Hi,
I cannot confirm anything without examination but it sounds like irritant contact dermatitis. Irritant dermatitis, the most common type of contact dermatitis, involves inflammation resulting from contact with acids, alkaline materials such as soaps and detergents, cosmetics, or other chemicals.
Avoid using any lotions and creams over the face for the meantime. Wash your face with a mild cleanser with moisturizing properties like Cetaphil. Pat your face dry. Then apply a good hypoallergenic moisturizer over the area and see if this improves. If the symptoms still persist then you can apply mild steroid like dermacort.
It is very difficult to precisely confirm a diagnosis without examination and investigations and the answer is based on the medical information provided. For exact diagnosis, you are requested to consult your doctor. I sincerely hope that helps. Take care and please do keep me posted on how you are doing.
Stop using the facial cloths, and be very gentle with your skin over the next couple weeks while it heals. Try an aloe vera gel (make sure it contains no alcohol.) This will reduce redness and speed healing.
If you must use a cleanser, try something very very mild like Cetaphil or Dove. If you can go without, wash your face with only warm water until the rash disappears.
I have been washing my face with only water for almost a month now because I too broke out in a rash from overexfoliating. I was afraid I would breakout with acne from not using a cleanser, but I haven't had a pimple since. The skin can balance itself out on its own if you let it. Just be patient and you'll see results soon.
All the best.