| Entities | |
| Topics and Issues | COVID-19 (41) Data Suppression (19) |
In June 2020, PERC issued a paper, Addition is Better than Subtraction: The Risks from Data Suppression and Benefits of Adding More Positive Data in Credit Reporting.
This paper examines approaches to credit reporting in response to the COVID-19 pandemic. While lenders are using existing tools under the Metro 2 credit reporting standards—including the use of Special Comment Codes (SCC) and Payment History Profile codes to indicate accounts affected by a natural disaster (SCC “AW”), account in forbearance (SCC “CP”), and payments deferred (Payment History Profile code “D”)—and are making accommodations for some student loan and residential mortgage borrowers under the CARES Act, there remain calls by some members of Congress for an outright ban on credit reporting any adverse information, covering all consumers during (and for some period after) the COVID-19 crisis—a policy referred to as “suppression and deletion.” Proponents of suppression/deletion argue that borrowers remain at risk through no fault of their own, and existing measures fall short.
Opponents of suppression/deletion worry that such a policy will (1) result in a substantial degradation of the integrity of the national credit reporting system, (2) pose a threat to the safety and soundness of the financial sector, and (3) do more harm to consumers (particularly lower income consumers) and small businesses than good. This paper gauges the probable impacts from large-scale data deletions by using past, empirical evidence. The data show that suppression/deletion will greatly reduce access to affordable sources of credit, harming consumers, but particularly lower to moderate income persons, as well as the young and members of minority communities. This paper also considers an alternative, encouraging the reporting non-financial positive payment data (timely payments).
Evidence from the impacts of including telecoms payment data is examined, and shows benefits in terms of greater access to mainstream credit and improved lending performance. Instead of restricting accurate late payment data, Congress should encourage the reporting of timely payment data from large broadband, content, and telecoms services providers to the NCRAs as a proactive, evidence-based solution. If these large service providers continue to choose not to report on-time payments voluntarily, a reporting mandate could be used as have been utilized in other countries.
Additional resources:
TransUnion blog, New Research Finds Suppression and Deletion of Credit Data Could Harm Consumers.