Credit card billing and fee disputes and aggressive tactics to collect credit card and other debts remain among the top complaints of American consumers, despite new initiatives to protect cardholders, according to a survey released Wednesday by a coalition of government and private consumer advocates.
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The comprehensive survey of 31 state, county and city agencies, located in 18 states across the nation, found that the practices of credit card companies, debt collection agencies, credit "repair" firms and other debt-related entities represented the second most common consumer grievance, close behind the perennial No. 1 gripe: transactions involving auto purchases and repairs.
"Given the lingering recession, it is not surprising that credit and debt complaints remain second only to auto problems," said Anna Huddleston-Aycock, president of the North American Consumer Protection Investigators, one of the survey's sponsors. "Many of the complaint examples that agencies provided were related to the difficult financial situations that consumers and businesses faced last year."
In addition, debt-related complaints topped the list of worst complaints, a category based on the number of such complaints, the amount of loss, the vulnerability of the affected consumers and a certain "outrageousness" factor.
An example cited in the report: The North Dakota Attorney General's Office received many complaints about threatening calls from people demanding payments for payday loans. "In most cases, the consumers did not owe the money," the report found. "They had either already paid off the loans they had gotten or did not have a loan as they did not complete the online loan application process." Nevertheless, when the consumers refused to pay, the callers threatened to arrest them or kidnap their children or extradite the consumers to the Dominican Republic.
Debt-related complaints also ranked high -- claiming third place on the list of fastest-growing problems. This also comes as little surprise in light of the nation's slow economic recovery and stubbornly high unemployment rate.
"Consumers who are deeply in debt and are unable to borrow money from traditional lenders to dig their way out may be tempted by online offers for personal loans, but they could end up even worse off than they were before," the study concluded. "Some of the fastest-growing complaints, such as credit and debt problems and store closings, are probably linked to the tough economic times."
The findings related to credit card and other debt-related complaints disappointed consumer advocates, given a variety of recent efforts by the Federal Trade Commission and other agencies to channel and regulate the behavior of debt collectors. In addition, new disclosures and protections incorporated into the Credit CARD Act of 2009 were supposed to help cardholders understand their rights and obligations, with a goal of reducing unpaid debts by consumers and minimizing their contact with debt collectors.
Stronger consumer laws called for
In fact, consumer advocates Wednesday identified credit and debt problems as one of the areas most in need of even stronger laws, in this case to curtail what the survey report called "abusive debt collection practices."
Overall, the Consumer Complaint Survey Report found that consumer grievances remained strong last year, with responding consumer protection agencies reporting 252,009 complaints in 2010, plus millions of additional inquiries from consumers and businesses seeking information and advice.
Among the other most common complaints: mortgage-related fraud, shoddy home improvement work, false retail advertising and defective retail merchandise, service or billing disputes with phone, cable TV, satellite TV and other utilities, deceptive practices regarding Internet sales and the resulting problems with credit card charges.
At the same time, however, state and local government budget cuts left many agencies with significantly diminished resources and, in some cases, struggling for survival.
Agencies can't handle all the complaints
Despite the volume of complaints, nearly half of the surveyed governmental consumer agencies reported that they endured budget cuts and severely limited resources in 2010. In many cases, it was the second or third year in a row that budget reductions compelled the agencies to reduce their efforts to assist aggrieved consumers.
For instance, consumer advocates working for Broward County, Fla., were so severely impacted by budget cuts that each case worker was saddled with 150 open complaints. As a result, the Fort Lauderdale-area agency now refuses to handle complaints about Internet credit card sales, landlord/tenant deposit disputes, or any matter involving less than $200. In Virginia, budget cuts forced the state's Department of Agriculture and Consumer Services to close another regional office, leaving open only one of the original four.
"State and local agencies are the bedrock of the consumer protection system in the United States, but many are dealing with severely strained resources," said Susan Grant, director of consumer protection for the Consumer Federation of America, the lead sponsor of the survey., "They are being forced to do more with less, and this is having a real impact on consumers."
Complaints down -- or uncollected?
She and others attributed a seemingly dramatic decline in reported consumer complaints -- 252,009 in 2010 compared with 300,895 in 2009 -- to budget-induced reductions in activity by consumer agencies rather than to improvements in the consumer environment. "With the budget cuts going around the country, we had many local consumer protection agencies that have basically shut down," said Huddleston-Aycock. "So, we are no longer getting numbers from them."
Backing up that conclusion, Stuart Scott, bureau chief of mediation and enforcement for Florida's Department of Agriculture and Consumer Services, said his agency is being compelled to pick up the slack created by diminished services at the local level. Consumer complaints kicked up to his office have risen by 21%, he said, though a hiring freeze has been in place there.
"We have had to absorb those complaints," Scott said. "We're seeing no trend of decreasing at all. In fact, it's rising every month."
The report also highlighted new types of complaints, including problems with group discount coupons (particularly regarding the coupons' expiration dates), medical billing practices, companies offering to buy consumers' cars, "recovery services" that falsely promise to retrieve money that consumers have lost to time share resale companies, massive data breaches and tax-related scams.
Given these new challenges, advocates said, consumer protection agencies need to be considered higher priorities when state and local officials work on their budgets.
"Consumer protection agencies need more funds to do their jobs effectively," Grant said. "They provide essential public services, like firefighters and police, and deserve the same support."
The consumer complaint survey, an annual project, was sponsored by the National Association of Consumer Agency Administrators in addition to the Consumer Federation of America and North American Consumer Protection Investigators. It was conducted between March and May 2011 and, in most cases, reflected consumer complaints handled during 2010.
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