Consumers Beware: A Top Ten List of Complaints

On July 31, 2012, the Consumer Federation of America (CFA) and the North American Consumer Protection Investigators (NACPI) released the results of a survey that compiles information collected from 38 state and local consumer protection agencies across the United States to determine the top ten consumer complaints of 2011. The list contains some of the old standbys and some new entrants that our readers might find interesting.

The top two consumer complaints, those relating to auto sales, leasing, and repairs, and those related to credit and debt services, made repeat appearances in the top ten list of consumer complaints. Complaints regarding real estate fraud or confusing or unfair real estate sales practices made their first appearance in the top ten. The complete list of the top ten consumer complaints, in order of volume of complaints beginning with the most common,is as follows:

1. Auto: Misrepresentations in advertising or sales of new and used cars, lemons, faulty repairs, leasing and towing disputes.
2. Credit/Debt: Billing and fee disputes, mortgage modifications and mortgage-related fraud, credit repair, debt relief services, predatory lending, illegal or abusive debt collection tactics.
3. Home Improvement/Construction: Shoddy work, failure to start or complete the job.
4. Retail Sales: False advertising and other deceptive practices, defective merchandise, problems with rebates, coupons, gift cards and gift certificates, failure to deliver the items purchased.
5. Utilities: Service problems or billing disputes with phone, cable, satellite, Internet, electric and gas service.
6. Services: Misrepresentations, shoddy work, failure to have required licenses, failure to perform or complete the job.
7. Internet Sales tied with Landlord/Tenant Issues: In the context of Internet sales, misrepresentations or other deceptive practices, and failure to deliver online purchases; in connection with landlord tenant, unhealthy or unsafe conditions, failure to make repairs or provide promised amenities, deposit and rent disputes, illegal eviction tactics (complaints of bed bug infestations and landlords' unwillingness to deal with them are on the rise).
8. Fraud: Bogus sweepstakes and lotteries, work-at-home schemes, grant offers, fake check scams, as well as other common frauds. One specific example is the "grandparent scam" in which a scammer calls an individual and claims to be his or her grandchild (or other friend or relative) who is in trouble and needs money.
9. Real Estate: Timeshare sales and resales, retirement communities and assisted living facilities, real estate fraud
10. Household Goods tied with Home Solicitations: In connection with the sale or repair of household goods, misrepresentations, failure to deliver the promised goods or services, faulty repairs in connection with furniture or appliances; with regard to home solicitations, misrepresentations or failure to deliver the promised goods or services in door-to-door, telemarketing or mail solicitations; and do-not-call violations

The report mentioned several new types of complaints that consumer protection agencies have begun to see frequently. One is the practice of "timeshare reselling," in which a company charges a fee to resell a timeshare that someone does not want, but then keeps the fee without selling the time share. To add insult to injury, companies have sprung up that offer to recover such fees from timeshare resellers but fail to do so, again pocketing the fee collected from the consumer. Scammers are also putting a new twist on an old scam -- the one in which a scammer promises to send a check for a large sum of money to someone if they will immediately wire a smaller amount of money to the scammer. Instead of requesting the money via wire transfer, scammers now ask for money in the form of a prepaid card which means there is no way to trace the money to its recipient.

The survey report recommended several new laws that CFA and NACPI believe would aid in the prevention of consumer complaints, such as stronger penalties for companies that conduct businesses without the requisite licenses, stronger regulation of debt collection practices, and the prohibition of mandatory arbitration clauses in consumer contracts. Many of the report's proposals focus on greater regulation; the report suggests specifically that more regulation of online dating services, internet gambling cafes and debt collectors would be helpful. Other proposals focus on increased transparency, including stricter requirements for what identifying information a business must provide to a consumer, such as a physical address and working telephone number.

The report also provided tips helpful for consumers who wish to avoid the issues topping the list of complaints. For example, the report urges consumers to make purchases using a credit card because they will then have the right to dispute any charges should the seller fail to deliver the goods or services that it has offered. Other advice focuses on verifying the identity and legitimacy of a company before deciding to do business with it, including requesting proof of any required licenses or registrations. The report also highlights the availability of consumer protection agencies to help consumers navigate business transactions or identify scams.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.