The CFPB recently issued its second Quarterly Consumer
Credit Trends Report which examines the impact of changes to credit reporting
regarding the reporting of civil public records. In 2015, the three major credit reporting
agencies (“CRAs”) entered into settlements with over thirty states. The settlements required the three CRAs to
implement minimum personal identifying information (“PII”) standards and data
collection frequency requirements for civil public records appearing on
consumer reports. The settlements also
resulted in the CRAs discontinuing their reporting of civil judgments.
The Report breaks civil public records into three broad
categories: bankruptcies, judgments and tax liens.
Bankruptcies: The Report spends little, if any, time
discussing bankruptcies because the number of bankruptcies being reported
remained virtually unchanged after the new standards took effect. The Report concludes this is an indication
that bankruptcies were being reported with sufficient PII prior to July 1,
2017.
Tax Liens and
Civil Judgments: The Report
notes that the number of tax liens being reported dropped off significantly
after July 1, 2017 with the reporting of state tax liens declining more than
federal tax liens. The reporting of
judgment liens disappeared altogether in July 2017. The Report then looked at the impact the
reporting of tax liens and judgments had on credit scoring. It should come as no surprise that with the
new PII standards and removal of judgment liens, affected consumers’ credit
scores increased. The amount of increase,
however, does not appear to be significant (0-15 points) and may be
attributable to the fact that many of the consumers in those categories also
had other derogatory tradelines. What is
interesting, however, is that the increase in scores did impact a fairly significant
number of consumers (17%) and their placement into higher credit bands (for
instance, movement from deep subprime to subprime).
As noted by the Report, there remains insufficient data to
draw any conclusion as to whether the removal of public records will affect the
predictability and accuracy of commercial credit scoring models.
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