Webinar guest speakers discuss credit reporting industry findings, flaws

By Nelson Santiago

Consumer Action concluded a year of robust educational programming with its Dec. 7 webinar on what consumer advocates should know about credit reports and scores in a pandemic economy. While their credit rating may not be at top of mind for consumers who are trying to keep their families fed and housed through the COVID-19 crisis, maintaining a good score, monitoring reporting activity and disputing errors is vitally important at a time when households may have taken advantage of deferred payment options (for things like student loans), need to access credit to make ends meet, or be targeted by pandemic-related financial scams.

Our guest speakers—three leading credit experts—presented credit report and credit score basics, shared research findings that point to higher rates of credit file disputes in Black and Hispanic neighborhoods, and discussed problems in the credit reporting system and the need for reform.

Dr. Heather Brown, financial education and impact specialist and Financial Education Exchange (FinEx) program leader at the Consumer Financial Protection Bureau (CFPB), explained why credit matters, described how lenders check credit, and outlined steps for building and rebuilding credit. She also invited viewers to join the CFPB FinEx program, through which participants can receive updates on research and tools, engage with other financial practitioners, discuss best practices in a LinkedIn discussion group, and meet CFPB presenters who can work with their organizations. (For more information, visit the CFPB website.)

Dr. Brown’s colleague Dr. Ryan Sandler, senior economist with the CFPB, discussed the agency's recently published report "Disputes on Consumer Credit Reports", which is part of a series of CFPB reports produced using a longitudinal sample of records from one of the three nationwide consumer reporting agencies. Dr. Sandler's report looks at the demographic characteristics of credit report disputers (people who notify a credit reporting agency that information in their report is inaccurate) and the outcomes for accounts with dispute flags. Among his findings: consumers with dispute flags in their credit reports ("disputers") were generally younger than non-disputers (contrary to what might be expected in light of older consumers having more experience with credit); disputers were much more likely to have low credit scores when the disputed account was opened; and dispute flags were significantly more common from consumers residing in majority Black census tracks, and somewhat more likely in majority Hispanic census tracts, compared to consumers residing in majority white census tracts.

Chi Chi Wu, staff attorney with the National Consumer Law Center (NCLC), was the final presenter, and she spoke bluntly about credit bureau abuses. Wu said that, over the years, NCLC has documented a lot of problems with credit bureaus and the credit reporting system (inaccuracies, mixed files, a bias in favor of the creditor in disputes, etc.)—problems that stem, largely, from the fact that consumers are not the credit reporting industry’s customers; creditors and debt collectors are. Yet, Wu points out, credit bureaus have turned these failings into a market opportunity, where they sell our own information back to us in the form of credit monitoring (so that we can check our reports for errors more frequently than should be necessary). Wu went on to speak about other systemic credit reporting issues, including racial disparities in credit scores, inappropriate use of credit reports (such as for employment and, sometimes, even immigration), and how credit scores fundamentally reinforce inequality. Wu also talked about how "buy now, pay later" loans may impact credit, and about several proposals for reforming the credit reporting system.

The webinar was followed by an extended Q&A session, providing even more for viewers to use in their own consumer education and advocacy efforts.

If you missed the webinar, which was produced as part of our COVID-19 Educational Project, with funding from Chase, you can watch it here.