A look at 14,000 credit card complaints sent to the federal consumer bureau shows big differences in how cards solve disputes
Synchrony Financial, the big store-card issuer behind Wal-Mart, Lowe’s and Amazon cards, among others, gets more complaints at the federal government’s complaint window than its peers.
But it also pays refunds more often when customers grumble, 2014 data show.
CreditCards.com looked at the nearly 14,000 complaints people made about credit cards last year to the U.S. Consumer Financial Protection Bureau — up 6 percent from 2013. Rather than look at what causes complaints, we examined how companies dealt with them — an insight that is unavailable from other sources.
“I think it comes down to the philosophy of the company in dealing with consumers,” said Edgar Dworsky, a lawyer and founder of ConsumerWorld.org. “Is the company inclined to make good with the consumer?”
Looking at 12 major card issuers, we found big differences in the way they handle beefs:
- Per dollar of card balances, Synchrony, formerly GE Capital, was about twice as likely to get a complaint than average among 12 large card issuers. However, it also paid refunds most often, issuing “monetary relief” — refunds or waivers — to more than one-third of grouches. The dollar value of companies’ refunds wasn’t available.
- American Express, a frequent leader in card satisfaction surveys, shined less brightly in the complaint data. About one in four of its customers was still unhappy after AmEx dealt with their gripe. That was the highest rate of disputed solutions among the group, although TD Bank, Chase and Bank of America had dispute rates almost as high.
- People in some states are substantially more likely to get refunds than others. More than one-third of complainers in Wyoming and South Dakota got credits, double the rate in West Virginia and Mississippi (see state refund rate chart).
Refund policies vary
“There are very different philosophies around refunding fees,” said Jim Miller, senior director of banking services practice at the market research company J.D. Power. “Some banks I think feel the CFPB pressure — they’re quicker to refund than others.”
After Synchrony, the banks most likely to hand out credits were Citi and Barclaycard. At the other end of the scale, Bank of America was the least likely to solve complaints with cash, followed by Chase and Wells Fargo. A BofA spokeswoman had no comment on the refund rate, but said the company works with customers to solve disputes.Synchrony Financial representatives did not respond to questions about complaint handling. In addition to store cards, the company issues the CareCredit card for paying medical bills.
Industrywide, the typical amount of refunds or credits that companies paid was $122 during a one-year period ending March 31, 2014, according to the agency’s semiannual report. Fees, billing disputes, interest rates and identity theft are issues that rankle cardholders most often. Many complaints that involve cards may be outside the issuer’s control, such as identity theft or charges for faulty goods and services.
American Express, which had more disputed solutions than peers, said that its thorough review of complaints leaves few valid gripes that make it to the CFPB. “[I]f it should get to this last phase where it gets reported to the CFPB, we are more likely to affirm that the original decision was fair and correct,” spokeswoman Elizabeth Crosta said in an email response to questions.
AmEx handles CFPB complaints with a special work group, but the group uses the same policies to investigate and resolve complaints as other complaint channels, she said.
In addition, Crosta said, many AmEx cards are charge cards that don’t carry a balance, so comparing companies on the basis of total balances overstates AmEx’s complaint rate.
Miller said that AmEx’s relatively posh customer base could also be a factor. “If you’re looking at more affluent customers, their expectations are higher than subprime borrowers’,” he said. While subprime cardholders likely have run into fees before, for example, “If you get someone who just made one mistake, they’re used to everybody taking care of them.”
At the other end of the scale, the company with the fewest disputed solutions was Synchrony, at 13.6 percent of complaints. Considering its willingness to hand out refunds, high customer satisfaction with its problem-solving skills is not surprising. Capital One, Barclaycard and USAA also had relatively low rates of disputed solutions.
The sum of all gripes
In the U.S., about 10 percent of all cardholders have some kind of problem with credit cards a year, an annual survey by J.D. Power says. That makes the 14,000 complaints logged by the CFPB a tiny fraction of all the card gripes that people zing in to customer service, carp to state regulators about or just stew over without taking action.
“It’s a little dangerous looking at what makes it to the CFPB level,” Miller said. “Whatever you respond to before that doesn’t make it into the database.”
In addition to tracking the volume of complaints per company and their responses, the records outline the major reasons for people’s discontent. However, consumers select the subject of their complaint, and may interpret problems differently, the CFPB said. For example, billing disputes, the No. 1 complaint, often involve charges from a merchant that the cardholder thinks are wrong or unjustified. However, they might also involve bills for interest charges, imposed by the bank, which the cardholder disputes. Consumers “may have differing interpretations of what these categories mean,” the agency’s report to Congress said.
Another wrinkle in the database is the absence of Alliance Data Systems, whose Comenity Bank unit is behind about 120 store cards, mostly from niche retailers. Comenity is the 12th largest card issuer by balances, based on its $9.5 billion in average card loans outstanding in the fourth quarter of 2014. But a quirk in its business structure — it takes in relatively few deposits — exempts it from the CFPB’s public complaint data. For banks with less than $10 billion in deposits, the CFPB refers complaints to bank regulatory agencies.
Mike Bowman, director of marketing and media for The Quarter Roll financial magazine, said his experience showed that requests for fee waivers can be handled in different ways — even within the same card company. When dealing with one issuer, “Customer service reps seemed not to have the power to make any exceptions at all,” he said. But when he started to talk about closing the account, he was transferred to the customer retention department, which had more flexibility to grant concessions.
“If you really want to go another step, you have to ask for somebody” above the front-line customer service worker, he said. When he’s been hit by an unexpected charge such as an annual fee on a previously no-fee card, “Capital One has always been very lenient with me, and American Express is not,” said Bowman, who recently wrote an article about his experiences getting companies to roll back fees.
Jeanne Hogarth, vice president for policy at the Center for Financial Services Innovation, said the highly competitive credit card market gives customers some degree of power to push for concessions to maintain their goodwill. “A lot of these companies will do refunds of late payment fees simply because the $35 isn’t that big a deal,” she said. “The bank was right, the customer was wrong; but they’re going to refund your money anyway to keep you happy.”
Complaints’ value debated
As the CFPB considers expanding the complaint data to include peoples’ descriptions of the problems they encounter, a debate burns about the value of making the information public.
“I worry about the credibility of the database,” said Hester Peirce, senior research fellow at the Mercatus Center at George Mason University. “I know whenever I get off the phone with a financial institution, I’m unhappy about something.”
Critics say the flaws in the complaint data undermine its legitimacy as a tool for comparing customer satisfaction and customer service efforts at different companies. Complaints are not always reasonable, but the public exposure of the CFPB database puts pressure on companies to placate people who speak up.
“The cost of responding and settling [complaints] that the company would otherwise push back on is going to get passed on to all their customers,” Peirce said. But consumer advocates say public complaints are an important way for consumers to evaluate companies, and can be a powerful deterrent to sharp practices.
“Businesses will strive to compete with each other on their consumer protection record, in addition to the price and features of products or services they offer,” David Certner, policy director at AARP, said in a regulatory comment letter. Across all industries, companies resolved only 20 percent of complaints in consumers favor, showing that they’re hardly caving into pressure, Certner added.
Where the gripes are
One of the hardest trends to interpret is the difference in credit cards’ refund rates from one place to another. The vast majority of credit card business is handled by major banks that span the nation, so differences due to variations among regional banks should be slight.
Yet refunds went to about 1 in 3 gripers from Wyoming, South Dakota and Iowa, more than twice as often as in Mississippi and West Virginia. Throughout the U.S., the typical refund rate was about 20 percent.
Regional variations in income and education could be affecting refund rates.
“You wonder, are some complaints better written, or more intelligible,” said Dworsky of ConsumerWorld.org. “Or something about lower income [areas] having a different nature of complaint compared to higher income.”
The states with high refund rates also filed relatively few complaints in the first place, suggesting that residents picked their battles carefully.
As for where the gripes come from, the East Coast accounted for nine of the 10 most-rankled states, on a per capita basis. Washington, D.C., led the group by far, perhaps because more residents of the capital city know that consumer bureau exists. Next were Delaware, Illinois (the sole Midwestern grouch), New Jersey, Rhode Island, New York, Florida, Connecticut, Maryland and Virginia. People in Idaho and Wyoming were the least upset with their cards — or maybe they were just more stoic about it.