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.