OCC Comsumer Assistance: Process Is Similar to That of Other	 
Regulators but Could Be Improved by Enhanced Outreach (23-FEB-06,
GAO-06-293).							 
                                                                 
In January 2004, the Office of the Comptroller of the Currency	 
(OCC)--the federal regulator of national banks--issued rules	 
concerning the extent to which federal law preempts state and	 
local banking laws. Some state officials and consumer groups	 
expressed concerns about a perceived loss of consumer protection.
GAO identified (1) how OCC's complaint process compares with that
of other federal bank regulators, (2) how complaint information  
informs OCC's supervision of national banks, and (3) issues that 
consumer advocates and state officials have raised about OCC's	 
consumer protection efforts and OCC's responses to the issues.	 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-06-293 					        
    ACCNO:   A47577						        
  TITLE:     OCC Comsumer Assistance: Process Is Similar to That of   
Other Regulators but Could Be Improved by Enhanced Outreach	 
     DATE:   02/23/2006 
  SUBJECT:   Bank management					 
	     Banking law					 
	     Banking regulation 				 
	     Comparative analysis				 
	     Consumer protection				 
	     Federal law					 
	     Federal regulations				 
	     Grievance procedures				 
	     National banks					 
	     Performance measures				 
	     Regulatory agencies				 
	     Standards evaluation				 
	     Customer satisfaction				 

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GAO-06-293

     

     * Report to the Subcommittee on Oversight and Investigations, Committee
       on Financial Services, House of Representatives
          * February 2006
     * OCC CONSUMER ASSISTANCE
          * Process Is Similar to That of Other Regulators but Could Be
            Improved by Enhanced Outreach
     * Contents
          * Results in Brief
          * Background
          * OCC's Handling of Consumer Complaints Is Similar to That of Other
            Regulators
               * OCC and Other Federal Regulators Follow the Same General
                 Process in Resolving Consumer Complaints
               * OCC Does Not Seek Feedback from Consumers on Services
                 Provided
               * Outcomes of Complaints Handled by All of the Federal
                 Regulators Fall into the Same General Categories
                    * Regulators Provided Consumers Additional Information
                    * Complaint Is Considered Withdrawn or Tabled Due to
                      Litigation
                    * Regulators Determine That Bank Was Not in Error
                    * Regulators Determine That Bank Was in Error
               * OCC Handles a Greater Volume of Complaints Than the Other
                 Bank Regulators
               * Federal Regulators Have Similar Timeliness Goals, but OCC
                 Overstated Its Timeliness in Resolving Complaints by
                 Including Inquiries in Its Calculation
          * CAG's Consumer Complaint Data Inform OCC's Bank Supervisory
            Activities
          * Despite OCC Efforts, State Officials and Consumer Advocates Still
            Have Concerns About OCC's Commitment and Capacity to Address
            Consumer Complaints
               * While State Officials and Advocates We Contacted Remain
                 Concerned About OCC's Commitment to Consumer Protection,
                 Some Were Unaware of Its Consumer Protection Efforts
               * State Officials View OCC's Efforts to Share Information
                 About Complaint Outcomes as Unsatisfactory
               * Others Raise Concerns About CAG's Centralized Operations,
                 Although OCC Cites Advantages
               * Some Groups and Officials Have Concerns About Complaint
                 Handling Capacity, and OCC Plans to Increase Capacity
          * Conclusions
          * Recommendations
          * Agency Comments and Our Evaluation
     * Scope and Methodology
     * Comments from the Office of the Comptroller of the Currency
     * GAO Contact and Staff Acknowledgments

Report to the Subcommittee on Oversight and Investigations, Committee on
Financial Services, House of Representatives

February 2006

OCC CONSUMER ASSISTANCE

Process Is Similar to That of Other Regulators but Could Be Improved by
Enhanced Outreach

Contents

Figures

February 23, 2006Letter

The Honorable Sue W. Kelly Chairwoman The Honorable Luis V. Gutierrez
Ranking Minority Member Subcommittee on Oversight and Investigations
Committee on Financial Services House of Representatives

In January 2004, the Treasury Department's Office of the Comptroller of
the Currency (OCC), which supervises federally chartered "national" banks,
issued two final rules, the bank activities rule and the visitorial powers
rule (commonly known as the "preemption rules"). The bank activities rule
addressed the applicability of certain types of state laws to lending,
deposit-taking, and other federally authorized activities of national
banks. The visitorial powers rule addressed OCC's view of its authority
under federal law to inspect, examine, supervise, and regulate the affairs
of national banks. Some state officials, Members of Congress, and consumer
groups opposed the rules because of what they viewed as potentially
adverse affects on the dual banking system-which encompasses both national
and state-chartered banks-and on consumer protection. In particular, state
attorneys general, state banking departments and consumer advocates
expressed doubts about OCC's ability or inclination-as the sole regulator
of national banks and their operating subsidiaries-to adequately protect
consumers.

In addition to OCC, the Federal Reserve System (Federal Reserve)-including
the Board of Governors and the 12 Federal Reserve Banks-the Federal
Deposit Insurance Corporation (FDIC), and the Office of Thrift Supervision
(OTS)1 are the primary federal regulators of banks. For commercial and
savings banks with state bank charters, states charter the entity and have
supervisory responsibilities, while the Federal Reserve or FDIC serve as
the primary federal supervisor for these banks. In the

National Bank Act, the Congress created OCC to supervise national banks.2
In its capacity as the supervisor of national banks, OCC issues
regulations, policies, and interpretations to establish standards, define
acceptable practices, provide guidance on risks, and prohibit or restrict
practices. Under the Federal Trade Commission Act, OCC is charged with
protecting consumers from unlawful and deceptive practices by national
banks. One indicator of potential consumer protection issues is consumer
complaints that OCC receives and their resolution. The main division
within OCC tasked with handling consumer complaints is the Customer
Assistance Group (CAG), located in Houston, Texas.

In your letter, you requested that we review OCC's rulemaking process for
promulgating the preemption rules, OCC's process and capacity to handle
consumer complaints, and the impact and the potential impact of the rules
on the dual banking system and consumer protection. On October 17, 2005,
we provided you with a report on the rulemaking process.3 This report
focuses on OCC's process and capacity to handle consumer complaints.
Specifically, the report identifies (1) how OCC's consumer complaint
process and its disposition of complaints compare with those of other
federal bank regulators, (2) how OCC's complaint process relates to the
supervision of national banks, and (3) issues that consumer advocates and
state officials have raised about OCC in relation to consumer protection
and OCC's responses to these issues. We will soon provide you with a
separate report that discusses the impact of the rulemaking on the dual
banking system and consumer protection.

To examine how OCC handles complaints and how its consumer complaint
process and disposition of complaints compare with those of other bank
regulators, we interviewed OCC officials, as well as their counterparts at
the Federal Reserve, FDIC, and OTS. In addition, we analyzed OCC's
consumer complaint policies and procedures. We visited the CAG office in
Houston and observed its work, and we reviewed a nonprobability sample of
complaint case files to understand the different types of complaints and
outcomes. We also obtained and analyzed data on consumer complaints from
the four federal bank regulators covering calendar years 2000 to 2004 to
determine the number and types of complaints, as well as the nature of the
outcomes for consumers, and how many complaints were resolved within the
regulators' required time frames. To determine how OCC's complaint process
relates to the supervision of national banks, we interviewed OCC and bank
officials. We also analyzed documents to identify how, and the extent to
which, bank officials and OCC examiners use consumer complaint information
in planning and implementing supervisory activities, including policies
and guidance. To identify issues raised by consumer advocates and state
officials about OCC and its role in consumer protection, we conducted site
visits between March and August 2005, in four states: California, Georgia,
New York, and North Carolina. We selected these locations based on their
experience with state consumer protection laws. The site visits included
interviews of state attorneys general, banking regulators, banking
officials, and local consumer advocate groups, as well as analysis of
relevant documents. We also interviewed state attorneys general and
banking regulators in Iowa and Idaho by telephone. We interviewed
representatives of national consumer groups and trade groups for state
officials-banking regulators and states' attorneys general-in Washington,
D.C. We conducted our audit work in the previously mentioned four states,
in addition to Texas and Washington, D.C., from October 2004 through
December 2005 in accordance with generally accepted government auditing
standards. Appendix I provides a detailed description of our scope and
methodology.

Results in Brief

OCC's policies and procedures for handling and resolving consumer
complaints are similar to those of the other federal regulators. All of
the regulators follow the same general process when handling consumer
complaints, and all claim to take a neutral position regarding consumers
and banks that they regulate. However, OCC differs from some of its
federal counterparts in that it does not have a customer feedback
mechanism as part of its consumer complaint process. OCC, like the other
federal bank regulators, resolves most complaints it receives by providing
information to consumers. This can include clarifying consumers'
misunderstandings, referring consumers to other regulators, or advising
the consumers to seek legal counsel when their complaint concerns a
factual dispute that only a court can resolve. Less frequently, regulators
determine that specific errors or wrongdoings have occurred. The volume of
complaints OCC handles annually is greater than that of the other federal
bank regulators, likely reflecting its position as the supervisor of banks
that account for the majority of the nation's bank assets. OCC's total
volume of complaints has generally decreased over the past 5 years and has
not increased appreciably since OCC issued the preemption rules. OCC, like
other federal agencies, is required to measure its performance toward
achieving goals related to services it provides. For example, all of the
federal regulators strive to resolve consumers' complaints within similar
time frames, usually 60 days. In reporting its performance against its
timeliness goals, OCC has overstated the agency's percentage of complaints
addressed within the 60-day target because it combined consumer inquiries,
which typically require less time, with complaints in this measurement.

OCC uses consumer complaint data collected by CAG (1) to assess risks and
identify potential safety, soundness, or compliance issues at banks; (2)
to provide feedback to banks on complaint trends; (3) and to inform policy
guidance for the banks it supervises. OCC's bank examiners use consumer
complaint information to focus examinations they are planning or to alter
examinations in progress. Examiners review data CAG has collected on
consumer complaints to aid them in determining the risks a bank may face
and the appropriate scope of their examination. For example, because of
complaints about a particular bank loan product, examiners may-in addition
to reviewing the bank's written policies regarding that product-examine a
sample of loan files. CAG also often provides OCC policy staff with
summaries of consumer complaint information, which influences compliance
policy guidance that OCC provides in advisory letters to banks. Finally,
OCC also uses CAG's complaint data to provide feedback to banks, focusing
on potential risk issues that may affect the banks' compliance with
consumer protection laws and/or other risks. CAG officials said that they
meet annually with the 10 banks having the highest complaint volumes
during the previous calendar year. In calendar year 2004, such meetings
would have covered the national banks responsible for about 81 percent of
the total complaint volume.

Many of the state officials and advocates with whom we spoke,
nevertheless, continue to be concerned about OCC's commitment and capacity
to address consumer complaints, especially given their perception that the
effect of the rules is a loss of protection provided by state laws and
processes. While OCC has taken some action designed to increase consumer
knowledge about its consumer assistance services, consumer groups and
attorneys general assert that OCC is unwilling to share information on
complaint outcomes, and expressed concern about OCC's capacity to
adequately serve consumers nationwide, particularly given CAG's single
centralized location. Consumer advocates see themselves as working to
advance the interest of their clients, while OCC or CAG, defines itself as
a neutral arbiter. However, some consumer advocates and some state
officials see OCC as pro-bank. Some advocates with whom we spoke were
unclear about how the OCC processes complaints through CAG and what
assistance it can provide consumers. OCC has taken steps aimed at better
informing the public about its services, such as revising a consumer
complaint brochure. OCC cited privacy concerns as limiting its ability to
share information about the outcome of complaints, but it drafted a
Memorandum of Understanding in an effort to facilitate sharing information
with state agencies. However, state officials with whom we spoke generally
viewed it as an arrangement essentially favoring OCC; and, according to
OCC officials, only one state official signed the memorandum. OCC revised
the draft memorandum in an attempt to address those concerns, however, no
additional state officials were willing to enter into the memorandum. Many
of the consumer groups with whom we spoke viewed CAG's centralized
location as a shortcoming because CAG staff, they said, could not be
familiar with schemes or problem institutions in local areas. According to
OCC, CAG operations were centralized in Houston because it offers
efficiency advantages and facilitates identifying national trends and
potential problems. Finally, some consumer groups and state officials
questioned OCC's complaint-handling capacity, stating that the 2004
preemption rules could eventually increase the number of complaints OCC
receives. CAG data show that the total number of complaints, in any given
year, received from state offices-including banking departments and
states' attorneys generals-is a relatively small percentage of the total
number of complaints; therefore, any increase in referrals to OCC from
those offices might not have a dramatic effect on total overall volume. To
accommodate expected increases in telephone calls due to growth in the
banks under its supervision, OCC has hired more CAG staff and has begun
working with a third-party vendor to expand CAG's telephone service from 7
to 12 hours a day.

This report makes recommendations to the Comptroller of the Currency that
are designed to improve OCC's process for handling consumer complaints and
inquiries as well as its efforts to inform, educate, and serve bank
customers. We provided a draft of this report to OCC for review and
comment. In written comments, the Comptroller of the Currency concurred
with our recommendations (see app. II). Specifically, OCC agreed to
develop and implement a customer feedback mechanism to receive input and
measure satisfaction of those who have used CAG services. OCC also agreed
to revise the data it publicly reports on timeliness to reflect complaints
resolved within the 60-day goal separately from data reported on
inquiries. Finally, OCC agreed with our recommendation that it develop and
implement a comprehensive plan to inform bank customers, consumer
advocates, state attorneys general, and others of its role in handling
consumer inquiries or complaints about national banks. OCC also provided
technical comments that we incorporated, as appropriate.

Background

OCC's mission focuses on the chartering and oversight of national banks to
ensure their safety and soundness, on fair access to financial services,
and on fair treatment of bank customers. As of March 2005, the assets of
the banks that OCC supervises accounted for approximately 67 percent-about
$5.8 trillion-of assets in all U.S. commercial banks. Among the more than
1,800 banks OCC supervises are 14 of the top-20 commercial banks in asset
size.4

OCC groups its regulatory responsibilities into three program areas:
chartering, regulation, and supervision. Chartering includes not only
reviewing and approving applications for charters but also reviewing and
approving proposed mergers, acquisitions, and reorganizations. Regulation
includes establishing written regulations, policies, operating guidance,
interpretations, and examination policies and handbooks. Additionally, in
its most recent strategic plan, OCC identified its regulatory approach as
one that would ensure that national banks operated in a "flexible legal
and regulatory framework" that enables them to provide a "full competitive
array" of financial services.

According to OCC's latest strategic plan, OCC's supervision program
consists of ongoing supervisory and enforcement activities undertaken to
ensure that each national bank is operating in a safe and sound manner and
is complying with applicable laws, rules, and regulations concerning the
bank, customers, and communities it serves. OCC's supervisory activities
include examinations and enforcement actions, dispute resolution, ongoing
monitoring of banks, and analysis of systemic risk and market trends. OCC
policies establish a minimum level of activity that must occur during the
supervisory cycle, during which time examiners assess the overall
condition of the bank in the areas of capital adequacy, asset quality,
management, earnings, liquidity, and sensitivity to market risks. Such
examinations are generally referred to as "safety and soundness"
examinations. In large banks, much of this work is conducted throughout
the year by examiners assessing specific aspects of a bank's management
and operations, while in the smaller banks, the on-site examination
generally occurs at one time during a 12- or 18-month period.5 OCC has a
team of full-time, on-site examiners who are located at large banks
throughout the year and who conduct ongoing monitoring and examinations.
In addition to the safety and soundness examinations, OCC conducts
compliance examinations that assess the bank's compliance with laws
intended to protect or assist consumers, such as laws related to
disclosure of loan terms, fair lending, equal credit opportunity, and
others. Consumer compliance examinations are conducted on a continuous
3-year cycle in large banks and at least every 36 months at small banks.

OCC traditionally has issued opinions on a case-by-case basis, rather than
rules or regulations, on whether the National Bank Act preempts state laws
that impose standards or restrictions on the business of national banks.
In contrast, on January 13, 2004, OCC issued the two preemption rules on
the extent to which the National Bank Act preempts the application of
state and local laws to national banks and their operating subsidiaries.
The rules and the manner in which OCC promulgated them generated
considerable controversy and debate, including questions about OCC's
authority to issue the rules. According to OCC, the two rules "codified"
judicial decisions and OCC opinions on preemption under the National Bank
Act by making them generally applicable and clarified certain issues. The
visitorial powers rule, as stated by OCC, clarifies that (1) federal law
commits the supervision of national banks' banking activities exclusively
to OCC (except where federal law provides otherwise) and that (2) states
may not use judicial actions as an indirect means of regulating those
activities.6 The banking activities rule preempts categories of state laws
that relate to bank activities and operations, describes the test for
preemption that OCC will apply to state laws that do not fall within the
identified categories, and lists

certain types of state laws that are not preempted.7 In proposing the
banking activities rule, OCC stated that it needed to provide timely and
more comprehensive standards about the applicability of state laws to
lending, deposit taking, and other authorized activities of national banks
because of the number and significance of questions banks were posing
about preemption in those areas.8

However, opponents such as consumer groups and state legislators feared
that the preemption of state law, particularly concerning predatory
lending practices, would weaken consumer protections. They noted, in
commenting on the preemption rules, that the rules would prevent states
from regulating operating subsidiaries of national banks and would
diminish the states' ability to protect their citizens. Prior to OCC's
issuance of the rules, consumers who had complaints with national banks or
their operating subsidiaries sometimes filed complaints with state
officials who tried to resolve them, although consumers could have filed
such complaints with OCC, and many did. Since OCC issued the rules, some
state officials refer all complaints involving national banks to OCC while
others, through informal arrangements, still try to assist consumers. It
is too soon to assess the practical effect of the rules on a consumer who
has a complaint with a national bank, given the short time frame and legal
questions raised by opponents to the rules. We address some facets of the
rules' practical effect on consumers in this report and will address
others in our subsequent report on the impact of the rules on the dual
banking system and consumer protection.

One of OCC's strategic goals is to ensure all customers have fair access
to financial services and are treated fairly. The agency's strategic plan
lists objectives and strategies to achieve this goal, including fostering
fair treatment through OCC guidance and supervisory enforcement actions
where appropriate, and providing an avenue for customers of national banks
to resolve complaints. The main division within OCC tasked with handling
consumer complaints is CAG. This group is a part of OCC's Office of the
Ombudsman, a distinct division of OCC that operates independently of the
agency's bank supervision function. In addition to CAG, the Office of the
Ombudsman oversees (1) the national bank appeals process-a forum by which
banks may appeal the results of OCC's supervisory examinations and ratings
and (2) a postexamination questionnaire to obtain feedback from banks. The
Ombudsman reports directly to the Comptroller and is a member of OCC
senior management team (the Executive Committee) that includes the Chief
Counsel, the Chief National Bank Examiner, and the Senior Deputy
Comptrollers for Large Bank and Mid-size/Community Bank Supervision.

CAG's mission is to ensure that bank customers receive fair treatment in
resolving their complaints with national banks. According to the 2004
Report of the Ombudsman, CAG carries out its mission by providing services
to three constituent groups: (1) customers of national banks-by providing
a venue to resolve complaints, (2) OCC bank supervisors-by alerting
supervisory staff of emerging problems that may result in the development
of policy guidance or enforcement action, and (3) national bank
managers-by providing a comprehensive analysis of complaint volumes and
trends. The Deputy Ombudsman manages and directs CAG operations. Since
1999, CAG has employed about 40 full and part-time staff, and it had 49
staff in 2005. The annual operating and personnel budget attributable to
CAG operations more than doubled from $2.6 million to $5.4 million between
1999 and 2005. According to our analysis of CAG budget and staffing data,
the budget's growth has outpaced that of staff due to the design and
implementation of its computer network.

OCC's Handling of Consumer Complaints Is Similar to That of Other
Regulators

OCC's process for handling and resolving consumer complaints is similar to
that of the other three federal bank regulators. We identified six
distinct steps that all of the federal regulators follow when processing
consumer complaints. Unlike two of the federal regulators, OCC lacks a
process for collecting feedback from consumers it assists. OCC and the
other federal regulators also resolve complaints in a similar fashion,
with the outcomes generally falling into the same categories. While the
most common resolution of complaints was that of the regulator providing
the consumer additional information, regulators also consider a complaint
resolved if it is withdrawn or tabled due to litigation, or if the
regulator determines that the bank did, or did not, make an error. The
volume of complaints OCC handles is generally in proportion to the assets
of the national banks it supervises. From 2000 through 2004, OCC handled
on average more than twice as many complaints as the other regulators
combined. OCC and other federal regulators have similar goals in
responding to consumer complaints in a timely fashion. However, by
combining consumer inquiries and consumer complaints in determining
whether it met its timeliness goals, OCC overstated its performance on
these goals.

OCC and Other Federal Regulators Follow the Same General Process in
Resolving Consumer Complaints

All four federal regulators we reviewed take similar approaches in
processing consumer complaints about banks they supervise.9 The regulators
define their role as a neutral arbiter between consumers and the banks
they regulate when processing complaints. For instance, the 2004 Report of
the Ombudsman states that CAG's role is to be neutral in answering
questions and offering guidance on applicable banking laws, regulations,
and practices and that it should not be an advocate for either the bank or
consumers. As illustrated in figure 1, each regulator generally follows
six distinct steps in processing a complaint:

o The consumer submits the complaint;

o The regulator determines if the bank is under its supervision;

o The regulator forwards the complaint to the bank;

o The bank sends a response to the regulator;

o The regulator examines the response to see if it completely addresses
the consumer's complaint; and

o The regulator notifies consumer of complaint's outcome.

Figure 1: Consumer Complaint Processes of Selected Banking Regulators

Although consumers may initially contact OCC or other regulators about
their complaints via various methods, such as telephone, mail, fax, or, in
some cases, E-mail, regulators normally do not formally accept a complaint
until they have received a signed complaint form or letter.10 After a
regulator receives a formal complaint, it must then determine if the bank
involved is under its jurisdiction. If not, then the regulator determines
who is the appropriate regulator and provides the consumer with contact
information or forwards the complaint. Once the appropriate regulator
receives the complaint, it forwards the complaint to the bank. OCC uses a
secure Web-enabled application-CAGNet11-that permits it and participating
national banks to send and receive documents and images electronically.

Banks have a set period of time to respond to a complaint, though the
period varies among regulators. Among the four federal regulators, the
time allowed for initial response ranges from 10 to 20 days, with OCC
requesting a response within 10 days.12 All of the regulators permit the
banks to request additional time to review the complaint or compile
necessary information. After completing its review of the complaint, the
bank sends a response to the regulator. Often, the bank responds
concurrently to the consumer, since the consumer is the bank's customer.
After receiving the bank's response, each regulator examines it to
determine if the consumer's complaint has been completely and
appropriately addressed. At this step, the regulator examines the
complaint and response to determine if any additional follow-up is
necessary by its supervisory or legal staff. If it is not satisfied with
the bank's response, then the regulator requests additional information or
clarification from the bank. Once satisfied with the bank's response, the
regulator notifies the consumer about the outcome of the complaint.13

OCC Does Not Seek Feedback from Consumers on Services Provided

Of the four federal regulators, two offer consumers a method for providing
feedback on the complaint process once the regulator has notified the
consumer of the outcome. The Federal Reserve and FDIC offer consumers a
feedback survey once their complaints have been resolved. The Federal
Reserve mails a satisfaction survey, while FDIC directs consumers to a
Web-based survey. Federal Reserve officials explained that the Federal
Reserve has surveyed consumers since the mid 1980s and can link individual
surveys back to original complaints, but the agency has not analyzed the
aggregate data or used any findings from the surveys to modify its
complaint-handling process. However, Federal Reserve officials explained
that sometimes specific survey results are shared with staff who worked on
the complaint or with management to better target staff training.

Neither OCC nor OTS has any formal mechanism to measure satisfaction with
the consumer complaint process (though officials from both agencies
explained that they receive many letters expressing both satisfaction and
disappointment with their services). OTS officials explained that the
small number of complaints they receive does not warrant the resources
necessary to implement a customer satisfaction survey.

Like other federal agencies, OCC measures and reports on certain aspects
of its performance in accordance with the Government Performance and
Results Act of 1993 (GPRA).14 According to the 2004 Report of the
Ombudsman, OCC measures the effectiveness of its supervisory process
through an examination questionnaire, which is provided to all national
banks at the conclusion of their supervisory cycles. The questionnaire is
designed to gather direct and timely feedback from banks on OCC's
supervisory efforts. While the questionnaire is a useful step to help OCC
assess its performance regarding its national bank clients, OCC does not
have a comparable tool to gather information regarding its performance in
assisting the consumers of national banks. Collecting information about
how individual consumers assess the assistance CAG provides in answering
their questions or helping resolve a complaint with their bank could be
equally helpful for OCC to measure its performance in ensuring fair
treatment of bank customers. OCC officials stated that they understand the
value of measuring the satisfaction of consumers who they assist and are
evaluating several different options for obtaining consumer feedback.

Outcomes of Complaints Handled by All of the Federal Regulators Fall into
the Same General Categories

OCC and the other three federal regulators offer consumers similar
resolutions in their final responses to complaints. In analyzing the
complaint data across the four federal regulators, we found that the
regulators, after investigating complaints, generally resolved them in one
of four ways, as shown in order of decreasing frequency: (1) providing the
consumer with additional information without any determination of error,
(2) withdrawing the complaint or tabling complaints already in litigation,

(3) finding that the bank had not made an error, and (4) finding that the
bank had made an error.15

Regulators Provided Consumers Additional Information

Between 2000 and 2004, the most common resolution of complaints handled by
all federal regulators was that consumers were provided more in-depth or
specific information about their complaints (see fig. 2).

Figure 2: Complaint Resolutions of Selected Federal Regulators

Note: Columns may not add to 100 due to rounding. Bars without numbers are
less than 4 percent.

In these cases, the regulator's investigation revealed that the consumer
required additional information to understand his or her situation, and
the regulator made no determination of whether the bank or the consumer
had made any error. For example:

o The regulator might explain to the consumer that the complaint involves
a contractual dispute that is better handled by a court. For instance, in
one case, OCC informed a consumer to consider seeking legal counsel since
the matter between the bank and the consumer involved a factual dispute
concerning the interest rate on a credit card. The bank, based on its
review of credit information, raised the interest rate on the consumer's
credit card after providing the consumer adequate notice about the
impending change to the terms of credit, which included information on how
to opt out of the credit card if the consumer did not agree to the new
terms. The consumer complained that the bank failed to provide adequate
notice and, thus, improperly raised the interest rate. After reviewing the
relevant documentation from both the consumer and bank, OCC informed the
consumer that since the bank claimed to have sent the proper notice to the
consumer and the consumer denied receiving the notice, the agency could
not judge which party was correct. Therefore, OCC counseled the consumer
to consider taking legal action should the consumer want to pursue the
matter further.

o The regulator may determine that rather than wrongdoing, there was a
miscommunication between the bank and its customer.16 For example, in one
case involving a checking account, a bank charged a maintenance fee to an
account with a zero balance. The checking account had a minimum monthly
maintenance fee, which the bank deducted automatically from the checking
account. When the bank charged the monthly maintenance fee and the balance
became negative, the bank charged an overdraft fee. The consumer
understood that overdraft protection should cover the maintenance fee but
did not recognize that overdraft protection would result in an additional
fee. After OCC forwarded the complaint to the bank, the bank decided to no
longer hold the consumer liable for the delinquent monthly maintenance and
overdraft fees that accumulated. OCC viewed the matter as miscommunication
between the bank and consumer.

o The regulator may determine that the complaint should be forwarded to a
different regulator. When appropriate, all four federal regulators
directly refer consumers, or forward their complaints, to other federal
and state agencies. We found that three federal regulators-the Federal
Reserve, FDIC, and OCC-referred a considerable number of consumers who
contacted them to another federal agency to have their complaints or
inquiries addressed. For example, from 2000 through 2004, FDIC referred
about 40 percent of the consumers who contacted them with a complaint to
another federal agency; the Federal Reserve and OTS referred about 53
percent and 3 percent, respectively. OCC, during this same period,
referred approximately 38 percent of its callers to another federal
agency.17

Complaint Is Considered Withdrawn or Tabled Due to Litigation

For OCC, the second most frequent type of complaint resolution was
"withdrawn"18 or "complaint in litigation," while it was the least common
for the Federal Reserve and OTS and the third most common for FDIC.19
These are complaints that, by and large, the regulator is not able to
address. None of the federal regulators address complaints that they find
are already involved in any legal proceeding at the time the consumer
contacts them. In the case of OCC, one of the major reasons for complaints
being withdrawn, according to OCC officials, is that the consumer does not
send in the requested information, such as the signed complaint form or
letter OCC requires before it begins any complaint investigation. As shown
in figure 2, in 2000, OCC closed about 17 percent of complaint cases
because it did not receive requested information or the complaint was in
litigation, while in 2004, OCC closed nearly 37 percent of these cases for
the same reasons. One reason for this increase, OCC officials explained,
is that in mid-2000 they made changes to the database that tracks
complaints. In particular, after the changes, the database coded
complaints as "withdrawn" when the regulator did not receive information
it requested from a consumer within 30 days. Previously, this type of
complaint remained opened indefinitely or until the consumer provided the
information. OCC's policy is to reopen any complaint cases if the consumer
sends in the requested information after 60 days from the day OCC made the
request for additional information. Since OCC does not open a new case in
such instances, this policy negatively impacts OCC's average in meeting
its timeliness goals for resolving complaints.

According to OCC officials, another reason for this increase is OCC's
policy of encouraging consumers to contact the bank prior to filing a
complaint with OCC.20 It is typical for the staff to provide a case number
and complaint form to the consumer to use if he or she is unsuccessful in
resolving the problem with the bank. OCC officials explained that in many
instances they assume that the bank and the consumer has worked the
problem out since the consumer never sends in a completed complaint form.
In these instances, OCC codes the complaint as withdrawn because the
consumer did not submit a completed complaint form. OCC officials
explained that this coding procedure has an advantage. Although the
complaint has been withdrawn, the information that the consumer provided
through the initial contact is available to examination staff as well as
to the bank, and it provides insight to potential issues at the bank.

Regulators Determine That Bank Was Not in Error

This category of complaint resolution was third for OCC in terms of
frequency, while it was second for the other regulators. The regulators
frequently resolve cases by finding that banks did nothing wrong, and the
consumers do not have legitimate complaints, that is, the bank was
correct. For example, in one case, OCC informed the consumer that an
incorrectly completed deposit slip led the consumer to believe the bank
improperly deducted funds from the consumer's checking account. OCC had
the bank provide the consumer copies of the deposit slip and checks
recorded on the slip, which showed the consumer inaccurately transcribing
the amounts from the checks to the deposit slip.

Regulators Determine That Bank Was in Error

"Bank Made an Error" was the least common outcome for complaints resolved
by OCC and FDIC and next-to-least common for the other two regulators. The
bank error category includes both regulatory violations and problems
consumers had with the bank's customer service. In these instances, the
regulators determine that the bank did make an error in how it provided
its products and services to the consumer. For example, in one case, OCC
determined that a bank did not properly respond when fraudulent charges
were identified on a consumer's credit card account, and the bank did not
reverse them. The complaint was resolved when the bank reimbursed the
consumer's credit card account.

OCC Handles a Greater Volume of Complaints Than the Other Bank Regulators

Likely reflecting the greater volume of bank assets under its supervision,
OCC handled more complaints from 2000 through 2004 than FDIC, OTS, and the
Federal Reserve combined. During this time period OCC processed, on
average, 10 complaints for every billion dollars under its

supervision, while FDIC averaged 6 complaints, the Federal Reserve 3
complaints, and OTS 5 complaints (see fig. 3).21

Figure 3: Number of Complaints Per Billion Dollars in Assets under
Supervision of Selected Federal Regulators

From 2000 through 2004, credit cards were the most common product involved
in complaints addressed by OCC, FDIC, and the Federal Reserve.22 According
to officials from OCC and FDIC, complaints about credit cards will
continue to remain high because consumers have multiple credit cards and
use them frequently. During this same time period, the assets of banks
under OCC's supervision that issued credit cards averaged $221 billion,
while the total assets of the banks under the supervision of the other
three regulators averaged $87 billion.23 Given these numbers, it would
appear that the volume of complaints OCC handles is not out of proportion
to the bank assets under its supervision, especially given that OCC
supervises several banks that specialize in issuing credit cards. Although
OTS also receives complaints about credit cards, during the same time
period it received the most complaints about home mortgage loans. This is
not exceptional, given that mortgage lending is a leading activity of the
thrifts and savings banks OTS supervises.

Federal Regulators Have Similar Timeliness Goals, but OCC Overstated Its
Timeliness in Resolving Complaints by Including Inquiries in Its
Calculation

Consistent with GPRA and its implementing guidance, OCC provides
information in its annual report that includes performance measures,
workload indicators, customer service standards, and the results achieved
during the fiscal year. OCC aims to resolve complaints within 60 days. The
Federal Reserve, FDIC, and OTS also have a goal of resolving complaints
within 60 days. In fiscal years 2003 and 2004, OCC's target was to close
80 percent of all complaints within 60 calendar days of receipt. According
to its 2003 annual report, OCC exceeded its target by closing 87 percent
of complaints within 60 days. However, our analysis of calendar year data
that OCC provided to us shows that only about 66 percent of complaints
were closed within 60 days. Similarly, the 2004 annual report states that
OCC closed 74 percent of complaints within the established time frame,
while our analysis of OCC's data shows that in calendar year 2004, it was
approximately 55 percent. The discrepancy between the percentages reported
in the annual reports and our analysis cannot be entirely explained by the
fact that we reviewed calendar year data and the annual reports include
fiscal year data.24

OCC officials explained that the differences between its reported figures
and our analyses are the result of differences in the consumer complaint
data on which each is based. The annual reports stated that the agency
closed 69,044 complaints in 2003 and 68,104 complaints in 2004. However,
these totals include inquiries that the agency handled, not just
complaints. Inquiries-which may be questions or comments subject to an
immediate, simple answer-can typically be handled at the initial contact
between the consumer and OCC, while some complaints can take well over the
60-day time frame to investigate and resolve. Therefore, by including both
inquiries and complaints in determining whether it met its timeliness
goals, OCC overstated its performance, as measured by the percentage of
complaints resolved within the target time frame. OCC officials explained
that the data in the annual reports were presented using the generic term
"complaints" to simplify the amount of information given to the reader.

As OCC officials explained, some complaints involve more complex products,
such as mortgages. Also, depending on the nature of the complaint, such as
allegations of fair lending abuse, some investigations take more time. All
four regulators have a percentage of complaints that they cannot resolve
within their established time frames. OCC officials also explained that
the time used in resolving complaints is a result of how it handles
consumer appeals. Since OCC considers an appeal a reopened complaint, the
start date for calculating the number of days it takes to resolve a
complaint reverts back to the date it was originally filed with the
agency. This practice had the affect of adversely impacting the measure of
OCC's timeliness in meeting its timeliness goals.

CAG's Consumer Complaint Data Inform OCC's Bank Supervisory Activities

According to the 2004 Report of the Ombudsman, CAG's role includes
providing information to OCC examiners and the banks to "elevate" the
issues raised by consumers and make them visible to OCC staff involved in
supervision. The complaint data CAG collects, summarizes, and disseminates
to OCC's examiners helps the examiners to identify banks, activities, and
products that require further review or investigation. OCC supervision
guidance requires examiners to consider consumer complaint information
when assessing a bank's overall compliance risk and ratings and when
scoping and conducting their examinations.25  OCC guidance also requires
that the banks have processes in place to monitor and address consumer
complaints.

According to compliance examiners we interviewed, the examiners learn
about complaints primarily through a Web-based application called CAG
Wizard. The application allows examiners to access near real-time consumer
complaint data. Examiners can review specific complaints, generate
standard reports or conduct customized searches of the data. The
information available to examiners includes data on all of the banks OCC
supervises, not just those where an examiner is currently assigned. With
this capability, examiners can also generate similar reports on similar
institutions. Examiners with whom we spoke said CAG Wizard is a useful
tool. They reported using the application to prepare for an examination or
when developing the annual risk assessment of the bank. Often, the
examiners compare the complaint data that banks maintain with the data CAG
provides through CAG Wizard.

OCC examiners and CAG staff also collaborate on other activities. For
example, CAG staff may alert examiners if there are certain types of
complaints that warrant further attention or if patterns emerge in the
overall complaint volume about the bank. CAG officials and OCC examiners
told us that there is an open line of communication between their
respective staffs. For example, examination staff at one national bank
undertook a specific investigation based on a complaint forwarded from
CAG. Examination staff specifically requested and reviewed information
from the bank concerning the advertising of a product and the bank's
associated fees. Examiners can also forewarn CAG staff about any impending
bank actions related to products, services, or policy that may cause
consumers to complain. For instance, the bank might be changing the terms
on a credit card product, and as such, sending a notification to
customers. Such mailings typically lead to an increase in calls to CAG,
but with forewarning from the examiners, CAG can have more accurate
information on hand to use in assisting bank customers who call with
questions.

OCC also uses consumer complaint data collected by CAG to formulate
guidance for national banks. Topics of these guidelines cover various
aspects of banking, including risks involved with using third-party vendor
partners (e.g., when a bank partners with another business to provide a
service to bank customers), predatory lending, and credit card practices.
For example, CAG received a significant number of consumer complaints
about aggressive marketing tactics and inadequate disclosures related to
credit repair products offered through third parties. In response to the
complaints received, OCC issued guidance in 2000 warning banks about

risks posed to them by engaging third-party vendors for products and
services linked to the credit cards that banks issue.26

CAG provides the largest national banks with aggregate information on the
complaints about them. Also, CAG staff meets annually with bank officials
of at least the 10 banks that received the most complaints during the
previous calendar year. In 2004, the 10 banks with the most complaints
accounted for 81 percent of all the complaints that OCC received. At these
meetings, CAG officials discuss significant issues, such as data on
complaint volume and trends, comparable data for the bank's peers and the
industry, and current issues the bank should address. Prior to these
meetings CAG officials consult with examiners on what specific issues
warrant additional analysis or attention by bank officials. According to
examiners, they attend the meetings and offer input on any specific topics
CAG should highlight. Most bank officials with whom we spoke also said
that the meetings with CAG were useful in helping them address customer
satisfaction.

Despite OCC Efforts, State Officials and Consumer Advocates Still Have
Concerns About OCC's Commitment and Capacity to Address Consumer
Complaints

Many of the state officials and advocates with whom we spoke continue to
be concerned that OCC does not have the necessary commitment or capacity
to provide consumers with sufficient protection against violations of
laws. Unlike consumer advocates and state attorneys general, OCC defines
itself as a neutral arbiter in terms of assisting consumers. Yet state
officials and consumer advocates perceive OCC as being pro-bank, not
neutral, and as such, they may hesitate to forward complaints on behalf of
their citizens or clients. Some officials were unaware of CAG's process
for handling consumer complaints; however, OCC recently took steps to
publicize its customer assistance function. State officials were concerned
about a perceived unwillingness by OCC to share information about the
outcomes of complaints. Other groups with whom we spoke view the CAG's
centralized location as a shortcoming because CAG staff, they said, could
not be familiar with current lending practices that pose high risk to
consumers or to problematic institutions in local areas. OCC has taken
some steps to provide flexibility in operations to meet any upcoming
increases in demand for its services.27

While State Officials and Advocates We Contacted Remain Concerned About
OCC's Commitment to Consumer Protection, Some Were Unaware of Its Consumer
Protection Efforts

As we previously reported, OCC received close to 3,000 letters commenting
on the banking activities rule, with the majority of commenters opposed to
the rule and citing concerns about weakened consumer protections.28
Comments from state officials argued that a lack of state regulation would
create "an enormous vacuum of consumer protection without adequate federal
regulation to fill the gap." Many of these commenters suggested that OCC
needed to do more, not less, to protect consumers. These views were echoed
by those with whom we spoke in preparing this report, as were concerns
that the visitorial powers rule severely limits the advocates' and state
officials' abilities to assist their constituents and clients, thereby
exposing them to potential consumer protection violations. The rule,
according to OCC, clarifies that federal law commits the supervision of
national banks exclusively to OCC. Because advocates work to advance the
interests of their clients, they do not see their role being adequately
filled by OCC, or CAG, which defines itself as a neutral arbiter. Although
part of OCC's mission is to ensure fair access to financial services and
fair treatment of bank customers, the perception remains, among the groups
with whom we spoke, that OCC is "on the side" of the banks. Some advocates
with whom we spoke were unclear about how OCC processes complaints through
CAG and what assistance it can provide consumers. Some of the state
officials and advocates with whom we spoke were unaware of the CAG, its
process for responding to consumer inquiries and complaints, or the help
it can provide. Some of the state officials and advocates with whom we
spoke said that they are reluctant to refer clients to the agency, given
their level of mistrust of OCC and lack of knowledge about its customer
assistance function. However, CAG data from November 2001 to September
2005 show referrals from all 50 state banking departments and 49 state
attorneys' general offices.

OCC officials said that they have several ongoing initiatives aimed at
better informing the public about their services. For example, OCC
recently revised its consumer complaint brochure. The brochure has
"frequently asked questions" about OCC and the role it, and CAG
specifically, play in resolving consumer complaints. This new version will
be printed in Spanish and English. As of November 2005, OCC said they had
distributed a small number of brochures to each national bank. In addition
a "camera-ready" version will be made available to banks so that they can
print more copies if they choose. However, OCC officials said they will
not require the banks to display or distribute the brochures. In addition,
officials said they do not have a distribution plan to give the brochure
directly to the general public, although they did give a small supply to
the Better Business Bureaus.29 We note that the information in the
brochure is available on the OCC Web site.

OCC also informs the public about CAG services and performance through the
Annual Ombudsman report. This report is available on OCC's Web site and
contains information on total case volume handled in the previous year, as
well as a general discussion about complaint volumes and trends. Also, in
2004, OCC redesigned its Web site to enhance the consumers' capability to
access information and learn more about its services. The redesigned Web
site provides a searchable list of national bank operating subsidiaries
that do business directly with consumers, which allows individual
consumers to determine if an entity is associated with a bank supervised
by OCC. However, some of the consumer groups with whom we spoke said that
one limitation of this list is that it does not have dates attached to the
list of operating subsidiaries indicating when they became associated with
the bank, which can be important in trying to identify the parties
involved in a transaction at a particular time. OCC officials said that
they will address any complaint brought against a national bank and its
operating subsidiaries, regardless of when the transaction took place.

OCC officials also said CAG staff are engaging in a series of outreach
meetings with state government organizations and Better Business
Bureaus.30 For example, in November 2004, senior CAG officials met with
one state attorney general's office to demonstrate how OCC handles
consumer complaints. That state attorney general told us that it was clear
from the meeting that the CAG officials seemed earnest in wanting to
cooperate, even though the two sides might still disagree on the
appropriate roles for OCC and the states in protecting consumers. OCC
officials said they intend to hold similar meetings with other state
attorneys general and state banking departments, although none were
planned as of November 2005. OCC staff is also engaged in outreach efforts
with the Better Business Bureaus, which includes conference presentations,
as well as meeting with several bureaus in order to educate them on OCC's
customer assistance services and to enable OCC to better understand the
nature and volume of complaints received by the Better Business Bureaus
involving national banks. In addition, OCC officials are requesting that
Better Business Bureaus update their Web sites to include a link to OCC.
Also, during fiscal year 2005, representatives from CAG and OCC's
Community Affairs office held outreach meetings with national consumer
group organizations, such as the Consumer Federation of America, American
Association of Retired Persons, and the National Association of Consumer
Agency Administrators.

State Officials View OCC's Efforts to Share Information About Complaint
Outcomes as Unsatisfactory

Among some of the states' attorneys general with whom we spoke, there is
the perception that OCC is not willing to cooperate in protecting
citizens, as evidenced, in part, by their perception of OCC's
unwillingness to share information on consumer complaint outcomes. Most
state attorneys general staff with whom we spoke said they are willing to
forward complaints to OCC, but they have not been receiving what they
perceive to be adequate information on the outcome of referrals. According
to OCC officials, it is agency policy to send the consumer a letter
acknowledging receipt of a complaint submitted to OCC. If a complaint is
forwarded to OCC from another agency, it is OCC's policy to send a copy of
the acknowledgment letter to the forwarding agency. Nonetheless, some
state attorneys general and other state officials said that, in their
experience, OCC does not provide any information about the resolution of
the complaints, which is what state officials want. However, in commenting
on a draft of this report, OCC officials told us that if state officials
request information on the resolution of an individual complaint, OCC will
notify them of the outcome. Specifically, they said that an attorney from
OCC's Community and Consumer Law Division will contact the state official
once a case is closed and will discuss the case. Although it is not a
written policy, OCC officials told us these contacts are common practice.

In July 2003, OCC suggested a "Memorandum of Understanding" (MOU) between
itself and state attorneys general and other relevant state officials that
could, in OCC's words, "greatly facilitate" its ability to provide
information on the status and resolution of specific consumer complaints
and broader consumer protection matters state officials might refer to
them. In his letter prefacing the MOU, the former Comptroller of the
Currency stated that both attorneys general and OCC "have a mutual
interest in ensuring that consumers are protected from illegal, predatory,
unfair, or deceptive practices." To that end, the Comptroller urged
attorneys general to send individual customer complaints directly to OCC.
He also asked state officials to refer concerns about broader consumer
protection issues to OCC saying,

The MOU was sent to all state attorneys general as well as the National
Association of Attorneys General (NAAG) and the Conference of State Bank
Supervisors (CSBS). Some of the officials from banking departments and the
offices of attorneys general that we interviewed as well as
representatives of CSBS said they viewed OCC's proposed MOU as
unsatisfactory because, in their view, it essentially favored the OCC. In
a written response to the OCC Comptroller, declining to sign the MOU, one
state's attorney general described the proposal as one where "states send
complaints to OCC with the idea that, at some later date, we would have
the right to inquire about the results of the 'resolution' of the matter
obtained by OCC." In addition, some of the state officials with whom we
spoke believed that signing the proposed MOU would amount to a tacit
agreement to the principles of the banking activities and the visitorial
powers rules.

According to OCC, states' attorneys general-in informal comments on the
proposed MOU-felt that the proposal was unilateral, imposing certain
conditions upon states that received information from OCC, but not upon
OCC when it received information from state officials. Also, OCC noted
that the proposed MOU did not provide for referrals from OCC to state
agencies of consumer complaints OCC received pertaining to state regulated
entities. Therefore, in 2004, OCC attempted to address these concerns in a
revised MOU, which it provided to CSBS and the Chairman of the NAAG
Consumer Protection Committee. According to OCC,  the revised MOU
expressly says that an exchange of information does not involve any
concession of jurisdiction by either the states or by OCC to the other.
Specifically, it states,

Only one state official signed the original 2003 Memorandum, and according
to OCC, to date, no additional state officials have signed the 2004
version.

Others Raise Concerns About CAG's Centralized Operations, Although OCC
Cites Advantages

Consumer groups also expressed misgivings about forwarding complaints to
OCC. Many of the groups with whom we spoke viewed CAG's centralized
location as a shortcoming because they believe that the CAG staff thus
could not be familiar with current lending practices that pose high risk
to consumers or problematic institutions in local areas. The consumer
advocates we interviewed said an in-depth understanding of local real
estate conditions was necessary to prevent predatory lending abuses.
Furthermore, they said that OCC's 60-day time frame is too long to
effectively address many of their clients' acute needs, such as when
immediate action is needed to stop a foreclosure proceeding. We note
however, that the other federal bank regulators and three of the six state
regulators with whom we spoke all have a 60-day goal for resolving
complaints.

According to OCC officials, the agency centralized its consumer operations
in Houston because it offers efficiency advantages. FDIC officials said
they are consolidating their complaint handling operations for the same
reasons. OCC examiners we interviewed also pointed out that a central
facility makes sense, given that national banks operate across state lines
and have so many customers in multiple markets. According to CAG and bank
supervision staff, funneling data to, and analyzing it in, one location
provides more potential for seeing national trends and potential problems.

However, there are also potential drawbacks to having only one operational
facility available for any such customer function, as it increases the
likelihood that there might be disruptions in service. For example,

during Hurricane Rita in September 2005, telephones were not staffed for 4
days at CAG, due to the evacuation of Houston.31 However, consumers were
able to submit complaints by either E-mail or fax. During that period, OCC
received 14 faxes opening new cases, as well as 184 E-mails-34 from
bankers and 150 from consumers. Of those complaints from consumers, 16
were from Members of Congress. OCC staff said these numbers are in-line
with normal activity levels. When we asked about the closure, the
Ombudsman replied that he decided to obey the evacuation notice issued by
Houston-area officials, and while this may have resulted in some backlog
of cases, his first priority was ensuring the safety of the Houston OCC
employees.

In December 2005, OCC began seeking private-sector support for the CAG
facility, in order to expand its telephone service hours. This expansion
will give OCC the ability to quickly expand CAG's telephone operating
hours in the event of an emergency, and because the third-party vendor
will be located outside of Houston, those staff will be able to help OCC
continue to serve consumers, even if the Houston office is unable to
operate.

Some Groups and Officials Have Concerns About Complaint Handling Capacity,
and OCC Plans to Increase Capacity

Some consumer groups and state officials stated that the recent banking
activities and visitorial powers rules could potentially increase the
number of complaints OCC receives, since now OCC will more likely handle
all complaints pertaining to national banks and their operating
subsidiaries. These groups and officials argued that OCC did not have the
capacity to adequately handle any new volume. Furthermore, they contend
OCC could not match the resources (i.e., personnel and hours of
operations) of state banking departments, consumer credit divisions, and
offices of state attorneys general that currently work to resolve
complaints and, more broadly, to identify fraudulent and abusive
practices. However, we note that state banking departments and state
attorneys general handle other types of consumer complaints, such as
complaints about automobile dealers, mortgage brokers, and check cashers.

Since OCC issued the preemption rules in January 2004, the volume of
complaints, according to CAG data, has remained fairly steady. In fact,
between 2000 and 2004 complaints received by OCC have decreased 37
percent. According to OCC staff, complaint volume was high around 2000 due
to a settlement with a large national bank on credit card disclosure
issues. CAG data for 2005, while available only through June at the time
of our review, indicate a potential increase in the volume of complaints
when compared with 2004.32 CAG officials believe that the conversion from
state charters to federal charters of two large banks in 2004 accounts for
the increase.33 That is, customers of those banks who had complaints
previously contacted the appropriate state regulator and either the
Federal Reserve or FDIC, which jointly regulate state chartered banks.
After the banks converted to federal charters, customers contacted OCC
concerning any complaints.

These data suggest that an increase to levels of complaints experienced
before the 2004 preemption rules could be absorbed by current OCC
resources. Further, CAG data show that the total number of complaints, in
any given year, received from state offices, including banking departments
and states' attorneys generals, is a relatively small percentage of the
total number of complaints; therefore, any increase in referrals to OCC
from those offices might not have a dramatic effect on total overall
volume. Nevertheless, concerns that OCC resources were not equivalent to
those of a state attorney general or state banking department were still
prevalent among some of those with whom we spoke at the state level.
However, OCC officials said that they have staff-beyond CAG-that work on
consumer protection issues, including bank examiners in compliance
supervision and attorneys in the Community and Consumer Law and
Enforcement and Compliance divisions.

Until 2004, OCC staffed the CAG's toll-free telephone line 4 days a week,
8 hours a day, but now has service 5 days. One measure OCC uses to gauge
how effectively it is servicing customers is the wait time for callers to
speak with a CAG representative. OCC officials told us their goal is to
answer 80 percent of CAG calls within 3 minutes or less. According to OCC
data,

between June 2004 and November 2005, CAG met this goal, although wait
times generally were longer for Spanish speaking services.34 In addition,
to accommodate the expected increase in call volume due to recent charter
conversions, OCC has recently hired more CAG specialists. Lastly, in
December 2005, OCC began seeking private-sector support for the CAG
facility, in order to expand its telephone service hours. A third-party
vendor will handle routine matters, such as providing materials to satisfy
noncomplex questions, obtaining information from callers that is necessary
to open a case file, routing the caller to the appropriate OCC specialist
and providing the status of an open case. In addition, the vendor's
employees will be able to direct the many callers who have concerns that
pertain to institutions not regulated by OCC to the appropriate regulator.
OCC plans to begin expanding the CAG's telephone hours of operation after
vendor selection and training is completed.

Conclusions

Overall, OCC's consumer complaint handling operations appear to be in-line
with practices of other regulators, with OCC handling a larger volume of
complaints than the other bank regulators, likely reflecting its position
as the supervisor of banks that account for the majority of the nation's
bank assets. A significant portion of OCC's and other regulators' work
involves providing or clarifying information for bank customers who have
questions and/or have misunderstood a bank product or service. Officials
from all four regulators said that assisting consumers through the
complaint process is an important part of their efforts to educate
consumers about financial products and services. Two of the federal bank
regulators collect some feedback from consumers who make complaints or
inquiries; OCC does not. In contrast, OCC does seek feedback from banks
after every examination, through a survey. Given that part of OCC's
mission is to ensure that consumers of national banks' products and
services are treated fairly and have fair access to financial services,
obtaining feedback from bank customers who contact CAG should be useful in
improving both its service to customers and helping banks to do likewise.
Moreover, federal standards reflected in GPRA require that government
agencies measure their progress toward goals, including those related to
serving the public. OCC measures its timeliness in serving consumers with
complaints and inquiries as one indicator of its performance and discloses
the results in reports that are publicly available. However, because those
reports combine data on complaints and data on inquiries-which are
questions or comments that are subject to an immediate, simple answer and
typically require less time to handle-they overstate OCC's performance in
meeting its timeliness goal for resolving actual complaints.

OCC appears to make appropriate use of the data CAG collects and analyzes
by informing banks about their performance in relation to consumer
complaints and by using the data to inform its examination and supervisory
activities. CAG's analysis of complaint data is presented to bank
officials annually and used to identify any concerns. OCC examiners
reported CAG data as useful tools in scoping examinations and in assessing
areas of risk. We documented instances when examiners' audit plans were
influenced by information from CAG. We also identified instances when
information gathered from CAG complaints and additional research by
supervisory staff contributed to the development of supervision policies
and guidance.

The concerns expressed by a broad range of consumer advocates and state
officials indicate some uneven understanding of OCC's process for handling
consumer complaints, possibly contributing to the lack of trust that the
agency will be aggressive in protecting consumers' interests. Because
these concerns may inhibit state officials or consumer advocates from
sharing information with or referring consumer complaints to OCC, they
could adversely affect the agency's effectiveness in regulating banks or
assisting bank customers who have complaints. Consumer advocates and
others are concerned about CAG's centralized location and its capacity to
handle complaints particularly if the volume of complaints should
increase. Recent efforts such as outreach to the Better Business Bureaus
and development of a revised brochure for consumers regarding CAG are
appropriate steps designed to better inform the public of its process and
services. However, the distribution plans for the brochure focus on the
banks and rely on them to share the brochure with bank customers, if the
banks wish. Given that the former Comptroller has acknowledged that OCC
and state officials "have a mutual interest in ensuring that consumers are
protected from illegal, predatory, unfair, or deceptive practices," it is
essential that OCC undertakes outreach to key state partners-regulators
and consumer advocates-in a manner that effectively and efficiently
informs the public, and especially customers of national banks, about what
CAG does and how state officials and OCC can work together to protect
consumers. Such efforts cannot only raise awareness among the states about
OCC's efforts and capabilities to assist consumers, it might help allay
the suspicion and mistrust we identified and construct a path for better
cooperation between OCC, state officials, and consumer advocates in the
future.

Recommendations

To identify ways to improve its process for handling consumer complaints
and inquiries and its efforts to better inform, educate, and serve bank
customers, we recommend that the Comptroller of the Currency take the
following three actions:

o Develop and implement a feedback mechanism to receive input and measure
satisfaction of bank customers who have used CAG services.

o Revise the data publicly reported on timeliness to reflect complaints
resolved within the 60-day goal separately from data reported on inquiries
resolved within the time frame.

o Develop and implement a comprehensive plan to inform bank customers,
consumer advocates, state attorneys general, and other appropriate
entities of OCC's role in handling consumer inquiries or complaints about
national banks. The plan could include such steps as directly distributing
an informational brochure to some bank customers and meeting with state
and local consumer advocates and appropriate state officials to describe
OCC's role and processes for assisting bank customers and others who raise
consumer protection concerns.

Agency Comments and Our Evaluation

We obtained written comments on a draft of this report from the
Comptroller of the Currency; they are presented in appendix II. OCC
generally concurred with the report and agreed with our three
recommendations. Specifically, OCC stated that a broader comparison of
consumer protection activities, including those of state agencies, would
have provided a clearer picture of protections available to consumers, but
it acknowledged that such a comparison was beyond the scope of our report.
Regarding the recommendations, OCC said it will develop and implement a
customer feedback mechanism to receive input and measure satisfaction of
those who have used CAG services. OCC also agreed to revise the data that
it publicly reports on timeliness to reflect complaints resolved within
the 60-day goal separately from data reported on inquiries. Finally, OCC
acknowledged that state officials may not be aware that it does have some
practices currently in place to inform state officials of the outcome of
consumer complaints, and therefore it will undertake additional outreach
to state agencies to make them aware of those options. Therefore, OCC
agreed with our recommendation that it develop and implement a
comprehensive plan to inform bank customers, consumer advocates, state
attorneys general, and other appropriate entities of its role in handling
consumer inquiries or complaints about national banks. OCC also provided
technical comments that we have incorporated, as appropriate.

As agreed with your office, unless you publicly announce the contents of
this report earlier, we plan no further distribution of this report until
30 days from the report date. At that time, we will provide copies of this
report to the Comptroller of the Currency and interested congressional
committees. We also will make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site at
h  ttp://www.gao.gov.

If you or your staff have any questions concerning this report, please
contact me at (202) 512-8678 or w  [email protected]. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on the
last page of this report. Key contributors are acknowledged in appendix
III.

David G. Wood Director, Financial Markets and    Community Investment

Scope and MethodologyAppendix I

To describe how the Office of the Comptroller of the Currency (OCC)
handles consumer complaints and to compare how its process compares with
that of other bank regulators, we interviewed officials in OCC's Customer
Assistance Group (CAG), as well as their relevant counterparts at the
Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and Office
of Thrift Supervision (OTS). We visited the CAG office in Houston, Texas,
and observed its work, including a review of 18 closed cases to learn what
information CAG collects from complaints.1 In addition, we reviewed CAG's
policies and procedures that relate to consumer complaint processing.

To describe how the four regulators resolve the complaints they handle, we
requested complaint data for calendar years 2000 through 2004.2
Specifically, we obtained information about the source and resolution
(outcomes) of complaints, the banking products or services involved, and
the amount of time the regulators took to resolve them. The data came from
four different databases: (1) OCC's REMEDY database, (2) the Federal
Reserve's Complaint Analysis Evaluation System and Reports (CAESAR), (3)
FDIC's Specialized Tracking and Reporting System (STARS), and (4) OTS'
Consumer Complaint System (CCS). We obtained data from OCC, the Federal
Reserve, FDIC, and OTS in September 2005 that covered calendar years 2000
through 2004. For purposes of this report, we sought to use REMEDY,
CAESAR, STARS, and CCS data to describe the number of cases each regulator
handled, what products consumers complained about, how the regulators
disposed of complaints, the number of complaints and inquiries the
regulators forwarded to other federal agencies, and how long it took the
regulators to resolve complaints. To assess the reliability of data from
the four databases, we reviewed relevant documentation and interviewed
agency officials. We also had the agencies produce the queries or data
extracts they used to generate the data we requested. Also, we reviewed
the related queries, data extracts, and the output for logical
consistency. We determined these data to be sufficiently reliable for use
in our report.

To make general comparisons about the source and resolution of complaints
between the four regulators, we created categories that include all of the
codes each regulator used to describe the sources and resolutions of
complaints. Officials of the Federal Reserve, FDIC, OTS and OCC agreed
with our categorization of their respective source and resolution codes.
The source categories were "consumer," "federal," "state," and "other."
The resolution categories consisted of (1) regulators provide consumers
additional information, (2) complaint is withdrawn or tabled due to
litigation, (3) regulators determine that bank was not in error, and (4)
regulators determine that bank was in error. Using the codes, we sorted
each of the regulators' complaints and tallied the number of complaints
that fell into each category. We also sorted the complaints by codes
indicating the type of bank product or service and confirmed for certain
products, such as credit cards, that the codes represented the entire
universe of complaints about the product. To describe how long it takes to
resolve a complaint, we requested from each regulator a frequency count of
how many complaints were resolved within and over 60 days.

To describe how CAG's efforts related to OCC's supervision of national
banks, we interviewed OCC officials and reviewed related documents about
how consumer complaint data influence bank examinations and guidance. We
interviewed CAG officials and examiners at six national banks concerning
how CAG shares consumer complaint information and how information is used
by bank examiners. In addition, we interviewed bank officials to learn
what information CAG provides the banks and how banks use the information.

To identify issues raised by consumer advocates and state officials, we
conducted site visits in four states: California, Georgia, New York, and
North Carolina. The site visits included interviews of state attorneys
general, banking regulators, banking officials and local consumer advocate
groups, as well as analysis of relevant documents. We also interviewed
state officials in two additional states, Iowa and Idaho.3 We selected
these locations, in part, based on their experience with state consumer
protection laws. In addition, we interviewed representatives of national
consumer groups, including the Center for Responsible Lending, Consumer
Federation of America, National Community Reinvestment Coalition, National
Consumer Law Center, and Association of Community Organizations for Reform
Now. Also, we interviewed representatives of national trade groups for
state officials in Washington, D.C., including the Conference of State
Bank Supervisors and the National Association of Attorneys General.

We conducted our work in California, Georgia, New York, North Carolina,
Texas, and Washington, D.C., from October 2004 through December 2005 in
accordance with generally accepted government auditing standards.

Comments from the Office of the Comptroller of the Currency Appendix II

GAO Contact and Staff AcknowledgmentsAppendix III

David G. Wood (202) 512-8678

In addition to those named above, Katie Harris (Assistant Director), Nancy
Eibeck, Jamila Jones, Landis Lindsey, James McDermott, Kristeen McLain,
Suen-Yi Meng, Marc Molino, David Pittman, Barbara Roesmann, Paul Thompson,
and Mijo Vodopic made key contributions to this report.

(250226)

www.gao.gov/cgi-bin/getrpt? GAO-06-293 .

To view the full product, including the scope

and methodology, click on the link above.

For more information, contact David G. Wood at (202) 512-6878 or
[email protected].

Highlights of GAO-06-293 , a report to the Subcommittee on Oversight and
Investigations, Committee on Financial Services, House of Representatives

February 2006

OCC CONSUMER ASSISTANCE

Process Is Similar to That of Other Regulators but Could Be Improved by
Enhanced Outreach

In January 2004, the Office of the Comptroller of the Currency (OCC)-the
federal regulator of national banks-issued rules concerning the extent to
which federal law preempts state and local banking laws. Some state
officials and consumer groups expressed concerns about a perceived loss of
consumer protection. GAO identified (1) how OCC's complaint process
compares with that of other federal bank regulators, (2) how complaint
information informs OCC's supervision of national banks, and (3) issues
that consumer advocates and state officials have raised about OCC's
consumer protection efforts and OCC's responses to the issues.

What GAO Recommends

GAO recommends that OCC (1) measure the satisfaction of consumers it
assists; (2) revise the way it measures and reports on its timeliness in
resolving consumer complaints; and (3) better inform the public, state
officials, and others of its role in handling consumer questions and
complaints.

OCC agreed with our conclusions and recommendations.

Overall, OCC's process for handling consumer complaints-carried out
primarily by its Customer Assistance Group (CAG)-is similar to that of the
other three federal bank regulators. However, unlike two of them, OCC
lacks a mechanism to gather feedback from consumers it assists that could
help it and the banks improve service to consumers. All of the regulators
resolve the majority of complaints by providing or clarifying information
for bank customers; less frequently, the regulators investigate and
determine that a bank or customer erred. OCC annually handles more
complaints than the other regulators, likely reflecting its position as
the supervisor of banks with the majority of the nation's bank assets.
OCC's complaint volume has not increased appreciably since it issued the
preemption rules. OCC, in accordance with federal requirements for
agencies to measure how they are fulfilling goals related to serving the
public, measures the percentage of complaints it resolves within 60 days,
a target other federal bank regulators also use. In reporting its
performance, however, OCC includes data on its response to consumers'
inquiries, which typically take less time, thereby overstating its
performance on timeliness of responses to complaints.

OCC's bank examiners use consumer complaint information collected by CAG
to plan or adjust examinations. CAG staff and examiners communicate
regularly regarding specific complaints or complaint volume and coordinate
these efforts to provide consistent messages when discussing
consumer-related issues with bank officials. In addition, complaint data
inform OCC policy guidance to banks, often addressing potential compliance
and safety and soundness risks banks face. CAG also provides feedback to
banks, focusing on complaint trends and potential risks that may impact
the banks' compliance with consumer protection laws or other issues.

Many of the state officials and consumer advocates GAO contacted during
visits to four states, as well as some representatives of national
organizations, nevertheless remain concerned about OCC's commitment and
capacity to address consumer complaints-especially given their perception
that the rules effectively ended protections provided by state laws and
processes. Specific concerns these officials cited include an inability to
obtain information on complaint outcomes, the fact that OCC handles
complaints from a single location, and the adequacy of CAG's resources.
OCC has taken actions addressing some of these concerns. The agency views
itself as a neutral arbiter and continues to provide an avenue for
consumers to file complaints related to national banks. OCC recently hired
additional CAG staff and has begun working with a third-party vendor to
expand telephone service from 7 to 12 hours a day. GAO noted that some
officials and advocates contacted were unaware of OCC's process for
handling consumer complaints and the assistance it can provide.
*** End of document. ***