CFPB Monthly Complaint Report — January 2016

CFPB_Complaints_Jan_2016The CFPB’s January 2016 Consumer Complaints report was released yesterday for data gathered in December (and prior) 2015. In the report, the CFPB lays out complaints by product/service, by state/district and by company.

The report is comprised of three main sections:

Section 1 – Complaint Volume (by product, state, and company)
Section 2 – Product Spotlight (a different product profiled each month)
Section 3 – Geographic Spotlight (a different state profiled each month)

Our review will focus on the first section of the January 2016 report. Note that the CFPB uses different time periods for different metrics. To avoid confusion, we’ll point out the month(s) being reported in chart titles and captions. Also, when practical we will provide a comparison to the June 2015 report (the first report in the series).

Section 1 – Complaint Volume

Complaints by Product/Service
The top three products/services complained about in December 2015 were Student Loans, Debt Collection and Mortgages comprising 32%, 19% and 17% of total complaints, respectively. These top three products/services are the same as in the June 2015 report where Student Loans, Debt Collection and Mortgages comprised 32%, 20% and 19% of total complaints, respectively.

CFPB-Jan-2016-Rept-Dec-2015-Complaints-by-Product
CFPB Jan 2016 Report, Dec 2015 Complaints by Product/Service © 2016 StratAgree™

The bottom three products/services complained about in December 2015 were Bank Account or Services, Money Transfer and Other Financial Services comprising 1% of total complaints, each.

These bottom three products/services are the same as in the June 2015 report where Bank Account or Services, Money Transfer and Other Financial Services each comprised 1% of total complaints.

Complaints by State/District
Because populations vary widely from state to state, we’ll use normalized data–complaints per 100,000 population. Note that complaints volumes are rising slowly as consumer become more aware that they can file complaints with the CFPB.

The top three states/districts for complaints in December 2015 were Washington DC, Delaware and Maryland with 689, 444 and 401 complaints per 100,000 population, respectively.

CFPB-Jan-2016-Map-Dec-2015-Data
CFPB Jan 2016 Report, Dec 2015 Complaints per 100,000 Population, by State © 2016 StratAgree™

These top three states/districts are the same as in the June 2015 report (the first CFPB report) where Washington DC, Delaware and Maryland had 577, 371 and 333 complaints per 100,000 population, respectively.

The bottom three states/districts for complaints in December 2015 were North Dakota, Iowa and West Virginia with 102, 116 and 120 complaints per 100,000 population, respectively. These bottom three states/districts are the same as in the June 2015 report (the first CFPB report) where North Dakota, Iowa and West Virginia had 81, 96 and 97 complaints per 100,000 population, respectively.

The regions with the highest per-capita complaints are the District of Columbia and two of its neighboring states–Delaware and Maryland. This would suggest that awareness of the CFPB is highest in the regions with the highest concentration of federal government and CFPB employees as well as their friends and families. We’ll watch to see if this disturbing anomaly subsides over time.

Monthly Complaints for Top Ten Most Complained About Companies
The data for complaints by company is provided as a rolling average of 3 months’ complaints. The most current data is from the period August – October, 2015. Apart from the age of the data, there are two big problems with the complaints by company data. First, it doesn’t factor in the size of the company. And second, it does not account for industry differences (credit reporting vs. consumer banking vs. credit card companies, etc.). As pointed out in previous reports, larger companies will obviously have more complaints than smaller companies. Here are the numbers in graphical form.

CFPB-Jan-2016-Rept-Aug-Oct-2015-Complaints-by-Company
CFPB Jan 2016 Report, Aug-Oct 2015 Average Monthly Complaints, by Company © 2016 StratAgree™

Let’s look more closely at the four banks listed in the “Top Ten Most Complained About…” list–they happen to be the largest four banks in the country. For context, here is a pie chart showing the 2015 market shares of Bank of America, Wells Fargo, JP Morgan Chase, Citibank and all others:

Bank Market Shares 1Q 2015
Bank Market Shares 1Q 2015 © 2016 StratAgree™

Considering their large size, we can expect the number of complaints about these banks to be large as well. In fact, we could assume that complaints about each of these banks should roughly equal their market share. But, before we can make that comparison, we need to strip out non-bank product complaints from the CFPB data so we can compare apples-to-apples. Here’s a chart showing the breakout of complaints about the largest banks as a percent of total bank product complaints (credit reporting and alternative financial services complaints have been removed):

CFPB-Jan-2016-Rept-Aug-Oct-2015-Share-of-Complaints
CFPB Jan 2016 Rept, Aug-Oct 2015 % Bank Product Complaints, by Bank © 2016 StratAgree™

Breaking the data this way, we see that the four banks that have 54% of the consumer banking market are the target of 60% of consumer bank product complaints. More interesting is the fact that Bank of America and Wells Fargo appear to have more complaints than their market share would indicate while Chase and Citibank appear to have fewer complaints than we would expect. That observation makes it just wrong for the CFPB to label them as part of the “Ten Most Complained About Companies”

Only time will tell if the CFPB data quality will improve, but for now we can’t determine with certainty whether the biggest banks are better or worse than other banks.

Summary

The vast number of consumer complaints to the CFPB relate to credit issues–75% of complaints appear to be about credit products and credit reporting and 19% are regarding debt collection. Other financial services (money transfer, etc.) account for 2% of total complaints while complaints about checking and savings accounts were just 1% of the total.

Complaints about checking and savings accounts were just 1% of the CFPB total.

Geographically, the highest complaining regions were Washington DC, Delaware and Maryland with complaints per 100,000 population of 689, 444 and 401, respectively. Complaints for the rest of the country averaged 202 per 100,000 population. It would appear that CFPB employees, their families and friends continue to drive artificially high complaint volume.

Again, the CFPB’s Top Ten Most Complained About Companies data doesn’t tell us much because it doesn’t consider company size or other differences (banks are lumped in with credit reporting agencies, mono-line credit card companies, mortgage servicers and alternative financial services providers like payday lenders and money transfer businesses).

Even with the flaws, it is helpful to see which products are being complained about and which regions generate the most complaints. StratAgree will continue to monitor future CFPB monthly complaint reports and strive to draw meaningful conclusions from them.

Community Banks Have Unique Opportunities

Opportunity Abounds for Community Banks

It is an interesting time for community banks. While they haven’t taken as big of a hit to their reputations as the larger national banks over the past five years, many have been unable to slog themselves out of the “mushy middle.” To see the entire Gallup report, click here.

 

Forbes’ Best Banks 2016

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For the seventh straight year, Forbes has come up with a list of America’s Best Banks. While we’d like to see measures of customer satisfaction included in these rankings, Forbes uses a more typical set of criteria based on strength and stability. Here’s how they determined the best in order to rank the 100 largest publicly traded banks and thrifts:

We looked at 10 metrics this year regarding asset quality, capital adequacy, growth and profitability. Banks range in size from $7 billion-in-assets Banc of California to $2.4 billion giant JPMorgan Chase JPM +0.00%. We tweaked the methodology this year to better reflect the current banking environment. We dropped return on average equity and nonperforming loans (NPLs) as a percentage of loans. We added three new metrics: return on average tangible common equity; net charge-offs as a percent of total loans and efficiency ratio.

Other metrics include: net interest margin; nonperforming assets as a percent of assets; reserves as a percent of NPLs, two capital ratios (Tier 1 and risk-based) and revenue growth over the last 12 months. All data is based on regulatory filings for the period ending Sept. 30. Each of the 10 metrics are weighted equally in the final rankings.

In addition to the rankings, Forbes discuss what has been going on in the banking industry. A few notable observations stand out:

  • There were only eight bank failures last year compared to 157 in 2010
  • The FDIC’s Problem Bank List stood at 203 in September, the lowest level since 2008, compared to a peak of 888 in March 2011
  • In order to comply with all of the regulatory orders, banks have been forced to raise a lot of equity and raise expenses.
  • There is a massive gap in size between the four biggest U.S. banks and everyone else, yet none of the Big Four could crack the top 50, with Wells Fargo the top performer at No. 52.
  • Last year’s top 50 banks returned 7.2% on average in the stock market, twice the return of the bottom 50.

There is a massive gap in size between the four biggest U.S. banks and everyone else, yet none of the Big Four could crack the top 50, with Wells Fargo the top performer at No. 52.

For the Forbes article about “America’s Best Banks 2016”, click here. For the article about their methodology and the full list showing each bank’s assets, return on equity and other financial details, click here.

Now, without further ado, here is Forbes list of “America’s Best Banks 2016”

  1. CVB Financial (holding company for Citizens Business Bank)
  2. PacWest Bankcorp
  3. Prosperity Bancshares
  4. Glacier Bancshares
  5. Hilltop Holdings
  6. Signature Bank
  7. First Republic Bank
  8. Community Bank System
  9. Bank of Hawaii
  10. Western Alliance Bancorp
  11. Cullen/Frost Bankers
  12. Cathay General Bancorp
  13. East West Bancorp
  14. BankUnited
  15. Home BancShares
  16. Washington Federal
  17. National Penn Bancshares
  18. Umpqua Holdings
  19. Columbia Banking System
  20. Investors Bancorp
  21. Bank of the Ozarks
  22. Capital One Financial
  23. First National of Nebraska
  24. State Street
  25. Pinnacle Financial Partners
  26. Popular
  27. PrivateBancorp
  28. BBCN Bancorp
  29. New York Comm. Bancorp
  30. Central Bancompany
  31. First Interstate BancSystem
  32. South State
  33. WesBanco
  34. First BanCorp
  35. Flagstar Bancorp
  36. U.S. Bancorp
  37. Commerce Bancshares
  38. Simmons First National
  39. BOK Financial
  40. BancorpSouth
  41. Provident Financial Svcs
  42. Park National
  43. BB&T
  44. MB Financial
  45. United Community Banks
  46. Capitol Federal Financial
  47. Great Western Bancorp
  48. F.N.B.
  49. United Bankshares
  50. International Bancshares
  51. SVB Financial Group
  52. Wells Fargo & Company
  53. Union Bankshares
  54. M&T Bank
  55. First Financial Bancorp
  56. Banc of California
  57. Old National Bancorp
  58. Renasant
  59. Northern Trust
  60. First Citizens BancShares
  61. PNC Financial Services
  62. JPMorgan Chase
  63. Capital Bank Financial
  64. Texas Capital Bancshares
  65. Fifth Third Bancorp
  66. Webster Financial
  67. Huntington Bancshares
  68. Customers Bancorp
  69. SunTrust Banks
  70. NBT Bancorp
  71. Chemical Financial
  72. Zions Bancorporation
  73. Bank of New York Mellon
  74. Citigroup
  75. Trustmark
  76. First Midwest Bancorp
  77. Wintrust Financial
  78. KeyCorp
  79. IBERIABANK
  80. Comerica Incorporated
  81. Valley National Bancorp
  82. Northwest Bancshares
  83. FirstMerit
  84. TFS Financial
  85. UMB Financial
  86. Associated Banc-Corp
  87. Sterling Bancorp
  88. Astoria Financial
  89. Berkshire Hills Bancorp
  90. Bank of America
  91. Synovus Financial
  92. Fulton Financial
  93. Regions Financial
  94. TCF Financial
  95. Citizens Financial Group
  96. People’s United Financial
  97. Hancock Holding
  98. EverBank Financial
  99. First Niagara Financial
  100. First Horizon National

A Look at the CFPB's Monthly Complaints Report

As participants in the financial services industry, we should be interested in what the Consumer Finance Protection Bureau (CFBP) is working on. To better understand this regulator, StratAgree has begun to review their monthly reports of consumer complaints. The most recent report was released in late December. In it, the CFPB lays out complaints by product/service, by state/district and by company.

Please note that other organizations and individuals have already criticized the CFPB data and analyses as flawed, inaccurate and downright wrong. Our purpose is not to criticize as we believe that over time the data will become more valuable. As a relatively new resource, we believe it will improve. But, because of the report’s current shortcomings, we will attempt to make reasonable corrections as practical.

The monthly report is comprised of three main sections:

Section 1 – Complaint Volume (by product, state, and company)
Section 2 – Product Spotlight (a different product profiled each month)
Section 3 – Geographic Spotlight (a different state profiled each month)

This month’s review will focus on the first section of the November 2015 report. Note that the CFPB uses different time periods for different metrics. To avoid confusion, we’ll point out the month(s) being reported in chart titles and captions. Also, when practical we will provide a comparison to the June 2015 report (the first report in the series).

Section 1 – Complaint Volume

Complaints by Product/Service
The top three products/services complained about in November 2015 were Student Loans, Debt Collection and Mortgages comprising 31%, 19% and 19% of total complaints, respectively. These top three products/services are the same as in the June 2015 report where Student Loans, Debt Collection and Mortgages comprised 32%, 20% and 19% of total complaints, respectively.

CFPB Nov 2015 Rept Complaints by Prod
CFPB Nov 2015 Report Complaints by Product/Service © 2016 StratAgree™

The bottom three products/services complained about in November 2015 were Bank Account or Services, Money Transfer and Other Financial Services comprising 1% of total complaints, each.

These bottom three products/services are the same as in the June 2015 report where Bank Account or Services, Money Transfer and Other Financial Services each comprised 1% of total complaints.

Complaints by State/District
Because populations vary widely from state to state, total complaints per state is misleading. We’ll therefore use the normalized data (complaints per 100,000 population).

The top three states/districts for complaints in November 2015 were Washington DC, Delaware and Maryland with 674, 433 and 390 complaints per 100,000 population, respectively.

CFPB-Nov-Rept-Complaints-per-100000-by-State-2015-11
CFPB Complaints per 100,000 Population, by State 2015-11 © 2016 StratAgree™

These top three states/districts are the same as in the June 2015 report (the first CFPB report) where Washington DC, Delaware and Maryland had 577, 371 and 333 complaints per 100,000 population, respectively.

The bottom three states/districts for complaints in November 2015 were North Dakota, Iowa and West Virginia with 99, 113 and 117 complaints per 100,000 population, respectively. These bottom three states/districts are the same as in the June 2015 report (the first CFPB report) where North Dakota, Iowa and West Virginia had 81, 96 and 97 complaints per 100,000 population, respectively.

The regions with the highest per-capita complaints are the District of Columbia and two of its neighboring states–Delaware and Maryland. This would suggest that awareness of the CFPB is highest in the regions with the highest concentration of federal government and CFPB employees as well as their friends and families. We’ll watch to see if this disturbing anomaly subsides over time.

Monthly Complaints for Top Ten Most Complained About Companies
The data for complaints by company is provided as a rolling average of 3 months’ complaints. The most current data is from the period July – September, 2015. Apart from the age of the data, there are two big problems with the complaints by company data. First, it does not factor in the size of the company. And second, it does not take into account differences in industry (credit reporting vs. consumer banking vs. credit card companies, etc.). With these flaws, larger companies will obviously have more complaints than smaller companies. Here are the numbers in graphical form.

CFPB Nov 2015 Rept Jul-Sept Complaints by Company © 2016 StratAgree™
CFPB Nov 2015 Rept Jul-Sept Complaints by Company © 2016 StratAgree™

Let’s look more closely at the four banks listed in the “Top Ten Most Complained About…” list. They just happen to be the largest four banks in the country. For context, here is a pie chart showing the 2015 market shares of Bank of America, Wells Fargo, JP Morgan Chase, Citibank and all others:

Bank Market Shares 1Q 2015
Bank Market Shares 1Q 2015 © 2016 StratAgree™

Considering their large size, we can expect the number of complaints about these banks to be large as well. In fact, we could assume that complaints about each of these banks should roughly equal their market share. But, before we can make that comparison, we need to strip out non-bank product complaints from the CFPB data so we can compare apples-to-apples. Here’s a chart showing the breakout of complaints about the largest banks as a percent of total bank product complaints (credit reporting and alternative financial services complaints have been removed):

CFPB Nov 2015 Rept Jul-Sept % Complaints by Bank
CFPB Nov 2015 Rept Jul-Sept % Bank Product Complaints by Bank © 2016 StratAgree™

Breaking the data this way, we see that the four banks that have 54% of the consumer banking market are the target of 60% of consumer bank product complaints. More interesting is the fact that Bank of America and Wells Fargo appear to have more complaints than their market share would indicate while Chase and Citibank appear to have fewer complaints than we would expect. That observation makes it just wrong for the CFPB to label them as part of the “Ten Most Complained About Companies”

Only time will tell if the CFPB data quality will improve, but for now we can’t determine with certainty whether the biggest banks are better or worse than other banks.

Summary

The vast number of consumer complaints to the CFPB relate to credit issues–76% of complaints appear to be about credit products and credit reporting and 19% are regarding debt collection. Other financial services (money transfer, etc.) account for 2% of total complaints while complaints about checking and savings accounts were just 1% of the total.

Complaints about checking and savings accounts were just 1% of the CFPB total.

Geographically, the highest complaining regions were Washington DC, Delaware and Maryland with complaints per 100,000 population of 674, 433 and 390, respectively. Complaints for the rest of the country averaged 197 per 100,000 population. It would appear that CFPB employees, their families and friends are driving artificially high complaint volume in those regions.

Lastly, the CFPB’s Top Ten Most Complained About Companies data doesn’t tell us much because it doesn’t consider company size or other differences (banks are lumped in with credit reporting agencies, monoline credit card companies, mortgage servicers and alternative financial services providers like payday lenders and money transfer businesses).

Even with the flaws, it is helpful to see which products are being complained about and which regions generate the most complaints. StratAgree will continue to monitor future CFPB monthly complaint reports and strive to draw meaningful conclusions from them.

Competition for Checking Is Heating Up Again…

By now, this offer should be familiar to everyone in our business–“Switch to Bank X and Get $300!”

Banks, particularly the larger players are pulling out the stops with offers of $300, $400, even $500 for moving. What are these banks looking for? Customer relationships–checking, savings and a loan relationship. Some of the offers are targeted at new checking customers and offer large bonuses for opening and funding a premium account. Others are going after relationships offering bonus money for various account types. All have activity and funding requirements, but know this–these offers work.

StratAgree recommends that regional and community banks do two things. First, they must understand the value of customer relationships to know how much is reasonable to spend to acquire them. Second, they need to ensure that their digital banking offerings (particularly mobile banking) are current and attractive.

Customer Value
Banks need to know which account types customers buy, what the average balances in those accounts are and the length of time customers keep these accounts open to begin to understand the value of a customer relationship. Many a marketer has been criticized for high cost per account acquired but few of the criticizers have solid evidence for why they believe it’s “too much.” Better marketing decisions are possible when you know the real value of a customer relationship

Digital Tech
The bigger banks are investing in state-of-the-art mobile banking platforms. Smaller players are beginning to lose share on this alone. Get current. Again, customer relationships are probably worth more than you think. Marketing isn’t the only investment required to attract and retain them.

Here’s a great piece that appeared at bankdirector.com about 6 weeks ago. Although it’s a similar story, we don’t see this as a new trend–it’s always been good business. It’s just that some players have better information to guide their strategy.  Chase has been using this tactic for many years with great effect. They know what a customer is worth. Do you?

 


 

To learn more about Customer Lifetime Value, contact Alpine Jennings at 716-713-4266 or

Robert Dorn at 404-987-2419.

 

Women Stuck Managing Home Finances

Women, more often than not are the CFO of their household. Our friends at The Financial Brand have compiled research from Regions Bank, Allianz and other sources showing that women feel like financial management of the household ends up being their responsibility in spite of their feeling less confident in financial matters compared to men.

44% of women said they are solely responsible for making financial decisions for their household, compared to 35% of men. However, men rated their overall confidence in handling finances higher (6.20 on a seven-point confidence scale) than women (only 5.86). Women under age 50 rated their confidence even lower (5.61).

The largest confidence gap between women and men is in the area of investing, where women respondents showed a confidence level of 4.75 on a seven-point scale compared to 5.42 for men. For the entire article click here.

Banks Need to Step It Up With Millennials

Our friend, David Kerstein of Peak Performance Consulting Group wrote an interesting piece on the need for banks to attract millennials that appeared last month on BAI’s Banking Strategies blog. Dave’s premise isn’t anything new, but the fervor in which he makes his point is particularly apropos–other competitors will step in to serve this important segment in banks don’t. In fact, it’s already happening.

Banks need to take action or risk losing this segment to new entrants in the payment, consumer banking and business banking space. And there is cause for concern: we counted 38 different non-traditional competitors in the payments space alone, of which 10 were new in the last year.
–David Kerstein

As we’ve stated before, StratAgree’s assessments is that banks’ must focus on experience and that means digital. Serendipitously, consumers in the Millennial segment are up to ten times more likely to switch than more mature (older) counterparts. The point is: the time is now to make sure your customer experience is up to date so you can protect the customers you have and attract new customers from laggard institutions.

To see Dave’s article in its entirety, click here.

 

Younger Consumers Ditching TV

Millennials are dropping cable after leaving their parents’ home.  The trend appears to be related to lower incomes of younger consumers. A new Nielsen report, (covered by the New York Times, see link below) shows the trend is likely to reverse as these younger consumers start families.

smartphone-982563_640For us, the takeaway is that 1 in 4 consumers ages 18-24 without children are foregoing cable TV. According to the research, these consumers are using an antenna or the internet for TV.

For consumers under the age of 32, at least half of their TV watching is on computers, tablets or smartphones.

Not surprisingly, this growing trend underscores the necessity for advertisers to build their presence in digital media.

The entire text of the NYT article can be found here.

Key Purchase of First Niagara Will Make it 13th Largest in U.S.

Cleveland-based KeyCorp (KEY) agreed to buy First Niagara Financial Group Inc (FNFG) for $4.1 billion.

What Does It Mean?
Large bank deals appear to be back. Though they had slowed in the aftermath of the financial crisis, acquisition of banks over $1 billion in assets is picking up again. Key reports that the combined company will have over 1,300 branches in 15 states and deposits of almost $100 billion. The deal is the 2nd biggest this year and, when completed, Key’s purchase of First Niagara will make it the 13th largest bank in the U.S at $135 billion in assets.

First Niagara, a well-known brand in Western New York had fallen on hard times over the past several years. After a decade of rapid growth through acquisition, the company was just not able to adapt to the extended low-interest environment. Expenses were too high compared to its revenue. Other factors, including the announcement of a “process issue” and a $1.1 billion writedown of company goodwill spooked market watchers and eroded company credibility. For the past two years, rumors persisted that the bank was being prepared for a sale.

What Can We Expect Now?
In the protracted low-interest-rate environment of the past seven years, banks have had to focus on expense control to protect profitability. Because Key and First Niagara both have a presence in many of the same markets, tough decisions will have to be made about which offices to keep and which ones to shut down. Customers will be impacted by any such changes so bank decision makers will need to exercise care.

Rival banks like Buffalo-based M&T Bank will be doing their best to take advantage of the customer disruption that will come as Key blends First Niagara into its operations. In fact, it is expected that competitor banks will target affected customers with special offers specifically designed to lure them away from the disruption.

While some analysts are saying that Key paid too much for troubled First Niagara, only time will tell. One thing is certain–bank mergers appear to be back.

Citi Testing Screenless, Cardless ATMs

Diebold has created an ATM that is screenless and doesn’t use ATM cards. How does it work, you ask? You use your smartphone!

Using your smartphone you preschedule pickups of cash. When you get near the ATM it identifies you by the near field communication (NFC) chip on your phone. And then confirms your identity through other means, like an eye scan.

This new ATM is being shown at a trade show this week in Las Vegas and Citi has begun testing them in a few areas. However, it could be years before an ATM like this becomes the standard. Several banks have been trying to develop and test cardless ATMs for years. But so far none have done a large-scale test of such a machine.

Yet someday a screenless, cardless ATM may become the norm.

For the full article from Consumerist, and a picture of what one of these ATMs look like, click here.