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What Banks Must Do To Protect Against Noncompliance Risks

September 22, 2016

compliance is cheaper than finesBanks and credit unions are subject to extensive federal regulations regarding how they interact with customers and handle customer data, especially as it relates to lines of credit. Examples of consumer lending regulations include:

  • The Fair Credit Reporting Act (1970): Regulates the collection, dissemination, and use of customers’ private information as it pertains to their credit reports
  • The Truth in Lending Act & Regulation Z (enacted 1968 under the Federal Reserve; turned over to Consumer Financial Protection Bureau in 2011): Standardizes the disclosure of costs and charges associated with lending so consumers can shop around
  • The Credit Card Accountability Responsibility and Disclosure (CARD) Act (2009): Emphasizes fairness and transparency in the credit application process; also known as the Credit Card Holders Bill of Rights
  • The Dodd-Frank Wall Street Reform and Consumer Protection Act (2010): Created an independent watchdog agency to hold lenders accountable and prevent the risky, exploitative behavior that contributed to the recession of 2008

In the wake of the 2008 recession, the issue of regulation has been highly visible, both to those inside the financial industry and to consumers who benefit from these protections. Lenders who are found to be noncompliant with any of these regulations face heavy punitive fines. In 2014 alone, U.S. and European banks paid out nearly $65B in noncompliance fines, according to Boston Consulting Group. That’s not to mention the cost of litigation above and beyond the fines themselves.

With so much at stake, banks must be proactive about compliance.

any institution that offers lines of credit is subject to annual compliance auditsFinancial institutions that offer credit cards, mortgages, specialized loans, and co-branded credit cards through retail partners are subject to annual audits to assess their compliance status. Many institutions may think they are ready for these audits, but could be more proactive about ensuring their safety.

Customer service and sales personnel could be considered to be on the front lines of compliance efforts. Their behavior toward customers who are applying for credit is a make-or-break factor. In order to protect themselves against noncompliance risks, banks need to take steps before, during, and after the application process.

  • BEFORE: Thorough training for customer-facing staff, and regular follow-up on this training, are essential. Anyone in a lending role must be aware of the behaviors that could trigger a noncompliance red flag. These can include their professionalism, comprehensive knowledge of fees and policies, ability to answer customers’ questions, “pressuring” behaviors that could influence customers to apply or not apply, and whether the customer is treated differently based on factors like race, gender, age, and household income.
  • DURING: Treat customers according to the best practices covered in training. Explain all pertinent details to the customer and provide the disclosures required by law. Make sure the customer has the opportunity to speak up with any questions, concerns, or needs for clarification, so that by the time they walk out your door, they are well-equipped to make an informed decision.
  • AFTER: Surveying customers following their application process helps banks assess whether the above criteria were actually met. Data produced by these surveys proves useful during the audit process. Conducting surveys also helps banks identify potential red flags in nearly real time and address them with the necessary measures.

Leniency or human error across any regulatory criteria comes with mighty consequences. Having the right people in the right roles, emphasizing training and adherence to regulations, and following up with surveys and research, are among the best steps banks can take to protect themselves. This is especially relevant for co-branded credit cards that banks may offer in partnership with retailers, where the training element is out of the bank’s direct control. (Read more about the risks of co-branded credit card partnerships.)

Who holds the banks accountable for compliance?

Following the recession, the Obama administration created the Consumer Financial Protection Bureau via the Dodd-Frank Act. Rather than leave everything to the Federal Reserve, the administration saw it necessary to appoint this agency as an objective third-party witness to lenders’ behavior.

Individual institutions, too, can benefit from appointing an objective, reliable outside party to monitor compliance. To help banks and credit unions insure their compliance status, CSP’s compliance solutions address the “After” portion of the credit application process. We collect data from customer surveys to support a bank’s position in the event of a complaint or an audit. This solution, which is entirely customizable, also allows us to notify a bank of potential red flags as they occur and reduce the risk of oversights or surprises.

To find out more about how we help banks protect themselves, contact John Berigan with your questions by email or by calling (800) 841-7954 ext:101.

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Customer Loyalty: 9 Ways to Influence Emotions, Reasoning, and Behavior

July 19, 2016

Customer loyalty is a hot topic, but what exactly is a loyal customer? The first thing that might come to mind is “a customer who keeps doing business with you.” That sounds reasonable; however, it’s also incomplete.

It’s likely that some repeat customers come back only because they are under a binding contract, intimidated by the process of changing providers, or sticking with you from sheer force of habit. In each case, it wouldn’t take much for a competitor to lure them away. That is why customer loyalty, real loyalty, is such a critical factor in your company’s success.

A more comprehensive definition of a loyal customer is one who believes in the value of what you have to offer; who has evaluated you as the best available option; and who continues to choose your service or product over the competition and encourages others to do the same.

A more complete definition of customer loyalty

A more complete definition of customer loyalty

Within this definition are three distinct aspects of customer loyalty. Let’s take a closer look at them and what you can do to influence each type.

Emotional loyalty

The emotional aspect is crucial in the relationship between customer and company, and a powerful driver of the other two types of loyalty. Customers not only want to feel like they can trust your company; ideally, they also like your company. Other important emotional values include friendliness, attitude, and “cool factor.” A value proposition that is associated with these sentiments will be much more likely to invoke loyalty.

Emotional loyalty is especially important in fields where big financial interests and sensitive data meet personal experiences, like the banking industry. Events like the financial crisis, market instability, and bank account hacks can damage customer loyalty, and (re)building trust is key. To maximize emotional loyalty:

  • Be transparent in your communication with customers.
  • Make customer service a top priority throughout the organization.
  • Show customizers that you care through your marketing and advertising messages.
Rational loyalty

This aspect of customer loyalty reflects the logical, unemotional side of the customer’s purchase decision. In other words: do your customers think they are getting the best deal? To maximize rational loyalty:

  • Reward repeat customers.
  • During the sale, clearly outline the tangible benefits you can offer.
  • Offer attractive extras, like credit cards that earn points, flyer miles or cash-back rewards.
Transactional/behavioral loyalty

Finally, transactional or behavioral loyalty can be seen as momentum. Once a customer starts buying from a particular business or becomes attached to a brand, as long as emotional and rational loyalty are each well-nurtured, transactional loyalty follows and becomes habitual. Because this type of loyalty is so heavily reliant on the other two, it can be derailed if a customer becomes dissatisfied emotionally or rationally.

To optimize the shopping process itself:

  • Make sure all service channels, including websites and apps, are easy to use and up to date.
  • Various service channels should be connected; customers should be able to shop however, whenever and wherever.
  • Offer extras that make shopping fun, like gamification elements or apps that reward customer engagement.

 

Building customer loyalty can seem like a complicated process. Understanding it, however, starts with a simple step: knowing your customer. Voice of the Customer data is where you’ll discover the key components that drive your customers’ loyalty – and what might be driving them away. Equipped with that knowledge, you can make specific changes within your organization to influence those key drivers in the desired direction. You’ll also want to use periodic benchmarking to evaluate how you are performing against those measurements compared to your competitors.

For more information about Voice of the Customer and Competitive Benchmarking solutions from CSP, contact us online or call 800.841.7954 ext. 101.

3 Steps to Coaching Employees Using Performance Reports

June 15, 2016

Customers often base their opinion of a company on their service experience, so you want yours to be top-notch. Proper training helps employees achieve customer service goals, which in turn provides motivation to continue doing well and to keep improving.

As you embark on coaching your employees to make your customer service experience even better, you want the training to be as effective as possible. The three-step approach below can help, combined with using employee performance reports that can guide you in knowing where to start the conversation, and what to address first.

To set up your employee performance training as a roadmap for success and help your employees achieve optimal performance, follow these steps during your coaching sessions:

1. Prioritize issues.

Avoid piling up a laundry list of all areas for improvement at once. Rather, start with the top issue that will help your employee improve customer experience the most.

manager development trainingEmployee performance reports can be used to analyze information that is customized to each employee. CSP provides several such reports. One that is useful in helping to identify priorities is the CSP Evaluation Summary report. This report can uncover patterns with its performance and satisfaction scores, and can quickly point out trends in an employee’s performance.

The Performance Criteria Scores by
Employee report presents all criteria questions for all employees at once. It can be filtered by employee and date, and can show if the coaching is leading to an improvement in scores.

Or use the Performance Issues report to see all criteria scores and which ones are scoring the lowest. Are your employees consistently introducing themselves to your customers? Are they using the customer’s name? This report breaks down each behavior with percentages to give you an easy-to-read chart that also can be explored in-depth if needed.

Focusing on one issue at a time helps you hone in on a single aspect of performance that you can come back to in the future, as part of an overall evaluation of your employees’ responsibilities and expectations.

2. Investigate causes.

Is coaching and training the appropriate response to an employee’s performance? To find this out, analyze the performance areas that are below expectation. Determining the root cause for low performance will help you establish next steps with your employee.

Once you have used the Performance Issues report to identify the area needing improvement, identify the cause for it. Is the performance problem due to awareness, resources, ability, or effort?

Use the chart below to review the actions most appropriate to each root cause:

Root Cause Action
Lack of awareness Re-communicate expectations and priorities
Lack of resources Help the employee secure the needed resources
Lack of ability Coach and train the employee to improve their knowledge and skills
Lack of effort Motivate or take disciplinary action
3. Give constructive feedback.

Your analysis using the CSP reports will not only have revealed opportunities for improvement, but also areas of strength. Use these reports to guide you in the feedback you provide to your employees. Positive feedback strengthens performance and motivates employees to continue providing good customer service or improve upon past performance. Keep these tips in mind when providing feedback:

  • Feedback should be balanced, touching on both strengths and weaknesses.
  • People learn differently so find a variety of resources to help each employee meet his or her individual goals.
  • To get the most value, both positive and constructive feedback should not be a one-time conversation, but an ongoing discussion.

Following these steps and incorporating reports such as those offered by CSP will allow you to continue increasing employee engagement. Help take your team to the next level when you take advantage of these tools and watch your employee performance soar.


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Banks: Are Your Co-Branded Credit Card Partners Putting You at Risk?

May 10, 2016

Retailers love store credit cards and purchase financing. When a store offers its customers credit, those customers are more likely to continue shopping there and making larger purchases. The store then collects additional profit on each sale in the form of interest, usage fees, and penalties.

When retailers partner with banks to provide lines of credit to their customers, banks get to see some of that profit, too. On its face, it’s an attractive and mutually beneficial arrangement, giving banks an additional source of sales outside their usual channels. However, not all that glitters is gold…

Consumer advocates are quick to warn consumers about the downsides of opening an in-store credit card, like undisclosed fees and penalties, promotional discounts that eventually expire, and potential harm to their credit scores. But it’s not just customers who use co-branded credit cards and purchase financing at their own risk.

Banks that partner with retailers expose themselves to non-compliance risks.
co branded credit cards

In-store credit cards are popular among retailers and customers, but banks need to exercise caution.

Following the financial crisis of 2008 that gave rise to the Great Recession, Congress, the Federal Reserve, and the Consumer Financial Protection Bureau have pushed for increased oversight and regulation of creditors. In 2009, President Barack Obama signed into law the CARD Act, imposing strict regulations to protect cardholders from unclear, unfair, or even predatory business practices.

Of course, banks are painfully aware of these regulations and the hefty penalties that come along with them. When a bank issues credit products in-house, it has direct oversight and control over the process. The bank can ensure that credit applications and accounts are being handled in compliance with regulations.

However, partnering with a third party retailer removes that element of control.

Banks must trust that their retail partners are just as rigorous about compliance as they would be themselves – and as with many things, there are no guarantees that all will go according to plan.

Merchants are also subject to the Payment Card Industry Data Security Standard (PCI-DSS), which aims to protect the security of payments made with credit and debit cards. That includes payments made online, and the possibility that hackers might access consumer data and disperse it to criminals. A separate set of standards, the Payment Application Data Security Standards (PA-DSS), ensures that a merchant’s vendors supply products that are PCI-compliant.

And these are just a few examples of the extensive regulations surrounding the issuance of credit. The penalties for non-compliance with these laws and standards are nothing to be taken lightly. Not only are there hefty punitive fines to consider. Non-compliance has a ripple effect that touches share prices, investors, and senior managers, not to mention customers.

What can banks do to protect themselves against non-compliance risks?

Short of staying out of the co-branded credit card business altogether, and missing out on the benefits, banks must take it upon themselves to ensure that their partners are behaving by the rules.

Manage the risks of issuing retail credit cards by monitoring retailers' practices.

Manage the risks of issuing retail credit cards by monitoring retailers’ practices.

As customer experience experts and advocates with a long history of serving banks, CSP has developed a solution to this problem. We can do the footwork of checking in and collecting information on retailer compliance for you. We look for red flags like:

  • How was the customer treated during the application process?
  • Were they pressured into applying for a credit card?
  • Was the private information on their applications handled properly?
  • Did the retailer do enough to make the consumer aware of policies, rates, and fees?
To find out more about how we help banks protect themselves, contact John Berigan with your questions by email or by calling (800) 841-7954 ext:101.

 

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How Manager Development & Training Benefits Your Business

May 4, 2016

Professional development is an ongoing responsibility shared by both employees and their employers. However, managers and human resources personnel are often tied up in handling the paperwork of employment – hiring, firing, benefits, and grievances – leaving little bandwidth to focus on developing employees’ resources, talents, and career journeys.

Most businesses conduct some kind of periodic employee performance review, but miss the opportunities and advantages of structured follow-up and support. “Crisis” cases may get the attention they need, but middling and high-achieving employees can be left without a clear path forward to continued improvement.

Here’s the truth: Continued employee development can’t fall off the priority list.

manager development trainingThis is true for employees at all levels of the company, and especially relevant for managers. Managers are the cornerstones of a company’s internal culture. Their behavior, attitude, and ability to lead and nurture their team are directly correlated with employee satisfaction and engagement, which in turn influences the customer experience.

Off-the-shelf training materials and one-time leadership seminars are appetizers at best. Unfortunately, they won’t fill you up, and the effects tend not to last once employees are immersed back in their day-to-day duties. There may be a temporary boost in morale, productivity, and performance, but without continued support and attention, it won’t be long before they slip back into their comfort zones until it’s time for their next review.

Manager development is manager empowerment.  

In order for managers to effectively lead, coach, and nurture their employees, they must be nurtured themselves. You wouldn’t expect someone who lives on fast food and soft drinks to suddenly get up and compete in the Tour de France. Likewise, without proper “nutrition,” managers lack the supportive structure to deliver their best performance.

manager development trainingCoaching and training are not just about learning and sharpening skills, they’re about empowering staff to excel in each and every position, to collaborate effectively as a team, and to effect positive change in the workplace.

Empowered managers and employees:

  • feel valued by their employers
  • enjoy coming to work each day
  • are genuinely invested in the success of the company
  • resist the distractions of workplace conflict and politicking
  • are unlikely to look for other jobs, and
  • regularly engage in proactive, positive behavior.

These attributes ripple out to all areas of job performance. Even customers will feel the effects: customer interactions tend to go more smoothly, and issues get resolved more easily, when employees feel empowered to take action.

Development starts with data.

Collecting and evaluating data is essential to measuring progress and determining the effectiveness of a development initiative. It’s the first step of CSP’s Manager Development Training solution, forming a baseline from which to move forward with a targeted coaching program.

manager development trainingData also allows CSP to customize each program to each business. Every customer service climate will differ, even between separate locations of the same business. Within those climates, customer expectations and needs will also vary, and thus the key drivers of satisfaction and success along with them. CSP uses each business’s data to illuminate what those key drivers are, and tailor the Manager Development Training program to empower managers and employees to have the optimal effect on those attributes.

Consistency creates accountability.

What these customized programs share in common is a consistent structure of ongoing support. Not only does CSP create a path forward toward organizational improvement, your team also benefits from our years of experience guiding companies through times of change. Obviously, we want the effects of this training to stick, so change management techniques are reinforced from the top down throughout the training process.

As the program takes shape, we supply materials, conduct workshops, and regularly check in to evaluate progress. This consistent, committed approach to development is critical. It’s unlikely that managers will slip back into their old ways when there are measures in place to hold them accountable. Without those measures, there’s always the risk that other priorities, responsibilities, deadlines and duties will wind up distracting their attention from their job performance. That’s why leadership books and seminars so often fade from memory before companies can see the benefits.

There’s also something to be said for third-party objectivity when it comes to in-house matters. Managers commonly fall victim to a type of tunnel vision when they can’t see beyond the walls of their own office. CSP has seen it all, and we capitalize on that 30,000-foot view of organizational management to help each business navigate its own journey forward.

To learn more about Manager Development & Training, contact CSP’s John Berigan by email or by calling 800.841.7954, ext. 101.

 

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