Report Finds Consumers Confused by Credit Card Terms

After months of controversy over whether consumers’ complaints about credit cards should be aired in public, a government watchdog agency released its first report on such complaints on Wednesday.

One main result: Credit card issuers have less to fear than they thought. It’s true, more than 5,000 consumers complained about their credit cards in the last three months. But over 3,100 of those complaints were resolved. And in the overwhelming majority of cases—87 percent—the complaints were resolved to customers’ satisfaction, according to the report by the Consumer Financial Protection Bureau.

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Issuers worried that making the complaint registry public would allow aggrieved consumers to air false or misleading grievances, and also that it might expose information about their business strategies that the companies consider proprietary. In a statement accompanying the report, Raj Date, the bureau’s interim director, defended the agency’s decision to make the data public.

“When consumers contact us, we get a snapshot of how the consumer finance markets are working,” Date said in a press release.

According to that snapshot, consumers have three main problems with their credit cards. First, they’re simply confused. Many complained that they couldn’t understand the terms of their credit cards, and related things like debt protection services.

“These complaints show a mismatch between consumer expectations and the way the product functions,” according to the release.

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The second most common problem involved third-party fraud, usually with scammers using consumers’ credit card numbers to buy goods illicitly. Identity theft is the second most common problem experienced by consumers, the report found, accounting for 10.8 percent of all complaints, second only to billing disputes, which comprise 13.4 percent of the complaints.

Finally, the third category of common complaints involves factual disputes between issuers and consumers. These may include disputes over the interest rate and payment. The good news is that issuers resolved most of these complaints, the bureau found.

Moving forward, the bureau said it plans to expand its complaint system to cover not just credit cards but also mortgages and home equity loans (by the end of December) and most other consumer financial products (by the end of 2012).

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Image: Helga Weber, via Flickr.com