Research and Statistics

Survey: Credit card, collection complaints growing quickly


The nation’s fastest growing consumer complaints involve aggressive collection tactics for credit card and many other debts, says a survey released Thursday.

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This probably will surprise no one during this time of sweeping economic distress, but it is still worthy of consideration — and concern:

The nation’s fastest growing consumer complaints involve aggressive collection tactics for credit card and many other debts. The worst consumer complaints deal with loan modification and other home foreclosure rescue scams.

Those are the conclusions of a survey released Thursday by a coalition of government and private consumer advocates.

Complaints up, resources down
“Last year was a tough time for consumers and for consumer agencies,” said Susan Grant, director of consumer protection for the Consumer Federation of America, which represents 300 pro-consumer organizations around the country and served as the coalition’s lead member.

Top 10 consumer complaints
Following are the top complaint categories that most frequently appeared before the consumer agencies:

  1. Auto: Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes
  2. Home improvement/construction: Shoddy work, failure to start or complete the job
  3. Credit/debt collection: Billing and fee disputes, mortgage fraud, credit repair, debt settlement, predatory lending, illegal or abusive collection tactics
  4. Utilities: Service problems, billing disputes with phone, cable, satellite, Internet, electric and gas services
  5. Retail sales: False advertising, defective merchandise, problems with rebates, coupons, gift cards and gift certificates, nondelivery
  6. Services: Misrepresentations, shoddy work, failure to have required licenses, failure to perform
  7. Household goods: Major appliances and furniture, problems with nondelivery, misrepresentations, faulty repairs
  8. Landlord/Tenant: Unhealthy or unsafe conditions, failure to make repairs or provide promised amenities, deposit and rent disputes, illegal eviction tactics
  9. Internet sales: Misrepresentations, nondelivery in online purchases; (tied with) Home solicitations: Misrepresentations, nondelivery in door-to-door, telemarketing and mail solicitations, do-not-call violations
  10. Health products and services: misleading claims, failure to deliver

Source: The 2008 Consumer Complaint Survey Report

The survey of 34 state, county and city agencies — located in 19 states across the nation — found that all complaints, especially those related to the nation’s economic crisis, grew at a swift rate in 2008 and are continuing to rise.

At the same time, however, those agencies are confronting their own budget pressures that, in many cases, constrain their ability to assist consumers.

Sixty-two percent of the agencies reported more complaints last year than during the prior year and nearly half said they sustained budget cuts. Overall, the agencies responding to the survey handled 265,324 complaints and won $247,499,155 in restitution or savings for consumers.

“It’s ironic that at the same time that more people are asking state and local consumer agencies for help, their budgets are shrinking,” Grant said. “They deserve public support so they can continue to protect consumers from losing their hard-earned cash and ensure that the marketplace is fair for legitimate businesses.”

Though a golden oldie — transactions related to auto purchases and repairs — led the list of most common consumer complaints, issues directly related to the economic crisis attracted the most glaring spotlight.

Debt complaints — rising with a bullet
Debt collections topped the list of fastest growing complaints and came in as the third most-common complaint overall. That category included mortgage-related fraud, igniting grave concern on the part of experts who said that such abuses also qualified as the worst consumer complaints of the year.

The “worst complaints” earned that dreadful distinction by affecting a large number and wide variety of victims, particularly those who might have special vulnerability based on their age or income.

“I would venture to say that, in next year’s survey, loan modification scams and fraud are probably going to be No. 1 on the [most common] list because of the definite increase and spike in the number of foreclosures that we are seeing and because homeowners are really desperate,” said Pastor Herrara Jr., director of the Los Angeles County Department of Consumer Affairs.

“They are traumatized by losing their homes,” Herrara said. “People will do whatever they can to save their homes and unfortunately there are scammers out there that are going to take advantage of the situation and many of them are fly by nights.”

Grant called the growing prevalence of foreclosure rescue scams “just outrageous situations.”

The findings of the consumer agencies’ survey closely mirror what the Federal Trade Commission found in its 2008  list of consumer complaints, released in February 2009.

Among the other findings of the survey:

  • Problems directly related to the worsening economy included false promises to repair bad credit, modify loans or otherwise settle debts, high-cost payday loans, false offers for loans with upfront fees, fraudulent work-at-home and other business opportunities, and, of course, those aggressive debt collection tactics. In one example cited by the study, a West Virginia woman who expressed preliminary interest in a telephone offer to help her reduce her  credit card debt later found a $900 charge on her card for that company’s services, although she never signed up for the plan.
  • Many agencies said that disputes involving relatively small amounts of money were beginning to arrive in great volume. Handling such disputes requires nearly as much time as handling problems that involve larger amounts, and they also represent a measure of our times. “Clearly, these days, every penny counts for consumers,” Grant said.
  • Nearly everyone involved in consumer protection urged government officials to restore budgets and staffing levels to pre-crisis levels. One shocker: Some agencies no longer have resources to take enforcement actions. “Agencies are coping with the situation by triaging complaints, streamlining complaint procedures, cross-training, using student interns, partnering with outside mediation programs, and focusing their limited enforcement resources on cases in which they are most likely to make a difference,” the study reported.
  • Representatives of many agencies called for new laws and other regulatory efforts to battle abusive credit and debt collection practices, curb excessive bank fees, strengthen consumers’ rights in contracts, and address other issues important to consumers.

“A federal agency that would focus on financial safety would help consumers and state and local consumer agencies by setting minimum standards that would not pre-empt state laws,” Grant said.

The 2008 Consumer Complaint Survey Report was released by the National Association of Consumer Agency Administrators and the North American Consumer Protection Investigators, in addition to the Consumer Federation of America.

The survey was conducted from March to May 2009 and, in most cases, reflected cases handled by the various agencies during the 2008 calendar year.

See related:  Credit card phishing: What it means, how to prevent it,  ID theft, debt collection top FTC’s list of consumer complaints, Credit Card Help: 8 things you must know about credit card debt, How to keep debt collectors at bay, Debt collection sample letters, Struggling debt collectors to debtors: Let’s make a deal, 10 tips for dealing with debt collections and collectors

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