Sustainable Customer Remediation & High-Performing Agile Teams

Our client is a leading Fortune 50 multinational financial services firm, employing 268,000 people, serving 69 million customers, and managing assets exceeding $1.8 trillion.

Service Provided

Business Transformation

Capabilities Utilized

Regulatory Compliance & Remediation

Client challenge

Over a four-year period, our client discovered that approximately 2.8 million of its customer auto loan accounts had been wrongly charged for auto insurance. Many customers, who were charged for unnecessary insurance, faced financial difficulties, including delinquency and even vehicle repossession, due to these errors.

The client had hired a third-party firm to manage Collateral Protection Insurance (CPI) for its auto loan accounts. CPI is a standard practice that helps lenders protect their investments if customers fail to insure their vehicles. The process is simple: when a customer takes out an auto loan, they agree to maintain vehicle insurance. If the customer doesn’t have insurance, the bank can purchase CPI and charge the customer’s loan account. Typically, CPI is much more expensive than the insurance customers could buy independently.

As the CPI program administrator, this third-party firm was responsible for reviewing customer accounts, verifying insurance status, and purchasing CPI for customers without coverage. Unfortunately, the firm misidentified customers’ insurance status and applied insurance charges where they weren’t needed. Even worse, many affected customers were not notified, leaving them unaware of the mistake and unable to request corrections.

The impact on customers was extensive, with over half a million affected. Some customers noticed the error early and raised complaints with our client. Others had automatic loan payments set up, and since payments were first applied to insurance charges and then to the loan balance, they didn’t realize they were considered delinquent until their vehicles were repossessed. Bank leaders now sought a solution to address these issues, rectify the situation for impacted customers, and prevent similar errors in the future.

Our solution

Leaders at our client identified the issue of improper insurance charges, notified regulators, and halted the bank’s CPI program as well as its relationship with the third-party administrator. This client then engaged Valtree Solutions to evaluate the scope of this problem and establish a comprehensive, sustainable remediation effort.

First, Valtree Solutions consultants worked to identify the scope of impact and build the client’s response plan. Second, Valtree deployed a process design and execution group: a team of senior and junior consultants who developed and implemented remediation processes for CPI-impacted customers. Finally, Valtree supported the formation of a third-party remediation oversight function; this system facilitated customer-reported claims of harm or inappropriate applications of CPI.

Valtree’s process design and execution group worked with client SMEs and leaders to build and train three Agile teams to support the remediation effort. Each team was made up of both Valtree consultants and client-badged employees, allowing our client to benefit from Valtree’s expertise while also building process knowledge internally.

These integrated Agile teams managed remediation in three key areas.

The bankruptcy and third-party vendor support team worked with customers who had active or recently closed bankruptcy cases and built a system to facilitate these customers’ claims.
The business integration team supported the required remediation efforts for existing bank processes, such as updating customers’ credit reports.
The remediation payment and notification team managed customer data and payment and notification audits. Between 2017 and 2020, this process design and execution group identified the scope and processes for remediation, managed all notifications and customer payments, and delivered responses to regulators.

The response group’s success laid the foundation to establish the client’s new Enterprise Customer Remediation Center of Excellence. Based on the target operating model the Valtree teams established, this sustaining organization will execute all future customer remediation efforts for our client. Valtree’s access to high-performing talent allowed us to build an effective response team that began executing quickly, and our emphasis on training paved the way for this client to establish a quality, sustaining customer remediation organization.

Results

Customers affected by improper charges received 1.2 million letters and 919,000 checks, amounting to over $700 million in payments. The client successfully passed multiple periodic assessments by the Consumer Financial Protection Bureau (CFPB) and prepared for a review by the Office of the Comptroller of the Currency (OCC). Integrated teams, consisting of both Turnberry and client personnel, facilitated a smooth transition of knowledge and processes to the fully client-staffed Enterprise Customer Remediation Center of Excellence in August 2021.

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