Do financial regulatory agencies listen to consumers?

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Do financial regulatory agencies listen to consumers?
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United States -- Congress. -- House. -- Committee on Banking, Currency and Housing. -- Subcommittee on Consumer Affairs
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Table of Contents
    Front Cover
        Page i
        Page ii
    Letter of transmittal
        Page iii
        Page iv
    Table of Contents
        Page v
        Page vi
    Introduction and findings
        Page 1
    Summary of recommendations
        Page 2
        Page 3
    Consumer study
        Page 4
        Page 5
        Page 6
    Federal Reserve Board
        Page 7
        Page 8
        Page 9
        Page 10
        Page 11
        Page 12
        Page 13
    Comptroller of the currency
        Page 14
        Page 15
        Page 16
        Page 17
        Page 18
    Federal Deposit Insurance Corporation
        Page 19
        Page 20
        Page 21
        Page 22
        Page 23
        Page 24
    National Credit Union Administration
        Page 25
        Page 26
        Page 27
        Page 28
    Federal Home Loan Bank Board
        Page 29
        Page 30
        Page 31
        Page 32
        Page 33
        Page 34
    Addresses and telephone numbers of Consumer Affairs Offices
        Page 35
        Page 36
    Back Cover
        Page 37
        Page 38
Full Text
*


[COMMITTEE PRINT]


DO FINANCIAL REGULATORY AGENCIES


LISTEN TO


CONSUMERS?


STAFF REPORT
OF TIE
SUBCOMMITTEE ON CONSUMER AFFAIRS
OF THE

COMMTITEE ON


BANKING, CURRENCY


AND HOUSING


HOUSE OF REPRESENTATIVES
94th Congress, Second Session


Printed for the use of the Committee on Banking, Currency and Housing

U.S. GOVERNMENT PRINTING OFFICE


WASHINGTON : 1976


77-M0
















COMMITTEE ON BANKING, CURRENCY AND HOUSING


HENRY S. REUSS, Wisconsin, Chairman


LEONOR K. (MRS. JOHN B.) SULLIVAN,
Missouri
THOMAS L. ASHLEY, Ohio
WILLIAM S. MOORHEAD, Pennsylvania
ROBERT G. STEPHENS, JR., Georgia
FERNAND J. ST GERMAIN, Rhode Island
HENRY B. GONZALEZ, Texas
JOSEPH G. MINISH, New Jersey
FRANK ANNUNZIO, Illinois
THOMAS M. REES, California
JAMES M. HANLEY, New York
PARREN J. MITCHELL, Maryland
WALTER E. FAUNTROY,
District of Columbia
LINDY (MRS. HALE) BOGGS, Louisiana
STEPHEN L. NEAL, North Carolina
JERRY M. PATTERSON, California
JAMES J. BLANCHARD, Michigan
CARROLL HUBBARD, JR., Kentucky
JOHN J. LAFALCE, New York
GLADYS NOON SPELLMAN, Maryland
LES AuCOIN, Oregon
PAUL E. TSONGAS, Massachusetts
BUTLER DERRICK, South Carolina
PHILIP H. HAYES, Indiana
MARK W. HANNAFORD, California
DAVID W. EVANS, Indiana
CLIFFORD ALLEN, Tennessee
NORMAN E. D'AMOURS, New Hampshire
STANLEY N. LUNDINE, ew York


''V


ALBERT W. JOHNSON, Pennsylvania
J. WILLIAM STANTON, Ohio
GARRY BROWN, Michigan
CHALMERS P. WYLIE, Ohio
JOHN H. ROUSSELOT, California
STEWART B. McKINNEY, Connecticut
JOHN B. CONLAN, Arizona
GEORGE HANSEN, Idaho
RICHARD T. SCHULZE. Pennsylvania
WILLIS D. GRADISON, JR., Ohio
HENRY J. HYDE, Illinois
RICHARD KELLY, Florida
CHARLES E. GRASSLEY, Iowa
MILLICENT FENWICK, New Jersey
RON PAUL, Texas


i j V PAU jELSON, Clerk and Staff Director
WILLi.)M P. DiXON, General Counsel
MjfHEL P. FLAHERTY, Collsel
SGRAETY CREWS II, Counsel
ORMAN W FINK, Minority Staff Director
GRAHAM T. NOR2TU?, Deputy Minority Staff Director


S1BCONdWrTEE ON CONSUMER AFFAIRS


V ltANKyANNUNZIO, IllInois, Chair
LEONOR X., CHALMES P.
Missouri MILLICENT F]
GLADYS NOON SP'ELMAN, Mairylan CIAIALIS E. G
HlENRY B. GONZALEZ, Texas
WALTER E. FAUNTROY,
District of Columbia
STEPHEN L. NEAL, North Carolina
"ERtNAND J. ST GERMAIN, Rhode Island
CURTIS A. PRNS, Staff 1)iretor


Iian
WYLIE, Ohio
INNWICK, New Jersey
Rt A S S LEY, Iowa


(1I)









LETTER OF TRANSMITTAL


HENRY S. REUSS,
Chairman,
ALL MEMBERS OF THE COMMITTEE ON BANKING, CURRENCY AND Hous-
ING: It is a basic principle of the nation that the agencies of govern-
ment are established to serve the people. Lately, many have questioned
whether those agencies are indeed serving the people.
As Chairman of the Consumer Affairs Subcommittee, I have been
concerned as to whether the financial regulatory agencies are serving
all of the people instead of only the financial institutions which they
supervise.
To this end, I asked the staff of the Consumer Affairs Subcommittee
to conduct a study to determine what happens when a consumer files a
complaint against a financial institution with one of the regulatory
agencies. The goal was to determine whether or not these regulatory
agencies conduct independent investigations of the complaint, or
whether they merely ask the financial institution to "look into the
situation". The second of the study was to determine whether or not
consumers were satisfied with the way their complaint was handled.
Unfortunately, a vast majority of the consumers were not satisfied
with the way which the agencies handled their complaint. Even the
simple task of notifying a consumer that a complaint letter had been
received and was being investigated was often ignored or notification
delayed. It is my hope that the financial regulatory agencies will use
this study to improve their performance in the consumer complaint
area. It does no good for these agencies to write glowing commenda-
tions of their consumer affairs effectiveness in their annual reports
while basic consumer complaints go unanswered. We need agencies that
can solve problems not agencies that are vying for press agentry
awards.
FRANK ANN UNZIo, Chairman.


(III)



















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CONTENTS


page
I. Introduction -------------------------------------------------- 1
II. Findings ------------------------------------------------------ 1
III. Summary of recommendations -----------------------------------2
IV. Consumer study ----------------------------------------------- 4
V. Federal Reserve Board ----------------------------------------- 7
VI. Comptroller of the Currency ------------------------------------14
VII. Federal Deposit Insurance Corporation -------------------------- 19
VIII. National Credit Union Administration --------------------------- 25
IX. Federal Home Loan Bank Board ----------------------------29
X. Addresses and telephone numbers of Consumer Affairs Offices------- 35
(V)














DO FINANCIAL REGULATORY AGENCIES LISTEN TO
CONSUMERS?

I. IN TRODUCTION
In recent years many Americans have come to have less and less
trust and confidence in the institutions of their government. Al-
though many individuals form impressions based in events in general,
an individual's opinion is likely to be most influenced by those govern-
mental actions which directly affect him. One such action is the treat-
ment a consumer receives when he has a problem and complains to a
government agency. The quality of this treatment will have a large
impact on whether or not a consumer has a favorable attitude toward
government.
The Subcommittee on Consumer Affairs considered it appropriate
at this time to examine the complaint handling process at the Federal
Deposit Insurance Corporation, the Federal Reserve Board, the Comp-
troller of the Currency, the Federal Home Loan Bank Board and the
National Credit Union Administration. These agencies have substan-
tial involvement with consumer credit protection laws and the first
three of the above-mentioned agencies have consumer affairs offices
which kave been in operation for more than one year and are specifi-
cally designated to take action on consumer complaints by 202 (f) (1)
of the Federal Trade Commission Improvement Act. In addition, the
Subcommittee staff conducted a survey of consumers who had sub-
mitted complaints to these agencies to determine their satisfaction
with the treatment which their complaints received.
The survey of consumers indicated that an astonishingly large
number, nearly 70% of those responding, were not satisfied with the
agencies' resolution of their problems. Regardless of the Subcom-
mittee's evaluation of the agencies' performance in this area or of
the agencies' own self-evaluations in this area, what the consumer
himself feels is of the utmost importance. Based on the results of this
survey, it is clear that the consumer is frustrated and unhappy with
the results of the complaint handling process. It is also clear that
agencies, rather than concentrating on their public image alone, must
take meaningful steps to improve their ability to resolve consumer
complaints.
II. FINDINGS
None of the consumer affairs offies (or Washington offices of those
agencies without consumer affairs offces) become in oh'ed in the actual
mestigati'on of the consumer complaints which they receive. All
agencies, with the exception of the Office of the Comptroller of the Cur-
rency, routinely forward consumer complaints to regional offices for
(1)







processing. The Consumer Affairs Division of the Comptroller uses
members of the Comptroller's Legal Division to investigate complaints.
The method of investigation of consmer complaint most fre-
quently used by all agencies is to request details concerning the corn-
plaint fram the financial institution complained about. This method
puts primary reliance on the financial institution's version of the prob-
lem. Consumers are rarely contacted for additional details and exam-
iners are rarely sent out to conduct on-site investigations of consumer
copil)la ints.
No agency routinely cheeks records of financial institution8 to de -
term The the accuracy of the i n- farition provided by a financial insti-
tuticn to the agency in connection with conisumner complaints. Since
the information under the current system of investigation is provide(l
principally by the bank involved in the complaint itself, some means
of checking, the reliability of the information should be provided.
No efforts have been made by t7e agencies to publicize the consumer
affair's o/tces' ability to handle (/nd resolve consumer corn plain ts.
Without such publicity consumers are unlikely to know where to direct
their complaints. The potential for confusion is demonstrated by the
fact that the Subcommittee staff observed a number of complaints
which had been sent by consumers to the wrong agency and which were,
in tuirn, forwvarded by the receiving agency to another agency which
(lid not have jurisdiction over the consumers problem. If agencies
themselves misdirect complaints on occasion, the difficulties which con-
sumers have in deciding where to go with their problems can only be
more severe.
None of the aqncies pubsh consumer educati;onal materials ,ith
the exception of the Federal Reserve Board which has issued only a
limited mnber of consumer-oriented mate,-ials. Although several
agencies issue pamphlets describing the details of their savings ac-
count insurance program, none of these materials deal with consume er
credit protection laws or consumer education.

III. SuiM, tARY oF RECOMiMENDATIONS
The Subcommittee staff makes the following recommendations for
the consumer affairs offices and agencies included in this report.
1. Consumer complaints should be handled by a central consumer
affairs office within the agency involved. This office should carry out
all steps necessary to resolve a consumer complaint short of conduct-
ing an on-site investi4ation.
2. On-site investi(ations of consumer complaints at the financial in-
stitiitifof ilvole(l should be conducted, whenever necessary., in order
to obtain additional information or to check pertinent records. The de-
cision to carry out such an investigation should be made by the consu-
meir affairs office.
3. The staff of the consumer affairs office should b encouraged to
contact the consumer who submitted the complaint when the office re-
quires additional information in order to handle the complaint.







4. During regularly-scheduled examinations of financial institutions,
the staff examining the financial institution should inspect records of
the financial institution which the institution submitted to the con-
sumer affairs office in connection with a consumer complaint. This
would serve as a check for the accuracy of the information supplied
by the financial institution.
5. Consumer affairs specialists should be designated at the regional
offices of these agencies to to serve as liaison with the consumer affairs
offices in Washington, to help to publicize the consumer affairs office
in Washington and to be responsible for consumer education within
the region.
6. The consumer affairs offices should publicize their complaint
handling ability and make consumer access to their offices easier.
-Information leaflets describing the work of the offices and their
complaint handling ability should be widely distributed (partic-
ularly to consumer groups and to the financial institutions).
-Posters describing the consumer affairs offices and their complaint
handling ability should be required to be placed in financial in-
stitutions over which the particular consumer affairs offices has
complaint-handling jurisdiction.
-A toll-free telephone number to the consumer affairs office in
Washington should be established for each agency and listed in
telephone directories throughout the country.
7. A consumer complaint form should be introduced and distributed
by the consumer affairs offices for use by consumers, allowing the con-
sumer affairs offices to specifically request the types of information
needed to resolve a complaint.
8. The consumer affairs offices and agencies should periodically eval-
uate their complaint handling operation to determine how successfully
it is functioning and whether there are ways in which it could be
improved.
9. The consumer affairs offices of the agencies examined in this report
should maintain liaison with one another and other government con-
siner affairs offices. They should also seek to increase their contact
with consumer groups.
The Subcommittee staff anticipates that the cost of implementing
these recommendations will be minimal since they primarily involve
introduction of new procedures. The additional staff duties recoin-
mended can be implemented by restructuring present staff.and their
duties and, in the case of the Federal Deposit Insurance Corporation.
by hiring staff for those positions which have already been authorized
but are currently vacant. If agencies can achieve compliance with
consminer protection laws and demonstrate that they are able to redress
consumer complaints, the number of such complaints is likely to be
reduced along with the need for actions against the financial institu-
tions, saving the government valuable staff time and the costs of
prosecution.


77-305-76-2








IV. Co-NSxsu-iEr STUDY
In order to evaluate the satisfaction on the part of consumers with
the complaint handling process at the Federal Reserve Board, the
Federal Deposit Insurance Corporation, the Federal Home Loan Bank
Board, the Office of the Comptroller of the Currency and the National
Credit Union Administration, the Subcommittee staff carried out a
survey of consumers who had either filed complaints with these agen-
cies in Washington or had their complaints referred from other
agencies.
The Subcommittee staff contacted a randomly selected sample of
approximately 20% of the consumers who sent written complaints to
these agencies in 1976. Because of the low number of complaints filed
with the National Credit Union Administration in Washington, almost
all of the consumers who had their complaints handled by this agency
were contacted. Similarly, because the Federal Home Loan Bank Board
has no central recordkeeping system for consumer complaints, the
consumers contacted in this study were those whose complaints had
been either referred from other agencies or initially sent by the con-
sumer to the Federal Home Loan Bank Board's Office of Housing and
Urban Affairs. Consumers were sent a cover letter explaining the pur-
pose of the study together with a questionnaire and a self-addressed
stamped envelope.
The Subcommittee staff was overwhelmed by the speed with which
the questionnaires were returned and by the exceedingly high rate of
consumer response. Surprisingly, the first response received by the
Subcommittee came within three days after the questionnaire had been
sent out, and the bulk of returned questionnaires were received within
two weeks. Many consumers submitted lengthly and detailed replies
about their complaints and enclosed copies of correspondence and
relevant documents. Many consumers also asked for further assistance
front the Subcommittee in resolving their problems. Some consumers
telephoned the Subcommittee while others added extra special delivery
postage to the already self-addressed stamlped envelopes, thus emphas-
izing the importance of their views.
The consumer questionnaire asked for responses to three principal
questions:
(1) Was the natter resolved by the agency to your satisfact ion?
(2) What is your overall view of the manner in which your
complaint or inquiry was handled?
(3) How long did the agency take to acknowledge your letter?
Because a number of consumers who were contacted indicated that
the agency which had supplied their name to the Subcommittee had
forwarded their complaint to another agency for handling, the re-
sponses of those consumers were not included in the study.
The results of the survey are presented in the following chart.











Number of questionnaires*.sent out

Number of questionnaires returhed

Consumer response rate
Number of questionnaires returned less
number referred to other agencies'
Number of consumers satisfied with
agency resolution of their problem

Number.of consumers not satisfied with
agency resolution of their problem

Percentage of consumers satisfied with
agency resolution of their problem

Percentage of consumers not satisfied
with agency resolution of their problem

Number of consumers rating overall
agency complaint handling EXCELLENT

Number of consumers rating overall
agency complaint handling GOOD

Number of consumers rating overall
agency complaint handling FAIR

Number of consumers rating overall
agency complaint handling POOR

Percentage of consumers rating overall
agency complaint handling EXCELLENT

Percentage of consumers rating overall
agency complaint handling GOOD

Percentage of consumers rating overall
agency complaint handling FAIR

Percentage of consumers rating overall
agency complaint handling POOR


Number of consumers stating agency
acknowledgement sent within 2 weeks

Number of consumers stating agency
acknowledgement Pot sent within 2 weeks

Percentage of consumers stating agency
a know edgement sent withih 2 weeks

Percentage of consumers stating agency
acknowledgement not sent within 2 weeks


Compt


ed


:rol Ier DIL UthLbMi f K6.NWA ____P
Ill 61 36 65 56 329

64 34 22 36 29 185

58% 56% 61%J 55% 52% 56%

58 33 19 22 29 161
14 8 4 5 11 42


31 22 12 91 18 92

31% 27% 25% 36% 38% 31%


69% 73% 75% 64% 62% 69%


9 9 2 5 8 33


6 2 6 3 3 20


5 3 2 3 8 21

28 17 9 7 10 71


19% 29% 11% 27% 28% 23%


13% 6% 31% 17% 10% 13%

10% 10% 11% 17% 28% 15%

58% 55% 47% 39% 34% 49%


17 12 7 9 14 59

37 16 12 12 15 92


31% 43% 37% 43% 48% 39%


69% 57% 63% 57% 52% 61%


B" | IP%






While no attempt was made to assess the merits of each consumer
complaint, the results of the survey indicate that there is widespread
dissatisfaction on the part of consumers with the treatment accorded
their complaints. Overall, 56% of all questionnaires sent out by the
Subcommittee were returned. Nearly 70% of the consumers responding
stated that they were vot satisfied with the resolution of their com-
plaint by the agency involved and approximately half rated the agen-
cy's handling of their complaint as "poor." Sixty-one percent of the
consumers indicated that the agency in question took over two weeks
to acknowledge their letters.
Based on the percentage of consumers who were satisfied with the
resolution of their complaints, the five agencies surveyed by the Sub-
committee staff fall into two main groupings. The first grouping,
composed of those acencies with a consumer dissatisfaction rating
equal to or greater than the combined dissatisfaction rating of all
agencies (69% ), includes the Office of the Comptroller of the Currency,
the Federal Deposit Insurance Corporation and the Federal Home
Loan Bank Board. The second grouping has a lower dissatisfaction
rating with approximately six out of ten consumers dissatisfied with
the resolution of the complain ts. In this group are the Federal Board
and the National Credit Union Administration.
As far as consumer evaluation of the overall complaint handling
process is concerne(d, the National Credit Union Administration had
the lowest percentage of dissatisfied consumers and received the lowest
"poor" rating of all the agencies surveyed (34%), closely followed by
the Federal Reserve Board. The Federal Home Loan Bank Board
had the highest percentage (751) of dissatisfied consumers. Closely
following the Federal Home Loan Bank Board in terms of a high
dissatisfactiol rating was the Federal Deposit Insurance Corporation
with a rating of 7 l% aid the Comptroller of the Currency with a
697 rating.
The Federal Deposit Insurance Corporation had the highest per-
centage of consumers who considered the agency's overall complaint
handing process to be "excellent" (32%), followed by the National
Credit Union Administration ai the Federal Reserve Board. The
National Credit Union Administration had the highest percentage of
consumers who ainswered that the agency sent anI acknowledgement
within two weeks. (48%). The Copltroller of the Curency received
the lowest rating for prompt replies (only 31% of the consumer
stated that the aency sent an acknowle(deIment within two weeks),
followed closely by the Federal Home Loan Bank Board's 37%
rating.
In aIdditioln to these numerical indications of consumer discontent,
the comments contained in the responses returned to the Subcommit-
tee evidenced a pervasive sense of dissatisfaction which ranged from
simple frustration at the delays involved in having problems resolved
to pure anger at the lack of results. Glowing letters of commendation
were rat1e amnd, when they appeared, often dealt with a speedy response
oil the 1)art of the agency to a request for information.








CONSUMER AFFAIRS OFFICES MANDATED BY STATUTE
The Federal Trade Commission Improvement Act which became
law in January, 1975, required the Federal Reserve Board, the Federal
Deposit Insurance Corporation and the Office of the Comptroller of
the Currency to establish separate consumer affairs divisions charged
with:
(1) receiving and taking appropriate action upon complaints
with respect to unfair or deceptive acts or practices by banks in
or affecting commerce in order to prevent such acts or practices,
and
(2) enforcing compliance with regulations to be issued by .the
Board of Governors of the Federal Reserve System defining the
above-mentioned acts or practices.
In addition, the Federal Trade Commission Improvement Act
requires the Board of Governors of the Federal Reserve System to
prescribe regulations (1) defining with specificity such unfair or de-
ceptive acts or practices, and (2) which contain requirements pre-
scribed for the purpose of preventing such acts or practices.

V. FEDERAL RESERVE BOARD
The Federal Reserve System was established to serve as the nation's
central bank with the execution of monetary policy as its major
responsibility. The Federal Reserve Board has the responsibility of
helping to maintain the strength and vitality of the U.S. economy
through control of monetary policy.
The Federal Reserve System is supervised by a Board of Governors
consisting of seven members appointed bv the President with the
advice and consent of the Senate. The Board has broad powers and is
authorized to fix reserve requirements of member banks, determine
maximum rates of interests, determine discount rates and regulate the
amount of credit that may be extended on any security.
There are twelve regional Federal Reserve Banks, each of which is
owned by the member banks in its region. Member commercial banks
include all national banks (which are required to join the Federal
Reserve System). State-chartered banks can also choose to become a
part, of the Federal Reserve System, but their membership is subject
to approval by the Board of Governors.
The Office of Saver and Consumer Affairs was established in July,
1974, by the Federal Reserve Board in anticipation of the enactment
of the Federal Trade Commission Improvement Act. Under this Act,
in addition to establishing a consumer affairs division, the Federal
Reserve Board is also charged with issuing regulations defining unfair
or deceptive practices in banking, and prescribing requirements to
prevent such acts or practices. To date, the Board has not issued such
regulations. Thus far, the principle activities of the Office of Saver
and Consumer Affairs-in connection with the Federal Trade Com-
mission Improvement Act-have been in the consumer complaint
handling area.








The Office of Saver and Consumer Affairs describes its objectives
and responsibilities as follows:
The Office of Saver and Consumer Affairs is charged xith the responsibility
of assuring that the interests of savers and consumers are given adequate and
specific attention in considerations leading to all Board decisions. In addition,
the Office was given direct responsibility for a number of consumer oriented
programs imandated to the Board by Congress.
The Office of Saver and Consumer Affairs is also responsible for:
. drafting, amending and interpreting regulations implementing Congres-
s1ial legislation, monitoring enforcement activities for those regulations with
regard to State member banks of the Federal Reserve System, and the preparation
and dissemination of educational materials concerning the rights and responsi-
bilities of both creditors and consumers under these regulations. The Office also
administers the Board's consumer complaint handling system.
There are eight major consumer protection laws, in addition to the
Federal Trade Commission Improvement Act, which the Office of
Saver and Consumer Affairs is responsible for enforcing with respect
to banks within its jurisdiction. They are the Truth in Lending Act,
the Fair Credit Reporting Act, the Fair Credit Billing Act, the Con-
sun-r Leasing Act (once it goes into effect), the Equal Credit Oppor-
tunity Act, the Home Mortgage Disclosure Act, Title VIII of the
Civil Rights Act of 1968 and the Securities Exchange Act of 1934.
With the exception of the Fair Credit Reporting Act and Title Viii
of the Civil Rights Act of 1968, the Office of Saver and Consumer
Affairs is also responsible for drafting regulations pursuant to these
laws.
The Office of Saver and Consumer Affairs maintains a staff of fifty-
two members, seventeen of whom are attorneys. The Office is divided
into five sections:
(1) General Program Support (which handles consumer comn-
plaints) has designated two staff members to handle consumer com-
plaints, only one of whom works full-time on consumer complaints.
The other staff member is also responsible for developing consumer
education materials;
(2) Fair Credit Practices (which handles Truth in Lending, Fair
Credit Billing and Fair Credit Reporting with respect to issuing
and implementing regulations);
(3) Equal Credit Opportunity (responsible for issuing and en forc-
ing regulations under the Equal Credit Opportunity Act);
(4) Over-the-Counter (OTC), Fair Housing & Special Studies
(provide economic analysis for the other sections); and
(5) Securities Credit Regulation (ad ministers the implementation
of the Board's securities regulations).
The lproposed budget for 1976 for the Office of Saver and Consumer
Affairs is $1,212,339.
In the area of consumer education, the Board of Governor of the
Federal Reserve System has distributed large quantities three million
copies) of a leaflet describing the basics of Truth in Lending to con-
s$In1rs. This leaflet also has a Spanish version and has also seen wide-
spread distribution (one-lnlf million copies). These pamphlets list
the address of the Board of Governors of tle Federal Reserve System
for reference in case consumers have questions about Truth in Lendling







in connection with a particular credit transaction. The Board has also
distributed large quantities of a more technical pamphlet dealing
with Truth in Lending which contains the Truth in Lending Act and
Regulation Z.
The staff of the Federal Reserve System is currently developing
pamphlets similar to the basic Truth in Lending leaflet to explain the
provisions of the Fair Credit Billing and Equal Credit Opportunity
Acts to consumers. In addition to these printed materials, the Board
has also developed a consumer-oriented film strip dealing with the
Truth in Lending Act which is available in Washington at the Board
and through the regional Federal Reserve Banks.
The complaint handling ability of the Office of Saver and Consumer
Affairs has not been widely publicized to consumers. For example,
although the Office of Saver and Consumer Affairs' address appears
in the "Guide to Federal Consumer Services" published by the Depart-
ment of Health, Education, and Welfare's Office of Consumer Affairs,
no mention is made of the fact that the Office of Saver and Consumer
Affairs receives and takes action on consumer complaints. The same
ommission occurred in a recently published (June, 1976) consumer
guide, Help: The Useful Almanac published by Consumer News, Inc.,
which apparently relied on the "Guide to Federal Consumer Serv-
ices" as a source for its information on the Federal Reserve System.
Complaint Handling
The Office of Saver and Consumer Affairs handles all consumer com-
plaints and inquiries received by the Federal Reserve Board. The
Office's main complaint handling responsibilities are to maintain files
on complaints and to answer the inquiries received from consumers.
The Office of Saver and Consumer Affairs maintains a detailed sta-
tistical procedure using consumer complaint index cards for recording
all pertinent information concerning all individual consumer com-
plaints received throughout the country. The index cards are kept in
a central filing system in the Washington office, and provide the Office
with data for identifying areas of unfair and deceptive practices.
Letters of acknowledgment are sent to consumers upon receipt of
their complaints and inquiries by the Office of Saver and Consumer
Affairs. Where information has been requested by a consumer, a letter
is sent to him which attempts to explain any law or regulation pertain-
ing to his problem. A copy of the law or regulation is usually included
for the consumer's information. A general form letter informing the
consumer that his complaint has been referred to another agency is
sent to the consumer when the complaint falls within the jurisdic-
tion of another agency.
In the first six months of 1976, the Office of Saver and Consumer
Affairs received 282 consumer complaints and inquiries. According
to the Office of Saver and Consumer Affairs, 69% of these consumer
complaints and inquiries were handled within six to ten working days.
However, in the Subcommittee's survey on consumers who filed written
complaints and inquiries with the Board, only k3% of those consumers
who responded to the question "how long did the agency take to
acknowledge receipt of your complaint" stated that the agency ac-
knowledged receipt of their complaints within two weeks.






10


Referrals of complaints received at the Federal Reserve Board are
made to the Federal Trade Commission, the Federal Deposit Insur-
ance Corporation, the Office of the Comptroller of the Currency, and
to the Federal Home Loan Bank Board, when the financial institution
involved in the complaint is not a State-chartered bank which is a
member of the Federal Reserve System.
Each of the twelve Federal Reserve Banks has designated a con-
sumer affairs specialist who has other duties in addition to complaint
handling. The consumer affairs specialist also acts as a contact point
between the Reserve Bank and the Office of Saver and Consumer Af-
fairs. When the Office of Saver and Consumer Affairs forwards a con-
sumer complaint to a Federal Reserve Bank, the Federal Reserve Bank
corresponds directly with the consumer, and sends copies of all cor-
respondence and pertinent information to the Office of Saver and
Consumer Affairs in Washington. Complaints which are sent directly
to a regional Federal Reserve Bank by consumers are handled by the
Federal Reserve Bank itself. The regional Federal Reserve Banks also
S1eld quarterly reports to the Office of Saver and Consumer Affairs
in Washington which include statistics on the number and types of
,onSumer complaints and inquiries handled by the Federal Reserve
Bank in that quarter.
Coiisumer complaints initially sent to Congress which are referred
to the Board for handling receive priority treatment, according to the
Office, of Saver and Consumer Affairs. The complaint handling process
for complaints referred by Congress is expedited and monitored by
the Board's Congressional Liaison Office. A response to the Congres-
sional referral is drafted after the Office of Saver and Consumer
Affairs completes its investigation, and is then forwarded to the Liaison
Office for approval and signature.
Consumer complaints which require investigation are sent to the
Federal Reserve Bank in the district where the member bank involved
is located. In these cases, the Federal Reserve Bank is requested to look
into the matter and corresponds directly with the consumer. Copies
of all letters and information sent to the consumer are forwarded to
the Office of Saver and Consumer Affairs in Washington. These com-
plaints are considered to be closed only after the staffs of the Reserve
Bank and the Federal Reserve Board are both satisfied that either the
problem has been resolved or that the consumer has received an ex-
planation of the relevant circumstances. Where there are special cir-
cumstances a bank examiner may make a special trip to the bank in-
volved. However, such trips occur infrequently.
Examiners do not have copies of complaints filed in connection with
the bank when they carry out their regular examination of the bank,
nor do examiners check bank records to make sure that the bank has
been supplying correct inforation in response to requests for infor-
mation by the Office of Saver and Consumer Affairs concerning com-
plaints.
Although the Board is considering the establishment of a separate
bank examination to check for compliance with consumer protection
lerislation, its responsibility for enforcing consumer protection laws
is currently carried out mainly through its regular examinations used
to (etermine financial soundness. Several Federal Reserve Banks have,







however, already begun conducting separate consumer protection ex-
aminations by specially trained staff on an experimental basis. The
Subcommittee staff highly recommends this latter approach* since
relying on examiners whose principal area of expertise is in examining
for financial soundness is unlikely to result in strict enforcement of
consumer protection laws.
Violations of consumer protection laws may be discovered through
bank examinations or as a result of a consumer complaint. When such
a violation is detected, the Federal Reserve Bank having jurisdiction
over the State-member bank in question attempts to have the bank cor-
rect the violation. The Federal Reserve Bank writes a letter to the
bank officials informing them of the violations discovered during the
examination process and instructing them to correct such violations.
Bank management is also informed of possible civil liability under
the law. Where small banks are involved, an explanation of relevant
provisions ofthe law is also included.
The Federal Reserve Board and the Federal Reserve Banks have,
on occasion, requested restitution for consumers who suffered damages
because of a violation of a consumer protection law or who had other-
wise 'been injured by bank actions. However, there is currently no set
policy concerning restitution for consumers and, whether or not resti-
tution will be sought in an individual case depends on the part icuar
situation. The Federal Reserve Board has the power to issue cease and
desist orders for -violation of consumer protection laws, although no
such orders have been issued to date for violations of these laws.
In 1975 Federal Reserve System examiners reported 543 violations
of the Truth in Lending Act, with an additional 99 violations 'dis-
covered as a result of consumer complaints, referrals from other gov-
ernmental agencies and consumer interest groups. In the same year,
173 State-member banks were reported to have violated the Act.
During the first six months of 1976, 28"2 consumer complaints and
inquiries were received by the Board in Washington. A breakdown
of their disposition is as follows:
52 referred to the proper agency for handling
18 referred to Federal Reserve Banks
212 handled by the Office of Saver and Consumer Affairs (25
of which were pending resolution as of June 30, 1976)
In addition, from January 1, 1976 through Mlarch 31, 1976. 629
consumer complaints were received by the twelve regional Federal
Reserve Banks.
All consumer complaints are classified and analyzed to enable the
Board to identify problem areas or patterns of abuse. The Office cate-
gorizes its statistical data by the Acts which it administers and en-
forces.
The major types of complaints and inquiries received by the Office
of Saver and Consumer Affairs in Washington for the first six months
of 1976 concerned:
Regulation B (Equal Credit Opportunity): 99 complaints re-
ceived
Regulation Z (Truth in Lending) : 61 complaints received
General Credit Procedures (such as service charges, deposit
accounts, and interest rates) : 41 complaints received.


77-305-76-3







The results of the consumer survey conducted by the Subcommittee
staff indicate that consumers have a mixed opinion of themanner in
which their complaints were handled by the Office of Saver and Con-
sumer Affairs.
Sixty-four percent of those consumers who responded to the ques-
tion "was the matter resolved by the agency to your satisfaction?"
replied "no." Thirty-nine percent of those consumers who responded
to the question what is your overall view of the manner in which your
complaint or inquiry was handled?" answered "poor." Twenty-seven
percent responded "excellent," with 17% responding "good" and 17%
"fair."
Recommendations
The Federal Reserve Board is responsible, under the Federal Trade
Commission Improvement Act, for issuing regulations defining "un-
fair or deceptive acts or practices" in banking and these regulations
are to be enforced by the -consumer affairs offices established by the
Act. However, the Board has not yet issued such regulations and, until
such regulations are issued, these consumer affairs offices can fulfill,
at most, only half of their responsibilities under the Act (specifically,
acting on complaints received).
The Board of Governors of the Federal Reserve System should not
rely solely on complaint statistics in developing these regulations.
Although statistics based on the number and types of complaints re-
ceived from consumers are likely to be helpful in detecting problem
areas that consumers have in their dealings with banks, their actual
usefulness depends on how accurately they reflect the volume and the
nature of the problems which consumers encounter, Because of the
lack of efforts to "advertise" the Office of Saver and Consumer Affairs'
complaint handling resources, there is a serious question as to whether
the consumer complaint statistics which the Board has compiled can
be relied upon as an exclusive means of determining whether unfair
or deceptive acts or practices are actually occurring.
VW'hile compilations and analyses of statistics may aid in identifying
j)rolem areas, the Subcommittee staff recommends that additional,
aIffrmattire steps be taken by the Board in fulfilling its rulemaking
responsil) 1 ities ii uder t he Federal Trade Commission Improvement
Act. Such steps should at least include (1) soliciting comment from
the public and consumer interest groups on possible unfair or decep-
tive acts or practices through media likely to reach the public and
(2) (lesignating sl)ecial staff to carry out an independent Investi ation
to determinee possible areas of unfair or deceptive acts or practices in
Ian king.
Tlie Federal Trade Comnmission Improvement Act calls for the
establishiwent of a "separate conisumer affairs divisionn" to receive and
take appropriate action on complaints. The Subcommittee staff be-
lieves that the efficiency and effectiveness of the complaint handling
l)rOCXss woll]l be greatly increased by giving the Office of Saver and
consumerr Affairs full responsibility for handling complaints received
by the Federal Reserve System throughout the nation.
At present, the Office of Saver and Consumer Affairs acts prncipally
as a complaint-forwarder insofar as its complaint handling functions
are concerne(l. Although it does reply to a substantial number of con-








situner inquiries, it neither becomes involved with on-site investigation
of consumer complaints nor does it make requests to individual banks
for information concerning the consumer complaint.
Centering responsibility for investigation of consumer complaints
in the Office of Saver and Consumer Affairs would result in several
significant advantages for consumers: (1) it would be closer to the
spirit of the Federal Trade Commission Improvement Act which
calls for a separate consumer affairs division dealing with complaints;
(2) it would permit each member of the Office of Saver and Consuner
Affairs involved in complaint handling to develop expertise in a par-
ticular area of consumer law and in particular types of consumer
complaints, and (3) it would permit each staff member handling con-
sumer complaints to devote his full attention to complaints.
The staff of the Office of Saver and Consumer Affairs handling
complaints would investigate all those complaints which do not require
an on-site investigation by making requests -for relevant papers and
documents and by contacting individuals and banks involved by tele-
phone. The staff- should be encouraged to contact the consumer who
submitted the complaint, whenever necessary. to clarify the problem
or to obtain additional information. Where the consumer complaint
involves a set of circumstances (as in potential violations of the Equal
Credit Opportunity Act) which cannot be easily resolved by telephone
or by requesting written information, a bank examiner should conduct
an on-site investigation of the complaint. Such an investigation should
be actively supervised by the staff of the Oflice of Saver and Consumer
Affairs.
Copies of all complaints handled by the Office of Saver and Con-
sumer Affairs should be sent to bank examiners at the regional level
for their information and use during regular bank examinations. Dur-
ing these examinations the examiner should check a random sample
of the records earlier furnished to the Office of Saver and Consuiner
Affairs to make sure that the information supplied by the bank was
accurate. If only a few complaints have been filed in connection with
the bank being examined, each one should be checked for the accuracy
of the information supplied to the Office of Saver and Consumer
Affairs.
The staff believes that insufficient efforts have been made to make
the public aware of the complaint handling capacity of the OPIce of
Saver and Consumer Affairs. The staff recommends that affirmative
efforts be made to increase public awareness of the Office of Saver and
Consumer Affairs and its complaint handling ability which Should
include, at a minimum-
(1) publication and distribution of informational pamphlets to banks. con-
sumer groups and other interested organizations and persons describing the
ability of the Office of Saver and Consumer Affairs to handle consumer
complaints.
(2) a requirement that those banks supervised and examined by the Federal
Reserve Board prominently display a poster describing the Office of Saver and
Consumer Affairs ability to handle consumer complaints and listing the address
and telephone number of the Office.
(3) introduction and listing of a nationwide toll-free telephone number for
the Office of Saver and Consumer Affairs in telephone directories throughout
the country.








The Subcommittee staff also recommends the introduction of a con-
sumer complaint form to promote efficiency in the handling of con-
sumer complaints. A complaint forin would be helpful for eoustoners
to use in presenting their complaints and would allow the Office of
Saver and Consumer Affairs to specifically request the types of infor-
mation that it requires to resolve a complaint.
The Subcommittee staff also recommends that the Office periodically
evaluate the overall efficiency of its complaint handling-system and
implement changes which would improve its efficiency.
The staff also recommends continued liaison with other government
consumer affairs offices and staff, and recommends increased liaison
with consumer groups.
The staff further recommends that all consumer complaints receive
equal treatment.

VI. COMPTROLLER OF THE CURRENCY
The Office of the Comptroller of the Currency was established by
Act of Congress for the purpose of establishing and regulating a na-
tional banlung system. The Comptroller administers approximately
4,700 national and District of Columbia banks with assets of some
$535 billion.
The Office of the Comptroller supervises the operatiosof. nat ioal
banks, including trust activities and overseas operations. The Office
also periodically examines national banks through a natisnw.de staff
of approximately 2,000 examiners, who are supervised by fourteen
regional administrators.
The Office must also approve all new national banks, conversion of
State-chartered banks into national banks, all mergers of national
banks, and the establishment of branches by national banks. The
budget for Fiscal Year 1976 is $78,000,000.
The Consumer Affairs Division of the Office of the Comptroller of
the Currency was created in March 1974, and became operational in
September 1974. The Division was created in anticipation of the pas-
sage of the Federal Trade Commission Improvement Act which man-
dates the establishment of such an office.
The Consumer Affairs Division is responsible for handling consumer
complaints, carrying out research studies focusing on certain con-
sumer-related issues (such as credit insurance and savings disclosure)
and for assisting in bank examination efforts.
According to the Director of the Consumer Affairs Division, the
Office has the following objectives and responsibilities:
the responsibility of protecting the rights of the public in dealing with
banks under our jurisdiction. The Division has attempted to make this Office
More accessible and respolisive to the public. We encourage the public to contact
us about complaints they have against national banks, to seek information and
present their views. The input we receive is beneficial to our program of policy
development. This Office has responsibility for enforcing compliance with State
and Federal consumer lawvs and regulations as they apply to national btnks...
The Consumer Affairs Division maintains continuing liaison with other Federal
regulatory agencies. State banking departments, consumer interest groups, and
industry asociations for mutual assistance and an interchange of ideas in the
field of banking consumer protection.





15


The Consumer Affairs Division is responsible for the enforcement
of the Truth in Lendig Act, the Fair Credit Reporting Act, the
Fair Credit Billing Act. the Consmner Leasing Act (once it goes into
effect), the Equal Credit Opportunity Act. Title VIII of the Civil
Rights Act of 1968, the Home Mortgage Disclosure Act, the Real
Estate Settlement Procedure Act, the Equal Employment Opportunity
Act., State usury laws and State consumer protection laws.
The Consumer Affairs Office, a division of the Comptroller of the
Currency, has a budget of $122,000 for 1976 which is allocated through
the Comptroller's Office. The Consumer Affairs Division has five staff
members: the Director, who is responsible for carrying out the func-'
tions of the Office; two secretaries; and two consumer affairs special-
ists, one of whom handles computer data and follow up procedures
concerning consumer complaints, and the other specialist who handle
regulatory and statutory matters.
The Consumer Affairs Division publishes no pamphlets or litera-
ture to educate the public or to inform them of the existence and
functions of the office. According to the Director, the idea of publish-
ing written materials was contemplated, but a decision not to publish
was made because it was believed that enough materials were being
published and distributed by other consumer organizations and bank-
ing trade associations.
Complaint Handlipg
The Consumer Affairs Division receives all consumer complaints
and inquiries directed to the Office of the Comptroller of the Currency
in Washington, and maintains records on all complaints received.
Consumer complaints and inquiries are recorded in a computerized
Consumer Complaint Information System which categorizes all the
complaints received in Washington and the fourteen regional offices.
The information on the computer is used to identify patterns of abuse
by individual banks and to monitor complaints in specific complaint
areas.
The data on the computer is also used for policy analysis bv the
Office. The statistics compiled by the computer are reviewed by the staff
on a quarterly basis. However, no recommendations have been made
as a result of such reviews. The need to examine banks more intensely
for compliance with consumer protection laws has resulted in efforts
to develop a separate consumer protection law compliance examina-
tion for all national banks.
Consumer complaint referrals are made to State Banking Depart-
ments, the Federal Trade Commission and the Federal Reserve Board.
Complaint referrals are received from the Federal Trade Commission,
the Federal Deposit Insurance Corporation, the Office of Consumer
Affairs located in the Department of Health, Education, and Welfare,
and from Congress.
According to the Director of the Consumer Affairs Division, Con-
gressional referrals received by his office are likely to receive a quicker
acknowledgement than other complaints, but receive no priority in
the investigational process. However, in the consumer responses to the
questionnaire sent out by the Subcommittee on Consumer Affairs,








several consiumners who had had complaints referred to the Consumer
Affairs Division by Congressional offices stated that their complaints
had received prompt and efficient handling as a result of Congressional
intervention. They stated that they felt that the handling would have
taken considerably longer if they had written directly to the Consumer
Affairs Division.
According to the Consumer Affairs Division, a letter of acknowledge-
ment is sent to the complainant upon receipt of a consumer complaint,
as well as a request to the bank involved asking for the bank's ex-
pl]anation of the complaint. However, the Consumer Affairs Division
does not respond to all of the consumer complaints and inquiries which
it receives. Consumers submitting complaints who are considered by the
Division to be "obviously unstable or not capable of understanding that
a problem does not exist" do not receive an acknowledgement upon
receipt of their complaints.
When work on a complaint is completed, the consumer is sent a final
letter informing him of the factual findings of the investigation. Ac-
cording to the Director of the Consumer Affairs Division, a final re-
sponse is generally sent to the consumer within four weeks after receipt
of the complaint. However, the consumer may not hear from the Con-
sumer Affairs Division until the complaint is resolved by the Division
regardless of the amount of time required for the investigation. An
illustration of the delay by the Division in sending final letters is the
eight hundred and one consumer complaints, one quarter of all com-
plaints received in 1976 as of July 19, 1976, which the Division has
listed as pending. These consumers have not received final letters of
resolution.
The actual investigation of a complaint received by the Washing-
ion office is handled by the Law Department of the Office of the Comp-
troller. There are two attorneys who work full-time on consumer com-
pilaints from this department. If further investigation if required, the
complaint is referred to the appropriate regional office for additional
inv-estigvation by a bank examiner.
Examiners do not check bank records during regular bank examina-
tions to make certain that the information which the bank had earlier
supplied concerning the consumer complaint was correct. However,
where there is a "complex" factual situation, bank examiners do go to
banks to obtain information relevant to complaints. In the first six
months of 1976, approximately ten to twelve consumer complaints
filed with the Consumer Affairs Division in Washington had resulted
in such special investigation by bank examiners in order to obtain in-
formation needed to resolve consumer complaints. When the special
investigation is completed. the factual information concerning the
cotnpilaint is svnt either to the Washington office, or, if the complaint
was originally received by a regional office, to the regional office. The
matter is then analyzed by the staff and the consumer is informed of
the findings. If a violation has occurred, the consumer is informed of
the remedies which are available and corrective action is taken to en-
force compliance by the bank with the law.
There are several actions which the Consumer Affairs Division may
recommen('d to the Comptroller to insure that banks comply with the
c,11,-Iuer protection laws: (1) Restitution mav be sought where the
c nstiiiWi has suffered a monetary loss as a result of a bank's violation







of a law. Of the complaints received from January 1 to July 19, 1976,'
264 resulted in consumer reimbursement. Records of the amounts of
money involved in such reimbursements are not maintained by the
Consumer Affairs Division. (There is currently some uncertainty with-
in the agency as to the legal authority it has to require restitution for
consumers) ; (2) In instances of repeated violations of consumer pro-
tection laws, the Division may seek a formal agreement with the bank
to comply with these laws. The agreement, if violated, may result in
the issuance of a cease and desist order; and (3) A cease and desist
order may be issued in extreme cases of continuous violations, but this
measure is taken only as a last resort. According to the Director of the
Division, relatively few cease and desist orders are issued, although
several banks are under formal agreement with the agency.
No consumer complaints have resulted in the imposition of civil
sanctions, nor have any cases been referred to the Department of
Justice as a result of consumer complaints. However, referrals to the
Department. of Justice have been made on the basis of violations dis-
covered during regular bank examinations. Most of these referrals in-
volved violations of Regulation Z (Truth in Lending).
From January 1 to July 19, 1976, 3.278 consumer complaints and in-
quiries were received by the Comptroller's Consumer Affairs Division.
The most numerous types of compaints received by the Consumer Af-
fairs Division and the regional offices of the Comptroller are as
follows:
Deposit Function: Complaints
Deposit not credited --------------------------------------------104
Discrepancy in account -----------------------------------------205
Service charges ------------------------------------------------85
Forged signature or endorsement ----------------- --------78
Loan Function:
Amount of interest charges-usury -------------------132
Regulation Z-Fair Credit Billing --------------------------------126
Individual credit decision ----------------------------- 113
Other Functions:
General complaints including advertising, incompetent or rude person-
nel, lost or stop payment of official checks or money orders ---------263
Trust service --------------------------------------------------130
The following statistics describe how complaints received in 1976
were resolved.
Complaints
Bank legally correct ----------------------------------------------- 825
Open complaints ---------------------------------------------------801
Information ------------------------------------------------------598
Factual disputes--contestable --------------------------------------- 323
Referral to other agency --------------------------------------------196
Consumer reimbursed-bank legally correct ---------------------------- 15
Consumer reimbursed-bank error ------------------------------------106
Bank error ------------------------------------------------------ 100
Even though the eight hundred and one complaints listed as "open
complaints" are included in "Consumer Complaints Resolutions"
statistics, the majority of these complaints are Pending resolution ac-
cording to the Director of the Consumer Affairs Division.
R ecoinme ndation~s
The Federal Trade Commission Improvement Act calls for the
establishment of a "separate consumer affairs division" to receive and
take appropriate action on complaints. The Subcomm ttee staff believes







that the efficiency and effectiveness of the complaint handling process
would be greatly increased by giving the Consumer Affairs Division
full responsibility for handling all complaints received by the Comp-
troller of the Currency throughout the nation.
At present, the Consumer Affairs Division turns over the complaints
it receives to Comptroller staff within the Legal Division for investiga-
tion. Complaints received by regional offices are handled by those of-
fices. Thus, the Consumer Affairs Division itself neither becomes in-
volved with on-site investigation of consumer complaints nor does it
itself make requests to individual banks for information concerning
the consumer complaint.
Centering responsibility for investigation of all consumer com-
plaints received by the Comptroller of the Currency in the Consumer
Affairs Division would result in several significant advantages for
consumers: (1) it would be closer to the spirit of the Federal Trade
Commission Improvement Act which calls for a separate consumer
affairs division dealing with complaints; (2) it would permit each
member of the Consumer Affairs Division to develop expertise in a
particular area of consumer protection law and in particular types
of consumer complaints; and (3) it would permit each staff member
handling consumer complaints to concentrate his full attention on
complaints.
The staff of the Consumer Affairs Division would investigate all
those complaints which do not require an on-site investigation by
making requests for relevant papers and documents concerning the
complaint and by contacting individuals and banks involved by tele-
phone. The staff should be encouraged to contact the consumer who
submitted the complaint, whenever necessary, to clarify the problem
or to obtain additional information. Where the consumer complaints
involves a set of circumstances (as in potential violations of the Equal
Credit Opportunity Act) which cannot be easily resolved by telephone
or by requesting written information, a bank examiner should conduct
an on-site investigation of the complaint. Such an investigation should
be actively supervised by the staff of the Consuner Affairs Division.
Copies of all complaints handled by the Consumer Affairs Division
should be sent to bank examiners at the regional level for their infor-
mation and use during regular bank examinations. During these exam-
inations the examiner should check a random sample of the records
earlier furnished to the Consumer Affairs Division to make sure that
the in formation supplied by the bank was accurate. If only a few com-
plaints have been filed in connection.with the bank being examined,
each one should be checked for the accuracy of the information sup-
plied to the Consumer Affairs Division.
The Subcommittee staff recommends that a consumer affairs spe-
cialist l)e designated at each regional office to act as a liaison between
the Consumer Affairs Division and the regional office. The duties of
the person holding such a position would include (1) oversight on the
investigation of consumer complaints being handled by the bank ex-
amiiers in the region, (2) coordination of consumer complaint cor-
resl)onldence, and (3) responsibility for publicizing the Consumer
Affairs Division and its complaint handling functions as well as for
consumer education within the region..








According to the Director of the Consumer Affairs Division, the
Division has attempted to make the Division more accessible and
responsive to the public. However, the success of these attempts is put
into question by the results of the survey conducted by the Subcom-
mittee staff. In a random sampling of consumers who had filed writ-
ten complaints or inquiries in 1976 with the Comptroller of the Cur-
rency in Washingoton, D.C. 58% of those consumers who returned the
questionnaire rated the overall complaint handling process as "poor."
In addition, 69% of those consumers who returned the questionnaire
responded that the Office took longer than two 1eeks to acknwledge
receipt of their 'complaints.' Also, 69% of those consumers who re-
sponded to the question "was the matter resolved to your -satisfac-
tion ?" replied "no."
The Subcommittee staff believes that the Consumer Affairs Division
has been remiss in its failure to make affirmative efforts-to publicize
its existen-c and its ability to handle consumer complaint& A con-
sumer affairs office is of little value if consumers have never heard of it.
The staff recommends that affirmative efforts be taken to increase pub-
lic awareness of the -existence of the Consumer Affairs Division and
its ability to handle consumer complaints, which should include, at a
minimum:
(1) publication and distribution of informational pamphlets to banks, con-
suner groups and other organizations and persons describing the ability of the
Consumer Affairs Division 1o handle consumer complaints.
(2) a requirement that national banks and those operating under the code of
law for the District of Columbia prominently display a poster describing the Con-
sumer Affairs Division's ability to handle consumer complaints and listing the
address and telephone number of the Division.
(3) introduetion and listing of a nationwide toll-free number for the Consumer
Affairs Division in telephone directories throughout the country.
The Subcommittee staff also recommends the introduction of a con-
sumer complaint form to promote efficiency in the handling of con-
sumer complaints. A complaint form would be helpful for consumers
to use in presenting their complaints and would allow the Consumer
Affairs Division to specifically request the types of information that
it requires to resolve a complaint.
The Subcommittee staff recommends that all consumers receive a
response from the Consumer Affairs Division.
The Subcommittee staff also recommends that the Division periodi-
cally evaluate the overall efficiency of its complaint handling system
and implement changes which would improve its efficiency.
The staff also recommends continued liaison with other government
consumer affairs offices and staff, and recommends increased liaison
with consumer groups.
VI. FEDERAL DEPOSIT INSURANCE CORPORATION

The Federal Deposit Insurance Corporation was established to pro-
mote and preserve public confidence in banks and to protect bank de-
positors' funds by providing insurance coverage for bank deposits.
The Corporation insures national banks, most state banks. and some
mutual savings banks. The Corporation is also responsible for the
examination and supervision of FDIC-insured State-chartereod banks
which are not members of the Federal Reserve System.


77-305--76-- 4






20


The Federal Deposit Insurance Corporation is headed by a Board
of Directors which includes the Comptroller of the Cuncy and two
others who are appointed by the President with the advice and con-
sent of the Senate. There are fourteen regional offices of the Federal
Deposit Insurance Corporation. The budget for Fiscal Year 1976 is
$72,000,000.
The Federal Deposit Insurance Corporationl is responsible for- the
enforcement of the Truth in LendingAct, the Fair Credit Reporting
Act, the Fair Credit Billing Act, the Consumer Leasing Act (once it
goes into effect), the Equal Credit Opportunity Act, the Home Mort-
gage Disclosure Act and Title VIII of the Civil Rights Act of 1968.
It also has responsibilities under the Real Estate Settlement Procedure
Act.
The Office of Bank Customer Affairs was created in acordance with
and has responsibilities under the Federal Trade Commissina. Improve-
ment Act which required the establishment of a separate. consumer
affairs division within the Corporation.
In addition, the Federal Deposit Insurance Corporation's Board of
Direeors delegated four major responsibilities to the Office of Bank
Customer Affairs to be carried out in the interest of b customers in
banks supervised and examined by the Corporation. They axe:
(1) To Teceive and dispose of all bank customer complaints and inquiries;
(2) To recommend to the FDIC Board of Directors proposed regulations and
policy statements for the protection of bank customers;
(3) To recommend to the FDIC Board of Directors formal enforcement action
against banks where previous efforts to achieve compliance with laws, regulations
or policy statements affecting bank customers have been unsu ul; and
(4) To recommend to the FDIC Board of Directors special investigations and
surveys related to bank customer matters.
Although these responsibilities were delegated over one and a half
years ago by the Board of Directors, the Office of Bank Customer Af-
fairs states that two proposals have been made concerning bank cus-
tomers which resulted from consumer complaint input: (1) regula-
tions are presently being drafted by the FDIC's Legal Division to
amnenld its regulations requiring certain disclosures on time deposits;
and (2) ,a training seminar in fair lending is being developed in co-
ordination with the FDIC's Division of Bank Supervision, as well as
a manual of investigatory procedures for the agency's examiners.
The Office of Bank Customer Affairs is responsible for recommend-
ing to the Federal D)eposit Insurance Corporation's Board of Direc-
tors, policy statements and proposed regulations applicable to insured
State-chartered non-member banks for the protection of bank cus-
toiers. As stated in its Annual Report to Congress for 1975, the Office
(id not deem it necessary to submit recomImen(ations in these areas.
but failed to (isclose the cir-cumstances which led the Office to this
(onclusion.
The Office of Bank Customer Affairs presently has a staff of five,
which includes the Director, a consumer affairs specialist, a research
assistant. and two clerk-typists.
Although the Office of Bank Customer Affairs did not have a formal
budget for 1976, the Executive Office of the Corporation allocated
$81.000 from the Executive Offie's budget for the salaries of the five
staff members.






21


The Federal Deposit Insurance Corporation was the last of the three
banking regulatory agencies covered by the Federal Trade Commis-
sion Improvement Act to establish the required consumer affairs divi-
sion. While the Comptroller of the Currency and the Board of Gov-
ernors of the Federal Reserve System undertook to establish con-
sumer affairs divisions before the FTC Improvement Act became law
in January, 1975, the Federal Deposit Insurance Corporation did not
establish its consumer affairs division until April, 1975. The entire
staff for 1975, consisted of only one full-time member, the Acting
Director. A consumer affairs specialist assisted in handling consumer
complaints, but was not a permanent staff member during that year.
In addition to the slow start of the Office, the staff level of the
Office of Bank Customer Affairs was mi8represented in the Office's
Annual Report to Congress for the year 1975. The report, dated
March 15, 1976, stated on its first page, "Staff of the Office presently
(emphasis added) includes: a Director, three consumer affairs special-
ists, (having a background in law, bank examination, or a bank-related
discipline), one research assistant, and three clerical support person-
nel." However, at the time the report was submitted to Congress, the
Office had only a staff of four, consisting of the Director, one consumer
affairs specialist, one research assistant and one clerk-typist. As of
August, 1976, the staff level still had not reached the level of eight
people represented in the Annual Report.
The Office of Bank Customer Affairs has issued no pamphlets or
literature aimed at educating consumers, nor have any efforts been
made to publicize the existence of the Office and its functions to con-
sumers. In the Office of Bank Customer Affairs' Annual Report to the
Congress for 1975, the Office stated that it had not made a concerted
effort to publicize the existence of the Office. Although, the report
stated that publicizing the existence of the Office to the public would
be an objective for 1976, no steps have been taken to achieve this goal,
nor are any specific plans under consideration.
Complaint Handling
The Office of Bank Customer Affairs maintains a thorough record-
keeping system on complaints and inquiries. Complaints are listed on
a computer by complainant's name, by bank name, by type of com-
plaint and by date of receipt of the complaint.
The Office of Bank Customer Affairs has no investigational func-
tions. The investigative and examination work is performed by the
Division of Bank Supervision and the Legal Division of the Federal
Deposit Insurance Corporation.
When a complaint is received by the Office of Bank Customer Af-
-fairs, it is sent to the appropriate regional office for investigation by
a bank examiner. If a violation of a banking practice is found, the
examiner will discuss the violation with the bank. If the bank does
not change the practices found to have been in violation of the laws, the
Regional Director of the Federal Deposit Insurance Corporation will
send the bank a letter requesting the bank to comply with the laws and
regulations.
The Federal Deposit Insurance Corporation's Board of Directors
has the authority to issue cease and desist orders to enforce compliance
with laws under the agency's jurisdiction. However, a cease and desist





22


order has never been issued for a violation of a consumer protection
law, nor has the Office of Bank Customer Affairs ever recommended to
the Board a cease and desist order be issued because of a consumer
complaint.
Since the establishment of the Office of Bank Customer Affairs, no
civil sanctions have been imposed on banks as the result of a consumer
complaint. According to the Office of Bank Customer Affairs, inves-
tigations of complaints have not revealed any criminal activity which
would require the imposition of criminal sanctions. No consunwr coin-
plcints have been referred to the Departnent of Justice for further in-
vestigation or prosecution. However, the Federal Reserve System's
Annual Report to Congress on Truth in Lending for the Year 19T.,
states that the Federal Deposit Insurance Corporation has referred
five cases of apparent willful and knowing violations to the Justice
Department for possible criminal prosecution. Although the referrals
of these five cases were not the result of consumer complaints, they
indicate the potential for abuse of consumers.
Bank examiners have copies of all consumer complaints filed against
a bank when they carry out their regular examination of the bank.
Generally, if the complaint appears to have been resolved and the con-
sumer has not indicated dissatisfaction with the resolution of his
complaint, the examiner will do nothing further in connection with the
complaint. If needed, the examiner will take follow-up action. How-
ever, the bank examiner does not systematically check to see that the
information which the bank has supplied in response to the Federal
Deposit Insurance Corporation's request for information concerning
complaints has been accurate.
According to the Office of Bank Customer Affairs, when an investi-
gation is required, approximately thirty-three days on the' average
are needed to process the complaint with approximately six days being
required to process an inquiry. However, the experience of the Sub-
committee has indicated that a considerably longer time passes. A
consumer's complaint letter was forwarded from the Subcommittee
on Consumer Affairs to the Office of Bank Customer Affairs on
June 22, 1976. The Subcommittee specifically requested that a fol-
low-up letter be sent to it to enable it to properly respond to the con-
stimer. Tluirteemi weeks after the Congressional referral was sent, the
(ffice of Bank Customer Affairs had still not acknowledged receipt of
the complaint, nor supplied details of the investigation which had
beel requested.
From April 1. through December 1975, 506 consumer complaints
were received by the Office of Bank Customer Affairs. The major ara
of complaint ldealt with deposit and loan functions. A listing of the
iiiost frequently occllrring types of complaints received by the Office
are as follows:
i)eposit Function:
I)iscrepaney in account-----------------------------------------61
A d v e r t i s i n g . . . . . . .. . . . . . . . . . . 4 1
Premature withdrawal penalty ------------------------------------40
Payment of interest-----------------------------------------
Loan Function:
Regulation 1-lsclosure statment-..............- 7
Repossessioni-foreclosure ............- 14
Equal Cre(lit Opiortunity Act ------------------------------------ 2






23


As of September 1, 1976, statistics are available only for the period
January 1 through March 31, 1976. During this period the Office of
Bank Customer Affairs received 186 complaints. The numerical break-
down to these complaints by type of complaint is as follows:
Deposit function ------------------------------------------ 102
Loan function ----------------------------------------- 64
Others 20
The Oflice of Bank Customer Affairs is a referral center between
consumers and the regional offices of the agency, where the investi-
gational work is done. The actual work of the Office with respect to
complaint handling entails receiving complaints and inquiries, sta-
tistical recording of complaints, referring complaints for investiga-
tion and informing consumers of the factual findings concerning their
complaint.
The establishment of the Office of Bank Customer Affairs seems to
indicate a rather effortless reshuffling within the Division in order to
comply with the. Federal Trade Commission Improvement Act. The
Act specifically states that the agency establish "... separate division
of consumer affairs.. ." to handle consumer complaints. However, the
Office of Bank Customer Affairs (1) to date, shares office space with
several other offices in the Division of Bank Supervision; (2) was not
designated as a separate cost center for the 1976 budget; and (3) dur-
ing its first year of existence was inadequately staffed.
The Office of Bank Customer Affairs is responsible for represent-
ing the interests of consumers within the Federal Deposit Insurance
Corporation. However, the Office has made no recommendations to
the Board relating to consumer matters.
The Office has also failed to make any attempts to publicize the
existence of functions of the Office.
With all of these factors, the Subcommittee staff concludes that the
Office of Bank Customer Affairs has not taken its responsibility to
consumers seriously.
Recom mendations
The Federal Trade Commission Improvement Act calls for the
establishment of a "separate consumer affairs division" to receive and
take appropriate action on complaints. The Subcommittee staff believes
that the efficiency and effectiveness of the complaint handling process
would be greatly increased by giving the Office of Bank Customer
Affairs full responsibility for handling complaints received by the
Federal Deposit Insurance Corporation throughout the nation.
At present, the Office of Bank Customer Affairs acts as a complaint-
forwarder. It neither becomes involved with on-site investigation of
consumer complaints nor makes requests to individual banks for in-
formation: concerning the consumer complaint. The Office of Bank
Customer Affairs relies on bank examiners in the field to carry out in-
vestigations of complaints received. It should be noted that bank ex-
aminers have other duties in addition to complaint handling.
Centering responsibility for investigation of consumer complaints
in the Office of Bank Customer Affairs would result in several signi-
ficant advantages for consumers: (1) it would be closer to the spirit of
the Federal Trade Commission Improvement Act which calls for a





24


separate consumer affairs division; (2) it would permit each member
the Office of Bank Consumer Affairs to develop expertise in a par-
ticular area of consumer law and in particular types of consumer coi-
plaints and (3) it would permit each staff member handling complaints
to concentrate his full attention on complaints.
The staff of the Office of Bank Customer Affairs would investigate
all those complaints which do not require an on-site investigation by
making requests for relevant papers and documents and by contacting
individuals and banks involved by telephone. The staff should be en-
couraged to contact the consumer who submitted the complaint, when-
ever necessary, to clarify the problem or to obtain additional informa-
tion. Where the consumer complaint involves a set of circumstances
(as in potential violations of the Equal Credit Opportunity Act)
which cannot be easily resolved by telephone or by requesting written
information, a bank examiner should conduct an on-site investigation
of the complaint. Such an investigation should be actively supervised
by the staff of the Office of Bank Customer Affairs.
Copies of all complaints handled by the Office of Bank Customer
Affairs should be sent to bank examiners in the regional offices for their
information and use during regular bank examinations. During these
examinations the examiner should check a random sample of the
records earlier furnished to the Office of Bank Customer Affairs to
make sure that the bank being examined has been supplying accurate
information in connection with consumer complaints. If only a few
complaints have been filed in connection with the bank being examined,
each one should be checked.
The Subcommittee staff recommends that a consumer affairs special-
ist. be designated at each regional office to act as a liasion between the
Office of Bank Customer Affairs and the regional office. The duties of
the person holding such a position would include (1) oversight on the
investigation of consumer complaints being handled by bank examiners
in the region, (2) coordination of consumer complaint correspondence,
and (3) responsibility for publicizing the Office of Bank Customer
Affairs and its complaint-handling functions as well as for consumer
education within the region.
The Office of Bank Customer Affairs maintains that its program
in the consumer area has assisted many consumers with their banking
problems and contributed toward the general education of the con-
sumer in banking. However, the accuracy of this assertion is disputed
by the results of a survey conducted by the Subcommittee staff. In a
random sampling of consumers who tiled written complaints or in-
quiries with the Federal Deposit Insurance Corporation in 1976, 55%
rated the overall complaint handling process as poor.
In addition, ( 9 of those consumers who responded to the question
"was the matter resolved by the agency to your satisfaction?" replied

bhe Subcomnmittee believes that the Office of Banik Customer Af-
fairs has been remiss iII its failure to take affirmative efforts to pub-
licize its existence and its ability to handle consumer complaints. A
consumer affairs office is of little value if consumers have never heard
of it. The Office of Bank Customer Affairs in its Annual Report to
Congress for the year 1975 itself acknowledges the need for such
pliblicity, blit thus farm in 1976 has taken no steps in this area.






25


Affirmative efforts to be taken to increase public awareness of the
existence of the Office of Bank Customer Affairs and its ability to
handle consumer complaints should include, at a minimum:
(1) publication and distribution of informational pamphlets to banks, con-
sumer groups and other interested organizations and persons describing the
Office of Bank Customer Affairs' ability to handle consumer complaints.
(2) a requirement that State-chartered banks supervised and examined by
the Federal Deposit Insurance Corporation prominently display a poster describ-
ing the Office of Bank Customer Affairs' ability to handle consumer complaints
and listing the address and telephone number of the Office.
(3) introduction and listing of a nationwide toll-free telephone number for
the Office of Bank Customer Affairs in telephone directories throughout the
country.
The Subcormnittee staff also recommends the introduction of a con-
sumer complaint form to promote efficiency in the handling of con-
sumer complaints. A complaint form would be helpful for consumers
to use in presenting their complaints and would allow the Office of
Bank Customer Affairs to specifically request the types of informa-
tion that it requires to resolve a complaint.
The Subcom ittee staff recommends that the additional positions
already authorized for the Office of Bank Customer Affairs be filled
awd that those persons hired be well-qualified in the consumer affairs
field. In addition, the staff recommends that the Office of Bank Cus-
tomer Affairs have its own separate office quarters.
The Subcommittee staff further recommends that future annual
reports to Congress required by the Federal Trade Commission Im-
provement Act be detailed and not. misrepresent any facts concerning
the Office of Bank Customer Affairs' size or operations.
The Subcommittee staff also recommends that the Office periodically
evaluate the overall efficiency of its complaint handling system and
implement changes which would improve its efficiency.
The staff further recommends continued liaison with other govern-
ment consumer affairs offices and staff, and recommends increased
liaison with consumer groups.
COMPLAINT HANDLING IN THE NATIONAL CREDIT UNION ADMINISTRA-
TION AND THE FEDERAL HOME LOAN BANK BOARD
Unlike the Federal Reserve Board, the Federal Deposit Insurance
Corporation and the Comptroller of the Currency, the National Credit
YTnion Administration and the Federal Home Loan Bank Board do
not have consumer affairs offices mandated by statute.
The National Credit Union Administration, however, recently. es-
tablished a consumer affairs office without being required to do so
by law. The Federal Home Loan Bank Board has no consumer affairs
office.
VIII. NATIONAL CREDIT UNION ADM.uINISTRATION
The National Credit Union Administration was established in 197O,
as an independent agency in the executive branch to serve as an regu-
latory agency for all federally chartered credit unions. The National
Credit Union Administration is responsible for chartering new credit
unions, supervising and examining approximately 13,000 Federal
credit unions, and insuring Federal and approved State-chartered
credit unions.






26


There are six regional offices of the National Credit Union Adminis-
tration. The overall National Credit Union Administration budget
for 1976 is approximately $17,296,000.
The. National Credit Union Administration is responsible for en-
forcing the Truth in Lending Act, the Fair Credit Reporting Act, the
Fair Credit Billing Act, the Consumer Leasing Act (once it goes into
effect), the Equal Credit Opportunity Act, the Home Mortgage Dis-
closure Act and Title VIII of the Civil Rights Act of 1968 with respect
to tiose credit unions which it examines.
Until recently the National Credit Union Administration had no
consumer affairs office. But on July 22. 1976, although there was no law
requiring such action, Administrator C. Austin Montgomery directed
the establishment of a consumer affairs division within the National
Credit Union Administration in one of his first acts as Administrator.
According to the National Credit Union Administration, the objec-
tives and responsibilities of the Division of Consumer Affairs are to
be as follows:
to help credit union officials achieve high quality in the implementation of
consumer regulations in the simplest and most effective manner. The principle
responsibilities of the Division of Consumer Affairs are: (a) to assist NCUA
staff and credit union officials in understanding and carrying out the requirements
of the various consumer regulations, (b) to coordinate a responsive system of
handling credit union consumer complaints and (c) to develop training pro-
grams and appropriate brochures concerning the rights and responsibilities of
credit unions as well as their members.
The 'Division of Consumer Affairs will operate as a division of the
Office of Examination and Insurance, and is to be initially staffed with
a director, an analyst and clerk-typist. The National Credit Union
Administration anticipates that the Division of Consumer Affairs will
be fully operationall and staffed by early September, 1976.
Prior to the establishment of the Division of Consumer Affairs, con-
sumer' complaints by credit union members were handled by the Of-
fice of Examination and Insurance, which had designated several staff
members to handle consumer complaints and inquiries. Six attorneys
from the General Counsel's Office were also available to handle con-
sumer complaints.
Complaint Handling
The National Credit Union Administration's Washin0ton Office re-
ceives approximately one third of all consumer complaints and inquir-
ies received by the agency nationally.
Upon receipt of a consumer complaint at the Washington Office, an
acknowledgement is sent out within five days according to the Admin-
istration.
Consumer complaints by credit union members sent to the Washing-
ton Oflcc are handled as follows: (1) the complaint is forwarded to
the l)irector of the region in which the credit union involved in the
complaint is located. The Regional Director then writes to the Super-
visory Committee of the credit union involved requesting an investiga-
tion and askll it to attempt to resolve the complaint. (A Supervisory
Committee is composed of three or more cre dit union members re-
sponsible for internal audits); (2) After the investigation has been
completed, the Supervisory Committee sends its factual findings to





27


the Regional Director, who then corresponds with the consumer. The
complaint, according to the Office of Examination and Insurance is
usually resolved at this point: (3) Where the complaint itself indicates
that the individual has already complained without satisfaction to the
Supervisory Committee of the credit union involved, the Regional Di-
rector sends an examiner to the credit union to investigate the com-
plaint. According to the Office of Examination and Insurance, com-
plaints of this type frequently do not appear to have much validity,
but even in these instances, on-site investigations are nevertheless car-
ried out by examiners. As a general rule, however, examniners rarely
investigate complaints other than during their periodic examinations
of credit unions.
A numerical breakdown of types of consumer complaints is not
available. According to the Office of Examination and Insurance- how-
ever, 60% of the consumer complaints received by the National Credit
Union Administration concern credit discrimination.
A recent survey by the agency indicated that the number of com-
plaints received by the Washigton Office was averaging twelve per
week. According to the Office of Examination and Insurance, this
figure represents a significant increase over past levels. Cilmrently, the
National Credit Union Administration is establishing a data collection
system which will record the number and types of consumer com-
plaints received.
The National Credit Union Administration does not have procedures
or maintain a system of records through which information is avail-
able concerning the imposition of civil sanctions upon federally insured
credit unions. According to the Office of Exa:mination and Insurance,
however, only a very limited number of sanctions have been imposed
and only for small amounts.
No consumer complaints have resulted in criminal sanctions' nor in
referrals to the Department of Justice for further investigation or
prosecution. According to the Office of Examination and Insurance,
where credit unions have been in violation, they have agreed to and
have taken the necessary corrective action.
At the time of the annual examination of a credit uni6n, the exam-
iner receives a field file containing documents and correspondence re-
lating to the particular credit union being examined. Part of the exam-
ination procedure is to review the correspondence to see if any follow
up action is required. However, there is no specific requirement that
examiners check out the accuracy of information supplie& by the
credit union to the National Credit Union Administration as a result
of a consumer complaint.
The results of the consumer survey conducted by the Subcommittee
staff indicate that consumers have a mixed opinion of the manner in
which their complaints were handled by the National Credit Union
Administration. Sixty-two percent of those consumers who responded
to the question "was the matter resolved by the agency to' Yu'satis-
faction?" replied "no." Thirty-four percent of those consumers -who
responded tothe'question "what is your overall view of the manner in
which your complaint or inquiry was handled?" responded:" poor.
Twenty-eight percent also responded "excellent," with tweh-tv-eight
percent responding "fair," and ten percent responding tg6od.





28


The survey also indicated that 52% of the consumers whose com-
plaints were received by the National Credit Union Administration
did not receive an acknowledgement within two weeks.
Recommendions
The Subcommittee staff believes that the complaint handling proc-
ess within the National Credit Union Administration would be im-
proved by giving the newly-created Division of Consumer Affairs full
responsibility for all consumer complaints received by the National
Credit Union Administration throughout the nation. Rather than
forwarding complaints received by the National Credit Union Admin-
istration in Washington to Regional Offices for further action, the
staff of the Division of Consumer Affairs would itself act on those
consumer complaints which do not require an on-site investigation.
The staff would make requests to the credit union in question for rele-
vant papers and documents and contact individuals and credit unions
by telephone. Where the consumer complaint involves a set of circum-
stances (as in potential violations of the Equal Credit Opportunity
Act) which cannot be easily resolved by telephone or by requesting
written information, an examiner should be sent out to conduct an on-
site investigation of the complaint. The staff of the Division of Con-
sumer Affairs should be encouraged to contact the consumer who sub-
mitted the complaint whenever necessary to clarify the problem or to
obtain additional information. In addition, the staff should actively
supervise the handling and resolution of those complaints sent to re-
gional offices for such on-site investigation.
The Subcommittee staff recommends that a consumer affairs special-
ist be designated at each regional office to act as a liaison between the
Division of Consumer Affairs and the Regional Office. The duties of
the person holding such a position would include (1 oversight on the
investigation of consumer complaints being handled by examiners in
the region, (2) coordination of consumer correspon ence, and (3)
responsibility for publicizing. the Division of Consumer Affairs and
its complaint handling functions as well as for consumer education
within the region.
Efforts should be made to publicize the Division of Consumer Affairs
and its complaint handling ability. Such efforts should include, at a
minimum:
(1) publication and distribution of informational pamphlets to credit unions,
consumer groups and other interested organizations and persons describing the
Division of Consumer Affair's ability to handle consumer complaints.
(2) a requirement that credit unions examined by the National Credit Union
Administration prominently display a poster describing the Division of Con-
sumer Affair's ability to handle consumer complaints and listing the address and
telephone number of the Division.
(3) introduction and listing of the nationwide toll-free telephone number for
the Division of Consumer Affairs in telephone directories throughout the country.
The Subcommittee staff recommends the introdutcion of a consumer
complaint form to promote efficiency in the hauling of consumer com-
plaints. A coi)plaiiit forim would be helpful to consumers to use in
presenting their complaints and would allow the Division of Con-
sumer Afairs to specifically request the types of information that it
requires to resolve a complaint.





29


The Subcommittee staff also recommends that the Division of Con-
sumer Affairs:
(1) periodically recommend policies to the Administrator to protect consumer
interests.
(2) periodically analyze the statistical data it has gathered concerning con-
sumer complaints in order to suggest changes which can be made to prevent
similar complaints in the future.
(3) maintain its liaison with other government consumer affairs offices and
staff, and with consumer groups.
(4) periodically evaluate the overall efficiency of its complaint handling system
and implement changes which would improve its efficiency.
The Subcommittee staff recommends that the Division of Consumer
Affairs supply copies of all complaints which it handles to field exam-
iners for their information and use during regular examinations of
credit unions. During these examinations the examiner should check a
random sample of the records earlier furnished to the National Credit
Union Administration to make sure that the information supplied by
the credit union was accurate. If only a few complaints have been filed
involving the credit union, each one should be checked.

IX. FEDERAL HOME LoAN BANK BOARD
The Federal Home Loan Bank Board not only regulates Federally-
chartered savings and loan associations, but also serves as a credit
reserve for member savings and loan institutions engaged in home
mortgage lending. The Bank Board is a relatively small Federal agency
regulating a $300 billion industry. The total budget for Fiscal Year
1976 for administrative expenses for the Bank Board is $14,665,000.
The Board is responsible for the administration and enforcement
of the Federal Home Loan Bank Act, the Home Owners' Act of 1933,
Title IV of the National Housing Act and the Bank Protection Act of
1968. It is also responsible for the enforcement of the Truth in Lending
Act, the Fair Credit Reporting Act, the Fair Credit Billing Act, the
Consumer Leasing Act (once it goes into effect) the Equal Credit
Opportunity Act the Home Mortgage Disclosure Act and Title VIII
of the Civil Rights Act of 1968.
The Federal Home Loan Bank Board has no office whose sole re-
sponsibility is consumer affairs. However the Office of Housing and
Urban Affairs a division of the Bank Board established by an order of
the Chairman on September 3, 1970, handles some consumer com-
plaints and inquiries.
The Office of Housing and Urban Affairs describes its objectives and
responsibilities as follows:
The Office of Housing and Urban Affairs is responsible for advising the Board
on housing, urban problems, and minority affairs and for recommending policies
pertaining to these areas. This Office develops, implements, and evaluates pro-
grams to encourage housing investment and rehabilitation in older urban neigh-
borhoods, prevent discrimination in lending and employment by savings and loan
associations which have Federal charters or insurance of accounts by the Federal
Savings and Loan Insurance Corporation. This Office also serves as the Board's
liaison with the Office of Consumer Affairs at the Department of Health, Educa-
cation, and Welfare; the United States Commission on Civil Rights; and other
Government agencies and organizations concerned with consumer or minority
affairs.





30


Although the Office of Housing and Urban Affairs is Eited as a
consumer contact point in the "Guide to Federal Consumer Serices"
published by the Department of Health, Education, and Welfare's
Office of Consumer Affairs, the Office of Housing and Urban Affairs
is not responsible for all consumer complaints. The Office of Exami-
nations and Supervision, the Bank Board's Congressional Liaison
Office and the Supervisory Agents in the regional offices are also
responsible for handling certain types of complaints, and for han-
dling complaints from certain referral offices. The jurisdiction of each
office in handling consumer complaints is confusing because there are
several areas which overlap.
The following chart explains the responsibility of the offices which
handle consumer complaints and inquiries:
OFFICE OF HOUSING AND URBAN AFFAIRS
Has general oversight on all discrimination complaints and inquiries.
Serves as a referral office for all general complaints and inquiries from the
Office of Consumer Affairs in the Department of Health, Education, and Welfare.
OFFICE OF EXAMINATIONS AND SUPERVISION
Responsible for examination and supervision of Federal savings and loan
assoiation members.
Responsible for the development of examination techniques and for the en-
forcement of compliance with the laws under the agency's jurisdiction.
Hawdles and investigates all general consumer complaints and inquiries re-
ceived by the Bank Board, including those referred by other federal agencies.
Responsible for the investigation of all discrimination complaints.
SUPERVISORY AGENTS IN REGIONAL FEDERAL HOME LOAN BANKS
May receive general complaints directly from consumers, in which case, the
complaints never come to the attention of the Washington Office of Examinations
and Supervision.
Handles all correspondence to consumers concerning the factual and resolu-
tional aspects of all the complaints referred to them.
Congressional constituents' complaints and inquiries are received by
the Federal Home- Loan Bank Board's Congressional Liaison Office.
Thllese compaints and inquiries receive priority treatementin compari-
son to the handling of general complaints received by the Balk Board.
The Congressional complaint handling process is expedited by the
Office of Exuminations and Supervision. Correspondence is sent out
promptly to acknowledge receipt of the referral. An additional letter
is sent after the completion of the investigation.
The investigational work of all complaints is done by the Super-
visory Agents and Examiners in the regional Federal ome,Loan
Banks under the supervision of the Office of Examiiations and Si-
perv'ision. The primary function of tle Supervisory Agents 'nd exam-
iners is to monitor compliance with the laws under the agency's
jurisdiction.
The Office Of Examinations an(l Supervision has no staff members
whose sole responsibility is to handle consumer complaints, even
though this (ivision accounts for an estimated eight hundred of the
agency's employes.
Supervisory Agents are employed by the regional Federal Home
Loan Banks and are responsible for the initial investigation of all






31

complaints referred to them. Examiners are assigned to regional bank
offices to examine the savings and loan institutions in their regions for
financial soundness and compliance with consumer credit protection
laws.
The complaint handling process varies depending upon the type of
complaint. A step by step explanation of the process used by the Bank
Board's Washington office is as follows:
1. When the Office of Examinations and Supervision receives a consumer com-
plaint, an acknowledgement is sent out, and the complaint is directed to the
Supervisory Agent in the appropriate regional Federal Home Loan Bank. (Dis-
crimination complaints are sent to the Office of Examinations and Supervision,
where the process then begins).
2. The Supervisory Agent sends out a request for factual details concerning
the complaint to the savings and loan institution involved, with a five day limit
for respoAse. (The complaint may be resolved at this level. If so, the Supervisory
Agent corresponds directly with the consumer concerning the factual findings and
the resolution of the complaint. Copies of the correspondence are sent to the Office
of Examinations and Supervision or Office of Housing and Urban Affairs, which-
ever originally referred the complaint).
3. If further investigation is required, the Supervisory Agent refers the com-
plaint to an examiner in the regional Federal Home Loan Bank, although this
step occurs very seldom-usually in connection with discrimination complaints.
Otherwise examiners investigate consumer complaints which have been referred
to them at the regular examination of savings and loan institutions which occurs
every fourteen months.
4. If however, the violation continues, the following corrective measures can be
utilized:
"regulation by persuasion" requires the Supervisory Agent to send a
"supervisory letter" to the savings and loan institution, requesting a response
within thirty days to correct violations discovered by the examiner or Super-
visory Agent.
"cease and desist order" will be recommended to the Bank Board by the
Office of Examinations and Supervision if the violation of a law persists.
"involuntary termination" of a savings and loan association's status as an
insured institution with the FSLIC is the most severe sanction available to
the Bank Board. However, this sanction has never been utilized by the Board.
Only two cease and desist orders relating to consumer complaints
have been issued by the Federal Home Loan Bank Board. The first one
was issued in May, 1975, and concerned a case of misleading advertis-
ing. The second one, issued in December, 1975, involved noncompliance
with Regulation Z (Truth in Lending implementation regulations).
According to the Office of Housing and Urban Affairs, the total
process of handling a complaint received by this office is three weeks or
leSs. Where a complaint requires urgent attention, the process can be
shortened.,
The Office of Housing and Urban Affairs and the Office of Examina-
tions and Supervision stated that telephone complaints by consumers
are accepted.Initial action on a telephone complaint will be taken by
both offices, but consumers are requested to follow up their telephone
complaints with a written complaint.
A subcommittee staff member on July 12, registered a telephone
complaint with the Federal Home Loan Bank concerning a newspaper
advertisement by a member savings and loan association.
The staff member called the general telephone number at the Bank
Board and was informed that the savings and loan institution was not
under the Board's jurisdiction. The savings and loan was in fact under
the Board' jurisdiction, and a second call was made. This call was then





32

referred to the director of the Office of Examinations and Supervision,
where the Subcommittee staff member was then transferred to the ap-
propriate regional director's officer.
At this point, the complaint ws referred to an assistant staff member
of the regional director's office. After listening to the complaint, the
Board's staff member informed the complainant that the Board knew
about the problem and it was being taken care of. Asked what assur-
ance she would receive that some action would be taken, the Bank
Board staff member said to assume that the savings and loan institu-
tion involved would change the advertisement.
The identical advertisement appeared again on July 23, and another
call was made to the Bank Board staff member who had assured the
complainant the matter would be handled. He stated that the mislead-
ing advertisement was in fact suitable, because the information needed
to clarify the advertisement was in smaller print within the
advertisement.
This incident illustrates several points. The Bank Board staff mem-
ber mislead the complainant by stating that the savings and loan in-
stitution would change the advertisement. This change did not occur.
Secondly, when the Bank Board staff member was called again he then
took the position that the advertisement was suitable. The Subcommit-
tee staff analysis of this advertisement is that it was misleading and
corrective action should have been taken by the Bank Board.
There are two additional points that should also be noted from the
telephone calls to the Bank Board. First, the Bank Board staff mem-
ber never asked for the complainant's name or how she came to the
point of complaining. Secondly, the procedure involved in registering
stuch a complaint is too lengthy and frustrating for any person, wheth-
er a Subcommittee staff member or a consumer. There is obvious confu-
sion within the Bank Board as to who handles complaints.
According to the Office of Housing and Urban Affairs, the only con-
sumer complaint statistics that are maintained by the Bank Board are
discrimiii ination complaints and Truth in Lending complaints. Thirty
discrimination complaints and inquiries were received during 1975,
and seven have been received through May, 1976. These figures iclude
only those complaint and inquiries received by the Washingoton office
and 1not those which may have been submitted directly to Supervisory
Agents at the Federal Home Loan Banks. The Office of Housing and
Urban Affairs considers the number of regional complaints and in-
quiries to be insignificant.
I1 1975, six Truth in Lending (Regulation Z) complaints were re-
ceived. No such complaints have been received to date in 1976. These
figures do not include complaints received in the field offices, but that
figure is also coinsi(lered to be insignificant by the Office of Housing
an Urban Affairs.
The F ederal IIome Loan Bank Board has no central recordkeeping
system of all ,onsulmer complaints and inquiries and, thus, a complete
imurmeical 1)re1kdlown of general consumer complaints is not available.
lRecorls of consumer complaints and inquiries are scattered among the
Federal Home Loan Banks. Supervisory Agents in the field offices and
the )ank Board's Washington office.
The Subcommittee staff feels that the small number of consumer
cou1plaints received by the Federal Home Loan Bank loard does not





33


indicate a general lack of consumer problems, but rather a poor rec-
ordkeeping system and a failure to publicize the complaint handling
ability of the Federal Home Loan Bank Board.
The results of the consumer survey conducted by the Subcommittee
staff indicates that consumers have a poor opinion of the manner in
which their complaints were handled by the Federal Home Loan Bank
Board. The consumers were also highly dissatisfied with the resolution
of their complaints. It should be noted that the consumers included in
the survey did not include those consumers who had submitted coni-
plaints concerning credit discrimination.
Of those consumers who responded to the question "was the matter
resolved by the agency to your satisfaction?" 75% replied "no". Forty-
seven percent of those who responded to the question "what is your
overall view of the manner in which your complaint or inquiry was
handled by the agency ?" responded "poor". Only 11% answered "ex-
cellent," with 31% responding "good" and 11% responding "fair."
In addition, 63% of the consumers whose complaints were handled
by the Federal Home Loan Bank Board stated that the agency took
longer than two weeks to acknowledge receipt of their complaints.
Evaluation
The Office of Examinations and Supervision does not have a central
recordkeeping system on general complaints and inquiries which it
receives. Without records of complaints received, statistics cannot be
compiled, problem areas cannot be detected and evaluation of the com-
plaint handling system cannot be successfully carried out. In addition,
no effort is made to gather statistical information on complaints re-
ceived by the regional Federal Home Loan Banks.
Neither the Office of Housing and Urban Affairs nor the Office of
Examinations and Supervision publishes informational literature to
inform the public of their offices' ability to handle consumer com-
plaints. The only way consumers might learn of the existence of the
Office of Housing and Urban Affairs is through the Equal Housing
poster required by the Federal Home Loan Bank Board to be displayed
at member institutions and by the Federal Home Loan Bank Board's
notice in "Guide to Federal Consumer Services" published by the De-
partment of Health, Education and Welfare's Office of Consumer Af-
fairs. The poster advises those consumers who feel that they have been
discriminated against in the granting of credit to send a complaint to
the Department of Housing and Urban Development, and to also send
a copy of the complaint to the Federal Home Loan Bank Board's
Office of Housing and Urban Affairs in Washington. Thus, few sav-
ings and loan customers are likely to know that the Federal Home
Loan Bank Board possesses a complaint handling capability.
Consumer complaints received by the Federal Home Loan Bank
Board do not receive equal treatment in the complaint handling proc-
ess. Complaints referred by Congress are given priority over consumer
complaints sent directly by consumers to the Bank Board. Discrimina-
tion complaints are given, more attention than general complaints, in
that the handling of discrimination complaints is reviewed by the
Office of Housing and Urban Affairs, while other complaints are not.
Also, no statistical information on non-discrimination complaints is
maintained by the Office of Examinations and Supervision.






34


Recommedatiom
The Subcommittee staff recommends that a consumer affairs division
be established within the Federal Home Loan Bank Board to be respon-
sible for the centralized handling of all consumer complaints received
by the agency throughout the Nation. Establishment of such a division
would have the principal advantage of centering in one particular
division the currently-divided responsibility for handling consumer
complaints.
In addition, a centralized office would (1) permit each member of
the Consumer Affairs Division staff to develop expertise in a particular
area of consumer law and in particular types of consumer complaints
and (2) permit each staff member handing complaints to concentrate
his full attention on complaints (as contrasted with the current situa-
tion where a Supervisory Agent or a field examiner-who have other
demanding duties as well-bear the principal responsibility for
investigating the complaints).
The staff of the consumer affairs division would investigate all
those complaints which do not require an on-site investigation by mak-
ing requests for relevant information and documents and by contact-
ing individuals and savings and loan institutions involved by telephone.
The staff should be encouraged to contact the consumer who submitted
the complaint clarify the problem or to obtain additional information.
Where the consumer complaint involved a set of circumstances (as in
potential violations of the Equal Credit Opportunity Act) which can-
not be easily resolved by telephone or by requesting written informa-
tion, a field examiner should conduct an on-site investigation of the
complaint. Such an investigation should be actively supervised by the
staff of the consumer affairs office.
The consumer affairs office should also be responsible for: Assuring
effective enforcement of consumer protection laws; periodically rec-
ommending policies to the Board to protect consumers' interests;
periodically analyzing the statistical data it has gathered concerning
consumer complaints in order to suggest changes which can be made to
prevent similar complaints in the future; liaison with other govern-
ment consumer affairs offices and consumer groups; publicizing, its
ability to handle consumer complaints; issuing educational materials
for consumers on sa-ings and loan matters; and periodically evaluat-
ing the overall efficiency of the complaint handling system and im-
plementing changes which would improve its efficiency.
Records of the number and types of complaints received by the
Federal Ilone Loan Bank Board should be maintained by the con-
sumer affairs division and copies of all complaints handled by the office
should be sent to field examiners for their information and use during
regular examinations of savings and loan institutions. During these
examinations the examiner should check a random sample of savings
a11(d loan records earlier furnished to the consumer affairs office to make
sure that the institution being examined has been supplying accurate
information. If there are only a few complaints dealing with the
savings and loan institution, eacIh one should be checked.
The Subcommittee staff recommen(ls that a consumer affairs spe-
cialist be designated at each regional Federal Home Loan Bank to
at as a liaison between the consumer affairs division and the regional






35


Federal Home Loan Bank. The duties of the person holding this posi-
tion should include: (1) oversight on the investigation of consumer
complaints being handled by field examiners in the region; (2) coordi-
nation of consumer complaint correspondence, and (3) responsibility
for publicizing consumer affairs division and its complaint handling
functions as well as for consumer education within the region.
The Federal Home Bank Board should take affirmative steps to pub-
licize any consumer affairs division which it establishes and its com-
plaint handling ability. Such steps should include, at a minimum: (1)
publication and distribution of information pamphlets describing the
ability of the consumer affairs division to handle consumer complaints
to savings and loan institutions, consumer groups and other interested
organizations and persons; (2) a requirement that savings and loan
institutions prominently display a poster describing the consumer af-
fairs division's ability to handle consumer complaints and listing the
address of the division; and (3) introduction and listing of a nation-
wide toll-free telephone number for the consumer affairs division in
telephone directories throughout the country.
The Subcommittee staff also recommends the introduction of a con-
sumer complaint form to promote efficiency in the consumer complaint
handling. A complaint form would be helpful for consumers to use in
presenting their complaints and would allow the consumer affairs di-
vision to specifically request the types of information that it requires
to resolve a complaint.
X. ADDRESSES AND TELEPHONE N UMBERS OF CONSUMER AFFAIRS OFFICE
Federal Reserve Board, Office of Saver and Consumer Affairs, Martin
Building N.W., Washington, D.C. 20551, (202) 452-3946
Federal Deposit Insurance Corporation, Office of Bank Customer
Affairs, 1709 New York Avenue N.W., Washington, D.C. 20429,
(202) 389-4295
Office of the Comptroller of the Currency, Consumer Affairs Division,
490 L'Enfant Plaza East, S.W., Washington, D.C. 20219, (202)
447-1600
Federal Home Loan Bank Board, Office of Housing and Urban
Affairs, 320 First Street, N.W., Washington, D.C. 20552, (202)
376-3262
National Credit Union Administration, Consumer Affairs Division,
2025 M Street, N.W., Washington, D.C. 20456, (202) 254-8760










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