CFPB Report: Installments Top Consumer Complaints on Personal Loans

The Consumer Financial Protection Bureau detailed in its 2023 Consumer Response Annual Report that consumers have been the targets of fraudulent account openings, and installment loans were the most cited type of personal lending in complaints.

The report, released Friday (March 29), noted that complaints about credit or consumer reporting accounted for more than 81% of all consumer complaints sent to companies — and represented, in total, more than 1.1 million complaints.

“Consumers raised issues related to fraudulent activity in nearly every product category,” the CFPB said.  Those particular complaints focused on identity theft. Consumers reported not recognizing accounts or credit inquiries on their report.

Elsewhere, the Bureau said, “in checking or savings account complaints, consumers often complained that funds were taken from their accounts through unauthorized or fraudulent transactions. These transactions often involved peer-to-peer platforms.”

Installment Credit’s In the Crosshairs

Drilling down into personal lending, and among the report’s findings: installment loans were the type of loans most frequently cited in consumer complaints, representing 65% of all reports in the personal lending segment, and accounted for about 3,300 reports. The most common compliant, at 22%, stemmed from being charged interest and/or fees that the borrowers said that they did not expect.

“In their complaints, consumers stated that payments were withdrawn from their bank accounts without permission or on incorrect dates,” the Bureau wrote.

Also, “Consumers also reported issues with merchants that impacted their Buy-Now-Pay-Later (BNPL), [or] point-of-sale (POS) loans … Consumers reported that they did not receive the item they purchased using their BNPL or POS loans or returned the item, so they requested a cancellation of the loan. Companies typically responded that they investigated the merchant dispute, and consumers were still responsible for their debts.”

In separate PYMNTS Intelligence research, 3 in 5 shoppers opted for installment plans when shopping. As many as 78% of merchants told PYMNTS Intelligence that they plan to enhance their use of installment plans, while 39% of acquirers said the same. General-purpose card installment plans were the most popular, with 45% of consumers going that route. Merchant card installment plans and BNPL plans both appealed to 37% of consumers.

The appeal is widespread. PYMNTS found that 64% of shoppers who earn more than $100,000 annually paid via installments in the last 12 months, as did 61% of those who earn between $50,000 and $100,000 annually. Consumers earning less than $50,000 took advantage of the offerings, too, as 54% of them opted for split payments.