Black and Latino consumers dispute credit reportsNovember 25, 2021
New research from the Consumer Financial Protection Bureau (CFPB), finds that consumers residing in majority-minority neighborhoods that are either Black or Latino were more than twice as likely to have disputes appear on their credit reports compared to consumers residing in majority-white areas.
This finding held true in nearly every credit category reviewed, auto loans, student loans, credit cards, and retail cards between January 2012 and December 2019.
Among these credit categories, auto loans were the most problematic. Consumers in the majority Black areas were more than three times as likely to have disputes appear on their credit reports.
“Families living in majority Black and Hispanic neighborhoods are far more likely to have disputes of inaccurate information appear on their credit reports,” said CFPB Director Rohit Chopra. “Error-ridden credit reports are far too prevalent and may be undermining an equitable recovery.”
CFPB also documented the effects of the COVID-19 pandemic in credit reporting.
“Since the start of the COVID-19 pandemic, complaints to the CFPB about credit reporting issues have spiked, with credit reporting complaints increasing year-to-year by 129 percent in 2020, and is the most common complaint topic,” states the report. “Consumers who have disputes reported were also more likely to reside in census tracts that were majority Black or majority Hispanic. We find that outcomes for accounts with reported disputes vary substantially across types of credit, with student loan accounts relatively more likely to be deleted from consumers’ credit records, while auto loans are more likely to be marked closed and paid in full.”
When credit reporting is rife with errors, these and other failures can restrict consumer access to fair, equitable and affordable credit products. Additionally, as a growing number of employers add credit report reviews to their screening of applicants, erroneous and outdated items can be an obstacle to securing a job or a reason why access to the most affordable credit is denied.
Federal agencies like CFPB, and the Federal Trade Commission (FTC) accept consumer complaints and enforce protections granted through the Fair Credit Reporting Act (FCRA). Enacted in 1970, the FCRA requires consumer reporting companies to process and investigate the disputes in a timely manner, and correct any inaccuracies uncovered by the investigation. Documented FCRA violations can be grounds for related lawsuits that not only correct the misinformation but also provide restitution for resulting harms.
Beyond or before lawsuits, other consumer-initiated actions can lead to important financial protections.
A “credit freeze” can be requested by consumers to only allow access to credit report information with an explicit consumer authorization. While it is designed to prevent credit, loans, and services from being approved in a consumer’s name without consent, the Federal Trade Commission warns…