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.
