February 14, 2023

CFPB: New Report Finds One-Third Decline in Collections Items on Consumer Credit Reports

Report underscores ongoing concerns about accuracy of collections data, particularly with respect to medical debt

Today, the Consumer Financial Protection Bureau (CFPB) released a report examining trends in credit reporting of debt in collections from 2018 to 2022. The report found the total number of collections tradelines on credit reports declined by 33%, from 261 million tradelines in 2018 to 175 million tradelines in 2022. The share of consumers with a collection tradeline on their credit report decreased by 20% in the same timeframe. The CFPB also released today additional analysis examining factors that increase the likelihood of inaccurate medical collections reporting and may contribute to the decline in medical collections tradelines.

“Our analysis of credit reports provides yet another indicator that, due to a strong labor market and emergency programs during the pandemic, household financial distress reduced over the last two years,” said CFPB Director Rohit Chopra. “However, false and inaccurate medical debt on credit reports continues to be a drag on household financial health.”

Collections tradelines are furnished to credit reporting companies by third-party debt collectors. Commonly reported collection items include medical, rental and leasing, credit card, and utility accounts. Some third-party collectors work on behalf of original creditors for a fee (“contingency-fee-based debt collectors”) and others purchase accounts outright from creditors (“debt buyers”).

Unlike most other tradelines, debt collection tradelines rarely report positive information like on-time payments, and result in reporting of collections tradelines being almost entirely harmful to consumers. Collections tradelines are visible to potential lenders, employers, landlords, and others who run credit inquiries or background checks. Collections tradelines can limit people’s access to jobs and housing, as well as decrease credit scores and increase the cost of credit. Given the potential damaging impacts of collections tradelines, reporting of inaccurate data is especially harmful.

Today’s report is drawn from the CFPB’s Consumer Credit Panel, a nationally representative sample of approximately 5 million de-identified credit records maintained by one of the three nationwide credit reporting companies. Key findings of this report include:

Today’s report updates CFPB research published in 2019, which covered consumer credit records from 2004 to 2018. This report builds on prior work by the CFPB to analyze consumer credit reporting trends and to better understand the role of medical bills on credit reports.

Read today’s report, Market Snapshot: An Update on Third-Party Debt Collections Tradelines Reporting.

Read the accompanying analysis, Debt Collectors Re-Evaluate Medical Debt Furnishing in Light of Data Integrity Issues, which spotlights the data integrity challenges inherent in furnishing medical debt.

Consumers can submit complaints about credit reporting companies and debt collectors by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).

Employees who believe their companies have violated federal consumer financial protection laws, including the Fair Credit Reporting Act and the Fair Debt Collection Practice Act, are encouraged to send information about what they know to whistleblower@cfpb.gov.

This post was originally published here.