COVID-19 has affected many Americans’ credit scores.
Indeed, per one consumer group, there are record numbers of complaints about credit reporting errors since the pandemic struck in 2020 compared to the past several years. It seems the pandemic is to blame. Unfortunately, credit scores across the nation continue to fall.
The law in March 2020 that provided the first stimulus checks also provided for servicers of federally backed mortgages and student loans to allow borrowers to enter into forbearance or deferred payment plans. During the same time, credit card companies and issuers of auto loans voluntarily offered payment forbearance to their customers. Many Americans, largely as a result of Covid-19, took advantage of payment forbearances and deferrals offered. Only days after the aforementioned relief was put into law, the Consumer Financial Protection Bureau (CFPB) released a policy statement directing companies to ensure that they report that consumers were “current” on their loans even if in forbearance or deferred payment plan.
Unfortunately, some lenders and loan servicers incorrectly reported payments not required as a result of forbearance plans or otherwise as “late” to credit bureaus. Thus, consumers saw their credit scores fall as a result.
In 2012, the Federal Trade Commission (FTC) conducted a study with respect to credit reporting errors. The FTC found 25% of people had at least one mistake within their credit report(s). The pandemic has done nothing but escalates the rate of errors found within credit reports. Since April 1, 2020, the CFPB has received approximately 280,000 consumer complaints regarding credit reporting. This figure represents the highest number of complaints ever reported — an 86% increase from the days before the pandemic, according to the U.S. Public Interest Research Group (PIRG). “Consumers have every right to be angry with credit bureaus,” says Ed Mierzwinski, a senior director with U.S. PIRG.
Negative information will stay on a credit report for seven years, per Equifax. That means many people may suffer negative consequences not caused by any action or inaction on their part for nearly a decade. The consensus is that many people may have damaged credit scores and not even know.
Experts worry that if reporting errors were already happening to 25% of the population before the Covid-19 pandemic, that the number of reporting errors during the pandemic may be immense. Accordingly, it would not be surprising to see a litany of credit-reporting-related litigation in the coming months and throughout 2021, and it will be interesting to see the interplay between government regulatory agencies and the credit reporting agencies which determine whether the majority of Americans are able to purchase goods via credit.
Support: https://news.yahoo.com/credit-report-errors-surging-due-220000664.html
