Bad Data, Bad Analysis, Bad Results
Earlier this week, the CFPB released its Annual Report of Credit and Consumer Reporting Complaints. In the analysis and the accompanying press release, the Bureau expressed concern about the number of credit reporting complaints and the responses to those complaints.
It would be helpful if that concern was based on accurate data and analysis.
But facts are stubborn things. The CFPB’s press release claims “700,000 complaints,” and “more than 50%” of all complaints submitted to the Bureau concern Credit Reporting Agencies (CRA). A closer look, however, at the analysis tells a different story. The CFPB’s actual data shows the Bureau receiving more than 500,000 credit or consumer reporting complaints between January and September 2021. And the Bureau writes, “the volume of complaints received by the CFPB, while large, is a fraction of the volume of disputes submitted to furnishers and CRAs annually.”
Context is also important. Those complaints cited by the CFPB represent .03% of 1.6 billion credit accounts. In other words, there were no complaints regarding more than 99% of all credit accounts. As most companies in consumer-facing businesses would note, “One unsatisfied customer is one too many.” Still, the CFPB refusal to provide context in their statistical analysis creates misleading and inaccurate perceptions, and inaccurate media coverage of the matter, too boot, all of which are unhelpful, particularly when discussing policymaking.
The Bureau’s press release also criticizes the credit reporting agencies for neither providing substantive responses to complaints nor monetary relief to complainants, but never bothers to understand why. If the CFPB had examined why substantive responses may have dropped or monetary relief may have decreased they would have determined that the credit reporting system – both credit reporting agencies and creditors (data furnishers) – has been overrun with non-meritorious complaints.
In a related statistic, the Bureau notes that as many as 46,000 businesses offer credit repair services in the U.S that “purport to help consumers identify and dispute information on their credit reports, but many charge illegal fees, operate in bad faith, mislead consumers, or are outright fraud.” Both the FTC and the CFPB have brought legal actions against credit repair companies.
This CFPB analysis is not the typical regulatory gambit to push a “solution in search of a problem.” Rather, the CFPB refuses to acknowledge the problem that should be solved. If the CFPB wants to help consumers, it should (1) examine credit reporting disputes and complaints to determine how many are non-meritorious; (2) identify the companies that are submitting these fraudulent complaints and disputes; and (3) shut them down.
Doing so will free up vast resources to address real disputes and complaints.
January 7th, 2022 by Dan Bucherer