Late last week, the director of the Consumer Financial Protection Bureau (CFPB), Richard Cordray, made his agency’s semi-annual Congressional report and revealed some interesting data on the consumer response website put in place by the CFPB last year to track customer complaints.
Overall, credit card complaints are fewer than expected and credit card companies have been quick to address problems and work with customers to resolve issues. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act) was named as one reason that consumer complaints were at a lower-than-anticipated volume.
“We have fewer complaints about credit cards than I would have expected,” Cordray told the Senate Banking Committee at the September 12 hearing.
System Has Logged 72,000 Complaints So Far
In July 2011, the CFPB unveiled their consumer reporting system, first taking complaints about credit cards, expanding to include mortgage company complaints in December, and finally including bank accounts, private student loans, and consumer loans in March of this year.
Complaints have been filed at a projected rate of about 120,000 per year, hitting 72,297 as of September 3, 2012, and the most-cited companies have been mortgage lenders. Of the total numbers of complaints, Cordray said, “We have no idea when that will level off or where it will level off.”
Credit CARD Act
According to Cordray, the Credit CARD Act lowered the number of disgruntled credit card consumers by putting in place several reforms to credit card companies, among them:
- Fair allocation of payments – credit card companies must apply payments to higher-interest debt first, such as cash advances, instead of applying payments to the lower-interest debt first and allowing the higher-interest-bearing debt to climb.
- Limits on fees – one of these changes says that credit card companies can no longer charge over-the-limit fees to customers who have set a credit limit maximum. Instead of approving the over-the-limit purchase and charging the cardholder a fee, the credit card company must decline the charge, keeping the customer’s bill under their credit limit.
- No arbitrary interest-rate hikes – credit card companies must notify customers at least 45 days in advance before raising interest rates and give customers the option of canceling the card and paying it off at the current rate instead of agreeing to the higher interest rate.
Prepaid Cards Still on Radar
Credit cards may be in the good graces of the CFPB, but they still have their eye on the prepaid card industry, which was the subject of a hearing in May. The CFPB collected data on prepaid cards throughout the spring and summer and is expected to propose new regulations early next year.
Some of those might include:
- Liability clauses so that cardholders who have their cards lost or stolen would have some protection, such as a limit of $50 in consumer liability if the lost or stolen card is reported in a timely fashion.
- Requiring disputed transactions to be investigated so that prepaid customers have a way of getting their money back in case of a fraudulent transaction.
- Insurance against bank failure, which bank accounts and credit cards have through FDIC and could be extended to prepaid cards.
Cordray has said that in the prepaid card industry, some cards are “pretty responsible” – like these, some of the best prepaid cards available – and some are “pretty terrible and definitely exploitative.”