Consumer Loan Complaints Reveal Racial and Economic Disparities

Newly analyzed CFPB data show lower-income consumers reported more problems

The Consumer Financial Protection Bureau (CFPB) has released a report showing a significant difference in complaint patterns related to borrowing, based on the wealth and racial makeup of the community.

Key Takeaways

  • The Consumer Financial Protection Bureau (CFPB) analyzed nearly 1 million complaints in its database from 2018 to 2020 to better understand how experiences with financial institutions vary based on demographics.
  • The agency found differing patterns among communities with more wealth and more White, non-Hispanic residents compared to minority communities and communities with less wealth.
  • The CFPB expects to use the data to continue its work in protecting consumers from unfair and illegal practices by financial institutions.

How the Complaints Highlight a Racial and Economic Divide

Between 2018 and 2020, the Consumer Financial Protection Bureau received almost 1 million complaints, and in a recent report—the first of its kind—the agency has provided insight into how complaint patterns vary based on race and wealth.

For this report the CPFB mapped complaints to what it calls the "credit life cycle," which consists of loan origination; the servicing of performing loans; delinquent and distressed loan servicing and collections; and credit reporting. Credit reporting can occur at each of the other three points in the cycle. For example, lenders typically use credit reports to decide whether to grant a loan, report the borrower's regular payments to credit bureaus, and also report if those loans become delinquent or go to collections.

Here are some of the key findings of the report:

  • Consumers who live in communities with lower income levels and that are predominantly Black and Hispanic submitted complaints about credit reporting and delinquent loan servicing at a higher rate than residents of higher-income and predominantly White, non-Hispanic communities.
  • In contrast, those from wealthier, predominantly White, non-Hispanic communities were more likely to complain about loan origination and the servicing of performing loans.
  • Asian American and Pacific Islander communities submitted complaints about credit reporting at a higher rate than predominantly White, non-Hispanic communities, but they had a lower share of complaints about delinquent loan servicing.
  • Complaints about loan originations increased 50% in 2020, primarily for mortgages. The increase came disproportionately from higher-income neighborhoods and those with fewer people of color.
  • Residents of communities with the highest share of Black consumers submitted the most complaints per resident—complaints from communities where 95% or more of the residents are Black occurred at more than twice the rate of complaints from communities where 5% or fewer residents were Black.
  • Lower-income census tracts—those at or below 40% of their area's median income—submitted roughly 30% more complaints per resident than census tracts that are at about 100% of their area's median income.

The findings of the report highlight the different experiences and concerns people of color have compared to White consumers when they interact with financial institutions. The agency says it will use the information to inform its work to protect consumers from unfair and illegal practices in the financial services industry.

Consumers who have a complaint regarding a financial institution can report it on the CFPB website.

Article Sources
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  1. Consumer Financial Protection Bureau. "CFPB Report: Consumer Complaint Submission Patterns Vary by Demographic Characteristics of Census Tract."