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New FCRA risk-based rules kick in on Saturday
ALEXANDRIA, Va. (12/30/10)—For months, the Credit Union National Association has been advising credit unions that the Fair and Accurate Credit Transactions Act's (FCRA) risk-based pricing regulations, which become effective on Jan. 1, will require credit unions to provide risk-based pricing notices to each consumer in situations where two or more consumers are granted, extended, or otherwise provided credit. The National Credit Union Administration (NCUA) also is reminding credit unions of the rule’s effective date and requirements. In a Regulatory Alert signed by Chairman Debbie Matz, the NCUA noted the following:
* If a credit union offers risk-based pricing loan programs and uses credit scores to determine the annual percentage rate charged to each borrower, it will need to comply with the upcoming changes to risk-based pricing notices. * The new requirements take effect on Jan. 1 as a result of rules issued by the Federal Reserve Board and the Federal Trade Commission. * The two agencies’ rules are substantively identical and can be found at 12.CFR Part 222 and 16.CFR Part 640 and 698, respectively. The rules are meant to complement the existing adverse action notice provisions of the FCRA. * Section 615(h) of the FCRA generally requires a user of consumer reports to provide a risk-based pricing notice to a consumer. The notice is required when a credit union uses a consumer report in connection with an application, extension, or other provision of credit and, based on the consumer report, grants, extends, or provides credit on terms that are materially less favorable than terms the credit union has extended to other consumers. Section 615(h) does not apply to an application primarily for a business purpose. * The rules provide alternative means by which a credit union can determine who should receive a risk-based pricing notice. The rules also include certain exceptions to the general rule, including exceptions for creditors that provide a consumer with a disclosure of the consumer’s credit score.
The NCUA alert noted that the risk-based pricing notice requirement is designed primarily to improve the accuracy of consumer reports by alerting consumers to the existence of negative information on their reports. Consumers will be able to check their reports for accuracy and correct any inaccurate information. The agency enclosed, with the alert, the “Interagency Examination Procedures" examiners will use, and a questionnaire that will help a credit union document its compliance.
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