Collections Information Declines on Credit Reports—But There’s More to the Story

The Consumer Financial Protection Bureau (CFPB) recently issued an analysis of debt collection appearing on consumers’ credit reports. On the one hand, the findings are a positive sign: Consumers’ financial well-being seems to be improving. But on the other hand, the analysis shows that false and inaccurate information on credit reports continues to be a real problem impacting consumers’ lives.

In its report, the CFPB examined collection tradelines (i.e., the information about a debt collection) contained on consumers’ credit reports. The CFPB concluded that debt collection tradelines have declined since 2018. There were fewer people who had collections tradelines on their reports (down 20 percent) and fewer collection tradelines overall (down 33 percent).

CFPB Director Rohit Chopra said, “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.”

Collections relating to medical debt are still the most common tradelines on consumers’ reports. In the coming months, the national credit bureaus will remove small medical debts (under $500) and other related collections efforts. Therefore, the number of trade collections should continue to decline, but even with those reporting changes, half of American consumers will still have medical debt on their credit reports.

Here’s where the bad news of the report comes in.

The report also found that debt collection tradelines still frequently contain inaccurate information. Further, medical debt (again, the majority of debt reports) is particularly likely to be incorrect because of the difficulty of updating information from varied providers.

The data is so unreliable that contingency fee-based debt collectors are reducing their reporting to the bureaus. The debt collectors are concerned that they cannot comply with the Fair Credit Reporting Act’s requirements for accuracy, nor are they equipped to resolve complaints about errant reports.

This is, again, both good and bad news. If fewer collectors are reporting information, fewer collection tradelines (both accurate and inaccurate) will appear on people’s reports. But they’re also admitting their data is often inaccurate, and they don’t have the systems in place to deal with wrong information.

That’s why, if you see any errors or other issues on your credit report or if you’re being harassed by debt collectors, contact an attorney who specializes in these matters. Attorneys can help you work with debt collectors to reduce real debt while also helping you repair your record regarding incorrect debt tradelines. And they’ll help you receive compensation for the damage you’ve suffered due to reporting mistakes. Call today.