New Federal Rules To Require Consumer Notice When Risk-Based Pricing Applied
Dec 22, 2009
In a notice issued today, December 22, 2009, the United States Federal Reserve Board and the Federal Trade Commission announced that creditors generally will be required to notify consumers when less-than-optimal credit terms are offered through the use of risk-based pricing.
The rules, which become effective on January 1, 2011, were adopted to implement amendments to the Fair Credit Reporting Act.
A joint press release about the final rules that includes a hyperlink to the corresponding Federal Register notice is reprinted below.
Should you have any questions or comments, please contact Colodny Fass.
Agencies Issue Final Rules on Risk-Based Pricing Notices
The Federal Reserve Board and the Federal Trade Commission today announced final rules that generally require a creditor to provide a consumer with a notice when, based on the consumer’s credit report, the creditor provides credit to the consumer on less favorable terms than it provides to other consumers. Consumers who receive this “risk-based pricing” notice will be able to obtain a free credit report to check the accuracy of the report.
Risk-based pricing refers to the practice of setting or adjusting the price and other terms of credit provided to a particular consumer based on the consumer’s creditworthiness. The final rules provide creditors with several methods for determining which consumers must receive risk-based pricing notices.
As an alternative to providing risk-based pricing notices, the final rules permit creditors to provide consumers who apply for credit with a free credit score and information about their score. Today, most consumers must pay a fee to obtain their credit score.
The final rules implement section 311 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act.
The Federal Register notice is attached. The final rules are effective January 1, 2011.
2009 Banking and Consumer Regulatory Policy
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