Credit Card Trade Lines, Debt Collection Disputes Stand Out in CFPB Report

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The Consumer Financial Protection Bureau (CFPB) last week released a report on the consumer experience with the three largest nationwide credit reporting companies: Equifax, Experian, and TransUnion. Among the key takeaways in the report are that credit card history dominates the information in consumer reports and that debt collection items generate the highest rate of disputes.

According to the report, more than half of the trade lines in the credit bureau databases are supplied by the credit card industry. Specifically, 40 percent comes from bank cards, such as general credit cards, and 18 percent comes from retail credit cards. Only 7 percent comes from mortgage lenders or servicers, and only 4 percent comes from auto lenders.

The Bureau also reported that more than a third of credit reporting disputes have to do with debt collection. In 2011, consumers reached out to the credit reporting companies roughly 8 million times, resulting in disputes of 32 to 38 million items in their credit files. Almost 40 percent of the disputes relate to debt in collections, and debt in collections is five times more likely to be disputed than mortgage information.

The CFPB did note that the elevated proportion of disputes dealing with debt collection may have to do with consumers’ incentive to dispute any negative information on their reports, as debt collection trade lines are always negative.

“Today’s study is another step toward bringing more clarity to the confusing world of credit reports. It will help educate regulators and consumers about how this important industry works,” said CFPB Director Richard Cordray. “If consumers know how these companies handle their credit histories, they can make better decisions on how to handle their financial lives.”

Other interesting data singled out by the CFPB in the report announcement include:

  • Fewer than one in five people obtain copies of their credit report each year. About 44 million consumers per year, or about one in five, obtain copies of their files.
  • Most information contained in credit files comes from a small number of large banks and other financial institutions. In fact, the top 10 data furnishers provide 57 percent of the trade lines coming into the credit reporting companies. The top 50 furnishers provide 72 percent, and the top 100 furnishers provide 76 percent.

 

Continuing the Discussion

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  • avatar Marc Johnston says:

    “Almost 40 percent of the disputes relate to debt in collections, and debt in collections is five times more likely to be disputed than mortgage information”.

    What percentage is ultimately deemed frivolous or not legitimate? I would venture a guess that a very high percentage is frivolous considering that “credit repair” no longer involves doing the right thing and paying off the debts you create/incur. Now….its all about disputing (either yourself or hiring a “:credit repair” company to do it for you) in the hopes that someone will miss something and the tradeline will be deleted.

    Any of you out there getting the infamous “I am writing regarding a confusing item in my credit report” letters?

    I would be interested in connecting with those of you that are to discuss your method of handling

  • avatar David Winters says:

    I was thinking the exact same thing Marc and agree with you. We started to see the dispute letter flood gates open about 7 years ago.
    Hopefully the people at the CPFB look deeper than the initital numbers and look at how many consumers disputed every single item on their report.

  • avatar Ron Williams says:

    While impossible to say what percentage, a lot of the disputes made have to do with how the CRA’s display information on a consumer’s report. For example, Equifax displays purchased debt accounts only with the name of the debt purchaser and an account number and omits the name of the original creditor, even if the debt purchaser reports it. Certainly this triggers many “not my account” disputes, and, I would say, understandably so.

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