Skip to main content

CFPB Cracks Down On Discriminatory Credit Reporting For Black And Hispanic Consumers

Katie Jensen
Nov 03, 2021

Consumers in majority Black and Hispanic neighborhoods are far more likely to have disputes appear on their credit reports. 

KEY TAKEAWAYS
  • In nearly every credit category, consumers in majority Black areas were more than twice as likely to have disputes appear on their credit reports compared to residents in majority white areas.
  • For auto loans, residents in majority Black communities were more than three times as likely to have disputes appear on their credit reports than residents in white communities.
  • 2.8% of accounts had disputes in majority Black census tracts compared to 0.8% of accounts in majority white census tracts. 
  • This is only the latest redlining investigation the CFPB has reported on within the past few weeks, signaling a crackdown on racial disparities in the financial marketplace.

Today the Consumer Financial Protection Bureau (CFPB) released research finding that consumers in majority Black and Hispanic neighborhoods, as well as younger consumers and those with low credit scores, are far more likely to have disputes appear on their credit reports. 

The new research was gathered from a series of reports on trends in the consumer financial marketplace, using data on auto loans, student loans, and credit card accounts opened between 2012 and 2019. 

The report shows that consumers in majority Black and Hispanic neighborhoods continue to face significant challenges with credit scores. In nearly every credit category (auto loans, student loans, credit cards, and retail cards) consumers in majority Black communities were more than twice as likely to have disputes appear on their credit reports compared to residents in majority white communities. 

Specifically, for auto loans, residents in majority Black communities were more than three times as likely to have disputes appear on their credit reports than residents in white communities. The report revealed that 2.8% of accounts had disputes in majority Black census tracts compared to 0.8% of accounts in majority white census tracts. 

“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.”

Under the Fair Credit Reporting Act, people have the right to file a dispute with credit reporting companies to correct inaccuracies on their reports. The Act requires credit reporting companies to investigate the disputes in a timely manner and swiftly correct inaccuracies uncovered by the investigation. According to today’s report, these disputes are quite common. 

In October, the CFPB along with the Federal Trade Commission and the North Carolina Department of Justice filed an amicus brief in regard to a technology company that is attempting to use Section 230 of the Communications Decency Act to gain immunity from inaccurate, misleading, and false consumer reporting.

The press release by the CFPB stated that sloppy credit reporting, rife with errors, can limit fair and equitable access to individuals and families nationwide. The CFPB plans to investigate the reason for demographic disparities found in the report. 

This is only the latest redlining investigation the CFPB has reported on within the past few weeks, signaling a crackdown on racial disparities in the financial marketplace. Last week, the CFPB, DOJ and OCC took action against Trustmark National Bank for deliberately discriminating against Black and Hispanic Americans by purposefully neglecting to market, offer, or originate home loans to consumers in minority neighborhoods near the Memphis metropolitan area. Trustmark also discouraged consumers residing in or seeking credit for properties located in these neighborhoods from applying for credit. 

 

Published
Nov 03, 2021
MBA Offers Suggestions For Improving Refis, Forbearance

Responds to CFPB's request for information published in September.

Regulation and Compliance
Nov 30, 2022
2023 Conforming Loan Limit Tops $1M For High-Cost Areas

FHFA said the baseline conforming loan limit will increase 12% next year.

Regulation and Compliance
Nov 29, 2022
FHA Extends Waivers To Its HECM Loss-Mitigation Policies 

Extension applies to senior borrowers affected by COVID-19.

Regulation and Compliance
Nov 28, 2022
N.J. Real Estate Developer, Lawyer Admit To Mortgage Fraud

Plead guilty to defrauding Fannie Mae, insurers of over $3.5 million.

Regulation and Compliance
Nov 28, 2022
Strength In Numbers

Seeking advice from the CFPB

Regulation and Compliance
Nov 21, 2022
HUD OKs Private Flood Insurance Options For Homeowners 

FHA to allow private flood insurance policies on insured single-family mortgages in special flood hazard areas.

Regulation and Compliance
Nov 21, 2022