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New Adverse Action Credit Score Disclosure Requirements

by Credit Analytics Insights & Trends January 11, 2011

-- By Kari Michel

 

 What are you doing to prepare for the new credit score disclosure requirements for taking adverse action on the basis of information contained in a consumer credit profile report, including scoring models?        

 

The Dodd-Frank Wall Street Reform and Consumer Protection Act (CFPB) which was signed by President Obama on July 21, 2010, have prescribed new rules for Adverse Action and Risk Based Pricing notifications.  The new credit score disclosure rules will become effective July 21, 2011.  The rules have NOT been finalized at this time.

 

With the information currently available, the new rules will impact all lenders who take adverse action against a consumer due to information in a consumer credit report. 

Lenders will be required to disclose to the consumer:

·         The actual numerical score used in the adverse decision (new requirement)

·         The range of possible scores under the model used (new requirement)

·         All key factors that adversely affected the credit score

-       This legislation mandates the delivery of 5 factor codes (when applicable). The notice must include the top 4 and then a 5th when inquiries play a negative part in the score calculation (new requirement)

·         The date on which the credit score was created

·         The name of the entity that provided the score

 

If you have questions regarding the FCRA sections that are changing, you can refer to the Dodd-Frank legislation section 1100F. 

Comments for New Adverse Action Credit Score Disclosure Requirements

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Name: McmahonCONNIE
Time: Wednesday, January 12, 2011

A lot of specialists argue that personal loans aid people to live their own way, because they are able to feel free to buy necessary stuff. Moreover, various banks present credit loan for young and old people.
Name: RG Daigler
Time: Saturday, February 5, 2011

I'm glad lenders have to disclose the score they used, the range of possible scores and the name of the entity that provide the score. I found this article written by Ken Harney touches other things you should ask your lender about the new credit score disclosure requirements: http://www.mortgagematch.com/news/application-process/new-credit-disclosure-for-mortgage-applicants-479/
Name: Brian McKinney
Time: Thursday, July 21, 2011

If a financial instituion is NOT using a credit score in their lending decision are they still required to send a notice under this new requirement?
Name: Kari Michel
Time: Monday, July 25, 2011

@Brian McKinney: Thanks for your comment. The new rules have just been made final, and lenders need to consult with your own legal counsel with respect to your specific obligations. A Financial Institution must consult the entire rule, but generally if no credit score (as defined in the rule) is used at all in setting the material terms of credit, then there is no requirement to provide a score disclosure in an adverse action or risk-based pricing notice. For more information on the final rules, please go to: http://www.federalreserve.gov/newsevents/press/bcreg/20110706a.html
Name: Kari Michel
Time: Monday, July 25, 2011

@McmahonConnie, @RG Daigler: Thanks for visiting our blog and leaving comments.