As the holidays approach, instances of fraud can increase and become the focal point for a financial institution. Changing or evolving technologies, varying purchase practices, and the least controllable element, consumer awareness, can create an ideal context for fraud to occur.
But can the same context that gives rise to fraud also provide an opportunity for financial institutions to strengthen their member relationships? According to at least one report, the answer is “probably”.
Cornerstone Advisors has recently released a report linking member loyalty to the experience member or consumer have when they report that fraud has occurred. In part, financial institutions are bound by the requirements of the regulations. Provisions within the regulations detail when a financial institution is required to make the member “whole” and when the liability falls to the victim of the fraud. The regulations also speak to specific actions that a financial institution must take when an instance of fraud is reported by one of their members. However, how a financial institution addresses their members and the ease at which the financial institution makes available the ability of a member to report fraud can play a significant role in customer loyalty.
According to the report, of the members who reported negative experiences during the fraud resolution process, 66% of them considered leaving the financial institution, and 70% were determined to avoid new financial products altogether. Now, being a victim of fraud can easily be described as a negative experience, but the statistics suggest that the financial institution’s treatment of the process is equally as suspect as the instance of fraud itself.
Conversely, members with positive experiences are shown to engage with the financial institution more consistently. The report notes that of the members who reported positive experiences during the fraud resolution process, 83% said that it strengthened their overall relationships with their provider and 81% said that it improved their likelihood of getting additional products.
The report goes on to draw similar conclusions: the more positive the experience the member had, the greater the likelihood the member would stay with the financial services provider and the greater the likelihood the member will be more likely to use additional financial products.
So, as the holiday season approaches, here are some steps that financial institutions can consider when addressing member reports of fraud:
Be Compassionate. While it may seem obvious to the person recording the details of the instance that the member should have known that the interaction was fraudulent from the start, the member may not have been aware enough to know that. Being understanding from the start can make the member feel more comfortable about divulging details to their financial institution and help create positive experiences.
Know Regulatory Requirements. Both Regulation E and Regulation Z provide requirements that a financial institution must take when a member is a victim of fraud. These requirements include who is liable, the amount of the liability, how the fraudulent event is to be reported to the financial institutions and the timeline the financial institution is required to follow. Knowing what your financial institution is required to do will ensure an expedient resolution and can create a positive member experience.
Keep the Victim of Fraud Informed. Many times, members are not familiar with regulatory requirements or with the internal procedures of a financial institution. Clear and effective communication during the resolution process can create a positive experience for the member.
Be Proactive. Educating members about current fraud schemes can be an effective way to increase member awareness. Especially during the holiday season, the number of online or electronic transactions can increase, which can potentially create higher instances of fraud, particularly for the less aware members. Ensuring members are receiving consistent communication from their financial institution on the latest fraud scams can decrease instances during fraud’s “busy season”.
Have questions or want to know more? Contact ViClarity’s compliance services team at compliancesupport@viclarityus.com.
For more information, email Heather Line.
Your League-member benefits include the Compliance Hotline — providing exclusive access to dedicated compliance experts:
Using the above phone number and email address, you can gain access to a knowledgeable team that’s ready to address all your credit union’s compliance inquiries — promptly and efficiently. With the Compliance Hotline, you can proactively respond to impromptu questions and issues by getting clarity and insight on technical topics that normally slow you down. We want to help you unlock the full potential of your League membership by leveraging the resources and support you need to navigate the complex world of compliance effortlessly. We’re ALWAYS just a phone call or email away!
Additionally, other League-member compliance resources include:
Powered by ViClarity, a California’s Credit Unions and Nevada’s Credit Unions company.
