People of color, young borrowers more likely to file credit disputes: CFPB
WASHINGTON – Families in predominantly black and Hispanic communities, young consumers and those with low credit scores have a higher likelihood of litigation appearing on their credit reports, the Consumer Financial Protection Bureau said.
The agency analyzed credit data from 2012 to 2019 and found that families living in predominantly black and Hispanic census tracts were more likely to file disputes with credit bureaus for inaccurate information compared to families. white quarters.
If left unchecked, errors in a borrower’s credit report can limit financial access opportunities. Consumer advocates have complained for years that the process of correcting credit records is harder than it should be.
“Erroneous credit reports are far too prevalent and can jeopardize a fair recovery,” Director Rohit Chopra said in a press release.
The CFPB found that families in predominantly black census tracts were twice as likely as those in white census tracts to have credit disputes on their records in all credit categories examined by the agency, including those in white census tracts. credit cards, retail cards, auto loans, and student loans.
According to the report, only 0.8% of auto loans in majority white census tracts went to borrowers with a credit file dispute, compared to 2.8% of auto loans in majority black census tracts. . For credit cards, 2.5% of loans in white districts went to disputed accounts, while 4.7% of accounts contained litigation in black districts.
Meanwhile, 1.3% of student loans made in predominantly Hispanic census tracts went to borrowers with litigation files, compared with 0.9% of loans in white census tracts.
The CFPB also found that disputes were more common among younger borrowers and those with lower credit scores. Among auto loan borrowers with litigation on file, 41% were between 30 and 44 years old, compared with just 7% who were 62 and over.
The United States has three companies that act as private credit reporting agencies – Equifax, Transunion, and Experian – that use loan data used to calculate a borrower’s credit score, which has an impact on the cost and availability of credit.
Under the Fair Credit Reporting Act, US consumers have the right to dispute inaccuracies found in records maintained by credit bureaus nationwide.
“When credit reports are botched or riddled with errors, it can limit fair and equitable access to individuals and families nationwide,” the agency said in its press release.