Credit Card Banks Complain About Consumer Complaint Database

Credit card complaints
Credit card complaints

Last week, a grave injustice was done in America. A government-sponsored website appeared, naming and shaming some of America's leading corporate citizens. Capital One (COF) and Citigroup (C), Bank of America (BAC) and JPMorgan Chase (JPM) -- even American Express (AXP), the one bank whose products no Americans in their right mind would ever "leave home without" -- had their good names smeared by government fiat.

But never fear. When there's injustice in the world, a minority being oppressed, a "little guy" being crushed by the jackbooted bullies of the government's consumer protection agencies ... the American Bankers Association is there to help.

On Tuesday, the Consumer Financial Protection Bureau launched its new public Consumer Complaint Database. As the name suggests, this is a database of consumer complaints, filed by consumers wishing to chastise their credit card providers for misfeasances, malfeasances and other ill behaviors.

Full of issues ranging from mundane billing disputes and complaints of usurious interest rates to problems involving identity theft, unwanted credit card offers, troubles collecting on card "rewards," and everything in between, the main database runs to some 17,000 individual instances of consumer credit card rage, logged between the months of July 2011 and May 2012. At present, only the most recent complaints (those filed since June 1, 2012) are searchable -- 137 records in all -- and even these aren't the easiest to access or make sense of.

It is, however, a start -- and if the bankers have anything to say about it, that's all it will ever be.

Don't Ask, and We Won't Tell

According to the ABA, and its allied Consumer Bankers Association and National Association of Federal Credit Unions, out of the 383 million credit card accounts currently active in the U.S., fewer than 1% have ever had a complaint submitted about them to the CFPB. Now, one wonders whether 1% of credit card holders have ever even heard of the CFPB. But regardless, the bankers think that the small number of complaints being registered means there's really no need for the database to exist.

But if it must exist, the bankers would like to suggest some improvements. As you can see on the site, banks' names are named, accusations leveled, and protestations that the bank responded in a "timely" manner to the complaints are disputed -- but the identities of the consumers doing the naming, accusing, and disputing are hidden. Only the names of the banks in this case are published.

This, worries the ABA, creates a situation in which "the bureau's plan to release unverified data is disappointing and could mislead consumers." The CBA objects that "there are many complaints that at the end of the day are not justified." And when unfounded accusations are made and published then "there is a significant chance of a reputational hit." Thus, NAFCU laments that "given the nature of viral media, disclosing all complaints may paint a misleading picture and trigger reputational risks for solid institutions that could raise safety and soundness concerns for the financial institutions in question."

And you know if there's one thing bankers hate, it's seeing people get undeservedly "painted" with a bad reputation. Why, that would almost be like...

A Bad Credit Report

Lots of factors go into building a person's credit report. According to website, the number of credit inquiries made on your account, the amount you owe on your cards, and the percentage of your credit limit these owed amounts represent are just a few of the factors determining your "reputation" as a user of credit. What really hurts your credit score, though, are reports of unpaid or late-paid bills -- reports that, by the time they show up in a person's credit report, are hard to dispute and harder to resolve. And in some cases, it's hard to be sure who's even making the allegations.

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Similarly, the banks' worry that unsubstantiated complaints by a few crank callers could raise "soundness concerns" regarding "solid institutions" echoes objections that consumer advocates used to make against the banks' system on universal default. Before this system was banned by the 2010 CARD Act, if you paid just one bill late on a single credit card, you could quickly find yourself punished with interest rate hikes on all your credit cards, regardless of who issued them or whether you were current on most of them.

In short, the banks may be right that the manner in which the CFPB reports consumer credit card complaints is flawed and unfair. In fact, when pointing out how the system is rigged against them, they shouldbe right.

After all, they're the ones who figured out how to rig it that way against their customers in the first place.

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Motley Fool contributor Rich Smith does not own or short shares of any company named above (but he does have a few of their cards in his wallet). The Motley Fool owns shares of Citigroup, JPMorgan Chase, American Express, and Bank of America. Motley Fool newsletter services have recommended writing a covered strangle position in American Express.

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