When there is no APR, the material term is the one that has the most significant financial impact on the consumer and varies based on information in a consumer report. “Materially less favorable terms,” the phrase used in the Rule, generally means a higher annual percentage rate (APR). Rule § 640.3(a) Credit Granted on Materially Less Favorable Terms You must notify consumers when you have used information in their credit report to offer them credit on materially less-favorable terms than the best material terms available to most consumers. This publication summarizes the FTC’s Rule. The Federal Trade Commission, the Consumer Financial Protection Bureau, and the federal banking agencies each have published a Risk-Based Pricing Rule. Model forms are available for each type of notice. Rule § 640.5(e) Information about the credit score disclosure exception is below. An alternative way of complying with the Rule is to give a credit score disclosure notice to all customers, regardless of the terms on which you granted them credit (“credit score disclosure exception” notice). The Risk-Based Pricing Rule requires you to notify consumers if they are getting worse terms because of information in their credit report. Risk-based pricing occurs when lenders offer different interest rates and loan terms to borrowers, based on individual creditworthiness. the consumer’s credit score, if a score was used.notice of the consumer's right to dispute the accuracy or completeness of any information provided by the CRA FCRA § 611.notice of the consumer's right to a free copy of their report from the CRA if they ask for it within 60 days FCRA § 612.a statement that the CRA didn’t make the adverse decision and can’t explain why the decision was made.the name, address and phone number of the CRA (including a toll-free number for nationwide CRAs) that supplied the report.Your notice may be oral, written or electronic it must contain certain information: FCRA § 615(a) If you take adverse action based on information in a consumer report, you must tell the consumer. Your Obligations When Taking Adverse Action § 1691(d)(6) FCRA § 603(k)ĭenying a consumer’s request for additional credit under an existing account generally isn’t considered an adverse action but changing the terms of the existing account can be. a negative change in account terms in connection with an unfavorable review of a consumer’s account 5 U.S.C.a refusal to grant credit in the amount or terms requested.Adverse action is defined in the Equal Credit Opportunity Act and the FCRA to include: The most common type of adverse action is a denial of credit. If you take adverse action against a consumer based on information in a consumer report, you must tell the consumer. The Cost of Non-Compliance ADVERSE ACTION Who Should Send Risk-Based Pricing Notices? Your Obligations When Taking Adverse ActionĬredit Granted on Materially Less Favorable Terms ![]() If you are not subject to the FTC’s jurisdiction, contact your regulator about your obligations. The Federal Trade Commission and the Consumer Financial Protection Bureau have each published a Risk-Based Pricing Rule. When they receive these notices, consumers can contact the consumer reporting agency (“CRA”) that supplied the information to you to ensure their consumer report is accurate. if you grant credit, but on less favorable terms based on information in a consumer report, you must provide a “risk-based pricing” notice.if you deny a consumer credit based on information in a consumer report, you must provide an “adverse action” notice to the consumer.If you use consumer reports (sometimes called “credit reports”) to make credit decisions, you have legal obligations under the Fair Credit Reporting Act, known as the FCRA and the Risk-Based Pricing Rule. About the FTC Show/hide About the FTC menu items.News and Events Show/hide News and Events menu items.Advice and Guidance Show/hide Advice and Guidance menu items.Competition and Consumer Protection Guidance Documents.Enforcement Show/hide Enforcement menu items.
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