The CFPB recently published a new report, “Disputes on Consumer Credit Reports.” Using data on auto loan, student loan, general purpose credit card, and retail card accounts opened between 2012 and 2019, the report looks at the demographic characteristics of disputers and the outcomes for accounts with dispute flags. The report is yet another signal of a likely CFPB focus on potential violations of anti-discrimination laws not only by servicers of mortgage loans, but also by servicers of all types of consumer credit accounts.
The report’s key findings are:
- Consumers who had one or more account opened between 2012 and 2019 and had a dispute flag on at least one account of a given type of credit (“disputers”) were generally younger than consumers who had an account opened between 2012 and 2019 but had no dispute flags (“non-disputers”). The one exception to this pattern is for student loans, with student loan disputers more likely to be in the 30 to 44 age group than the 18 to 29 age group. The likely explanation offered by the CFPB is that consumers with a student loan opened in their 30’s are more likely to have refinanced or consolidated a loan and such loans may be more likely to have reporting issues that lead to disputes.
- For all four types of credit, disputers were much more likely than non-disputers to have low credit scores when the disputed account was opened. The CFPB offers several possible explanations. One is that consumers with deep subprime and subprime credit scores are more likely to experience errors. Another is that such consumers are more likely to check their credit reports more frequently than consumers with higher credit scores because they are more likely to have a credit application denied and thus also more likely to take advantage of the right to obtain a free credit report disclosed in an adverse action notice.
- Dispute flags were significantly more common from consumers residing in majority Black census tracts compared to consumers residing in majority White census tracts. The CFPB suggests that the disparity in dispute flags rates by census tract race in part reflects the patterns in credit scores
- After a dispute flag first appears, outcomes vary substantially across different types of credit. For example, a substantial share of auto loans with dispute flags is ultimately closed, a large share of student loans with disputed flags is ultimately deleted, and a large share of general purpose credit cards has the dispute flag removed with the account remaining open. Retail cards are significantly less likely to remain open with the dispute flag removed compared to general purpose credit cards and instead are more likely to be closed or deleted
The CFPB concludes the report by commenting that an important subject for further research is whether the patterns observed in the report are driven by differences across groups and credit types in the type or frequency of the underlying issues that result in a dispute flag or whether they are driven by furnishers’ practices for reporting dispute flags or responding to disputes.