The economic destruction of the foreclosure crisis and the Great Recession included not only the 4.5 million families who lost their homes and eight million workers who lost their jobs, but the crippling after-effect of poor credit histories that affected the ability of these consumers to obtain affordable credit, jobs, rental housing, and insurance.
A new white paper by the National Consumer Law Center explores these after-effects and proposes solutions to help afflicted consumers.
"Solving the Credit Conundrum: Helping Consumers' Credit Records Impaired by the Foreclosure Crisis and the Great Recession" reviews both the harm to individual consumers and the wider impact on economic recovery. It also documents the credit reporting problems caused by errors and anomalies, and discusses the broader problem of relying on past credit history to judge future performance, arguing that such a broad-brush approach fails to distinguish between consumers who are simply unlucky and those who are truly irresponsible. Finally, the paper makes policy recommendations to assist consumers whose credit reports were damaged by the foreclosure crisis and Great Recession.
"For millions of Americans, bad credit records are the result of bad luck, not bad character," said National Consumer Law Center attorney Chi Chi Wu and author of the report. "We hope this paper will prompt the development of methods to judge consumers so that they are not unfairly penalized by job loss, illness, or other life circumstances outside of their control."