Credit Card Complaints Continue To Decrease

From 2006 until late 2008, SmartCreditChoices.com received about ten to twenty legitimate complaints about credit card companies a month. In most instances, a consumer’s action caused the problem. The most common complaints typically revolved around late fees, the loss of 0% introductory rates and interest rate increases stemming from late payments. We typically advised our visitors to contact their company, politely plead their case to a supervisor and ask for leniency. Many visitors would write back to inform us of their successes and we took pride in the fact that we could make a difference.

Beginning in late 2008, the volume of credit card complaints began to accelerate dramatically. This trend intensified during 2009 as legislators were crafting the CARD Act. During this time, the nature of credit card complaints changed. Consumers began reporting rate increases, minimum payment increases, and credit limit cuts that in many instances had nothing to do with consumer behavior.

These complaints poured in and we often fielded ten or more in a single day. If this wasn’t disconcerting enough, our tried and true advice to consumers – call, politely plead your case to a supervisor and request leniency – simply stopped working. Just about every major credit card company – except Discover Card – was making drastic moves in advance of the CARD Act and customer service reps had their hands tied. Reading consumer emails became painful. We were on the frontline of a war against consumers and, like our visitors, we were powerless.

The impact these actions had on consumers was devastating. Many saw their interest rates increase to as much as 29.99%. Others, who had secured for life fixed APRs in the low single digits were forced to pay two times their previous minimum payment (something many could not afford) or accept higher, variable rates. At a time when consumers across the country were reeling from job losses and plummeting asset prices, credit card companies were pushing them to the brink.

Once the CARD Act took effect on February 22nd of 2010, the flood of complaints dried up. Banks were no longer able to raise rates on pre-existing balances on consumers who weren’t seriously delinquent or alter the terms of fixed rate cards. This led to a dramatic decline in the most severe complaints and the volume of emails declined significantly.

However, one complaint has persisted over the past year:  credit limit cuts. Now that credit card companies are no longer able to manage risk via re-pricing (i.e. raising rates), they have come to depend on credit limit cuts as a primary risk management tools.

Credit limit cuts impact consumers in a number of ways. The obvious way is by reducing credit. We hear from a lot of consumers who learn about these cuts when, believing they have hundreds, if not thousands of dollars in available credit, their cards are rejected when they try to make everyday purchases. This has obviously created a lot of problems, particularly for the many visitors who learn of credit limit cuts when traveling and find themselves strapped to pay for everything from meals to museum tickets.

However, a lot of people who are hit by credit limit cuts write to us because they are concerned about the impact the reduction will have on their credit score. This varies from person to person, but in some cases, it can be severe. A few people have written in to tell us that a credit limit cut impacted their credit score enough to disqualify them for mortgage refinancing. These people applied believing they had scores in the mid 700′s and found out during the application process that their scores had dropped significantly, thereby preventing them from getting good enough rates to justify refinancing.

Unfortunately, credit limit cuts will not be going away anytime soon. The volume of reports we have heard from consumers has dropped significantly over the past six months, but we still get ten to twenty emails on this subject a month.

As in the past, we advise consumers who were hit with credit limit cuts to contact their credit card companies and politely discuss the matter with a supervisor. This approach has had mixed results. Some report partial reinstatements, while others are simply given the company line.

Moving forward, we anticipate to hear from consumers who are suddenly hit with annual fees. Fortunately, we think this issue won’t occur in the very near future. Credit card companies have never been popular with consumers and, after what they did in 2009, we think they’ll wait a little while before embarking on another widespread campaign that stirs up consumer anger.