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Formal Disputes on Consumer Credit Reports

In early November, the CFPB released a report on formal disputes on consumer credit reports. This report could lead to legal problems for the three major credit bureaus or renew lawmakers’ efforts to tighten rules on the companies..

Formal Disputes on Consumer Credit Reports Skew Negative Towards POC

The CFPB did not identify exactly why communities of color have more dispute activity in their credit reports, but newly appointed Director Rohit Chopra called the trend “far too prevalent.”

In its analysis, the CFPB reviewed about 5 million credit reports and then determined the incidence of disputes on auto loans, student loans and credit card accounts that consumers opened between 2012 and 2019.

The result: Consumers from Black neighborhoods had the highest dispute rate at 2.8% for car loans, 2.4% for student loans and 4.7% on credit card accounts. That compares to 0.8%, 0.9% and 2.5%, respectively, for predominantly White communities. Hispanic neighborhoods had the second-highest dispute rates at 1.3%, 1.3% and 2.7%, respectively.

Evaluating The Report

“Whatever the reason, now we know that reducing credit reporting errors isn’t just a matter of fairness and justice.” states Chi Chi Wu,  a staff attorney at the National Consumer Law Center. “It’s a matter of racial equity and part of the solution to reducing the vast differences in credit scores.”

“We do not believe the complaints in the CFPB database are an accurate reflection of consumers’ experiences with credit reporting agencies,” the association said in a statement to CBS MoneyWatch. “Accuracy is the bedrock of the credit reporting industry and getting credit reports right for consumers is our most important job.”

The association dismissed CFPB’s conclusions on Black and Hispanic communities and said credit report disputes have no ethnicity bias because the data does “not contain race, gender, marital status or other kinds of demographic information.”

“The CFPB report undermines and overlooks the work that credit bureaus do to expand access to credit in minority and underserved communities,” the association said in its statement. 

This article was last updated on November 9, 2021