New U.S. Consumer Hotline Not Routing Some Complaints to Banks

Some consumer credit-card complaints haven’t reached banks that issued the cards because of technical problems in the new system created by the Consumer Financial Protection Bureau, industry groups and regulators said.

The month-old complaint response system has failed to properly route all inquiries, a problem bureau spokeswoman Jen Howard said the agency will resolve “within a matter of weeks.” Howard didn’t say how many complaints have been held up.

The agency launched the system, which is required by the Dodd-Frank financial-overhaul law, on July 21. Its website invites consumers to file complaints about credit cards, the most common form of consumer credit, and will eventually cover other financial services. Previously complaints about banks were handled by agencies including the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation and the Federal Reserve, all of which now refer calls to the bureau.

Some banks found that their volume of complaints dropped as the bureau’s system failed to work properly, said Richard Hunt, head of the Consumer Bankers Association. The banks were concerned they might be blamed for unanswered queries, he said.

“If you’re a bank, you don’t know there has been a complaint unless the CFPB tells you,” Hunt said in an interview.

Howard said some issuers did not receive complaints filed through the agency’s website because of “browser compatibility issues.” As they were resolved, the issuers in turn experience a “one-time increase” in complaints referred via the consumer bureau.

‘Not Prepared’

“We expect that within a matter of weeks all remaining technological issues will be resolved,” Howard said in an e- mailed response to questions.

Richard Riese, a senior vice president at the American Bankers Association Center for Regulatory Compliance, said the start-up problems demonstrate that the bureau is “clearly not prepared to take on the transfer of these responsibilities.”

Not all banks are seeing the problems. Paul Hartwick, a spokesman for Chase Card Services, a part of JPMorgan Chase & Co. (JPM) said the bureau’s system is functioning properly. “We are receiving referrals and the volume is consistent with our expectations,” Hartwick said in an e-mail.

Until 2010, as the mortgage crisis gained steam and a new credit-card law took effect, credit cards were the largest source of complaints filed with the OCC, which regulates nationally chartered banks including JPMorgan and Bank of America Corp. (BAC)

Point of Contention

In 2009, consumers registered 26,380 complaints on credit cards, or 37 percent of the total filed, according to the OCC’s website. In 2010, as changes mandated by the CARD Act of 2009 took effect, the number sank to 14,715, and mortgage-related inquiries hit 38,034.

The consumer complaint system, which applies to the 111 banks with assets over $10 billion, became a point of contention between bank lobbyists and the new agency even before it opened. Consumer groups want the bureau to allow anyone to view raw complaints, while industry representatives contend that would allow frivolous complaints to damage a firm’s reputation.

The bankers association, in an Aug. 1 letter to the Office of Management and Budget, said that information collected via the system “should be narrowly held for the purpose of addressing individual complaint resolution.”

Committee Review

“It should not be considered a source for analysis, reporting or sharing outside the Bureau’s or prudential regulators’ own supervisory purposes because the form of questions, content and reliability of information gathered and the interaction of all parties in handling this process are not finally settled,” Riese wrote in the letter.

A committee within the consumer bureau is working on the issue of how much complaint information to release, according to a person briefed on its work. Whatever the bureau does decide to release will be entirely public, the person said.

Dodd-Frank specifically permits, though it does not require, the complaints to be shared with the states. The bureau is already sharing information with some state attorneys general and the Federal Trade Commission through the FTC’s Consumer Sentinel system, according to an Aug. 12 blog post on the bureau’s website.

Bankers oppose the release of consumer complaint data “in a non-aggregated fashion” to state attorneys general, Riese said in the interview. State officials do not need the data since the consumer bureau has enforcement authority already, Riese said.

‘Second-Guessed’

“They cannot just open the door to being second-guessed by attorneys general who want to take a complaint or two and barge into a CFPB institution that has already thought it had addressed the issues,” Riese said.

Part of the initial problem with the bureau’s complaint system may have been the lack of testing before the launch. The bureau had said it would work with five issuers -- JPMorgan, Bank of America, American Express Co. (AXP), Discover Financial Services (DFS) and Capital One Financial Corp. (COF) -- to test the system. The bureau didn’t follow through, according to an executive with a major credit-card issuer who spoke on condition of anonymity.

Howard disputed that, saying that the bureau “consulted with and previewed the system with a number of issuers as well as with trade associations and consumer groups” before July 21.

Bryan Hubbard, a spokesman for the OCC, said that the consumer bureau would take over complaints on all financial products, not only credit cards, by March 2012.

Howard disagreed. “We haven’t announced a timeline,” she said.

To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

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