The Consumer Financial Protection Bureau (CFPB) has been accepting complaints since 2016 from consumers who have had problems with loans through online marketplace lenders. All complaints filed since then can be found online at the Bureau’s website Consumer complaints database.
The CFPB received more than 1.2 million complaints in 2023, 9,800 of which involved personal loans, title loans or payday loans. The main themes of these complaints range from problems receiving loan funds to problems making payments and unexpected costs.
If you are considering taking out a personal loan from an online lender, you may want to consider some of the problems that previous borrowers have encountered, in addition to researching individual lenders.
Online lenders versus traditional lenders
Online lenders offer unsecured personal loans that help consumers consolidate debt, renovate their home or pay for major expenses. Online lenders typically have lower interest rates and fewer fees and can be faster and more convenient than traditional bank loans.
However, traditional banks offer the personal service and reliability that online lenders often lack. The CFPB had online lenders in mind when it began accepting customer complaints into a public database. The idea is to keep lenders honest about their practices.
Personal loan complaints in 2023: major themes
Of the 7,200 personal loan complaints the CFPB received in 2023, 800 were from borrowers who were charged fees or interest they did not expect to pay. This was the most common complaint the CFPB received from personal loan borrowers in 2023. Another major complaint from personal loan borrowers related to difficulty making payments.
Unexpected costs or interest
Customers faced with unexpected interest and fees on personal loans generally complained about higher interest rates than initially quoted. Customers also felt that the lender did not openly disclose the fees.
Many personal loan complaints about unexpected interest and fees came from borrowers who did not have an accurate estimate of the interest they would pay before taking out a loan. For example, a customer who complained about an installment loan were told they would receive a “special rate” after meeting the requirements of their first loan with a company at 13 percent. The customer later learned that the interest on the new loan was in fact more than double the interest rate, at 27 percent.
A borrower in Missouri learned that their creditor was charging 158.82 percent interest on their installment loan, in violation of both the signed contract and state law. They also filed a formal complaint regarding the unexpected interest charged on the loan.
Many other complaints about unexpected interest and fees came from customers who were blindsided by extra costs. Another borrower who had taken out an installment loan requested a payoff quote to pay off their debt in full. Because the company did not process the payment in a timely manner, the payout statement was inaccurate at the time the payment was applied, resulting in unexpected charges to the borrower’s account.
Problems making payments
Customers who reported problems paying off personal loans generally complained about unresponsive customer service, lenders who failed to notify them if there was a problem processing their payment, and lenders who were unwilling to negotiate due dates and late fees.
Unresponsive customer service
Several borrowers complained about unresponsive creditors who did not make access to the account or payment reasonably easy.
One borrower complained that they could not log into their creditor’s website or app to view account information or make payments. Moreover, they could not reach their creditor’s customer service and therefore could not pay on time, even if they wanted to.
Payment processing issues
Several personal loan borrowers complained that they were not notified when their payments were missed and were subsequently charged additional late fees.
One borrower who had taken out a car loan to bring their account up to date. Two customer service representatives provided conflicting information and the borrower’s account was placed in delinquent status even though they had made timely payments through a registered line.
Payment negotiations
The most common complaint from borrowers about making payments is that lenders are unwilling to negotiate with them during difficult times. These complaints tended to be more general in nature, with borrowers attempting to communicate with lenders about the need to extend their payment terms or otherwise having difficulty paying off their loans, and generally receiving little to no assistance.
Although some lenders will negotiate with you and offer extensions and grace periods for late payments, they are not required to do so and some lenders have strict policies and fees.
Difficult to get a loan
About 12 percent of complaints in 2023 were related to difficulties in obtaining a loan. For example, one consumer who said they had a history of paying debts on time were still denied a loan. Another future borrower expressed similar frustrations, pointing out that they had “achieved a great score with not a single missed payment” and yet were denied a loan.
Tips to avoid problems with your personal loan
While personal loans can be a good option for people who need extra money and have the financial security to repay the loan on time, it is very easy to overlook the disclosure of fees and interest rates, make a miscalculation determine what you will pay in interest or even decrease. fall prey to predatory lenders if you’re not careful.
Read the fine print
Before choosing a lender, it is extremely important to know exactly what fees you will be charged and how high your interest rate may be. Many lenders are not particularly transparent with this information and often include this information as footnotes at the bottom of the product page of their website.
Make sure you have all of this information before you decide to work with a particular lender. Also carefully read the terms and conditions and any other documents that the lender sends you while you are getting the loan.
Know what you will pay in interest
Many of the personal loan complaints the CFPB received last year were from people who ended up paying interest they didn’t expect. Keep in mind that you may not always qualify for the lender’s lowest interest rates. Any estimate you receive from an agent before the lender runs a credit check and examines the full scope of your financial health may be inaccurate.
Before taking out a loan, calculate your expected interest rate and make sure you are willing to make payments given these additional costs. If you have less than excellent credit and want to find a lender that offers reasonable rates for your credit bracket, look into a bad credit loan.
Shop around and compare lenders
You should always shop around and compare lenders’ rates and other details before committing to a specific lender. Different lenders work best for different circumstances. Compare the best lenders and consider your full financial picture and how you plan to use the loan before making a decision.
Beware of predatory lending
While there are a variety of legitimate online and brick-and-mortar personal loan lenders available, there are also numerous personal loan scams and predatory lenders that consumers should be wary of.
Beware of deals that seem too good to be true and lenders that pressure you into making a decision. Also beware of phone calls or promotional emails from lenders.
To find out if a lender is legitimate, look up customer reviews, BBB Accreditationsand Bankrate Ratings.
Borrowers should try to avoid payday loans if possible, as these loans typically carry extremely high interest rates and have been known to put borrowers in a cycle of endless debt. If you are considering taking out a personal loan, consider an alternative way to borrow money.
How to file a complaint about your personal loan
You can file a complaint about your personal loan via the website Consumers financial
Protection Agency website.
Each week, the agency forwards more than 10,000 complaints to companies for response. When making a complaint, please ensure that you state your problem or concern clearly and concisely. You cannot file the same complaint twice. So it is important that you include all relevant information that the company you are complaining about needs to respond. Additionally, you want to be sure to include any important dates, amounts, and any relevant communications you may have had with the company in question.
The CFPB website also allows you to include up to 50 pages of supporting documents when filing a complaint.
In short
The personal loan complaints the CFPB received in 2023 reflect borrowers’ need for greater transparency from lenders about fees, interest and the payment process. They also show a trend where borrowers are having difficulty paying off their loan products, due to a lack of preparation on their part or a lack of transparency from the lender.
The main takeaway from these complaints is that borrowers must remain vigilant to avoid predatory lending and ensure they know the exact terms of their loan agreements.
