The Consumer Financial Protection Bureau (CFPB) recently released its monthly Complaint Report for October, in which the CFPB focuses heavily on credit card companies, specifically calling attention to cardholder complaints alleging unfairness and lack of understanding of credit products or practices. The heavy volume of complaints of this type may forewarn increased CFPB scrutiny of the practices at issue, even if technically lawful.
The CFPB started taking consumer complaints as soon as it got off the ground in 2011. In 2012, it launched a Consumer Complaint Database. Since that time, the CFPB has fielded more than 700,000 complaints. According to the CFPB, a company has 15 days to respond initially to both the consumer and the CFPB and is expected to close all but the most complicated complaints within 60 days. In general, most credit card issuers respond in a timely manner.
The most recent complaint report indicates that credit card complaints are on the rise; up approximately 23 percent since this time last year, with billing disputes topping the list with 16 percent of credit card complaints received. Customer confusion is the root of the billing dispute complaints, according to the report. Under Regulation Z (12 CFR Part 1026), which governs disclosures related to billing error rights, credit card issuers are required to provide a billing rights summary to the cardholder at account opening. In addition, each account statement must contain an address for billing-error inquiries and, at a minimum, an indication of the general purpose for the address. Even with these disclosures, the report suggests customers are confused as to their rights and responsibilities regarding statement billing errors.
The report flags five additional areas of concern:
- Confusion regarding how late fees are assessed and payment cut-off times
- Confusion on how deferred interest programs work
- Allocation of payments
- Accounts closed without prior notice
- Credit limit decreases without prior notice
Many of these kinds of complaints result from cardholders’ lack of understanding of what, how and when card issuers take action on cardholder accounts, and suggest that complaining cardholders often perceive that they are not treated fairly.
Although not all of the complaint categories spotlighted indicate potential regulatory violations, these statistics suggest mere technical compliance with laws and regulations will not shield an issuer from customer dissatisfaction and regulatory attention. The CFPB can take action against any practice it deems unfair, deceptive or abusive to a consumer pursuant to the UDAAP principles codified in the Dodd-Frank Act. The same act that launched the CFPB defines its purpose, objective and functions and gives it the ability to investigate and take action against issuers on otherwise lawful practices it determines are unfair to the consumer. Indeed, the CFPB has repeatedly emphasized that this is its approach. For example, during an April 2015 panel discussion at the Practicing Law Institute’s 20th Annual Consumer Financial Services Institute, Peggy Twohig, the CFPB’s assistant director for supervision policy, explained that the CFPB approaches the exam process with an eye toward risk to the consumer.
Twohig’s comments are consistent with CFPB Director Richard Cordray’s stated view on the value of complaints:
Each complaint that people take time to submit to the Consumer Bureau can provide invaluable information and insight. Consumer complaint data is part of our DNA and these complaints play an important role in our supervision of companies, our enforcement actions, our rulemakings, and our engagement with servicemembers, students, the economically vulnerable, and older Americans. Each complaint is a chance for us to evaluate a perceived problem and see if it can be addressed successfully. But more importantly, complaints make all the difference by informing our work and helping us identify and prioritize problems. We know that if we hear about the same problem from fifty consumers, it likely looms larger than if we hear about it only from one or two.
The bad news for issuers is that credit card complaints are on the rise. The good news could be that they have a clear window into the next wave of exam activity.