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Despite new laws, complaints against banks up

Analysts predict trend could hurt lenders over time

Presidential adviser Elizabeth Warren says that changes are needed to prevent banks from skirting new federal legislation. Presidential adviser Elizabeth Warren says that changes are needed to prevent banks from skirting new federal legislation.
By Pallavi Gogoi
Associated Press / December 10, 2010

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NEW YORK — Complaints against banks are soaring, suggesting that new laws and regulations put in place since the financial crisis two years ago are not dampening Americans’ anger over overdraft fees and foreclosure practices they view as unfair.

If the trend continues, analysts say, it will set banks on a collision course with their customers and lead to tougher rules that will hurt their earnings.

The Office of the Comptroller of the Currency estimates that complaints from customers of the 1,500 banks it regulates will hit 80,000 this year. That would be the highest level in the 15 years it has recorded them and more than double the 2008 total. The Better Business Bureau and state attorneys general also report big increases.

Regulators say the surge has put them on high alert. Both the Federal Reserve and the Federal Deposit Insurance Corporation have issued new guidelines and regulators have hired additional staff as they seek to resolve each complaint. The Fed sought to head off one area of large complaints in November 2009 by prohibiting banks from charging overdraft fees on ATM withdrawals without customers’ consent.

Elizabeth Warren, the Harvard professor chosen by President Obama to set up the Consumer Financial Protection Bureau, said she is frustrated with how banks find ways to skirt bans on certain practices.

‘‘We need fundamental change that will address the real, underlying issues,’’ she said in a Dec. 2 speech to the Consumer Federation of America. Consumer safety must trump ‘‘deceptive and dangerous innovations,’’ she said.

Officials at Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and Citigroup Inc. said they are listening to their customers and hiring staff to deal with problem areas like mortgages. ‘‘Customer relationships are the backbone of banking, and banks are constantly striving to meet customer demands,’’ said Peter Garuccio, a spokesman for the American Bankers Association.

Complaints about mortgages and foreclosures surged to the top spot this year. The comptroller estimates the number of grievances it will receive about home loans will almost double to 36,000, from 19,669 last year. That’s not surprising: Banks are fighting lawsuits over these issues and are being investigated by all 50 state attorneys general on how they conduct foreclosures.

For years, most complaints were over credit cards. Last year, Congress passed legislation that prohibited card companies from arbitrarily changing rates and limited fees. The changes are having an effect: Although credit cards are still the second-highest complaint category, they now make up just 22 percent of all complaints, down from 37 percent in 2009.