Black and Latino consumers dispute their credit reports double that of whites
By CharlÃ¨ne Crowell
While credit accounts provide widely accepted alternatives to cash transactions, the convenience of debit and credit cards can also become expensive when patterns of errors and inaccuracies appear in credit reports. In just one year – 2020 – more than 300,000 complaints have been filed with federal financial regulators regarding credit or consumer reports.
New research from the Consumer Financial Protection Bureau (CFPB) finds that consumers residing in majority minority neighborhoods who are either black or Latino were more than twice as likely to see disputes appear on their credit reports as consumers residing in predominantly white areas. This finding was held true in almost every credit category examined – auto loans, student loans, credit cards, and retail cards between January 2012 and December 2019.
Of these categories of credit, auto loans were the most problematic. Consumers in predominantly black areas were more than three times more likely to see disputes appear on their credit reports.
âFamilies living in predominantly black and Hispanic neighborhoods are much more likely to see conflicts of inaccurate information appear on their credit reports,â said CFPB director Rohit Chopra. “Erroneous credit reports are far too prevalent and can jeopardize a fair recovery.”
The CFPB has also documented the effects of the COVID-19 pandemic in credit reports.
âSince the start of the COVID-19 pandemic, complaints to the CFPB regarding credit issues have increased, with credit complaints increasing year-over-year by 129% in 2020, and is the subject of complaint most common, âthe report says. . âConsumers who reported disputes were also more likely to reside in predominantly Black or predominantly Hispanic census tractsâ¦ We find that the results of accounts with reported disputes vary widely depending on the type of credit, student loan accounts being relatively more likely to be deleted from consumer credit records, while auto loans are more likely to be marked as closed and paid in full. “
When credit reports are riddled with errors, these and other failures can restrict consumers’ access to fair, equitable and affordable credit products. Additionally, as a growing number of employers add credit report reviews to their selection of applicants, erroneous and outdated items can be a barrier to getting a job, or a reason why. access to the most affordable credit is denied.
Federal agencies like the CFPB and the Federal Trade Commission (FTC) accept consumer complaints and enforce protections afforded by the Fair Credit Reporting Act (FCRA). Adopted in 1970, the FCRA requires consumer reporting companies to process and investigate disputes in a timely manner, and correct any inaccuracies discovered by the investigation. Documented FCRA violations can be grounds for related legal action that not only corrects misinformation, but also provides redress for the harm resulting from it.
Beyond or before legal proceedings, other actions initiated by consumers can lead to important financial protections.
A âcredit freezeâ can be requested by consumers to allow access to credit report information only with explicit consent from the consumer. While it is designed to prevent the approval of credit, loans, and services on a consumer’s behalf without their consent, the Federal Trade Commission warns that its use may also delay consumer approval for new credit transactions. credit like new accounts. A credit freeze also does not prevent the credit report information of an existing creditor or its debt collectors.
Another consumer protection is known as a âfraud alertâ on credit files. Initially, this provision provides an initial period of one year during which new business credit accounts are required to verify the identity of the consumer before opening new credit. In addition, consumers who have been victims of identity theft are entitled to an extended fraud alert for seven years.
Beyond fraud alerts and credit freezes, under the FCRA, consumers also have the right to:
â¢ Free disclosure every 12 months – at the request of each national credit bureau and specialist consumer reporting agencies nationwide;
â¢ Be informed if the information in the credit files has been used against you. Anyone who uses a credit report or other type of consumer report to deny your application for credit, insurance, or employment – or to take other adverse action against you – must tell you and must give you the name, address and telephone number of the agency that provided the information; and
â¢ A 30-day window for consumer reporting agencies to correct or remove inaccurate, incomplete or unverifiable information. However, a consumer information agency may continue to report information it has verified to be correct.
A full summary of these and other FCRA protections is available at: https://www.consumer.ftc.gov/articles/pdf-0096-fair-credit-reporting-act.pdf
States can and do offer additional protections to consumers through the offices of state attorneys general. Typically, like the CFPB, these state offices accept online complaints which can be investigated and, when warranted, pursued. In some cases, joint and collaborative prosecutions link federal and state offices in pursuing consumer rights enforcement actions.
For example, on October 14, the North Carolina Attorney General joined the CFPB and FTC to file a friend of the court case in support of the FCRA to protect consumers from a tech company. who claimed immunity from inaccurate, misleading and bogus consumer reports found on the Internet to collect and then sell personal information for a profit.
The brief argued in part: â[T]it must ensure that these companies “exercise their grave responsibilities with fairness, impartiality and respect for the consumer’s right to privacy” – by applying the procedures and limitations that Congress mandated in the FCRA – is greater than ever . “
Now that the holiday season brings more spending, consumers would be wise to remain alert to credit usage and inaccuracies.