Handling Customer Complaints In Bank-Fintech Partnerships
By Jeremy Creelan, Laurel Loomis Rimon and Megan Poetzel (April 5, 2024)
Bank-fintech partnerships are the foundation for much of the recent
exponential growth in new consumer financial products. As these
products have developed, consumer complaints have emerged as key
components of regulatory risk for both sides of such partnerships.
Regulators regularly research and use consumer complaints to
identify potential examination and investigation targets and to
corroborate concerns as to alleged unfair or deceptive practices.
For prudentially regulated banks, any mismanagement of consumer
complaints by a partner fintech company responsible for handling
consumer complaints may result in a regulatory finding or violation
against it, including for failure to properly oversee the third-party
services.
The partner fintech may also face its own direct exposure to
enforcement as a service provider to the bank or from consumer
protection regulators.
In this regulatory landscape, it is critical that fintech and bank
partners adopt a well-defined and monitored process for ensuring the
proper handling of consumer complaints, and we offer the below
considerations in doing so.
1. Bank-fintech partners should be deliberate, coordinated
and inclusive in establishing a shared definition of what
constitutes a "complaint."
Banks and fintechs jointly offering a consumer financial product
should be aligned on what types of communications involving
customers will be treated as complaints, and will, therefore, be
subject to monitoring, analytics and potentially disclosure in response
to a government request.
Regulators routinely mine their own sources of consumer complaints, with the Consumer
Financial Protection Bureau, Federal Trade Commission, state attorneys general offices and
state consumer protection agencies all maintaining their own consumer complaint databases
and actively encouraging consumers to file online complaints.
Other public sources of consumer complaints include those made to the Better Business
Bureau, social media posts by consumers and media reports.
Nonetheless, not every customer communication is a complaint — some may be requests
for technical help or offer feedback not requiring a response.
Jeremy Creelan
Laurel Loomis Rimon
Megan Poetzel
However, regulators expect an expansive approach to collecting and monitoring consumer
complaints, allowing appropriate reaction when there are signs of customer confusion or
misunderstanding, or where customers are frustrated in their efforts to, for example, access
their funds on a timely basis.
Bank-fintech partners should ensure they are on the same page as to which customer
interactions are going to be responded to, tracked and later analyzed as complaints.
2. Following interagency guidance, bank-fintech partners should tailor contracts to
clearly allocate responsibility for complaints handling.
On June 6, 2023, the Office of the Comptroller of the Currency, the Federal Reserve Board,
and the Federal Deposit Insurance Corp. issued joint guidance[1] on risk management
related to third-party relationships.[2] The guidance addresses drafting effective contracts
with third-party service providers, including fintech partners.
The interagency guidance specifically states: "[e]ffective contracts typically specify whether
the banking organization or the [fintech company] is responsible for responding to customer
complaints or inquiries." Banks are specifically advised to evaluate the fintech company's
"history of addressing customer complaints or litigation and subsequent outcomes."
Thus, from the outset, the partnership agreement should be tailored to address customer
complaints and allocate responsibility clearly.
If the fintech company is responsible for handling consumer complaints, contractual
provisions should require the fintech company "to receive and respond to customer
complaints and inquiries in a timely manner and to provide the banking organization with
sufficient, timely, and usable information to analyze customer complaint and inquiry activity
and associated trends," as the June guidance put it.
If complaints handling is the bank's responsibility, it is important to include provisions for
the bank "to receive prompt notification" from the fintech company "of any complaints or
inquiries" received by the fintech, per the guidance.
In either instance, the interagency guidance emphasizes timely responses to consumers and
sharing information between the bank and their fintech partners. The guidance says both
parties should monitor "the volume, nature, and trends of customer inquiries and
complaints, the adequacy of the third party's responses (if responsible for handling
customer inquiries or complaints), and any resulting remediation."
3. Consumer complaints play an important role in prudential exams — which
concern both the bank and the fintech company.
During a prudential examination, regulators may use their legal authority to examine a
bank's oversight of complaint-handling functions or operations that a fintech company
performs on the bank's behalf. The OCC's examination manual provides a window into the
role of consumer complaints in prudential exams, stating that consumer complaints are
"indicators of potential risk management weaknesses or other deficiencies, such as
violations of laws or regulations."[3]
Banks and fintech companies with high complaint volumes will be more vulnerable to
examination, but the OCC says "even a single complaint can be an early warning sign of a
problem."
Moreover, as the June 2023 interagency guidance[4] confirmed, prudential regulators may
exercise their authority to issue legal process directly to bank service providers. And, as the
interagency guidance notes, they "may pursue corrective measures, including enforcement
actions, when necessary to address violations of laws and regulations or unsafe or unsound
banking practices by the banking organization or its third party."
4. The CFPB is expanding supervision over nonbanks and relying on consumer
complaints to do so.
In the Dodd-Frank Wall Street Reform and Consumer Protection Act, Congress granted the
CFPB authority to supervise nonbank entities providing consumer financial products or
services where it determined, after notice and an opportunity to respond, that the entity
poses risks to consumers.
The statute directs that this determination be made based on complaints collected through
the CFPB portal or other information from different sources.[5] In 2022, the CFPB publicly
announced[6] its intent to invoke this authority, which it had previously allowed to remain
dormant, to supervise nonbank entities.[7]
In late February, the CFPB indicated it had issued notice to a number of nonbank entities
that did not contest the CFPB's exercise of supervisory authority over them.[8]
One recipient, however, contested this action, arguing that there were insufficient grounds
for the CFPB to have a reasonable belief its product was a risk to consumers. As particularly
relevant here, the lender World Acceptance Corp. challenged whether the bureau could have
a reasonable belief supporting supervision based on unverified complaints, and where the
volume of complaints made against the entity was not out of line with those made
concerning similar companies.
In a public decision,[9] CFPB Director Rohit Chopra found that any number of "unverified"
consumer complaints are sufficient to satisfy that burden.[10]
5. Be ready to demonstrate proficiency in handling complaints.
With the above considerations, expectations and risks in mind, banks and fintech companies
should develop processes for handling complaints that inspire confidence in regulators and
be prepared to respond to a regulator's request for complaints and related policies and
procedures. The following reminders highlight fundamental, but often difficult, steps:
• Define and inventory every category of communication within the bank or fintech
company's system that may constitute a complaint;
• Know where the complaints are stored and how to access them, particularly where
data and information is shared by multiple parties or allocated to one or the other;
• Document and track record-keeping practices for complaints that change over time;
• Establish responsibility among partners for collecting, analyzing and reporting on
complaints metrics, trends and data; and
• Be prepared to demonstrate that complaint data and analysis are acted upon as
appropriate and necessary to improve the customer experience.
Conclusion
Complaints handling is a core focus for federal and state financial regulators, and an early
warning system for bank-fintech partnerships.
If these complaints are not properly collected, analyzed and used to improve the consumer
experience, financial institutions may be blind to significant risks. In a bank-fintech
partnership, addressing these risks takes early planning and intentional cooperation.
Jeremy Creelan is a partner and co-chair of the consumer law and fintech and crypto-assets
practices at Jenner & Block LLP.
Laurel Loomis Rimon is a partner and co-chair of the fintech and crypto-assets practice at
the firm. She previously served as head of litigation for the U.S. Department of Justice's
Asset Forfeiture and Money Laundering section and as assistant deputy enforcement
director for the Office of Enforcement at the CFPB.
Megan Poetzel is a partner at Jenner & Block.
Jenner & Block associate Farryal Siddiqui contributed to this article.
The opinions expressed are those of the author(s) and do not necessarily reflect the views
of their employer, its clients, or Portfolio Media Inc., or any of its or their respective
affiliates. This article is for general information purposes and is not intended to be and
should not be taken as legal advice.
[1] https://www.occ.gov/news-issuances/bulletins/2023/bulletin-2023-17.html.
[2]Federal Reserve System, Federal Deposit Insurance Corporation, and Office of the
Comptroller of the Currency, Interagency Guidance on Third-Party Relationships: Risk
Management, (June 9, 2023).
[3] https://www.occ.treas.gov/publications-and-resources/publications/comptrollers-
handbook/index-comptrollers-handbook.html.
[4] https://www.federalregister.gov/documents/2023/06/09/2023-12340/interagency-
guidance-on-third-party-relationships-risk-management.
[5] 12 U.S.C. §5514(a)(1), (b)(1).
[6] https://www.consumerfinance.gov/about-us/newsroom/cfpb-invokes-dormant-
authority-to-examine-nonbank-companies-posing-risks-to-consumers/.
[7] Consumer Financial Protection Bureau, CFPB Invokes Dormant Authority to Examine
Nonbank Companies Posing Risks to Consumers, (April 25, 2022).
[8] Consumer Financial Protection Bureau, CFPB Orders Federal Supervision for Installment
Lender Following Contested Designation, (Feb. 23, 2024).
[9] https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-federal-supervision-
