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AGENCIES PROPOSE DODD-FRANK CREDIT SCORE DISCLOSURE RULES

The Federal Reserve Board (Board) and the Federal Trade Commission (FTC) have published proposed rules implementing Section 1100F of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203 (July 21, 2010) (Dodd-Frank Act). Section 1100F amends the Fair Credit Reporting Act (FCRA) to require provision of credit scores with adverse action and risk based pricing notices. Section 1100F is effective July 21, 2011.

The Board and FTC propose to amend their respective risk-based pricing rules, which became effective January 1, 2011, to require disclosure of the following in risk-based pricing and account review notices if a credit score is used in making the credit decision: (i) a numerical credit score used in making the credit decision, (ii) the range of possible scores under the model used, (iii) the key factors that adversely affected the credit score of the consumer in the model used, (iv) the date on which the credit score was created and (v) the name of the person or entity that provided the credit score. Two new model forms are provided.

The Board also proposes to amend certain model notices in Regulation B, which implements the Equal Credit Opportunity Act (ECOA). The model notices include the content required by both the ECOA and the FCRA, so that persons can use the model notices to comply with the adverse action requirements of both statutes. The proposed amendments would revise the model notices to incorporate the new credit score disclosure requirements. The proposed amendments also include clarifications to the model notice currently intended for use by creditors using a proprietary credit scoring system and the Official Staff Commentary.

The Board and FTC are proposing these amendments pursuant to their existing rulemaking authority under the FCRA and ECOA to ensure that implementing regulations and model forms are in place by the date the requirements become effective (i.e., July 21, 2011), which also is the date that rulemaking authority transfers from the Board and FTC to the new Consumer Financial Protection Bureau.

Public comments on the proposed rules are due within 30 days after publication in the Federal Register, which is expected shortly.

  • Judy Scheiderer