Complaint resolution service publishes case studies, recall information and consumer news.

Virtually every bank examined for Community Reinvestment Act compliance during September passed, and none received the dreaded “Substantial Non-compliance” rating according to the FDIC.

Two banks received “Needs Improvement” ratings.

They are First Mutual Bank of Bellevue, WA and Pilgrim Bank of Pittsburg, TX.

The Act prohibits redlining, requiring that banks serve the entire community in which they are located.

Posted under Finance

SunTrust Mortgage ranks highest in customer satisfaction among home mortgage servicing companies, according to the J.D. Power and Associates 2005 Primary Mortgage Servicer Study released this month.

The inaugural study measures customer satisfaction with the nation’s largest mortgage services based on performance in four primary areas: billing, payment, annual account review/administration, and customer-initiated interaction.

SunTrust Mortgage performs particularly well in the areas of billing, payment and account review/administration. SunTrust is followed in the rankings by World Savings Bank, Bank of America and Countrywide Home Loans, respectively.

“With climbing interest rates suppressing refinance activity, customer recommendations to others has become even more vital to mortgage lending companies,” said Jeremy Bowler, senior director of the finance and insurance practice at J.D. Power and Associates. “Throughout our research, we find that customers who are satisfied with their lender are considerably more likely to offer a personal referral to a friend, co-worker or relative, illustrating the strong relationship between customer satisfaction and long-term customer value.”

The billing and payment factors are the two most important and highest-rated aspects of the customer experience with the company that services the mortgage. In these areas, customers place the strongest importance in the accuracy of posting payments as well as the variety of payment options.

The study finds that while only 20 percent of customers pay their mortgage online, those who pay online or through automatic deductions rate their lenders significantly higher overall than customers paying by mail or phone. Furthermore, customers who currently receive an online bill notification are among the most satisfied overall, yet only 6 percent indicate they take advantage of this option.

“In our increasingly electronic world, consumers are always looking for ways to save time in paying their monthly bills,” said Bowler. “However, more customers say they would like to pay or receive their mortgage bill online than actually do so, despite existing options available to most borrowers. Given the high impact that the perception of payment options has on overall brand impression, increasing customer awareness of payment options is an area of opportunity for servicers to distinguish themselves in the marketplace.”

For the industry as a whole, more than one borrower out of every 10 who contact their lender indicate the service representative they dealt with did not speak clearly.

“By far the most common cause of this complaint is poor articulation of words,” said Bowler.

“Customers who had difficulty hearing what the service representative was saying rated their experience very poorly—more than 300 index points lower than those customers who indicate they had no difficulties comprehending the representative they spoke with.”

The 2005 Primary Mortgage Servicer Study is based on responses from 9,214 home mortgage customers. J.D. Power and Associates now conducts three studies related to the mortgage lending experience.

Posted under Finance

“User names” and passwords should be supported in Internet banking transactions with new and better ways of identifying real customers from fraud artists trying to “highjack” bank accounts, according to an update on identity theft from the Federal Deposit Insurance Corporation (FDIC).

“Identity theft, particularly account hijacking, continues to grow as a problem for the financial services industry and for consumers,” said FDIC Chairman Don Powell. “Our review illustrates that ID theft is evolving in more complicated ways and that more can and should be done to make online banking more secure.”

The new findings are in a supplement to an FDIC study issued in December about ways to fight “phishing” scams, in which criminals send fraudulent e-mails to trick consumers into providing confidential financial information that can lead to illegal access to bank accounts. The supplement reviews and responds to public comments that the FDIC received about the original study, identifies the most recent trends in identity theft, and discusses a variety of new technologies that could be used to make Internet banking more secure.

In the latest findings, the FDIC concluded that the risk assessment financial institutions are required to perform regarding information security also should address customer authentication. The supplement also said that if an institution offers Internet banking, it has an obligation to properly secure that delivery channel. This extra level of security for online accounts, often referred to as “multifactor authentication,” would be used in addition to the traditional passwords. These new security features may include “tokens” issued to customers that generate new passwords every 60 seconds, software that can identify the computer that a customer uses to access online accounts, or contacting a customer by phone to make sure that he or she is the one attempting to access the account.

The FDIC and other federal banking agencies are expected to issue guidance this fall to insured financial institutions about improving the security of customer authentication methods. The latest FDIC findings are expected to be considered in the development of that guidance.
“The FDIC does not intend to propose one solution for all, but the evidence…indicates that more can and should be done to protect the security and confidentiality of sensitive customer information in order to prevent account hijacking,” the supplement said. It added that consumers are concerned about online security and may be receptive to using a new form of authentication “if they perceive it as offering improved safety and convenience.”

Posted under Finance, Privacy

The Federal Deposit Insurance Commission (FDIC) voted 5-0 today to approve a ruling forcing banks to notify customers when their Social Security number or other identification numbers may have been released or misued by external entities.

The action comes on the heels of Bank of America’s admission that it had lost data tapes with personal records of 1.2 million individuals.

The FDIC ruling, if approved by the Federal Reserve, could cause a significant increase in identity theft disclosures,” said Jim Stickley, Chief Technology Officer of TraceSecurity in a prepared statement. “Today, most large-scale identity thefts go unreported, either because the bank wants to avoid tarnishing their reputation or because they are simply unaware of the breaches. Many banks employ archaic data privacy practices that haven’t kept pace with the evolving threats. The exploits of identity thieves, however, which are often coordinated by international crime syndicates, have become increasingly creative and sophisticated. Many banks are caught in a catch-22 situation: Their customers are demanding greater online access to a broader range of financial services, yet as banks make their services available online to customers, they’re also making them available to thieves.”

Posted under Privacy

Bank of America and J.P. Morgan Chase & Co. are reportedly in talks to end class action suits against their banks for allegedly allowing auto dealers to charge black consumers higher automobile interest rates than white consumers. The Associated Press this week reached spokespeople at both companies who confirmed that talks about the issue were taking place.

At issue is an industry wide practice known as “dealer markup”. Consumers who arrange financing through an automobile dealer are not necessarily given the lowest rate possible. The Detroit Free Press quoted an industry spokesperson in December saying, “”The fact that a dealer is compensated for obtaining financing should come as no surprise.”

But consumer groups have been surprised at how a consumer’s race can influence the amount of extra “compensation” a dealer attempts to charge.

Various studies have shown that consumers using GMAC, American Honda Finance Corporation and Ford Motor Credut paid different rates, and those rates correlated with race. Other studies have drawn similar correlations to gender. In a Vanderbilt University study of more than 300,000 transactions over four years, 43% of black consumers were charged a higher rate versus 22% of white consumers. The additional amount charged over the life of the loan also varied — from an average of $557 for black consumers to $227 for white consumers. Another study showed that black GMAC consumers spent an additional $350 over the life of a loan than white consumers.

“This is one of automotive retail’s dirty little secrets, ” says Consumer Help Web president Joan Bounacos. “Too many transactions have taken place for this to be a statistical glitch. Dealers and lenders were clearly charging African-American consumers more than they charged Caucasian consumers. That is unacceptable in 2004 America.”

The National Auto Dealers Association (NADA), the auto retail industry’s trade group, has continually defended the practice of charging consumers higher rates, but has also worked on education efforts to ensure compliance with the law. Those efforts include a training video offered for sale to dealers on the group’s web site for $169.

While denying any discrimination, both banks are apparently in talks now to cap the total markup dealers can charge to any consumer. Lender GMAC reduced its cap 2.5 percentage points in 2004.

Posted under Customer Service