There was a time, it seems not long ago, that the only businesses that needed to worry about reviews were Hollywood production companies and restaurants. Now here we are in a world where too many bad reviews on Amazon can sink your listing even if you have the best price, and where many chief marketers and even some CEOs get rated on their brands’ net promoter scores.
It’s bad enough if you lose a bonus or some stock options because one-too-many needy customers complain, but how about that sucker punch to the gut getting followed up with an uppercut to the jaw in the fashion of a $747 million fine? That was the total amount of a penalty levied on Bank of America last year—$727 million in restitution to some 1.4 million customers plus a $20 million cash penalty to the Consumer Financial Protection Bureau (CFPB). Thousands of complaints to the agency uncovered the fact that enrollment materials and telemarketers for a credit insurance plan engaged in deceptive marketing practices. Complainants were told the first 30 days were free or that further steps needed to be taken to complete the enrollment, when in fact they were being enrolled and billed immediately.
The CFPB came into being four years ago to put some fiduciary bite behind bad reviews that has made financial industry marketers yelp, alright. In its relatively short run, the 2,000-person government agency that works in tandem with the FTC and FCC has also collected levies of $700 million from Citibank, $309 million from JPMorgan Chase, and $89 million from American Express. The size of those judgments, a new study finds, had a direct correlation to the number of complaints registered with the agency by unhappy customers. “What the CFPB is telling marketers is that if their first stop on the road to customer experience is deceptive advertising, then their cost to providing customer experience is going to be much higher,” says Alex Baydin.
Baydin is the CEO of PerformLine, provider of an SaaS platform for consumer finance marketers that automates compliance with truth in advertising laws. The CFPB’s database is available to the public, so PerformLine data miners dug in to see if they could gain any intelligence on how the agency arrived at the sums of its penalties. All you have to do if you’re a financial services marketer is keep the number 2,000 in mind. Stay below it, and you’ll skate. Rise above it, and call your company’s General Counsel.
PerformLine’s study showed that just 6% of companies receiving 2,000 complaints or less at the PCB were hit with fines, the average judgment being $60 million. But 58% of those who were the subject of 2,000 to 10,000 gripes were levied with penalties averaging $134 million, and 60% of financial companies showered with more than 10,000 complaints got slammed with average fines of $758 million.
PerformLine’s investigation also showed that the CFPB has become steadily more popular among consumers the longer it’s been out there. A smattering of a few thousand complaints in its inaugural year of 2011 turned into over 100,000 in 2013 and 170,000 so far this year. “People are beginning to learn that the complaint box is out now, and it’s hosted by the one organization that can actually do something about their complaints,” Baydin says. “So they can call the company to complain, or they can go to the CFPB.”
How long will it be before the overnight success of the CFPB is transferred into other verticals like automotive sales, or issue areas such as data privacy? The FTC and FCC both prefer to choose the violations they take on judiciously, concentrating on the big fish that they can hang up and display dockside as an example to the other big, bad fish. But there’s something to be said for businesslike trawlers like the CFPB that can take to the ocean and fill the holds of the U.S. Treasury with fines weighing in at nine digits.
“They’re fishing with a dragnet as well as with a fly rod,” says Baydin.