WASHINGTON (Reuters) - U.S. consumer complaints against banks dropped by nearly a third in 2011, while complaints against payday lenders more than doubled, according to data released on Thursday by the Better Business Bureau.
The data, which track consumer complaints in more than 4,000 industry categories, showed an increase of 6 percent to 894,868 overall in 2011, but registered more dramatic swings in some key financial service sectors.
Banks received the fifth-largest number of complaints in 2011, but saw a drop of 30 percent from 2010.
“To me, the overwhelming story here is that the numbers(the complaints) are small compared to how criticized the banks have been over the past 36 months,” said Jaret Seiberg, a senior policy analyst at Guggenheim Securities’ Washington Research Group.
“As the industry copes with Dodd-Frank, debit card limits, and with new mortgage rules -- despite these serious operations changes, complaints are still coming down,” Seiberg said.
Banks have faced new regulations since the financial crisis of 2007-2009, including the Dodd-Frank Financial Reform law and the Credit Card Act.
In the runup to the financial crisis, lenders freely extended mortgages to subprime borrowers with little documentation of their ability to repay. Many of these loans came loaded with opaque terms that resulted in skyrocketing payments, pushing huge numbers of borrowers into foreclosure.
Consumers also complained about widespread abuses in the credit card industry, citing hidden fees, random spikes in interest rates, and poor customer service.
The reforms imposed tough restrictions on the way banks offer and service consumer products like mortgages and credit cards, and have hurt the industry’s bottom line.
While banks got a better report card, complaints against payday lenders, companies that provide high interest, short term loans, rose 162 percent, though the group ranked 56th among all industries.
Jean Ann Fox, director of financial services at the Consumer Federation of America, said consumers may be reaching out to the BBBs with payday loan complaints because they are having difficulties contacting the growing number of online payday lenders.
The Federal Trade Commission recently filed several enforcement actions against online payday lenders for aggressive collections, not disclosing annual percentage rates, and charging customers for products they did not buy.
The new Consumer Financial Protection Bureau -- created by Dodd-Frank to police consumer products like mortgages and credit cards -- has vowed to scrutinize the short-term loan providers closely.
Seiberg said he was surprised there were not more complaints against payday lenders, noting that consumers who rely on them may not know where to turn when they have a problem.
“This is probably why this is a top priority for the Consumer Financial Protection Bureau,” he said.
Complaints related to credit cards and plans dropped 28 percent, while those against mortgage brokers fell 31 percent.
The mortgage brokerage business has “been in the dumps,” said Kathleen Day, a spokeswoman for the Center for Responsible Lending. She said the drop may be due to the decrease in the number of mortgage loans made last year, and the Federal Reserve’s 2011 rule making it illegal to boost mortgage broker pay for charging higher mortgage interest rates.
Complaints related to loans and small business loans also dropped 36 and 38 percent respectively.
“Through some of this new regulation, there has been more focus on disclosures of what consumers are getting and with that clarity on the front end you are going to see a decline in the complaints,” said Cary Hurt, chief executive officer of the Council of Better Business Bureaus.
Types of companies that received the most complaints were cell phone service and equipment providers, auto dealers, and television transmission companies.
Complaints against companies are categorized by the service BBB deems to be the company’s main business.
Editing by Gerald E. McCormick and Carol Bishopric