When you were a kid, did you ever wish you could take a peek at Santa’s Naughty and Nice lists in order to see where you and all of your friends stood in the big guy’s eyes? Well, this has sort of come true for credit card companies, but they’re not too happy about it.
In mid-June, the Consumer Financial Protection Bureau (CFPB) decided to make its database of consumer credit card complaints public, and in doing so struck an important blow for transparency in the personal finance industry while angering banking institutions that have something to hide. Anyone is now able to see not only how many complaints each credit card company has amassed (the information available online dates back to June 1), but also the type of each complaint and how it was handled by the respective company.
This will obviously be an asset for consumers as they compare credit cards and try to determine which issuer will best meet their needs, but before we get to exactly how this information can and should be used, I’m sure the curiosity is getting to you. So, without further ado, here are the best and worst issuers in terms of the number of consumer complaints received thus far relative to company size:
|4.||American Express||Capital One|
The most common types of complaints received since June 1 are by far those related to “Billing Disputes” (21% of the 530 complaints), “APR or Interest Rate” (14%), and ID Theft/Fraud/Embezzlement (8%).
Now that we’ve quenched your curiosity, let’s progress to exactly what this information means to you as a consumer.
First of all, the publication of consumer credit card complaints adds accountability for the credit card companies. They now know that if they act improperly, more people will be aware of it and their reputations will be damaged as a result. This will hopefully manifest itself in more consumer-friendly policies and an increased emphasis on resolving problems quickly and fairly.
We also gain useful insight into how exactly problems are resolved. For example, according to the CFPB’s records, 28% of consumer complaints have been closed by providing financial relief to the complaining customer. According to the CFPB, the median amount of relief provided in these cases was $130, with the most common amount being $25. This doesn’t mean that you can simply complain and get paid since most of this monetary relief is likely fees and finance charges being waived.
Now, while you might think that consumer complaint records will help you pick the right issuer from which to get a credit card, I must caution you against giving this too much weight in your decision-making process. It’s nice to deal with an issuer that has superb customer service, sure, but a credit card’s terms remain the most important factor when it comes to your bottom line. In other words, you want the credit card with the most lucrative rewards or the longest 0% interest rate, not necessarily one which makes it unlikely that you’ll have to escalate a dispute to a supervisor. My advice: Use customer service only as a tiebreaker between two cards with equal terms.
Finally, the CFPB’s complaint system isn’t only about credit cards, which is quite frankly refreshing to see. The organization also began fielding complaints about mortgages on December 21, 2011 and bank accounts, private student loans, and other consumer loans on March 1, 2012. Prior to these developments, there was some rightful cause for concern from the CFPB’s continued emphasis on the credit card industry, even after the CARD Act worked wonders in increasing transparency and eliminating many of the anti-consumer business practices that persisted prior to the Great Recession. Now it’s obvious that the CFPB is expanding its focus, and that coupled with the release of consumer complaint information across various segments of personal finance is undoubtedly a victory for consumers.