PERC Report Finds COVID-19 Data Suppression/Deletion Measures Likely to be More Harmful than Helpful

A new report released last week by the Policy & Economic Research Council (PERC) found that data suppression/deletion measures put forward in some proposed legislation addressing the economic fallout of COVID-19 was more likely to harm borrowers than to help them. The report, titled “Addition is Better than Subtraction: The Risks from Data Suppression and Benefits of Adding More Positive Data in Credit Reporting” reviewed previous research that looked at data deletion and found that lower-income and minority borrowers would be most harmed. The report also recommended adding positive (on-time) payment data of telecoms, cable and satellite TV, and broadband companies into the credit reporting system, rather than deleting negative (late) payment data.


Policymakers have been struggling with the complex issue of market shutdowns from the necessary healthcare measures. No one thinks it is fair to punish borrowers for a virus out of their control and tarnish their credit reports. However, accurate and complete credit data is also integral to the overall safety and soundness of the economy as well as post-pandemic economic recovery. Most agree the current lender accommodation measures passed by Congress in the Coronavirus Aid, Relief, and Economic Stimulus (CARES) Act do not go far enough to protect consumers. However, one suggested policy, found in the proposed Disaster Protection for Workers’ Credit Act (DPWCA) and the proposed HEROES Act, calls for deleting or suppressing late payment data for an indeterminate period of time. While well-intended, this measure would have the opposite impact of harming consumers.


PERC’s almost two decades of research has focused on the responsible use of data to expand financial inclusion. This report presented consistent findings proving that data deletions are harmful to borrowers and lenders. For example, one simulation found that credit scores went up, but credit approvals declined by 30%. Members of lower-income households were especially harmed by the data suppressions, with approvals falling 37% for those from the lowest income households.


By stark contrast, adding positive payment data increased approvals in one generic credit bureau risk model by 8% on average, and by 21% for the lowest income bracket. In short, data suppression will harm lower income persons and members of minority communities most, and adding positive data will help those same groups the most.


PERC President and CEO, Dr. Michael Turner, argues: “Telecommunications companies already report defaults and collections on credit reports. They use credit reports for eligibility determination, and they make loans for smart phones. They need to step up to the plate and do the right think to help millions of their customers.” A CFPB report found that between 2013 and 2018, more than 1 in 5 Americans had a telecoms collection on their credit report, and over 50% of subprime borrowers had at least one telecoms collection.


Dr. Turner added, “These companies are punishing their customers for being late without rewarding good payment behaviour. This is all the more important in a time when consumers need opportunities to build their credit reports. Adding positive payment data would make the credit reporting system fairer and more forgiving.”