The management of any type of consumer loan product can cause a complaint. The constantly evolving financial markets continue to develop new ways to provide a ready cash supply to anyone who needs it. In many respects, the old style of lending and borrowing money — typically from a bank to an account holder — has been superseded by digitally managed transactions, where there has been no development of a mutually trusting relationship. Very often in these transactions, the borrowers are not able to secure a loan from a more traditional lender and enjoy the borrowing benefit offered by the non-traditional lender.
However, sometimes these lenders impose steep fees or use onerous collection tactics on their customers that exceed the legal boundaries of their industry. The Consumer Finance Protection Bureau (CFPB) has been fielding complaints about all varieties of consumer loan products since 2012. Their June 2016 report reveals which of these lending industries are doing well by their customers, and which are not.
Three Main Causes For Complaints
Consumers these days are not happy with the efforts of collections agencies, credit reporting companies or mortgage loan managers. The June report reveals that complaints about these financial sector participants accounted for 68 percent of the 23,800 calls fielded in May 2016. Debt collectors have never been popular, and the Bureau received about the same number of calls about them between March and May 2016 (an average of 7,430) as they did in the same three months of 2015.
Credit reporters are also not a popular crowd. Complaints about their activities rose 2 percent year-over-year, from 4,690 in 2015 to 4,766 in 2016. Mortgage management skills also declined, apparently, with complaints about that service, increasing 6 percent from 4,254 to 4,528.
Two Industries Improved
On the other hand, complaints about Payday loans dropped 15 percent from March to May 2016 over the corresponding three-month period in 2015. Complaints about money transfers also fell by 2 percent over the last year.
Student Loan Complaints on the Rise
As a single product, complaints about student loans saw the greatest increase in volume, rising 61 percent from March to May 2016 (1,098 complaints) over the same period in 2015 (683 complaints). Part of that increase is due to the CFPB accepting complaints about federal student loans beginning in March in 2016. The 2015 statistic does not include data from that loan type.
Consumer Loans Also Create Complaints
For CFPB purposes, the phrase “consumer loan” incorporates a number of loan products: installment loans, title loans, pawn loans, lines of credit, and auto loans and leases. Some of these transactions originate online and take the form of “peer-to-peer” or marketplace lending, a relatively new form of lending that allows online investors to provide the loan funds. These businesses cause challenges for both borrowers and the CFPB because they are not banks, and are therefore not subject to regular banking rules.
These “consumer loans” generate a sizeable number of complaints. Between the March-to-May periods of 2015 and 2016, complaints about consumer lending tactics rose 27 percent, from 1,020 to 1,297. These loans account for 4 percent of the total complaints to the CFPB and are the sixth most complained about product.
Within this category, the June report focuses on a subset consumer loan product: auto loans. Auto loan borrowers complained about confusing payment processing activities, a lack of notice when the lender repossessed the vehicle, inexplicable deficiency notices after the lender repossessed the car, and the fact that their loan balance did not decrease even after they had made several large payments on the loan. For auto leases, complaints included concerns about inappropriately high “wear and tear” fees charged when the lessee returned the vehicle at the end of the lease contract.
For Arkansas consumers, the report includes a spotlight on lending concerns in that state.