Posted: October 21, 2021 at 3:42 p.m. EDT
WASHINGTON, 21 October 2021 / PRNewswire / – A New report published by the Policy & Economic Research Council (PERC) found that the data suppression / deletion measures proposed to deal with the economic fallout from COVID-19 will significantly reduce access to credit if implemented. The report, titled “Impacts from System-Wide Suppression of Derogatory Data in Credit Reporting,” simulated the impacts of large-scale suppression and suppression of negative credit information.
Over the past 18 months, policymakers in the United States and around the world have faced the complex issue of market closures due to necessary health measures. Nationally, the relatively narrow and focused credit reporting response of the CARES Act appears to have been largely successful. However, some members of Congress have called for an outright system-wide ban on credit reporting on adverse information, covering all consumers during (and for a period after) the COVID-19 crisis – a policy called “deletion and deletion.”
While the pandemic is heading in the right direction in the United States, the country is by no means out of the woods. With 22% of America’s population unvaccinated and much lower vaccination rates around the world, there are plenty of opportunities for the healthcare crisis to go awry. If this happens, lawmakers might be tempted to adopt suppression / suppression measures to protect consumers. In addition, narrower applications of this approach were recently introduced in Congress as amendments to the National Defense Authorization Act (NDAA). While well-intentioned, as in the case of the larger measure, smaller requests would be more likely to be detrimental to borrowers than helpful – in this case, active-duty military personnel.
The PERC report found that with a broader deletion / deletion policy in place, average credit scores increase – but not enough to match the simultaneous increase in the cut score used by lenders to decide which borrowers to reject. and which ones to accept. For example, after only six months of deletion / deletion, the cutoff score rises to 699 while the average credit score increases to only 693. The gap between the two widens over time, which means that more with a withdrawal policy in place, the more people who are denied access to affordable regular credit.
Evidence from the new study also shows that younger borrowers, low-income borrowers, and borrowers from minority communities will experience the greatest negative impacts. In one example, while the acceptance of credit for the general population fell by 18%, it fell by 46% for the youngest borrowers. Another scenario, including the moral hazard impact of a take-out / take-out policy, found that access to credit for 18-24 year olds was reduced by 90%. Such a widespread impact on an age group would likely have a lasting effect on their ability to generate wealth and build assets, which is notable as Millennials have struggled on this front compared to Gen X and babies. -boomers of the same age. By income, it fell 19% for the lowest income group, but 15% for the highest income group, a difference of 27%. For household members in predominantly white and non-Hispanic areas it fell 17%, but in predominantly black areas it fell 23% and in predominantly Hispanic areas it fell 25% .
PERC’s nearly two decades of research has focused on the responsible use of data to expand financial inclusion. This study was a continuation of a previous white paper titled “Addition Is Better Than Subtraction: The Risks Of Deleting Data And The Benefits Of Adding More Positive Data To Credit Reports.” He reviewed previous research on data deletion and presented consistent findings that data deletions are detrimental to borrowers. Unlike deletion / deletion, PERC research found that adding nonfinancial payment data to consumer credit reports dramatically increases access to credit for invisible loans (mainly low-income individuals, Americans young and old, minority communities and immigrants).
The report recommended adding positive (on-time) payment data from telecommunications, cable and satellite and broadband companies to the credit reporting system, rather than removing negative (on-time) payment data. delay). The inclusion of predictive data through channels authorized by consumers can also help offset the degradation of traditional credit report data resulting from the pandemic.
President and CEO of PERC Dr. Michael turner said, “US policymakers have struck a delicate balance with the provisions of the CARES Act, which have worked. Going forward, however, our study shows that they need to be cautious. Dr Turner highlighted the likelihood that those excluded due to deletion / deletion will turn to high cost lenders (pawn shops, payday lenders, securities lenders) to meet their actual credit needs. “We believe it is time for Congress to take action to promote the inclusion of alternative data in consumer credit reports,” Turner added.
Founder and President of the Society for Financial Education & Professional Development (SFE & PD) Ted daniels added, “PERC’s Credit Reporting Report contains extremely useful information as it details how the proposed COVID-19 data removal / deletion measures are actually reducing access to credit for consumers, especially minority populations. . In addition, the PERC report shows the need for fair and accurate disclosure. of all credit data – such as positive telecom, cable and satellite TV, and broadband payment data – in credit reports. “
Join us today To 1 p.m. EST on Zoom for a panel discussion on the report’s findings featuring Dr Turner and Patrick Walker of PERC, Ted daniels of SFE & PD, Bill Cheeks ABBA Associates Inc., and Dara Duguay of Credit Builders Alliance.
For more information please contact:
Email: [email protected]
Phone. +1 (919) 338-2798 x803
For more information please contact:
Email: [email protected]
Phone. : 443-614-2772
About PERC: The Political and Economic Research Council (PERC) is a non-partisan, not-for-profit organization dedicated to research, public education, and awareness raising on public policy issues. The goal of PERC is to educate and engage policy makers, consumers, the financial / business community and the general public, with the firm belief that a better informed public makes better decisions. Areas of expertise include information policy, economic development, access to credit and the global information economy. The Council is funded by profit and non-profit organizations that support the general mission and program of the Institute.
About SFE & PD: Since 1998, the Society for Financial Education and Professional Development (SFE & PD) has been one of the country’s leading nonprofit financial education and professional development organizations. SFE & PD teaches financial skills to people of all ages and backgrounds and is committed to improving the financial well-being of underserved and low-income communities. SFE & PD, based in Alexandria, Virginia, is chaired by the president and founder Ted daniels, a global leader in the financial literacy movement. Learn more about www.sfepd.org.
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SOURCE Political and Economic Research Council (PERC)
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