.svg)
The US Consumer Financial Protection Bureau (CFPB) has for the first time looked at consumer complaints related to cryptocurrencies and found that fraud and transaction issues pose significant problems.
The fierce, and sometimes controversial, protector of financial consumer rights, which has gained a number of political opponents during the past year partly due to its aggressive campaign against hidden bank fees, has now joined other US federal financial regulators in looking into the risks associated with the use of cryptocurrencies.
In a bulletin published yesterday (November 10), the CFPB analysed consumer complaints related to crypto and concluded that the complaints “strongly suggest that consumers are at risk when seeking to acquire or transact with crypto assets.”
“Our analysis of consumer complaints suggests that bad actors are leveraging crypto-assets to perpetrate fraud on the public,” said CFPB director Rohit Chopra.
“Americans are also reporting transaction problems, frozen accounts, and lost savings when it comes to crypto-assets,” the director added stressing that his agency “will continue our work to keep the payments system safe from fraudsters targeting Americans.”
In recent years, traditional financial institutions have increasingly started to offer consumers some kind of cryptocurrency product. These products range from credit, debit and prepaid cards offering rewards in crypto assets, to person-to-person (P2P) platforms enabling crypto payments.
With the availability of these offerings increasing, so too has the number of consumer complaints received by the CFPB. In total, the agency received over 8,300 complaints between October 2018 and September 2022, with the greatest number of complaints coming from California.
The most common issue facing American crypto users was fraud and scams (40 percent), which was followed by transaction issues, such as the money not being available when promised (16 percent), other transaction problems (25 percent) and other service problems (12 percent).
Source: CFPB bulletin
Consumers have also complained about unexpected fees or hidden costs, something the CFPB typically labels as “junk fees”, and problems with crypto credit, prepaid and debit cards.
For example, in some cases, consumers were unable to make purchases using these cards. Other consumers had issues closing their accounts, receiving the promised rewards or were not reimbursed after a fraudulent transaction.
The CFPB also received complaints about a wide range of account access and dispute resolution issues, such as indefinite account freezes during platform bankruptcies, hours-long platform outages, difficulty executing transactions and poor customer service.
No accountability
A common theme that the CFPB spotted, turning up in all different kinds of complaints, was the challenges facing consumers when they sought to hold companies accountable.
In situations where a consumer is facing a technical issue or a problem accessing their account, the agency said they often get help, even if they need to wait a long time to do so. However, in situations where consumers’ assets were stolen or they had their accounts hacked, they are often turned away.
In other cases that do not involve fraud or technical issues, the CFPB says companies sometimes cite “boilerplate” user agreement language to shake off responsibility.
The agency also noted that the number of crypto complaints appears to increase when the price of bitcoin and other crypto assets increases.
Although the bulletin only offers an overall analysis of consumer complaints, complaints often serve as a starting point for the CFPB to look into violations of consumer protection laws and take action if it sees the potential for large-scale harm to consumers.
