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Confusion over terms drives credit card complaints

December 07, 2011

| Money Rates Columnist

Although rules introduced this year by the Federal Reserve were supposed to make it easier for consumers to understand their credit card agreements, many consumers remain puzzled by the terms of their card.

That's the conclusion of the first report from the Consumer Financial Protection Bureau (CFPB), a new government agency that reviewed more than 5,000 credit card complaints in its first three months.

Agency takes on credit card complaints

The CFPB still doesn't have a director, but it opened for business in July and immediately began soliciting consumer complaints about credit cards.

The most common complaints in their first report were with billing disputes, interest rates and fraud reports, including embezzlement and identify theft. Late fees did not make the list of top 10 complaints, but confusion among cardholders about the terms of their card was a common characteristic in many of the 5,074 complaints reviewed by the agency.

More than 80 percent of the credit card complaints were forwarded to credit card company or card issuer, with banks reporting that three out of four of those disputes were settled. Consumers had a lower estimate, however, with only a little more than half saying they were satisfied with the bank's resolution.

In addition to releasing this report last week, the agency announced today that it would seek to simplify future card agreements, and released a prototype streamlined form that it hopes card issuers will copy.

Will credit card complaint data be published?

A lingering dispute remains over what the agency will do with its findings. The agency wants to publish the data, including the date, type of complaint, card issuer and consumer zip code. Consumers' personal and account information would be kept private.

According to Bloomberg, banking industry groups have expressed worries that publishing too much detail would encourage frivolous complaints that could hurt banks' reputations.

But consumer advocates want as much detail as possible available to consumers to decide where to apply for credit. The agency is taking public comment until January 30 on the matter.

Complaints expected to increase

The number of complaints is expected to increase as more people learn about the bureau and its mission. The agency has done little to promote its services, but it has been increasing its ability to handle complaints.

When consumers file a report, the matter is sent directly to the bank named in the complaint. Complaints coming to the bank through this route may be handled faster than those made directly to the bank because banks have special teams set up to handle government communications, the Wall Street Journal said.

The Consumer Financial Protection Bureau was created as a part of the 2010 Dodd-Frank bill. The bill's aim was to help consumers understand their agreements with financial companies, study financial trends and enforce federal finance laws by restricting unfair or deceptive practices.

The CFPB has also started to review consumer complaints about mortgages and home equity loans. Next year it intends to start looking into other bank products, such as checking accounts and safe deposit boxes.

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