignored. While there are no specific regulatory requirements addressing member complaints, NCUA has issued recommendations and best practices for receiving and responding to member complaints involving federal financial consumer protection, as well as other matters, in its Letters to Credit Unions 15-CU-04. Those recommendations include:
1. Establish channels to receive consumer complaints and inquiries. Channels, such as telephone numbers, email addresses and website links dedicated to receiving this type of correspondence should be considered. A credit union may also consider having dedicated branch personnel to deal with in-person complaints and inquiries.
2. Establish written policies and procedures.
a. Procedures will describe a credit union’s process of recording, categorizing, analyzing, investigating, resolving and responding to member complaints in an appropriate and timely manner.
b. It is important to have sufficient processes in place to monitor the types of complaints a credit union receives. This assists with identifying trends of possible consumer protection regulation violations, weaknesses in internal processes, opportunities for system enhancements, etc.
c. Certain states may have whistleblower protection statutes that require written policies to be disseminated or made available to employees, who may also be members.
d. Watch out for lawyers! We, as a class, tend to overwrite some policies and procedures to address every eventuality; the resulting policy may be an excellent law school final exam answer, but a 10-page, legally complex policy helps no one. Make sure your policies are understandable and to the point.
2. Carefully review the complaint to ensure you identify all the issues your member brings to your attention.
3. Determine the appropriate investigation of the complaint, and whether the complaint may reasonably be referred to responsible management for resolution; most should. For example, the investigation may include one or more of the following, as applicable:
a. An interview of the member;
b. A review of the member’s credit union file;
c. An interview of the appropriate credit union officials and/or employees;
d. A review of pertinent written and unwritten credit union policies and procedures;
e. An understanding of the relevant federal consumer protection laws and regulations; and
f. For fair lending complaints, consideration of the rationale for any exceptions or overrides from general policy or any relevant facts regarding field of membership.
4. In the hopefully remote event of a possible regulatory or statutory violation, effective and immediate remedial measures should be taken.
5. It is important to respond in writing to the member after completing the investigation.
a. If the complaint was submitted through NCUA’s Consumer Assistance Center, send a copy of the response to them with a reference to the case number that was assigned.
b. Sometimes a complaint can assert serious allegations, such as a regulatory or fair lending violation or discrimination. It is important to take allegations seriously and carefully craft any response to directly relate to the allegations.
c. To ensure all legal allegations are addressed adequately, sufficiently, and appropriately, consider asking legal counsel to review any responses before sending them.
6. Maintain a detailed record of complaints received, the credit union’s written response and any further communications with the member about the matter.
7. Periodically analyze complaint data to identify and address any trends, areas of risk and program weaknesses. This type of meta-analysis constitutes a better use of scarce audit/supervisory committee time and resources than dedicating two-thirds of the supervisory committee for four months to running down documents.
NCUA’s Consumer Assistance Center
Members may submit their complaint either directly to a credit union or to NCUA’s CAC. NCUA encourages members to try resolving problems directly with a credit union. If the problem cannot be resolved by directly contacting the credit union, members can submit their complaint to the NCUA’s CAC by submitting a form online or printing a PDF version of the complaint form and mailing it to the CAC. NCUA’s CAC has implemented procedures for addressing member complaints of which credit unions should be aware. CAC’s procedures include three phases when it receives a member complaint:
Phase One: Attempted Resolution by the Credit Union
In phase one:
- CAC assigns a unique identification number (or case number) to each complaint it receives.
- CAC reviews the complaint to determine if it involves matters within NCUA’s authority. If the complaint is not within NCUA’s authority, the agency notifies the member that the complaint has been referred to the applicable federal or state agency for handling. This is an analysis of jurisdiction to address the matter, performed at the outset.
- If the complaint involves a federal consumer protection law or regulation within NCUA’s enforcement authority, CAC sends a letter to the member informing them that the complaint has been forwarded to the credit union.
- CAC forwards the complaint and any documents provided by the member to the credit union. For FCUs, the complaint is sent to the supervisory committee chair. For some federally insured state CUs, the complaint is sent to the audit committee. For all credit unions, a copy of the complaint is sent to the credit union’s CEO.
- The supervisory committee, audit committee, and/or credit union management has 60 calendar days from the date of receiving the letter from CAC to review and attempt to resolve the matter.
At any point after submitting their complaint to NCUA, the member can call the agency to learn of the status of their case.
During these 60 days, the credit union should undertake the steps outlined above under “receiving and responding to complaints.” When the credit union notifies CAC in writing within the 60-day period that the matter has been resolved, CAC will close the case.
Phase Two: CAC Investigation
CAC may conduct its own formal investigation of the member’s complaint if it does not receive a written response within the 60 days, if a credit union has notified the center in writing that the complaint cannot be resolved, or the member disputes the resolution in writing to CAC within 30 calendar days of the date of the credit union’s response to the member. In this second phase:
- CAC sends a letter to the chair of the supervisory or audit committee, as applicable, with a copy to the credit union’s CEO stating CAC is investigating the member’s complaint. CAC provides the credit union with a copy of the member’s complaint and any supporting documents the member provided to the CAC.
- The credit union has 30 calendar days from the date of the letter to respond to the complaint as sent to CAC.
- CAC also sends a letter to the member indicating that it has begun an investigation of the complaint.
- CAC analyzes the credit union’s response to ensure it covers all the issues the member raised in the complaint and that, if necessary, appropriate actions are taken to comply with federal financial consumer protection laws and regulations.
- CAC requests additional information or clarification if the credit union did not sufficiently cover all the issues the member raised in the complaint or if there are remaining questions involving financial consumer protection laws and regulations.
- The member is notified that the investigation is ongoing, if necessary.
After conducting a full analysis of your response, CAC will notify the member and the credit union of one of the five following potential outcome determinations:
- The complaint does not involve a federal financial consumer protection law or federal consumer compliance regulation for which NCUA has enforcement authority, and therefore, CAC has closed the case;
- The complaint is the subject of a pending lawsuit, and therefore, CAC has closed the case;
- The credit union has resolved the complaint with the member, and therefore, CAC has closed the case;
- The credit union’s actions in this matter either did not violate or were not inconsistent with a federal financial consumer protection law or federal consumer compliance regulation, and CAC has closed the case; or
- The credit union’s actions either violated or were inconsistent with a federal financial consumer protection law or federal consumer compliance regulation for which NCUA has enforcement authority. To the extent NCUA has any supervisory concerns about the credit union’s actions, NCUA will follow up directly with the credit union to resolve them and ensure compliance with the applicable law(s) or regulation(s).
Phase Three: Appeal of CAC Determination
Appeals of CAC’s complaint response decision may be submitted by members and credit unions in writing within 30 days of the date of CAC’s determination letter. Appeals should be sent to the director of the Division of Consumer Affairs (within the Office of Consumer Financial Protection) for an independent review of the response. If necessary, the director may request additional information from the member or credit union before making a final decision. Another channel available for members and credit unions is submitting an appeal to the NCUA Ombudsman, although NCUA encourages the appeal process to go through the director instead.
Key Take-Aways and Best Practices Pointers
NCUA’s recommendations detailed above provide a clear framework for handling member complaints. Take the time to review credit union policies, procedures and processes concerning member complaints and to make sure they are in alignment with NCUA’s recommendations. Correct any areas of weakness to ensure member complaints are acted upon quickly and thoroughly. Keep an open mind about member complaints; you may find that because of investigating a complaint, the credit union can identify a more efficient and cost-saving way of conducting business. The critically constructive lens with which the credit union evaluates complaints on a “micro level” and then applies to its overall business strategies at a “macro level” can have beneficial ripple effects.
Joyce A. Johnson Keehan is a paraprofessional working with the credit union team at Kaufman & Canoles, P.C. out of the firm’s Raleigh, North Carolina, office. She is not an attorney but brings four decades of practical, hands-on compliance experience in the credit union community to bear on issues confronting the firm’s clients. Reach her at 984.222.8106.
Lisa Hudson Kim is an experienced attorney practicing in the Virginia Beach office of Kaufman & Canoles, P.C., with its credit union team. Kim has more than two decades of commercial litigation experience, including compliance issues and representation of credit unions and financial institutions throughout Virginia and North Carolina state and federal courts. Reach her at 757.491.4017.
The credit union team at Kaufman & Canoles, P.C., a CUES Supplier member, conducts frequent reviews of responses to member complaints equipping us to provide credit unions with sage, prudent and value-added guidance concerning the overall process and appropriate responses to member complaints.