As the consumer finance industry is aware, on June 25, 2015, consumer narratives became publicly available on the Consumer Financial Protection Bureau’s (CFPB) Consumer Complaint Database. As of Feb. 1, 2016, the Bureau has handled approximately 811,700 complaints across all products, of which 4,300 concern prepaid products, which are the focus of this month’s CFPB consumer complaint snapshot.

Prepaid products are an alternative form of consumer account simliar to a traditional checking account and are one of the leading consumer financial products in terms of growth in the United States. Much like the traditional checking account, these pre-paid accounts can be loaded with funds by either a consumer or a third party, allow people to make payments, store funds, withdraw cash, receive direct deposits, and send funds to other consumers. 

As CFPB Director Richard Cordray states, “prepaid products provide a crucial financial lifeline to many unbanked and under-banked households,” “It is important that consumers who rely on this important financial product can do so safely and efficiently, without undue hassles and runarounds.” This month’s snap shot highlighted consumer complaints which focused on access issues, incorrect account balances, and the wide variety of fees assessed with regard to prepaid products. 

Consumers complained about the inability to access their funds for an extended period of time, as well as access to their accounts and funds while an account was in dispute. Consumers found that when a charge was under review following a consumer dispute, the consumer’s entire account was frozen for the duration of the claim review, leaving consumers without access to their funds. Consumers also complained that when their prepaid cards expired, the re-issued card would not contain the former balance which remained at the time of the expiration leading to additional follow up and disputes concerning missing funds. Consumers found that they were being charged a vast array of fees for having and using a prepaid account, including being charged a fee to hold an account, make a transaction or balance inquiry, to change an access PIN, as well as fees for periods of inactivity on the account.   

While prepaid products were the focus of this month’s consumer complaint snapshot, debt collection, mortgages, and credit reporting still hold the top slot for the most complaints received by the CFPB, representing two-thirds of complaints submitted. However, complaints about “other” financial services are on the rise, including complaints about debt settlement, check cashing and money orders. There was a 77% increase in complaints received on these “other” services between November 2015 and January 2016, in comparison to the same time period 12 months prior. Payday loans also saw an increase of 12% during this same time period.   

In addition to the focus on complaints related to the prepaid product industry, this month’s Snapshot also highlights the consumer complaint statistics from the Houston, Texas metro area. As of Feb. 1, 2016, consumers in Texas have submitted 63,200 of the 811,700 complaints the CFPB has handled, 15,700 of those complaints are from the Houston metro area. 

Debt collection holds the highest percentage of complaints from consumers in both Texas and the Houston metro area, with 33% and 36% respectively, of complaints concerning debt collection issues. However, in a brief comparison to the national statistics, consumers in Texas have submitted mortgage complaints at a lower rate—16 percent of total complaints—than the national average, which is 26 percent of total complaints.

Practice Tips:

  • The final rules from the CFPB are set to be published in 2016 and will include guidance on prepaid products. Review the November 2014 proposed rules to ensure that your institution is ready with the necessary policies, procedures, and operational processes for when the final rules are issued.
  • The CFPB expects companies to respond to complaints and to describe the steps they have taken or plan to take to resolve the complaint within 15 days of receipt. The CFPB expects companies to close all but the most complicated complaints within 60 days. 
  • Keep detailed records and notes within your system of record of all efforts taken to investigate and review the allegations made in the consumer complaint. If corrections are necessary, note all corrections made to ensure a proper record trail is created for future reference. 
  • Maintain imaged copies of all complaints received, acknowledgements and responses sent to the consumer along with any supporting evidence. 

The Monthly Complaint Report can be found at here.