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Consumer Complaint Counts Can Help Determine Enforcement Risk [Report]

By PerformLine
November 12, 2020

Every year in our annual Consumer Complaints Report, we take a look at the Consumer Financial Protection Bureau (CFPB)’s Consumer Complaint Database and enforcement action trends to help financial institutions determine their risk of enforcement based on the total number of consumer complaints. The Enforcement Risk Scale takes a look at how an organization's  annual revenue and total complaint counts could impact the risk of an enforcement action.

Keep reading part two of this seven-part series to learn more about how complaints correlate with enforcements, how historical enforcement data can potentially help predict your organization’s risk, and why complaint management is a critical part of compliance.

Download our 2020 Consumer Complaints Report to learn about your organization's risk of enforcement

Risk of Enforcement Based on Complaints

Annual revenue size and number of complaints submitted to the CFPB can help your organization determine its risk of enforcement actions and provide a historical estimate of how much the total fine could be, as both a number and percentage of annual revenue.

When analyzing complaints, the CFPB suggests that “complaint volume” should be considered in the context of company size and/or market share. For example, companies with more customers may have more complaints than companies with fewer customers.

Taking this into consideration, we’ve analyzed all of the Bureau’s public enforcement actions (2012 - August 2020) to explore the average complaint count before an enforcement action was taken, the average fine amount, and what percentage of annual revenue that fine could be—all based on an organization’s annual revenue.

Enforcement Risk Scale
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While each enforcement action depends on a large number of factors and is unique to each case, this scale gives some insight into what you might expect from the Bureau. Access the complete scale by downloading the report.

Some key takeaways from our analysis:

  • The higher the annual revenue, the higher the average number of complaints before an enforcement action
  • Higher annual revenues typically warrant a higher fine amount (even though the fine amount is a smaller percentage of annual revenue compared to smaller revenue groups)
  • Institutions with annual revenue less than $20 million will likely feel the impact of a penalty more, as they can average up to 250% of annual revenue

Take a look in the CFPB’s Consumer Complaint Database and see how many complaints have been submitted against your organization—are you aware of these complaints? Have you responded and resolved most of these consumers’ issues? Are you responding in a timely manner? All of these factors are considered when the Bureau begins an investigation. 

Here are some other helpful resources on why consumer complaints are an important part of any compliance program:

Enforcement Actions and Fines So Far

As of Q3 2020, the CFPB has taken 146 public enforcement actions totaling $7.8 billion in fines since its creation. In its most recent quarter (July - September 2020), the Bureau brought 19 public enforcement actions—4x more than in Q2 and double the actions from Q1. In fact, the CFPB has already surpassed its total enforcement actions from 2019.

And now, with Biden as the president-elect, experts are predicting that the CFPB will soon revert back to a more aggressive version of itself, as seen under the Obama administration. Financial Institutions must prepare for increased regulatory scrutiny and be extra diligent in their consumer protection and regulatory compliance efforts. 

Download the 2020 Consumer Complaints Report for more key trends and insights that can help your organization identify key warning signals or risk. If you’d like to learn more about how PerformLine is helping leading organizations mitigate compliance risk and protect their brand, and how we can help protect your organization from an ever-changing regulatory environment, our experts are ready to help.

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Tags: Regulatory Compliance, CFPB, Consumer Protection, Risk Management, Consumer Complaint Series

GET THE 2020 CONSUMER COMPLAINTS REPORT

An analysis of consumer complaints and the risk signals that they present for financial institutions

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