• Fed and FTC Release Final Rules on Credit Score Notices
  • August 2, 2011 | Author: Jeffrey T. Powell
  • Law Firm: Jones, Walker, Waechter, Poitevent, Carrère & Denègre L.L.P. - Birmingham Office
  • The Federal Reserve Board and the Federal Trade Commission released final regulations on July 6, 2011, to incorporate changes made under the Fair and Accurate Credit Transaction Act of 2003, which amended the Fair Credit Reporting Act (FCRA) to provide credit scores and credit score information with risk-based pricing notices and FCRA adverse action notices. The regulations were issued pursuant to Section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

    In general, if a credit score is used in setting the material terms of credit or denying an extension of credit, notice to the customer is required. The final rules amend Regulation V (Fair Credit Reporting) to modify the requirements in the disclosures for risk-based pricing notices and to add model forms to incorporate these new credit score disclosures. In addition, the final rules amend Regulation B (Equal Credit Opportunity) to add model notices, which combine the new adverse action notice requirements for Regulation B and the FCRA for credit score disclosures.

    While the final rules amending Regulation V and Regulation B are effective August 15, 2011, the agencies state that Section 1100F “is self-effectuating and will become effective on July 21, 2011, even if there are no implementing rules or model forms.” Therefore, the effective date should be read as July 21, 2011. Given this confusion, your bank should make sure it has adopted the changes to the adverse actions notices and risk-based pricing notices.

    A credit score disclosure for adverse action notice must be provided in situations when a credit score is pulled for a reason other than credit, for example, if a credit score is used in determining whether or not to open a checking account. These final rules clarify that if a credit score is based on a consumer credit report and is used in any way in making credit decisions, an adverse action notice is required, regardless of the type of product.