Consumer Complaints About Banking Practices 2001-2008: What Were They Thinking?

Abstract:     
As the world-wide financial crisis of 2008 morphs into what many suspect will be a deep and sustained global recession, pundits and policymakers lament the excesses that resulted in the systemically significant overleveraging of the household sector. Not long ago, many of the same people whose current assessment is thoroughly negative held distinctly sanguine views of developments in finance, imagined at the time to have permanently improved household financial management in general, and homeownership prospects in particular. In the future, no doubt, a sober review of developments during the first decade of the 21st century will conclude that the truth lies somewhere in between the overly optimistic views common early on, and the strongly pessimistic analyses currently in circulation. Whatever the final verdict on the true nature of the revolution in household finance, consumers have experienced astounding changes in credit access and use, and in their dealings with financial institutions, including banks.

Just as analyses at the beginning of this decade focused on the magnitude and benefits of rising home ownership and the “democratization of credit,” much of the recent analysis focuses on the dimensions of problems households currently face and are likely to face in the future. One aspect that has heretofore not been covered in a systematic, quantitative way is the nature and volume of problems perceived by households in their interactions with banks. The main purpose of this study is to address that gap, with an emphasis in particular on the extent to which patterns of change in various types of household complaints emerged in tandem with, first, the significant expansion of credit availability, and more recently with the severe contraction in credit to the household sector. The information used in this analysis is from the Office of the Comptroller of the Currency’s “Customer Assistance Group” (CAG) database. That data is unique in its comprehensive coverage of the volume and type of customer complaints about their dealings with the nationally-chartered banks regulated and supervised by the OCC. The main finding of this study is that, relative to the extraordinary changes in the nature and scope of credit extension to households by national banks over the 2001-2008 boom and (ongoing) bust period, the pattern of consumers’ complaints changed relatively little.

Number of Pages in PDF File: 26

Keywords: Consumer Banking Complaints, Financial Crisis, Consumer Protection

JEL Classification: G21, G28, D12, D18

working papers series