In its first three months of operation, the new consumer financial watchdog received more than 5,000 credit card complaints from consumers. Many were confused about the terms of their cards and a few victimized by scammers, according to a report released Wednesday by the agency.
It is the first public disclosure of the volume of credit card complaints handled by the new Consumer Financial Protection Bureau (CFPB), an agency created to protect American families from deceptive, unfair and abusive financial products.
Nearly three of four card complaints sent to credit card companies (74 percent) were fully or partially resolved by the card issuers, according to the report issued by the CFPB. Consumers disputed the issuers' responses to their problems in only about 13 percent of complaints forwarded to banks.
However, the complaints show cardholders struggling to understand the terms of their credit cards and related products, such as debt protection services (also known as credit card insurance), where you pay a monthly premium that's supposed to cover your minimum credit card payment should you be unable to do so. As the report notes, these complaints "show a mismatch" between consumers' expectations of what they are getting and the way the card products function.
"When consumers contact us, we get a snapshot of how the consumer finance markets are working," Raj Date, the agency's acting director, said in a news release. "We are learning that there is a lot of consumer confusion about credit card terms."
The complaints also revealed instances of fraudulent credit card charges made by third parties to card accounts. "The CFPB has helped to obtain redress for defrauded consumers in these instances. In some cases, the bureau has consulted with the appropriate criminal authorities," according to the bureau.
Date said the complaints will help the CFPB identify potential problems and issues in the credit card market and help guide the agency in its response. In its arsenal of potential actions: supervising lenders, enforcing existing laws and rules, creating new rules, researching market trends and educating consumers.
The credit card complaints were collected via the agency's website, by phone, fax and by mail from July 21 through Oct. 21, 2011 -- the first three months of operation for both the federal agency and its new Consumer Response complaint system.
Top complaint: billing disputes Consumers complained the most about billing disputes, APR or interest rates, identity theft and closing or canceling an account.
However, as the CFPB points out and critics note, these categories are selected by consumers in a menu provided on the complaint form. Some consumers may have misidentified the category of their complaints or may not have known which of the areas identified by the bureau to select for their particular problem.
Bankers: Complaints are few Bank industry representatives said the number of complaints were small given the size of the credit card market.
"There are more than 383 million credit card accounts in the United States, and less than one-tenth of one percent of those have submitted a complaint to the bureau," Kenneth Clayton, chief counsel for the American Bankers Association (ABA) trade group, said in a statement. "This is a strong record, and one the industry will work to build upon."
Clayton suggested that banks want to address any complaints they receive: "Providing excellent customer service is of paramount importance to financial institutions and resolving every customer complaint is our top priority."
He added: "We look forward to working with the bureau to implement effective consumer response systems to ensure they gather and report meaningful data that will help resolve complaints and identify trends."
The new complaint system is being phased in over time. The CFPB selected credit cards for the initial phase because credit cards are widely used by many Americans and because the cards have historically been at or near the top of annual reports issued by the Federal Trade Commission on the financial practices generating the most consumer complaints.
Eventually, the bureau will handle all types of financial products. The website is set to begin processing mortgage-related complaints starting as early as Dec. 1, 2011. The remaining financial products are expected to be processed by the end of 2012, according to the agency.
The complaint system has not been without criticism and complaints. The ABA raised early concerns about the privacy of consumer information collected by the agency and whether banks were getting timely notice that consumers had filed complaints. Banks were concerned because they have a limited amount of time to respond to customer complaints once they are filed with the bureau. A bureau spokeswoman has said the agency worked through many of the early glitches in the complaint system and were resolving others as they became aware of problems.
Too soon to make comparisons Since the CFPB's credit card complaint data reflects only complaints about credit cards issued by large lending institutions (those with more than $10 billion in assets) that fall under the CFPB's jurisdiction and cover only three months, it is difficult to make apples-to-apples comparisons of the current level of card complaints compared to past years.
During all of 2010, the FTC received 33,258 credit card complaints -- a significant drop from previous years. Many lawmakers and consumer advocates attributed the nosedive to the impact of the Credit CARD Act of 2009, which curtailed many credit card industry practices widely criticized as deceptive and unfair.
Previously, complaint data was compiled by the FTC's Consumer Sentinel Network database. An annual report issued each year tallies the number consumer complaints filed for fraud, identity theft and a host of other practices. According to the Sentinel, 1.3 million complaints were logged in calendar year 2010.
In requests for public comment on collecting consumer complaint data, the CFPB has indicated it eventually expects to process 2.5 million Web complaints and 750,000 via phone or paper annually when its complaint system is fully operational.