Impact of now-complete removal of tax liens, civil judgments from consumer credit reports reviewed in CFPB report

The removal of tax liens and civil judgments from consumers’ credit reports in recent years did not have a large impact on the relationship between credit scores and consumers’ credit performance, the Consumer Financial Protection Bureau (CFPB) said in a report issued Tuesday.

The report was the CFPB’s ninth quarterly consumer credit trends report (qCCT). It looks back at national consumer reporting agencies’ (NCRA) work to remove all tax liens and civil judgments from consumer credit reports under a provision of the National Consumer Assistance Plan (NCAP), which was initiated in March 2015 in response to a settlement between those agencies and more than 30 state attorneys general to remedy alleged Fair Credit Reporting Act (FCRA) violations, the CFPB said.

The NCAP outlined several procedural changes, the report notes, including a 180-day waiting period for medical debt reporting and significant restrictions on public record reporting. Further, civil public records – tax liens, civil judgments, and bankruptcies – could only be included on a credit report if they were refreshed by the NCRA at least every 90 days and contained enough personally identifying information to match the right consumer’s credit record.

At the time of the bureau’s February qCCT report, just about half of tax liens had been removed from consumers’ credit reports, and all had been removed by April 2018, the agency said. It said bankruptcies are the only type of pubic record now included in consumer credit reports.

“It is possible that tax liens and civil judgments could be reported in the future if that reporting complies with the terms of the NCRA settlement, however there have been no signs of a return so far,” the report states.

Overall, the report finds that:

  • Consumers with public records tended to have lower scores than those without. In June 2017 (before NCAP’s changes took effect), half of consumers with judgments or liens had “deep subprime” scores (below 580).
  • Consumers with judgments or liens had a much higher overall delinquency rate than those without, but this difference is smaller when looking at consumers in the same credit score group.
  • Looking within credit score categories, the difference in delinquency rates between consumers with judgments or liens and those without them stays largely constant across time periods. This evidence suggests that the public records provision of the NCAP did not have a large effect on the relationship between credit scores and consumers’ credit performance.
  • Within credit score categories, the differences in delinquency rates across these groups of consumers did not change dramatically over time on all loans or new loans.

The CFPB’s December qCCT report is one of a series that uses a longitudinal, nationally representative sample of approximately 5 million de-identified credit records maintained by one of the three nationwide consumer reporting agencies.

Quarterly Consumer Credit Trends: Public records, credit scores, and credit performance (December 2019)