Consumer advocates say the sharp drop in complaints proves the credit card reform law is working, but the FTC isn’t convinced.
Early each year, the FTC releases its tally of the prior year’s top complaints detailing the activities or practices generating the most consumer beefs nationwide. In the list released Tuesday, identity theft and debt collection calls topped the 2010 complaint list at Nos. 1 and 2, as they have for several years.
Credit card complaints, however, dropped from 7th place to 10th in 2010. Overall, the number of credit card complaints filed by consumers declined about 26 percent during the year compared to 2009. By contrast, between 2008 and 2009, credit card complaints jumped a whopping 243 percent.
“News that credit card complaints dropped by over 25 percent in 2010 is one more indication that the CARD Act is achieving its goal of increased transparency and truth-in-packaging of credit products,” U. S. Rep. Carolyn Maloney said in an e-mailed statement. The New York City Democrat was the chief force behind credit card reform legislation in the House.
This is the first complaint report issued since major provisions of that law, the Credit CARD Act of 2009, took effect. Signed by President Obama in May 2009, the CARD Act imposed tough new restrictions on credit card issuers, including eliminating surprise interest rate hikes. Portions of the law were phased in over time with the majority of consumer protections starting Feb. 22, 2010.
According to the FTC, credit card complaints filed in 2010 involved account and billing issues, including interest rate changes, late fees, credit disputes and overcharges. Consumers also complained about fraudulent credit card offers and phishing attempts.
Consumer advocates: ‘Law is working’
Linda Sherry, national priorities director for the Consumer Action advocacy group, sees a connection between the new law and the decrease in complaints.
“Our own complaints on card issuers have dropped off, too,” Sherry said in an e-mailed response. “The most common things people complained about before the CARD Act were rate hikes on the balance and out-of-the-blue changes in terms. Now, card issuers can’t increase the APR on the balance unless you are 60 days late in paying or if it’s a variable rate card, and they owe you 45 days advance notice for most significant changes in terms.”
She adds: “This cuts way down on disgruntled consumers.”
Ed Mierzwinski, consumer program director for U.S. Public Interest Research Group, said the decline in complaints is just one indication that the CARD Act is working. He cited surveys and data released in February 2011 by the Consumer Financial Protection Bureau showing how the CARD Act has improved credit cards overall. In addition, research by the Center for Responsible Lending showed how credit cards have become more transparent since the law became effective.
“There are many, many indicators that the Credit CARD Act is working,” Mierzwinski adds.
FTC: Not so fast
An FTC official threw cold water on that explanation. It’s difficult to say why credit card complaints declined, says David Torok, director of the FTC’s division of planning and information. The complaint database, called the Consumer Sentinel Network, is a compilation of complaint lists from the FTC and state and local agencies. Complaints may be high one year and low the next simply because fewer consumers took the time to call or file complaints about problems they may have encountered.
As for the CARD Act, “We really can’t cite it for any type of trend in the marketplace,” he says.
Credit card complaint method changing in 2011
Consumers who want to file complaints about their credit card issuers currently have to contact the FTC as well as one of six different regulators, depending on the type of financial institution issuing the card. (See How to complain about a credit card.) However, in July 2011, when the new Consumer Financial Protection Bureau officially launches, that agency will become the major clearinghouse for consumer complaints about financial products such as credit cards, payday loans and mortgages. Torok from the FTC said next year the consumer complaint list will include all complaints filed with the new bureau.
Consumer groups have expressed concerns that Congress may cut funding for the new agency and severely limit its ability to act as a watchdog over the banking and financial industry.
For the 11th year in a row, identity theft remained the top gripe for consumers, generating 19 percent of the more than 1.3 million complaints filed in calendar year 2010. Problems with debt collectors were the second most popular beef (11 percent), followed by Internet services (5 percent), fraudulent prizes, sweepstakes and lottery contests (5 percent), and shop-at-home and catalog sales schemes (4 percent). (For a complete list of the 2010 consumer complaints and how they compare to past years, see the chart, Top consumer complaints to the FTC.)
Impostor scams — where an individual poses as a relative, friend or government asking consumers to wire or send money by other means — debuted on the FTC complaint list at No. 6 this year. More than 60,000 complaints were filed about this type of fraud. Torok says the scam involves someone claiming to be from a government agency and telling the consumer he or she has won a prize or sweepstakes and must send cash before claiming it. Another variation is someone calling and claiming to be a relative needing cash right away to perhaps get out of jail or some other difficulty.
“It’s really very disturbing when we hear about them,” Torok says. “They prey on elderly consumers. They gather as much factual data as they can, perhaps from social media or the Internet.
“Make sure you know who you are talking to, who’s calling,” he advises. The FTC in February issued a new alert, “Spotting an impostor.”
Fraud, schemes bilked $1.7 billion from consumers
According to the FTC, the majority of all complaints filed in 2010 were fraud-related. These schemes bilked consumers out of an estimated $1.7 billion. The average amount per scam: $594. Duped consumers said they were contacted most often via e-mails or websites.
More credit complaints
Other credit-related complaints making the FTC’s list in 2010 were: advance-fee loans, credit insurance protection and credit repair services (ranked 11th) and credit reporting bureaus, credit information furnishers and credit report users (12th). Advance-fee services promise a loan or credit card, but require you to first pay a fee. Credit card loss protection and insurance programs charge high premiums and rarely deliver on what’s promised if claims are filed. Credit repair services promise to remove damaging information from credit reports, but this may not be possible if the information legitimately belongs on the report. Complaints about credit reporting bureaus and furnishers of information for credit reports involve posting inaccurate data on consumers’ credit reports or failure to remove or reinvestigate errors.
Debt collection complaints most often involved third-party debt collection agencies, rather than creditors. Consumers typically complained about collectors calling repeatedly and continually, using profanity, misrepresenting who they were or the amount or status of the debts owed and other violations of the Fair Debt Collection Practices Act.
State and regional differences
Colorado topped the list of states with the highest per capita rate of reported fraud and other types of complaints. Maryland and Nevada followed on the list.
Florida topped the list of states with the highest incidence of ID theft per capita, with the Miami-Fort Lauderdale metropolitan area coming in first nationwide. Arizona, California, Georgia and Texas made up the rest of the Top 5 states for ID theft. According to the FTC, the most common forms of ID theft involved someone forging government documents and benefits information.
Across the country, several state consumer watchdogs are tracking their own consumer complaint activity — with similar results. Missouri’s attorney general announced his state’s top 10 list of consumer complaints on Feb. 25. Debt collector harassment was No. 1 followed by credit and debit card fraud, scams and unauthorized withdrawals.
Illinois’ attorney general released that state’s list March 2 showing a broad category of “consumer debt” — meaning mortgage lending, debt collection and credit cards — as the top consumer complaint generator in 2010.
How to complain:
Many states and local governments have consumer protection agencies. Check with your state Attorney General’s Office for the appropriate division to file complaints for your particular situation. The FTC does not investigate individual cases, but uses the number of complaints filed about a business or practice as a basis for enforcement actions which can result in fines and court-ordered restitution for victims.
To complain about debt collection or any other practices, the FTC takes consumer complaints online and through its toll-free number: (800) FTC-HELP.
If you’ve been a victim of ID theft, be sure to file a police report with your local city and file a complaint with the FTC. Follow these useful tips to check for and fix ID theft. According to the FTC’s 2010 complaint report, more than a quarter of victims (28 percent) failed to file police reports about their complaints. Nearly two-thirds (62 percent) notified their local police department, which wrote an incident report. Seven percent of victims notified their police department but said no report was taken.
To file a complaint about internet-related crimes, contact the FBI’s Internet Crime Complaint Center.
See related: Consumer protection board will take time to launch, A comprehensive guide to the Credit CARD Act , How to complain about a credit card, Consumer credit complaints see huge jump, FTC says, How to check for, fix ID theft, Video: 6 tips to protect yourself from ID theft, ID theft sample letters