The coronavirus pandemic has coincided with a dramatic increase in the number of complaints filed with the Consumer Financial Protection Bureau, according to a study released Monday by the consumer advocacy group U.S. Public Interest Research Group.
Based on a review of CFPB’s public complaint database, U.S. PIRG found that the total number of complaints nationwide jumped from about 277,000 in 2019 to nearly 445,000 in 2020 – an increase of roughly 60%.
More than 60% of the filings in 2020 involved credit reporting issues, a twofold increase from the previous year, according to U.S. PIRG. As in the rest of the country, Pennsylvanians most frequently reported inaccurate credit reports and difficulty getting credit reporting companies to investigate such problems, Monday’s report said. In 2020, credit reporting complaints in Pennsylvania climbed to triple their level in 2019.
While the complaints had been rising prior to 2020, Emma Horst-Martz, an advocate for U.S. PIRG's Pennsylvania affiliate PennPIRG, noted that the trend has accelerated during the pandemic.
“The pandemic has made many Americans scared about their finances, oftentimes in a new way. And having less money means that an accurate credit report matters even more than before,” Horst-Martz said.
Credit reports can determine eligibility for housing, loans, and sometimes even employment, Horst-Martz noted. “So the stakes are just higher right now, which is why people are paying more attention and more willing to take the extra step to file a complaint.”
Other experts say the federal CARES Act, which Congress passed last March in response to COVID-19, is also to blame. The legislation required some companies to defer loan payments as a form of relief for borrowers, and other lenders voluntarily followed suit.
But although the payments were supposed to be recorded as current throughout the deferral period, in some cases they were incorrectly marked as late, causing the credit scores of affected customers to drop. The errors have prompted several class-action lawsuits against lenders and loan servicers.
U.S. PIRG found that the nation’s “Big Three” credit reporting agencies – Experian, TransUnion, and Equifax – accounted for nearly 9 in 10 credit-reporting complaints. But Francis Creighton, President and CEO of the Consumer Data Industry Association, countered that credit report providers have achieved a 97 percent accuracy rate.
“The industry’s internal data indicates there is no evidence that complaint activity reflects a problem with credit reporting,” Creighton wrote in a statement. Rather, he said, organizations such as “credit repair companies” appear to be a culprit.
They “try to take advantage of consumers by promising they can take negative, but accurate, information off of credit reports for a fee,” Creighton said. “Additionally, these same companies are abusing the CFPB complaint portal with numerous and repeated frivolous disputes.”
Still, U.S. PIRG recommended a complete overhaul of the nation’s credit reporting system. For example, it advised policymakers to improve the dispute process for errors on credit reports and impose fines on companies that consistently furnish incorrect or incomplete reports. It also suggested that lawmakers consider replacing private credit bureaus with a public credit registry housed within CFPB, an idea the Biden Administration has promoted.
But for now, PennPIRG's Horst-Martz said, “Consumers aren't the credit bureaus' customers. Consumers are actually their product; businesses that buy credit reports are their customers.”
“We think [the companies] won't change their business model to improve accuracy unless they pay real financial penalties for both failing to investigate disputes and failing to fix the mistakes that are happening," she said. "They don't do either of these things well, and they don't have a lot of incentive to do them well.”
Creighton, the industry representative, noted that around the time the pandemic began, Equifax, Experian and TransUnion gave people the option to check their credit reports online for free every week. And he said that “while disputes are required to be resolved within 30 days, the majority are resolved within two weeks. If the dispute extends beyond that time frame, the law requires that the disputed information must be removed from the credit report.”
Even though COVID-19 has thrust many Americans into a state of financial vulnerability, the overall number of complaints filed with the CFPB has been steadily rising ever since the bureau was established a decade ago.
In addition to credit reporting issues, U.S. PIRG’s study found that grievances involved alleged attempts to collect debt not owed, problems managing checking and savings accounts, and trouble making mortgage payments. The report also highlighted hundreds of cases in which borrowers struggled to pay off payday loans, sometimes due to unexpectedly high fees or interest rates or an inability to contact the lender or loan servicer.
Researchers at U.S. PIRG suspect the increase in complaints could reflect a “continued hollow economic recovery” from the Great Recession of 2008 that has “helped people at the top, but certainly not all consumers,” Horst-Martz said.
During the pandemic, the report said, CFPB has exacerbated households’ mounting financial problems by temporarily loosening enforcement of its regulations in response to the crisis. The report urged the Senate to confirm President Joe Biden’s nominee to lead the agency, Rohit Chopra. U.S. PIRG predicted that Chopra, currently a commissioner on the Federal Trade Commission, would “correct the course after three years of disastrous leadership” under the Trump Administration, which significantly reined in the agency’s activities.
