FTC, Federal Reserve Board Propose Changes to Risk-Based Pricing Rule

The Federal Trade Commission and the Federal Reserve Board are seeking public comment on proposed amendments to the Risk-Based Pricing Rule that would require creditors, as of July 21, 2011, to disclose credit score information to consumers when a credit score is used in setting or adjusting credit terms.

Since January 1, 2011, the Rule has required creditors to send consumers a “risk-based pricing” notice when, based on the consumer’s credit report, the creditor provides the consumer with less favorable credit terms than it provides to other consumers. Consumers who receive the notice can obtain a free credit report to check the report’s accuracy. As an alternative to providing the notice, the Rule permits creditors to provide credit applicants with a free credit score and information about their score.

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 proposed amendments to the Rule would reflect new requirements that were added by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposed amendments would add content to risk-based pricing notices, provide new model notices, and specify certain technical requirements regarding credit score disclosures.

The Commission vote authorizing the publication in the Federal Register of the Notice of Proposed Rulemaking and model notice forms was 5-0. The proposal will be published soon in the Federal Register, and the comment period will end 30 days thereafter. Persons who want to file comments should refer to filing instructions in the Federal Register notice. The FTC staff contacts are Katherine White and Manas Mohapatra, Bureau of Consumer Protection, 202-326-2252.