[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13902-13921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-5413]
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FEDERAL RESERVE SYSTEM
12 CFR Part 222
[Regulation V; Docket No. R-1407]
RIN 7100-AD66
FEDERAL TRADE COMMISSION
16 CFR Parts 640 and 698
RIN R411009
Fair Credit Reporting Risk-Based Pricing Regulations
AGENCIES: Board of Governors of the Federal Reserve System (Board) and
Federal Trade Commission (Commission).
ACTION: Notice of proposed rulemaking.
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SUMMARY: On January 15, 2010, the Board and the Commission published
final rules to implement the risk-based pricing provisions in section
311 of the Fair and Accurate Credit Transactions Act of 2003 (FACT
Act), which amends the Fair Credit Reporting Act (FCRA). The final
rules generally require a creditor to provide a risk-based pricing
notice to a consumer when the creditor uses a consumer report to grant
or extend credit to the consumer on material terms that are materially
less favorable than the most favorable terms available to a substantial
proportion of consumers from or through that creditor. The Board and
the Commission propose to amend their respective risk-based pricing
rules to require disclosure of credit scores and information relating
to credit scores in risk-based pricing notices if a credit score of the
consumer is used in setting the material terms of credit. These
proposed amendments reflect the new requirements in section 615(h) of
the FCRA that were added by section 1100F of the Dodd-Frank Wall Street
Reform and Consumer Protection Act.
DATES: Comments must be received on or before April 14, 2011. Comments
on the Paperwork Reduction Act analysis set forth in Section III.A. of
this Federal Register notice must be received on or before May 16,
2011.
ADDRESSES: All comments will become a matter of public record.
Comments should be addressed to:
Board: You may submit comments, identified by Docket No. R-1407 and
RIN No. RIN 7100-AD66, by any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected]. Include docket
number in the subject line of the message.
FAX: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551. All public comments are available from the
Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons.
Accordingly, your comments will not be edited to remove any identifying
or contact information. Public comments may also be viewed
electronically or in paper in Room MP-
[[Page 13903]]
500 of the Board's Martin Building (20th and C Streets, NW.) between 9
a.m. and 5 p.m. on weekdays.
Commission: Comments should refer to ``FCRA Risk-Based Pricing Rule
Amendments: Project No. R411009,'' and may be submitted by any of the
following methods. However, if the comment contains any material for
which confidential treatment is requested, it must be filed in paper
form, and the first page of the document must be clearly labeled
``Confidential.''
Web site: Comments filed in electronic form should be
submitted by clicking on the following Web link: https://ftcpublic.commentworks.com/ftc/riskbasedpricingamendnprm and following
the instructions on the Web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the Web-based form
at https://ftcpublic.commentworks.com/ftc/riskbasedpricingamendnprm.
Federal eRulemaking Portal: If this notice appears at
http://www.regulations.gov, you may also file an electronic comment
through that Web site. The Commission will consider all comments that
regulations.gov forwards to it.
Mail or Hand Delivery: A comment filed in paper form
should include ``FCRA Risk-Based Pricing Rule Amendments: Project No.
R411009,'' both in the text and on the envelope and should be mailed or
delivered, with two complete copies, to the following address: Federal
Trade Commission/Office of the Secretary, Room H-113 (Annex M), 600
Pennsylvania Avenue, NW., Washington, DC 20580. The Commission is
requesting that any comment filed in paper form be sent by courier or
overnight service, if possible, because U.S. postal mail in the
Washington, DC area and at the Commission is subject to delay due to
heightened security precautions.
Comments on any proposed filing, recordkeeping, or disclosure
requirements that are subject to paperwork burden review under the
Paperwork Reduction Act should additionally be submitted to: Office of
Management and Budget, Attention: Desk Officer for the Federal Trade
Commission. Comments should be submitted via facsimile to (202) 395-
6974 because U.S. Postal Mail is subject to lengthy delays due to
heightened security precautions.
FOR FURTHER INFORMATION CONTACT:
Board: Mandie K. Aubrey, Senior Attorney; or Catherine Henderson,
Attorney, Division of Consumer and Community Affairs, (202) 452-3667 or
(202) 452-2412, Board of Governors of the Federal Reserve System, 20th
and C Streets, NW., Washington, DC 20551. For users of a
Telecommunications Device for the Deaf (TDD) only, contact (202) 263-
4869.
Commission: Manas Mohapatra and Katherine White, Attorneys,
Division of Privacy and Identity Protection, Bureau of Consumer
Protection, (202) 326-2252, Federal Trade Commission, 600 Pennsylvania
Avenue, NW., Washington, DC 20580.
SUPPLEMENTARY INFORMATION \1\:
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\1\ The Board is placing the proposed regulations in the part of
its regulations that implements the FCRA--12 CFR Part 222. For ease
of reference, the discussion in the SUPPLEMENTARY INFORMATION
section uses the numerical suffix of each of the Board's
regulations. The FTC also is placing the proposed regulations and
model forms in the part of its regulations implementing the FCRA,
specifically 16 CFR part 640. However, the FTC uses different
numerical suffixes that equate to the numerical suffixes discussed
in the SUPPLEMENTARY INFORMATION section as follows: suffix .70 =
FTC suffix .1, suffix .71 = FTC suffix .2, suffix .72 = FTC suffix
.3, suffix .73 = FTC suffix .4, suffix .74 = FTC suffix .5, and
suffix .75 = FTC suffix .6.
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I. Background
The Fair and Accurate Credit Transactions Act of 2003 (FACT Act)
was signed into law on December 4, 2003. Public Law 108-159, 117 Stat.
1952. Section 311 of the FACT Act added section 615(h), 15 U.S.C.
1681m(h), to the Fair Credit Reporting Act (FCRA) to address risk-based
pricing. Risk-based pricing refers to the practice of setting or
adjusting the price and other terms of credit offered or extended to a
particular consumer to reflect the risk of nonpayment by that consumer.
Information from a consumer report is often used in evaluating the risk
posed by the consumer. Creditors that engage in risk-based pricing
generally offer more favorable terms to consumers with good credit
histories and less favorable terms to consumers with poor credit
histories.
Under section 615(h) of the FCRA, a person generally must provide a
risk-based pricing notice to a consumer when the person uses a consumer
report in connection with an extension of credit and, based in whole or
in part on the consumer report, extends credit to the consumer on terms
that are materially less favorable than the most favorable terms
available to a substantial proportion of consumers. The risk-based
pricing notice is designed primarily to improve the accuracy of
consumer reports by alerting consumers to the existence of negative
information in their consumer reports so that consumers can, if they
choose, check their consumer reports for accuracy and correct any
inaccurate information. The Board and the Commission (the Agencies)
jointly published regulations implementing these risk-based pricing
provisions on January 15, 2010 (75 FR 2724) (January 2010 Final Rule).
The January 2010 Final Rule has a mandatory compliance date of January
1, 2011.
On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act) was signed into law. Public Law 111-
203, 124 Stat. 1376. Section 1100F of the Dodd-Frank Act amends section
615(h) of the FCRA to require creditors to disclose in risk-based
pricing notices a credit score used in making a credit decision and
information relating to such credit score. The effective date of these
amendments is July 21, 2011.\2\
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\2\ Section 1100H of the Dodd-Frank Act provides that the
amendments in Subtitle H of Title X, which includes Section 1100F,
become effective on a ``designated transfer date.'' The Secretary of
the Treasury set the designated transfer date as July 21, 2011. 75
FR 57252 (Sept. 20, 2010).
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Title X of the Dodd-Frank Act also establishes a Bureau of Consumer
Financial Protection (the Bureau), to which rulewriting authority for
certain consumer protection laws will transfer. Section 1088(a)(9) of
the Dodd-Frank Act amends section 615(h)(6) to provide that rulewriting
authority for section 615(h) will transfer to the Bureau. Pursuant to
section 1100H of the Dodd-Frank Act, however, this rulewriting
authority does not transfer to the Bureau until July 21, 2011.\3\ Thus,
rulewriting authority for the risk-based pricing provisions of FCRA,
including the amendments prescribed by section 1100F of the Dodd-Frank
Act, will not be vested in the Bureau until the date that the section
1100F amendments become effective.
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\3\ Section 1100H of the Dodd-Frank Act provides that the
amendments in Subtitle H of Title X, which includes Section 1088,
become effective on a ``designated transfer date.'' The Secretary of
the Treasury set the designated transfer date as July 21, 2011. 75
FR 57252 (Sept. 20, 2010).
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The Agencies believe it is important to have implementing
regulations and revised model forms in place by July 21, 2011. This
will help ensure that consumers receive consistent disclosures of
credit scores and information relating to credit scores and will help
facilitate uniform compliance when section 1100F of the Dodd-Frank Act
becomes effective.
Accordingly, the Agencies are proposing amendments to the risk-
based pricing rules that are consistent with section 1100F of the Dodd-
Frank Act pursuant to their existing authority under section 615(h) of
the FCRA. Section 615(h) gives the Agencies the
[[Page 13904]]
authority to issue rules implementing the risk-based pricing
provisions, and requires the Agencies to address in those rules the
form, content, timing, and manner of delivery of risk-based pricing
notices. In particular, section 615(h)(5) prescribes certain content
requirements for the risk-based pricing notices, but provides that the
required content elements are the minimum that must be disclosed.
Moreover, section 615(h)(6)(B)(iv) provides that the Agencies must
provide a model notice that can be used to comply with section 615(h).
Therefore, the Agencies have the authority to add content to the risk-
based pricing notices that they deem appropriate. The Agencies believe
that adding to the requirements for the risk-based pricing notice the
content required by section 1100F of the Dodd-Frank Act and providing
revised model notices is appropriate to avoid consumer confusion and to
ensure timely and consistent compliance with the new content
provisions.
II. Section-by-Section Analysis
Section ----.73 Content, Form, and Timing of Risk-Based Pricing Notices
Section ----.73(a) Content of the notice
Section 615(h) of the FCRA requires a person to include certain
information in a risk-based pricing notice. The January 2010 Final Rule
implements the general content requirements for risk-based pricing
notices in Sec. 222.72(a)(1) and Sec. 640.4(a)(1) (hereafter
``general risk-based pricing notice''). The January 2010 Final Rule
also sets forth the content requirements for any risk-based pricing
notice required to be given as a result of the use of a consumer report
in an account review in Sec. 222.72(a)(2) and Sec. 640.4(a)(2)
(hereafter ``account review notice'').
Pursuant to section 615(h) of the FCRA, the January 2010 Final Rule
provides that a general risk-based pricing notice must include a
statement that the person sending the notice has set the terms of
credit offered, such as the annual percentage rate, based on
information from a consumer report, and a statement that those terms
may be less favorable than the terms offered to consumers with better
credit histories. Similarly, the January 2010 Final Rule provides that
the account review notice must include a statement that the person
sending the notice has conducted a review of the account based in whole
or in part on information from a consumer report, and a statement that
as a result of that review the annual percentage rate on the account
has been increased. The January 2010 Final Rule also requires a person
to provide certain information about the consumer reporting agency that
furnished a consumer report and about the consumer's right to a free
consumer report. The January 2010 Final Rule also provides that the
general risk-based pricing notice and the account review notice must
encourage consumers to verify the accuracy of the information in their
consumer reports.
Section 1100F of the Dodd-Frank Act amends section 615(h) of the
FCRA to require that creditors disclose additional information in risk-
based pricing notices. Specifically, a person must disclose in a risk-
based pricing notice a credit score used in making a credit decision
and information relating to such credit score, in addition to the
information currently required by section 615(h) of the FCRA. Section
1100F of the Dodd-Frank Act requires that a risk-based pricing notice
include: (1) A numerical credit score used in making the credit
decision; (2) the range of possible scores under the model used; (3)
the key factors that adversely affected the credit score of the
consumer in the model used; (4) the date on which the credit score was
created; and (5) the name of the person or entity that provided the
credit score.
Pursuant to section 615(h) of the FCRA, proposed ----.73(a)(1) and
(a)(2) would amend the content requirements of the general risk-based
pricing notice and the account review notice, consistent with section
1100F of the Dodd-Frank Act. Proposed ----.73(a)(1)(ix) would require a
person to provide the additional content described above in a general
risk-based pricing notice if a credit score of the consumer to whom a
person grants, extends, or otherwise provides credit is used in setting
the material terms of credit. Similarly, proposed ----.73(a)(2)(ix)
would require a person to provide the additional content described
above in an account review notice if a credit score of the consumer
whose extension of credit is under review is used in increasing the
annual percentage rate.
Section 1100F of the Dodd-Frank Act requires a risk-based pricing
notice to include a disclosure of a credit score used by a person in
making the credit decision. However, a person who is required to
provide a general risk-based pricing notice or account review notice
may use a credit report to set the credit terms offered or extended to
consumers without using a credit score. In a case where a person does
not use a credit score in making the credit decision requiring a risk-
based pricing notice or account review notice, the person would not be
required to disclose a credit score and information relating to a
credit score in such a notice.
In some cases, a creditor may use the credit score of a guarantor,
co-signer, surety, or endorser, but not a credit score of the consumer
to whom it extends credit or whose extension of credit is under review.
Proposed ----.73(a)(1)(ix) and ----.73(a)(2)(ix) would only require a
person to disclose a credit score and information relating to a credit
score when using the credit score of the consumer to whom it grants,
extends, or otherwise provides credit or whose extension of credit is
under review. As discussed in the January 2010 Final Rule, a person is
not required to provide a risk-based pricing notice to a guarantor, co-
signer, surety, or endorser.\4\ A person may be required, however, to
provide a risk-based pricing notice to the consumer to whom it grants,
extends, or otherwise provides credit, even if the person only uses the
credit report or credit score of the guarantor, co-signer, surety, or
endorser.
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\4\ See 75 FR at 2731 (Jan. 15, 2010).
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The Agencies do not believe the credit score of one consumer, such
as a guarantor, co-signer, surety, or endorser, should be disclosed to
a different consumer who is required to be given a risk-based pricing
notice. Therefore, when a person only uses a credit score of a
guarantor, co-signer, surety, or endorser to set the terms of credit
for the consumer to whom it extends credit or whose extension of credit
is under review, the proposal would not require a credit score to be
provided in the general risk-based pricing notice or account review
notice.
In those situations where a person must provide a credit score and
information relating to a credit score to a consumer in a general risk-
based pricing notice or an account review notice, Sec. Sec. --
--.73(a)(1)(ix)(B)-(F) and ----.73(a)(2)(ix)(B)-(F) of the proposed
rules would require the following disclosures: (1) the credit score \5\
used by the person in making the credit decision; (2) the range of
possible credit scores under the model used to generate the credit
score; (3) all of the key factors that adversely affected the credit
score, which shall not exceed four factors, except that if one of the
key factors is the number of inquires made with respect to the consumer
report, the number of key factors shall not exceed five; (4) the date
on which the credit score was created; and (5) the name of
[[Page 13905]]
the consumer reporting agency or other person that provided the credit
score. In addition, to provide context for the additional content
requirements, proposed Sec. Sec. ----.73(a)(1)(ix)(A) and --
--.73(a)(2)(ix)(A) also would require a statement that a credit score
is a number that takes into account information in a consumer report
and that a credit score can change over time to reflect changes in the
consumer's credit history.
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\5\ ``Credit score'' is defined in the January 2010 Final Rule
in ----.71(l) to have the same meaning as section 609(f)(2)(A) of
the FCRA, 15 U.S.C. 1681g(f)(2)(A). This is consistent with the
definition of ``numerical credit score'' in section 1100F of the
Dodd-Frank Act.
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The Agencies request comment as to whether the proposed additional
content for general risk-based pricing notices and account review
notices in the proposed rules is appropriate.
Finally, the Agencies note that the January 2010 Final Rule
provides exceptions to the requirements to provide general risk-based
pricing notices for persons that provide credit score disclosure
exception notices to consumers who request credit. See Sec. Sec.
222.74(d), (e), and (f); Sec. Sec. 640.5(d), (e), and (f). Nothing in
section 1100F of the Dodd-Frank Act or this proposal limits the ability
of creditors to provide these exception notices in lieu of the general
risk-based pricing notice.
Section ----.73(b) Form of the Notice
The Agencies provide model forms that may be used for compliance
with the risk-based pricing requirements in Appendix H of the January
2010 Final Rule. Paragraph (b)(2) of the January 2010 Final Rule
clarifies how each of the model forms of the risk-based pricing notices
required by Sec. Sec. ----.72(a) and (c), and by Sec. ----.72(d) may
be used. Paragraph (b)(2) provides that appropriate use of the model
forms contained in Appendices H-1 and H-2 of the Board's rules and
Appendices B-1 and B-2 of the Commission's rules are deemed to be in
compliance with Sec. Sec. ----.72(a) and (c), and Sec. ----.72(d),
respectively. Use of these model forms is optional.
Under the proposal, the Agencies would amend Appendices H and B of
the January 2010 Final Rule to add two new model forms in Appendices H-
6 and H-7 of the Board's proposed rules and Appendices B-6 and B-7 of
the Commission's proposed rules, for situations where a credit score
and information relating to such credit score must be disclosed. See
Model Forms, below. Proposed paragraph (b)(2) would clarify that
appropriate use of Model Form H-1 or H-6, or B-1 or B-6, would be
deemed to comply with the requirements of the requirements of Sec. --
--.72(a) and (c). It would also clarify that appropriate use of Model
Form H-2 or H-7, or B-2 or B-7, would be deemed to comply with the
requirements of Sec. ----.72(d).
Section ----.73(d) Multiple Credit Scores
Some creditors may obtain multiple credit scores from consumer
reporting agencies in connection with their underwriting processes. A
creditor may use one or more of those scores in setting the material
terms of credit. Section 1100F of the Dodd-Frank Act only requires a
person to disclose a single credit score that is used by the person in
making the credit decision. The Agencies are proposing Sec. ----.73(d)
to address situations where a creditor obtains multiple credit scores
from consumer reporting agencies and must provide either a general
risk-based pricing notice or an account review notice to a consumer.
Proposed Sec. ----.73(d)(1) provides that when a person uses one
of those credit scores in setting the material terms of credit, for
example, by using the low, middle, high, or most recent score, the
general risk-based pricing and account review notices would be required
to include that credit score and information relating to that credit
score as required by proposed Sec. Sec. ----.73(a)(1)(ix) and
(a)(2)(ix). When a person uses two or more credit scores in setting the
material terms of credit, for example, by computing the average of all
the credit scores obtained, the notices would be required to include
any one of those credit scores and information relating to the credit
score as required by proposed Sec. Sec. ----.73(a)(1)(ix) and
(a)(2)(ix). The notice may, at the person's option, include more than
one credit score, along with the information specified in proposed
Sec. Sec. ----.73(a)(1)(ix) and (a)(2)(ix) for each credit score
disclosed.
Proposed Sec. ------.73(d)(2) provides examples to illustrate the
notice requirements for creditors that obtain multiple credit scores
from consumer reporting agencies. The first example described in
proposed Sec. ----.73(d)(2)(i) applies when a person that uses
consumer reports to set the material terms of credit cards granted,
extended, or provided to consumers regularly requests credit scores
from several consumer reporting agencies and uses the low score when
determining the material terms it will offer to the consumer. Under the
proposed rules, that person must disclose the low score in its notices.
The example described in proposed Sec. ----.73(d)(2)(ii) applies when
a person that uses consumer reports to set the material terms of
automobile loans granted, extended, or provided to consumers regularly
requests credit scores from several consumer reporting agencies, each
of which it uses in an underwriting program in order to determine the
material terms it will offer to the consumer. Under the proposal, that
person may choose any one of these scores to include in its notices.
Section ----.75 Rules of Construction
Section ----.75(c) Multiple Consumers
The proposed rules would amend Sec. ----.75(c) to address
circumstances where a person must provide multiple consumers, such as
co-borrowers, with a risk-based pricing notice in a transaction. The
proposed rules retain the rule of construction that clarifies that in a
transaction involving two or more consumers who are granted, extended,
or otherwise provided credit, a person must provide a risk-based
pricing notice to each consumer. The proposed rules, however, would
amend the rules addressing the provision of a risk-based pricing notice
when the consumers have the same address and when the consumers have
different addresses to account for situations where a risk-based
pricing notice contains a consumer's credit score.
Proposed Sec. ----.75(c)(1) provides that whether the consumers
have the same address or not, the person must provide a separate notice
to each consumer if a notice includes a credit score(s). Each separate
notice that includes a credit score(s) must contain only the credit
score(s) of the consumer to whom the notice is provided, and not the
credit score(s) of the other consumer. If the consumers have the same
address, and the notice does not include a credit score(s), a person
may satisfy the requirements by providing a single notice addressed to
both consumers.
The proposed rules would also amend Sec. ----.75(c)(3)(i) to
provide an example to illustrate the notice requirements when a person
must provide a risk-based pricing notice that includes credit score
information to multiple consumers. Proposed Sec. ----.75(c)(3)(i)
would clarify that, in a situation where two consumers jointly apply
for credit with a creditor and the credit decision is based in part on
the consumers' credit scores, a separate risk-based pricing notice must
be provided to each consumer whether the consumers have the same
address or not. Each separate risk-based pricing notice must contain
the credit score(s) of the consumer to whom the notice is provided.
Model Forms
Appendix H of the Board's rules and Appendix B of the Commission's
rules contain five model forms that the Agencies prepared to facilitate
[[Page 13906]]
compliance with the rules. Two of the model forms are for risk-based
pricing notices, and three of the model forms are for the credit score
disclosure exceptions. Each of the model forms is designated for use in
a particular set of circumstances as indicated by the title of that
model form. Model forms H-1 and B-1 are for use in complying with the
general risk-based pricing notice requirements in Sec. ----.72. Model
forms H-2 and B-2 are for use in complying with the risk-based pricing
notices given in connection with account review in Sec. ----.72.
The proposed rules would add two new forms that could be used when
a person must disclose credit score information to a consumer. Model
forms H-6 and B-6 set forth a risk-based pricing notice with credit
score information that could be used to comply with the general risk-
based pricing requirements if the additional content requirements of
Sec. ----.73(a)(1)(ix) apply. Model forms H-7 and B-7 set forth an
account review risk-based pricing notice with credit score information
that could be used to comply with the account review notice
requirements if the additional content requirements of Sec. --
--.73(a)(2)(ix) apply.
The Agencies request comment on the design and content of these
model forms. The Agencies specifically solicit comment on the ordering
of the content in Model Forms H-6 and H-7, and B-6 and B-7, and whether
the credit score and information relating to a credit score should be
presented prior to the information on credit reports.
Model forms H-1 and H-2, and B-1 and B-2 would be retained. The
general risk-based pricing and account review notices could continue to
be used to comply with Sec. ----.72 when the additional content
requirements discussed in Sec. Sec. ----.73(a)(1)(ix) and (a)(2)(ix)
do not apply. As with the other model forms, use of the model forms H-6
or H-7, or B-6 or B-7, by creditors would be optional. If a creditor
appropriately uses Model Form H-6 or H-7, or B-6 or B-7, or modifies a
form in accordance with the rules or the instructions to the appendix,
that creditor would be deemed to be acting in compliance with the
general risk-based pricing notice or account review requirement when
the content provisions of Sec. Sec. ----.73(a)(1)(ix) or (a)(2)(ix)
apply.
Finally, the proposal would amend instructions 1. and 2. to
Appendices H and B to reflect the addition of H-6 and H-7, and B-6 and
B-7.
III. Regulatory Analysis
A. Paperwork Reduction Act
1. Request for Comment on Proposed Information Collection
In accordance with the requirements of the Paperwork Reduction Act
of 1995 (PRA) (44 U.S.C. 3512; 5 CFR part 1320, Appendix A.1), the
Board and the Commission may not conduct or sponsor, and a respondent
is not required to respond to, an information collection unless it
displays a currently valid Office of Management and Budget (OMB)
control number.
In accordance with the PRA, the Board has reviewed the proposed
rule under the authority delegated by OMB. The proposed rule contains
requirements subject to the PRA. The collections of information that
would be required by this proposed rule are found in 12 CFR
222.73(a)(1) and (a)(2). The Board's OMB control number is 7100-
0308.\6\
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\6\ The information collections (ICs) in this rule will be
incorporated with the Board's Recordkeeping and Disclosure
Requirements Associated with Regulation V (OMB No. 7100-0308). The
burden estimates provided in this rule pertain only to the ICs
associated with this proposed rulemaking. The current OMB inventory
for Regulation V is available at: http://www.reginfo.gov/public/do/PRAMain.
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The information collection requirements contained in this joint
notice of proposed rulemaking will be submitted by the Commission to
OMB for review and approval under the PRA.\7\ The requirements are
found in 16 CFR 640.4(a)(1) and (a)(2).
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\7\ Current PRA clearance for the existing Fair Credit Reporting
Risk-Based Pricing Regulations, under OMB control number 3084-0145,
expires January 31, 2013.
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Comments are invited on:
(a) Whether the collection of information is necessary for the
proper performance of the Agencies' functions, including whether the
information has practical utility;
(b) The accuracy of the estimates of the burden of the information
collection, including the validity of the methodology and assumptions
used;
(c) Ways to enhance the quality, utility, and clarity of the
information to be collected;
(d) Ways to minimize the burden of the information collection on
respondents, including through the use of automated collection
techniques or other forms of information technology; and
(e) Estimates of capital or start up costs and costs of operation,
maintenance, and purchase of services to provide information.
All comments will become a matter of public record.
Comments should be addressed to:
Board: You may submit comments, identified by Docket No. R-1407 and
RIN No. RIN 7100-AD66, by any of the following methods:
Agency Web Site: http://www.federalreserve.gov. Follow the
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments.
E-mail: [email protected]. Include docket
number in the subject line of the message.
FAX: 202-452-3819 or 202-452-3102.
Mail: Jennifer J. Johnson, Secretary, Board of Governors
of the Federal Reserve System, 20th Street and Constitution Avenue,
NW., Washington, DC 20551. All public comments are available from the
Board's Web site at http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, unless modified for technical reasons.
Accordingly, your comments will not be edited to remove any identifying
or contact information. Public comments may also be viewed
electronically or in paper in Room MP-500 of the Board's Martin
Building (20th and C Streets, NW.) between 9 a.m. and 5 p.m. on
weekdays.
Commission: Comments should refer to ``FCRA Risk-Based Pricing Rule
Amendments: Project No. R411009,'' and may be submitted by any of the
following methods. However, if the comment contains any material for
which confidential treatment is requested, it must be filed in paper
form, and the first page of the document must be clearly labeled
``Confidential.'' \8\
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\8\ FTC Rule 4.2(d), 16 CFR 4.2(d). The comment must be
accompanied by an explicit request for confidential treatment,
including the factual and legal basis for the request, and must
identify the specific portions of the comment to be withheld from
the public record. The request will be granted or denied by the
Commission's General Counsel, consistent with applicable law and the
public interest. See FTC Rule 4.9(c), 16 CFR 4.9(c).
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Web site: Comments filed in electronic form should be
submitted by clicking on the following Web link: https://ftcpublic.commentworks.com/ftc/riskbasedpricingamendnprm and following
the instructions on the Web-based form. To ensure that the Commission
considers an electronic comment, you must file it on the Web-based form
at https://ftcpublic.commentworks.com/ftc/riskbasedpricingamendnprm.
Federal eRulemaking Portal: If this notice appears at
http://
[[Page 13907]]
www.regulations.gov, you may also file an electronic comment through
that Web site. The Commission will consider all comments that
regulations.gov forwards to it.
Mail or Hand Delivery: A comment filed in paper form
should include ``FCRA Risk-Based Pricing Rule Amendments: Project No.
R411009,'' both in the text and on the envelope and should be mailed or
delivered, with two complete copies, to the following address: Federal
Trade Commission/Office of the Secretary, Room H-113 (Annex M), 600
Pennsylvania Avenue, NW., Washington, DC 20580. The Commission is
requesting that any comment filed in paper form be sent by courier or
overnight service, if possible, because U.S. postal mail in the
Washington, DC area and at the Commission is subject to delay due to
heightened security precautions.
Comments on any proposed filing, recordkeeping, or disclosure
requirements that are subject to paperwork burden review under the
Paperwork Reduction Act should additionally be submitted to: Office of
Management and Budget, Attention: Desk Officer for the Federal Trade
Commission. Comments should be submitted via facsimile to (202) 395-
6974 because U.S. Postal Mail is subject to lengthy delays due to
heightened security precautions.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive public comments, whether filed
in paper or electronic form, will be considered by the Commission, and
will be available to the public on the Commission's Web site, to the
extent practicable, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission makes every effort to remove home
contact information for individuals from the public comments it
receives before placing those comments on the Commission's Web site.
More information, including routine uses permitted by the Privacy Act,
may be found in the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
2. Proposed Information Collection
Title of Information Collection: Fair Credit Reporting Risk-Based
Pricing Notice Amendments.
Frequency of Response: On occasion.
Affected Public: Any person that is required to provide a risk-
based pricing notice and uses a credit score in making the credit
decision requiring a risk-based pricing notice.
Board: For purposes of the PRA, the Board is estimating the burden
for entities regulated by the Board, Office of the Comptroller of the
Currency, Federal Deposit Insurance Corporation, Office of Thrift
Supervision, National Credit Union Administration, and the U.S.
Department of Housing and Urban Development (collectively, the
``Federal financial regulatory agencies''). Such entities may include,
among others, State member banks, national banks, insured nonmember
banks, savings associations, Federally-chartered credit unions, and
other mortgage lending institutions.
Commission: For purposes of the PRA, the Commission is estimating
the burden for entities that extend credit to consumers for personal,
household, or family purposes, and are subject to administrative
enforcement by the FTC pursuant to section 621(a)(1) of the FCRA (15
U.S.C. 1681s(a)(1)). These businesses include, among others, non-bank
mortgage lenders, consumer lenders, utilities, State-chartered credit
unions, and automobile dealers and retailers that directly extend
credit to consumers for personal, non-business uses.
Abstract: As discussed above, Sec. Sec. ----.73(a)(1)(ix)(B)-(F)
and ------.73(a)(2)(ix)(B)-(F) of the proposed rules would require the
following disclosures: (1) the credit score \9\ used by the person in
making the credit decision; (2) the range of possible credit scores
under the model used to generate the credit score; (3) all of the key
factors that adversely affected the credit score, which shall not
exceed four factors, except that if one of the key factors is the
number of inquiries made with respect to the consumer report, the
number of key factors shall not exceed five; (4) the date on which the
credit score was created; and (5) the name of the consumer reporting
agency or other person that provided the credit score. In addition,
proposed Sec. Sec. ----.73(a)(1)(ix)(A) and ------.73(a)(2)(ix)(A)
also would require a statement that a credit score is a number that
takes into account information in a consumer report and that a credit
score can change over time to reflect changes in the consumer's credit
history.
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\9\ ``Credit score'' is defined in the January 2010 Final Rule
in ------.71(l) to have the same meaning as 15 U.S.C.
1681g(f)(2)(A). This is consistent with the definition of
``numerical credit score'' in section 1100F of the Dodd-Frank Act.
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Estimated Burden: To ease creditors' burden and cost of complying
with the notice and disclosure requirements, the Agencies have provided
draft model forms in Appendices H and B of the proposed regulations.
Board: The Board believes that since financial institutions are
familiar with the existing provisions of section 615(h) of the FCRA,
which require risk-based pricing disclosures when a person uses a
consumer report in setting the material terms of credit, implementation
of the proposed requirements should not be overly burdensome. The
proposed requirements would require a person to add information to a
disclosure that it is already providing to a consumer.
The Board estimates that there are 18,173 respondents regulated by
the Federal financial regulatory agencies potentially affected by the
new disclosure requirements. The Board estimates that the 18,173
respondents would take, on average, 16 hours (2 business days) to
update their systems and modify model notices to comply with proposed
requirements. This one-time annual burden is estimated to be 290,768
hours. The Board believes that, on a continuing basis, the revision to
the rule would have a negligible effect on the annual burden.
Commission:
Number of respondents:
As discussed above, the proposed requirements would require a
person that is required to provide a risk-based pricing notice and uses
a credit score in making the credit decision requiring a risk-based
pricing notice to add information to that disclosure.
Given the broad scope of creditors, it is difficult to determine
precisely the number of them that are subject to the Commission's
jurisdiction and that engage in risk-based pricing and use a credit
score in making the credit decision requiring a risk-based pricing
notice. As a whole, the entities under the Commission's jurisdiction
are so varied that there are no general sources that provide a record
of their existence, and they include many small entities for which
there is no formal tracking method. Nonetheless, Commission staff
estimates that the proposed regulations will affect approximately
199,500 creditors subject to the Commission's jurisdiction.\10\ The
Commission invites
[[Page 13908]]
comment and information about the categories and number of creditors
subject to its jurisdiction.
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\10\ This estimate derives in part from an analysis of the
figures obtained from the North American Industry Classification
System (NAICS) Association's database of U.S. businesses. See http://www.naics.com/search.htm. Commission staff identified categories of
entities under its jurisdiction that also directly provide credit to
consumers. Those categories include retail, vehicle dealers,
consumer lenders, and utilities. The estimate also includes state-
chartered credit unions, which are subject to the Commission's
jurisdiction. See 15 U.S.C. 1681s. For the latter category,
Commission staff relied on estimates from the Credit Union National
Association for the number of non-federal credit unions. See http://www.ncua.gov/news/quick_facts/Facts2007.pdf. For purposes of
estimating the burden, Commission staff made the conservative
assumption that all of the included entities engage in risk-based
pricing and use a credit score in making the credit decision
requiring a risk-based pricing notice.
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Estimated Hours Burden: As detailed below, Commission staff
estimates that respondents would require, on average, 16 hours (two
business days) to update their systems and modify model notices to
comply with the proposed requirements. Thus, based on an estimated
199,500 respondents, the one-time burden, annualized for a 3 year PRA
clearance, would be 1,064,000 hours [(16 x 199,500) / 3]. The
Commission believes that, on a continuing basis, the revision to the
rule would have a negligible effect on the annual burden.
Estimated Cost Burden: Commission staff derived labor costs by
applying appropriate estimated hourly cost figures to the burden hours
described above. It is difficult to calculate with precision the labor
costs associated with the proposed regulations, as they entail varying
compensation levels of clerical, management, and/or technical staff
among companies of different sizes. In calculating the cost figures,
Commission staff assumes that managerial and/or professional technical
personnel will update systems for providing risk-based pricing notices
and adapt the written notices as necessary at an hourly rate of
$42.95.\11\ Based on the above estimates and assumptions, the estimated
one-time labor cost for all categories of FTC covered entities under
the proposed regulations, annualized for a 3 year PRA clearance, is
$45,698,800 [((16 hours x $42.95) x 199,500) / 3].
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\11\ This cost is derived from the median hourly wage for
management occupations found in the May 2009 National Occupational
Employment and Wage Estimates of the Bureau of Labor Statistics,
Table 1.
---------------------------------------------------------------------------
Commission staff does not anticipate that compliance with the
proposed amendments will require any new capital or other non-labor
expenditures. The proposed amendments provide a simple and concise
model notice that creditors may use to comply, and as creditors already
are providing risk-based pricing notices to consumers under the FCRA,
they already have the necessary resources to generate and distribute
these notices. Thus, any capital or non-labor costs associated with
compliance would be negligible.
B. Regulatory Flexibility Act
Board: The Regulatory Flexibility Act (RFA) (5 U.S.C. 601 et seq.)
requires an agency either to provide an initial regulatory flexibility
analysis with a proposed rule or certify that the proposed rule will
not have a significant economic impact on a substantial number of small
entities. The proposed regulations cover certain banks, other
depository institutions, and non-bank entities that extend credit to
consumers. The Small Business Administration (SBA) establishes size
standards that define which entities are small businesses for purposes
of the RFA.\12\ The size standard to be considered a small business is:
$175 million or less in assets for banks and other depository
institutions; and $7 million or less in annual revenues for the
majority of non-bank entities that are likely to be subject to the
proposed regulations. The Board requests public comment in the
following areas.
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\12\ U.S. Small Business Administration, Table of Small Business
Size Standards Matched to North American Industry Classification
System Codes, available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf.
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1. Reasons for the Proposed Rule
Section 1100F of the Dodd-Frank Act amends section 615(h) of the
FCRA to require persons to disclose a credit score and information
relating to that credit score in risk-based pricing notices when the
person uses a credit score in setting the material terms of credit.
Specifically, a person must disclose, in addition to the information
currently required by the January 2010 Final Rule: (1) A numerical
credit score used in making the credit decision; (2) the range of
possible scores under the model used; (3) the key factors that
adversely affected the credit score of the consumer in the model used;
(4) the date on which the credit score was created; and (5) the name of
the person or entity that provided the credit score. The effective date
of these amendments is July 21, 2011.
The Agencies are issuing proposed amendments to the risk-based
pricing rules pursuant to their existing authority under section 615(h)
of the FCRA to facilitate compliance with the new requirements under
section 1100F of the Dodd-Frank Act.
2. Statement of Objectives and Legal Basis
The SUPPLEMENTARY INFORMATION above contains this information. The
legal basis for the proposed regulations is section 615(h) of the FCRA.
The proposed regulations are consistent with section 1100F of the Dodd-
Frank Act.
3. Description of Small Entities To Which the Regulation Applies
The proposed regulations apply to any person that (1) is required
to provide a risk-based pricing notice to a consumer; and (2) uses a
credit score in making the credit decision requiring a risk-based
pricing notice. The total number of small entities likely to be
affected by the proposal is unknown because the Agencies do not have
data on the number of small entities that use credit scores for risk-
based pricing in connection with consumer credit. The risk-based
pricing provisions of section 1100F of the Dodd-Frank Act have broad
applicability to persons who use credit scores for risk-based pricing
in connection with the provision of consumer credit.
Based on estimates compiled by the Board, the Federal Deposit
Insurance Corporation, and the Office of Thrift Supervision, there are
approximately 9,585 depository institutions that could be considered
small entities and that are potentially subject to the proposed
rule.\13\ The available data are insufficient to estimate the number of
non-bank entities that would be subject to the proposed rule and that
are small as defined by the SBA. Such entities would include non-bank
mortgage lenders, auto finance companies, automobile dealers, other
non-bank finance companies, telephone companies, and utility companies.
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\13\ The estimate includes 1,504 institutions regulated by the
Board, 673 national banks, and 4,167 federally-chartered credit
unions, as determined by the Board. The estimate also includes 2,872
institutions regulated by the FDIC and 369 thrifts regulated by the
OTS. See 75 FR 36016, 36020 (Jun. 24, 2010).
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It also is unknown how many of these small entities that meet the
SBA's size standards and are potentially subject to the proposed
regulations use credit scores for risk-based pricing in connection with
the provision of consumer credit. The proposed regulations do not
impose any requirements on small entities that do not use credit scores
for risk-based pricing in connection with consumer credit.
The Board invites comment regarding the number and type of small
entities that would be affected by the proposed rule.
4. Projected Reporting, Recordkeeping and Other Compliance Requirements
The compliance requirements of the proposed regulations are
described in
[[Page 13909]]
detail in the SUPPLEMENTARY INFORMATION above.
The proposed regulations generally require a person that is
required to provide a risk-based pricing notice to a consumer and uses
a credit score in making the credit decision to provide a credit score
and information relating to that credit score in the notice, in
addition to the information currently required by the January 2010
Final Rule. Pursuant to the January 2010 Final Rule, a person is
currently required to determine if it engages in risk-based pricing,
based in whole or in part on consumer reports, in connection with the
provision of consumer credit. If the person does engage in risk-based
pricing based on consumer reports, the person generally is required to
establish procedures for identifying those consumers to whom it must
provide risk-based pricing notices.
A person that is required to provide risk-based pricing notices to
certain consumers would need to analyze the regulations. The person
would need to determine whether it used credit scores for risk-based
pricing of the consumers to whom it must provide risk-based pricing
notices. Persons that use credit scores for risk-based pricing would
need to provide a credit score and information relating to that credit
score to those consumers to whom it must provide an risk-based pricing
notice, in addition to the information currently required by the
January 2010 Final Rule. Persons would need to design, generate, and
provide notices, including a credit score and information relating to
that credit score, to the consumers to whom it must provide a risk-
based pricing notice.
The Board seeks information and comment on any costs, compliance
requirements, or changes in operating procedures arising from the
application of the proposed rule to small institutions.
5. Identification of Duplicative, Overlapping, or Conflicting Federal
Regulations
The Board has not identified any Federal statutes or regulations
that would duplicate, overlap, or conflict with the proposed
regulations. As discussed in Part III above, the proposed amendments to
the risk-based pricing rules are consistent with section 1100F of the
Dodd-Frank Act. The Agencies are proposing the rules pursuant to their
existing authority under section 615(h) of the FCRA. The proposed
amendments to the risk-based pricing rules have been designed to work
in conjunction with the requirements of section 1100F of the Dodd-Frank
Act to help facilitate uniform compliance when this section becomes
effective. The Board seeks comment regarding any statutes or
regulations, including State or local statutes or regulations, that
would duplicate, overlap, or conflict with the proposed regulations.
6. Discussion of Significant Alternatives
The Board welcomes comments on any significant alternatives
consistent with section 615(h) of the FCRA, including the provisions of
section 1100F of the Dodd-Frank Act, that would minimize the impact of
the proposed regulations on small entities.
Commission: The RFA, 5 U.S.C. 601-612, requires that the Commission
provide an Initial Regulatory Flexibility Analysis (IRFA) with a
proposed rule, unless the Commission certifies that the rule will not
have a significant economic impact on a substantial number of small
entities. See 5 U.S.C. 603-605. The SBA establishes size standards that
define which entities are small businesses for purposes of the RFA.\14\
The size standard to be considered a small business is: $175 million or
less in assets for banks and other depository institutions; and $7
million or less in annual revenues for the majority of non-bank
entities that are likely to be subject to the proposed regulations. The
Commission does not believe that the proposed regulations will have a
significant economic impact on a substantial number of small business
entities. The Commission recognizes that the proposed regulations will
affect some small business entities; however we do not expect that a
substantial number of small businesses will be affected or that the
regulations will have a significant economic impact on them.
Nonetheless, the Commission has prepared the following IRFA. The
Commission requests public comment in the following areas.
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\14\ U.S. Small Business Administration, Table of Small Business
Size Standards Matched to North American Industry Classification
System Codes, available at http://www.sba.gov/sites/default/files/Current_Size_Standards_Table.pdf.
---------------------------------------------------------------------------
1. Reasons for the Proposed Rule
Section 1100F of the Dodd-Frank Act amends section 615(h) of the
FCRA to require persons to disclose a credit score and information
relating to that credit score in risk-based pricing notices when the
person uses a credit score in setting the material terms of credit.
Specifically, a person must disclose, in addition to the information
currently required by the January 2010 Final Rule: (1) A numerical
credit score used in making the credit decision; (2) the range of
possible scores under the model used; (3) the key factors that
adversely affected the credit score of the consumer in the model used;
(4) the date on which the credit score was created; and (5) the name of
the person or entity that provided the credit score. The effective date
of these amendments is July 21, 2011.
The Agencies are issuing proposed amendments to the risk-based
pricing rules pursuant to their existing authority under section 615(h)
of the FCRA to facilitate compliance with the new requirements under
section 1100F of the Dodd-Frank Act.
2. Statement of Objectives and Legal Basis
The SUPPLEMENTARY INFORMATION above contains this information. The
legal basis for the proposed regulations is section 615(h) of the FCRA.
The proposed regulations are consistent with section 1100F of the Dodd-
Frank Act.
3. Description of Small Entities to Which the Regulation Applies
The proposed regulations apply to any person that (1) is required
to provide a risk-based pricing notice to a consumer; and (2) uses a
credit score in making the credit decision requiring a risk-based
pricing notice. The total number of small entities likely to be
affected by the proposal is unknown because the Agencies do not have
data on the number of small entities that use credit scores for risk-
based pricing in connection with consumer credit. The risk-based
pricing provisions of section 1100F of the Dodd-Frank Act have broad
applicability to persons who use credit scores for risk-based pricing
in connection with the provision of consumer credit.
The available data is not sufficient for the Commission to
realistically estimate the number of small entities, as defined by the
U.S. Small Business Administration (SBA), that the Commission regulates
and that would be subject to the proposed rule.\15\ The entities under
the Commission's jurisdiction are so varied that there is no way to
identify them in general and, therefore, no way to know how many of
[[Page 13910]]
them qualify as small businesses. Generally, the entities under the
Commission's jurisdiction that also are covered by section 1100F of the
Dodd-Frank Act include State-chartered credit unions, non-bank mortgage
lenders, auto dealers, and utility companies. The proposed regulations
do not impose any requirements on small entities that do not use credit
scores for risk-based pricing in connection with consumer credit.
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\15\ Under the SBA's size standards, many creditors, including
the majority of non-bank entities that are likely to be subject to
the proposed regulations and are subject to the Commission's
jurisdiction, are considered small if their average annual receipts
do not exceed $7 million. Auto dealers have a higher size standard
of $29 million in average annual receipts for new car dealers and
$23 million in average annual receipts for used car dealers. A list
of the SBA's size standards for all industries can be found in the
SBA's Table of Small Business Size Standards Matched to North
American Industry Classification Codes, which is available at http://www.sba.gov/sites/default/files/Current_Size_Standards_Table.pdf.
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The Commission invites comment regarding the number of and type of
small entities that would be affected by the proposed rule.
4. Projected Reporting, Recordkeeping and Other Compliance Requirements
The compliance requirements of the proposed regulations are
described in detail in the SUPPLEMENTARY INFORMATION above.
The proposed regulations generally require a person that is
required to provide a risk-based pricing notice to a consumer and uses
a credit score in making the credit decision to provide a credit score
and information relating to that credit score in the notice, in
addition to the information currently required by the January 2010
Final Rule. Pursuant to the January 2010 Final Rule, a person is
currently required to determine if it engages in risk-based pricing,
based in whole or in part on consumer reports, in connection with the
provision of consumer credit. If the person does engage in risk-based
pricing based on consumer reports, the person generally is required to
establish procedures for identifying those consumers to whom it must
provide risk-based pricing notices.
A person that is required to provide risk-based pricing notices to
certain consumers would need to analyze the regulations. The person
would need to determine whether it used credit scores for risk-based
pricing of the consumers to whom it must provide risk-based pricing
notices. Persons that use credit scores for risk-based pricing would
need to provide a credit score and information relating to that credit
score to those consumers to whom it must provide risk-based pricing
notice, in addition to the information currently required by the
January 2010 Final Rule. Persons would need to employ the professional
skills necessary to design, generate, and provide notices including a
credit score and information relating to that credit score to the
consumers to whom it must provide risk-based pricing notice.
The Commission seeks information and comment on any costs,
compliance requirements, or changes in operating procedures arising
from the application of the proposed rule to small institutions.
5. Identification of Duplicative, Overlapping, or Conflicting Federal
Regulations
The Commission has not identified any Federal statutes or
regulations that would duplicate, overlap, or conflict with the
proposed regulations. As discussed in Part III above, the proposed
amendments to the risk-based pricing rules are consistent with section
1100F of the Dodd-Frank Act. The Agencies are proposing the rules
pursuant to their existing authority under section 615(h) of the FCRA.
The proposed amendments to the risk-based pricing rules have been
designed to work in conjunction with the requirements of section 1100F
of the Dodd-Frank Act to help facilitate uniform compliance when this
section becomes effective. The Commission seeks comment regarding any
statutes or regulations, including State or local statutes or
regulations, that would duplicate, overlap, or conflict with the
proposed regulations.
6. Discussion of Significant Alternatives
The compliance requirements of the proposed regulations are
described in detail in the SUPPLEMENTARY INFORMATION above.
The proposed regulations generally require a person that is
required to provide a risk-based pricing notice to a consumer and uses
a credit score in making the credit decision to provide a credit score
and information relating to that credit score in the notice, in
addition to the information currently required by the January 2010
Final Rule. Alternatively, a business may comply with the January 2010
Final Rule by providing consumers with a credit score disclosure
notice. By providing a range of options, the Agencies have sought to
help businesses of all sizes reduce the burden or inconvenience of
complying with the proposed regulations.
Similarly, the proposed regulations provide a model notice to
facilitate compliance. By using the model notice, creditors qualify for
safe harbor. Creditors are not required to use the model notice,
however. If they provide a notice that clearly and conspicuously
conveys the required information, these creditors would comply with the
requirements of the rule, though they would not receive the benefit of
the safe harbor. Having this option provides creditors of all sizes
with flexibility in how to comply with the proposed regulations.
Notwithstanding the Agencies' efforts to consider the impact of the
proposed regulations on small entities, the Commission welcomes
comments on any significant alternatives consistent with section 615(h)
of the FCRA, including the provisions of section 1100F of the Dodd-
Frank Act, that would minimize the impact of the proposed regulations
on small entities.
Board of Governors of the Federal Reserve System
Text of Proposed Revisions
Certain conventions have been used to highlight the proposed
revisions. New language is shown inside [rtrif]bold-type arrows[ltrif]
while language that would be deleted is set off with [bold-type
brackets].
List of Subjects in 12 CFR Part 222
Banks, Banking, Consumer protection, Fair Credit Reporting Act,
Holding companies, Privacy, Reporting and recordkeeping requirements,
State member banks.
Authority and Issuance
For the reasons set forth in the joint preamble, the Board proposes
to amend chapter II of title 12 of the Code of Federal Regulations by
amending 12 CFR part 222, as follows:
PART 222--FAIR CREDIT REPORTING (REGULATION V)
1. The authority citation for part 222 continues to read as
follows:
Authority: 15 U.S.C. 1681b, 1681c, 1681m and 1681s; Secs. 3,
214, and 216, Pub. L. 108-159, 117 Stat. 1952.
2. Section 222.73 is amended as follows:
A. Paragraphs (a)(1)(vii) and (viii) are revised.
B. Paragraph (a)(1)(ix) is added.
C. Paragraphs (a)(2)(vii) and (viii) are revised.
D. Paragraph (a)(2)(ix) is added.
E. Paragraph (b)(2) is revised.
F. Paragraph (d) is added.
Sec. 222.73 Content, form, and timing of risk-based pricing notices.
(a) * * *
(1) * * *
(vii) A statement informing the consumer how to obtain a consumer
report from the consumer reporting agency or agencies identified in the
notice and providing contact information (including a toll-free
telephone number, where applicable) specified by the consumer reporting
agency or agencies; [and]
(viii) A statement directing consumers to the Web sites of the
Federal Reserve Board and Federal Trade Commission to obtain more
information about consumer reports[.][rtrif]; and[ltrif]
[[Page 13911]]
[rtrif](ix) If a credit score of the consumer to whom a person
grants, extends, or otherwise provides credit is used in setting the
material terms of credit:
(A) A statement that a credit score is a number that takes into
account information in a consumer report and that a credit score can
change over time to reflect changes in the consumer's credit history;
(B) The credit score used by the person in making the credit
decision;
(C) The range of possible credit scores under the model used to
generate the credit score;
(D) All of the key factors that adversely affected the credit
score, which shall not exceed four factors, except that if one of the
key factors is the number of inquires made with respect to the consumer
report, the number of key factors shall not exceed five;
(E) The date on which the credit score was created; and
(F) The name of the consumer reporting agency or other person that
provided the credit score.[ltrif]
(2) * * *
(vii) A statement informing the consumer how to obtain a consumer
report from the consumer reporting agency or agencies identified in the
notice and providing contact information (including a toll-free
telephone number, where applicable) specified by the consumer reporting
agency or agencies; [and]
(viii) A statement directing consumers to the Web sites of the
Federal Reserve Board and Federal Trade Commission to obtain more
information about consumer reports[.][rtrif]; and[ltrif]
[rtrif](ix) If a credit score of the consumer whose extension of
credit is under review is used in increasing the annual percentage
rate:
(A) A statement that a credit score is a number that takes into
account information in a consumer report and that a credit score can
change over time to reflect changes in the consumer's credit history;
(B) The credit score used by the person in making the credit
decision;
(C) The range of possible credit scores under the model used to
generate the credit score;
(D) All of the key factors that adversely affected the credit
score, which shall not exceed four factors, except that if one of the
key factors is the number of inquires made with respect to the consumer
report, the number of key factors shall not exceed five;
(E) The date on which the credit score was created; and
(F) The name of the consumer reporting agency or other person that
provided the credit score.[ltrif]
* * * * *
(b) * * *
(2) Model forms. [A m][rtrif]M[ltrif]odel form[rtrif]s[ltrif] of
the risk-based pricing notice required by Sec. 222.72(a) and (c)
[is][rtrif]are[ltrif] contained in Appendi[x][rtrif]ces[ltrif] H-1
[rtrif]and H-6[ltrif] of this part. Appropriate use of Model Form H-1
[rtrif]or H-6[ltrif] is deemed to comply with the requirements of Sec.
222.72(a) and (c). [A m][rtrif]M[ltrif]odel form[rtrif]s[ltrif] of the
risk-based pricing notice required by Sec. 222.72(d)
[is][rtrif]are[ltrif] contained in Appendi[x][rtrif]ces[ltrif] H-2
[rtrif]and H-7[ltrif] of this part. Appropriate use of Model Form H-2
[rtrif]or H-7[ltrif] is deemed to comply with the requirements of Sec.
222.72(d). Use of the model forms is optional.
* * * * *
[rtrif](d) Multiple credit scores--(1) In General. When a person
obtains two or more credit scores from consumer reporting agencies and
uses one of those credit scores in setting the material terms of
credit, for example, by using the low, middle, high, or most recent
score, the notices described in paragraphs (a)(1) and (2) of this
section must include that credit score and information relating to that
credit score required by paragraphs (a)(1)(ix) and (a)(2)(ix). When a
person obtains two or more credit scores from consumer reporting
agencies and uses multiple credit scores in setting the material terms
of credit, for example, by computing the average of all the credit
scores obtained, the notices described in paragraphs (a)(1) and (2) of
this section must include one of those credit scores and information
relating to credit scores required by paragraphs (a)(1)(ix) and
(a)(2)(ix). The notice may, at the person's option, include more than
one credit score, along with the additional information specified in
paragraphs (a)(1)(ix) and (a)(2)(ix) of this section for each credit
score disclosed.
(2) Examples. (i) A person that uses consumer reports to set the
material terms of credit cards granted, extended, or provided to
consumers regularly requests credit scores from several consumer
reporting agencies and uses the low score when determining the material
terms it will offer to the consumer. That person must disclose the low
score in the notices described in paragraphs (a)(1) and (2) of this
section.
(ii) A person that uses consumer reports to set the material terms
of automobile loans granted, extended, or provided to consumers
regularly requests credit scores from several consumer reporting
agencies, each of which it uses in an underwriting program in order to
determine the material terms it will offer to the consumer. That person
may choose one of these scores to include in the notices described in
paragraph (a)(1) and (2) of this section.[ltrif]
3. Section 222.75 is amended by revising paragraphs (c)(1) and
(c)(3)(i) to read as follows:
Sec. 222.75 Rules of construction.
* * * * *
(c) Multiple consumers--(1) Risk-based pricing notices. In a
transaction involving two or more consumers who are granted, extended,
or otherwise provided credit, a person must provide a notice to each
consumer to satisfy the requirements of Sec. 222.72(a) or (c). [If the
consumers have the same address, a person may satisfy the requirements
by providing a single notice addressed to both consumers. If the
consumers do not have the same address, a person must provide a notice
to each consumer.] [rtrif]Whether the consumers have the same address
or not, the person must provide a separate notice to each consumer if a
notice includes a credit score(s). Each separate notice that includes a
credit score(s) must contain only the credit score(s) of the consumer
to whom the notice is provided, and not the credit score(s) of the
other consumer. If the consumers have the same address, and the notice
does not include a credit score(s), a person may satisfy the
requirements by providing a single notice addressed to both
consumers.[ltrif]
* * * * *
(3) Examples. (i) Two consumers jointly apply for credit with a
creditor. The creditor obtains credit scores on both consumers.
[rtrif]Based in part on the credit scores, t[ltrif][T]he creditor
grants credit to the consumers on material terms that are materially
less favorable than the most favorable terms available to other
consumers from the creditor. [The two consumers reside at different
addresses.]The creditor provides risk-based pricing notices to satisfy
its obligations under this subpart. The creditor must provide a risk-
based pricing notice to each consumer [at the address where each
consumer resides.][rtrif]whether the consumers have the same address or
not. Each separate risk-based pricing notice must contain only the
credit score(s) of the consumer to whom the notice is provided.[ltrif]
* * * * *
[[Page 13912]]
4. Appendix H is amended by revising paragraphs 1. and 2. and
adding Model Forms H-6 and H-7 to read as follows:
Appendix H to Part 222--Appendix H--Model Forms for Risk-Based Pricing
and Credit Score Disclosure Exception Notices
1. This appendix contains [two][rtrif]four[ltrif] model forms
for risk-based pricing notices and three model forms for use in
connection with the credit score disclosure exceptions. Each of the
model forms is designated for use in a particular set of
circumstances as indicated by the title of that model form.
2. Model form H-1 is for use in complying with the general risk-
based pricing notice requirements in Sec. 222.72[rtrif]if a credit
score is not used in setting the material terms of credit[ltrif].
Model form H-2 is for risk-based pricing notices given in connection
with account review[rtrif]if a credit score is not used in
increasing the annual percentage rate[ltrif]. Model form H-3 is for
use in connection with the credit score disclosure exception for
loans secured by residential real property. Model form H-4 is for
use in connection with the credit score disclosure exception for
loans that are not secured by residential real property. Model form
H-5 is for use in connection with the credit score disclosure
exception when no credit score is available for a consumer.
[rtrif]Model form H-6 is for use in complying with the general risk-
based pricing notice requirements in Sec. 222.72 if a credit score
is used in setting the material terms of credit. Model form H-7 is
for risk-based pricing notices given in connection with account
review if a credit score is used in increasing the annual percentage
rate.[ltrif] All forms contained in this appendix are models; their
use is optional.
* * * * *
[rtrif]H-6 Model form for risk-based pricing notice with credit
score information H-7 Model form for account review risk-based
pricing notice with credit score information[ltrif]
* * * * *
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Federal Trade Commission
List of Subjects
16 CFR Part 640
Credit, Trade practices.
16 CFR Part 698
Credit, Trade practices.
Authority and Issuance
For the reasons discussed in the joint preamble, the Federal Trade
Commission proposes to amend chapter I, title 16, Code of Federal
Regulations, as follows:
PART 640--DUTIES OF CREDITORS REGARDING RISK-BASED PRICING
1. The authority citation for part 640 continues to read as
follows:
Authority: Pub. L. 108-159, sec. 311; 15 U.S.C. 1681m(h).
2. Section 640.4 is amended as follows:
A. Paragraphs (a)(1)(vii) and (viii) are revised.
B. Paragraph (a)(1)(ix) is added.
C. Paragraphs (a)(2)(vii) and (viii) are revised.
D. Paragraph (a)(2)(ix) is added.
E. Paragraph (b)(2) is revised.
F. Paragraph (d) is added.
Sec. 640.4 Content, Form, and Timing of Risk-Based Pricing Notices.
(a) * * *
(1) * * *
(vii) A statement informing the consumer how to obtain a consumer
report from the consumer reporting agency or agencies identified in the
notice and providing contact information (including a toll-free
telephone number, where applicable) specified by the consumer reporting
agency or agencies; [and]
(viii) A statement directing consumers to the Web sites of the
Federal Reserve Board and Federal Trade Commission to obtain more
information about consumer reports[.][rtrif]; and[ltrif]
[rtrif](ix) If a credit score of the consumer to whom a person
grants, extends, or otherwise provides credit is used in setting the
material terms of credit:
(A) A statement that a credit score is a number that takes into
account information in a consumer report and that a credit score can
change over time to reflect changes in the consumer's credit history;
(B) The credit score used by the person in making the credit
decision;
(C) The range of possible credit scores under the model used to
generate the credit score;
(D) All of the key factors that adversely affected the credit
score, which shall not exceed four factors, except that if one of the
key factors is the number of inquires made with respect to the consumer
report, the number of key factors shall not exceed five;
(E) The date on which the credit score was created; and
(F) The name of the consumer reporting agency or other person that
provided the credit score.[ltrif]
(2) * * *
(vii) A statement informing the consumer how to obtain a consumer
report from the consumer reporting agency or agencies identified in the
notice and providing contact information (including a toll-free
telephone number, where applicable) specified by the consumer reporting
agency or agencies; [and]
(viii) A statement directing consumers to the Web sites of the
Federal Reserve Board and Federal Trade Commission to obtain more
information about consumer reports[.][rtrif]; and[ltrif]
[rtrif](ix) If a credit score of the consumer whose extension of
credit is under review is used in increasing the annual percentage
rate:
(A) A statement that a credit score is a number that takes into
account information in a consumer report and that a credit score can
change over time to reflect changes in the consumer's credit history;
(B) The credit score used by the person in making the credit
decision;
(C) The range of possible credit scores under the model used to
generate the credit score;
(D) All of the key factors that adversely affected the credit
score, which shall not exceed four factors, except that if one of the
key factors is the number of inquiries made with respect to the
consumer report, the
[[Page 13917]]
number of key factors shall not exceed five;
(E) The date on which the credit score was created; and
(F) The name of the consumer reporting agency or other person that
provided the credit score.[ltrif]
* * * * *
(b) * * *
(2) Model forms. [A m][rtrif]M[ltrif]odel form[rtrif]s[ltrif] of
the risk-based pricing notice required by Sec. 640.3(a) and (c)
[is][rtrif]are[ltrif] contained in Appendi[x][rtrif]ces[ltrif] B-1
[rtrif]and B-6[ltrif] of this part. Appropriate use of Model form B-1
[rtrif]or B-6[ltrif] is deemed to comply with the requirements of Sec.
640.3(a) and (c). [A m][rtrif]M[ltrif]odel form[rtrif]s[ltrif] of the
risk-based pricing notice required by Sec. 640.3(d)
[is][rtrif]are[ltrif] contained in Appendi[x][rtrif]ces[ltrif] B-2
[rtrif]and B-7[ltrif] of this part. Appropriate use of Model form B-2
[rtrif]or B-7[ltrif] is deemed to comply with the requirements of Sec.
640.3(d). Use of the model forms is optional.
* * * * *
[rtrif](d) Multiple credit scores--(1) In General. When a person
obtains two or more credit scores from consumer reporting agencies and
uses one of those credit scores in setting the material terms of
credit, for example, by using the low, middle, high, or most recent
score, the notices described in paragraphs (a)(1) and (2) of this
section must include that credit score and information relating to that
credit score required by paragraphs (a)(1)(ix) and (a)(2)(ix). When a
person obtains two or more credit scores from consumer reporting
agencies and uses multiple credit scores in setting the material terms
of credit, for example, by computing the average of all the credit
scores obtained, the notices described in paragraphs (a)(1) and (2) of
this section must include one of those credit scores and information
relating to credit scores required by paragraphs (a)(1)(ix) and
(a)(2)(ix). The notice may, at the person's option, include more than
one credit score, along with the additional information specified in
paragraphs (a)(1)(ix) and (a)(2)(ix) of this section for each credit
score disclosed.
(2) Examples. (i) A person that uses consumer reports to set the
material terms of credit cards granted, extended, or provided to
consumers regularly requests credit scores from several consumer
reporting agencies and uses the low score when determining the material
terms it will offer to the consumer. That person must disclose the low
score in the notices described in paragraphs (a)(1) and (2) of this
section.
(ii) A person that uses consumer reports to set the material terms
of automobile loans granted, extended, or provided to consumers
regularly requests credit scores from several consumer reporting
agencies, each of which it uses in an underwriting program in order to
determine the material terms it will offer to the consumer. That person
may choose one of these scores to include in the notices described in
paragraph (a)(1) and (2) of this section.[ltrif]
* * * * *
3. Section 640.6 is amended by revising paragraphs (c)(1) and
(c)(3)(i) to read as follows:
Sec. 640.6 Rules of construction.
* * * * *
(c) Multiple consumers--(1) Risk-based pricing notices. In a
transaction involving two or more consumers who are granted, extended,
or otherwise provided credit, a person must provide a notice to each
consumer to satisfy the requirements of Sec. 640.3(a) or (c). [If the
consumers have the same address, a person may satisfy the requirements
by providing a single notice addressed to both consumers. If the
consumers do not have the same address, a person must provide a notice
to each consumer.] [rtrif]Whether the consumers have the same address
or not, the person must provide a separate notice to each consumer if a
notice includes a credit score(s). Each separate notice that includes a
credit score(s) must contain only the credit score(s) of the consumer
to whom the notice is provided, and not the credit score(s) of the
other consumer. If the consumers have the same address, and the notice
does not include a credit score(s), a person may satisfy the
requirements by providing a single notice addressed to both
consumers.[ltrif]
* * * * *
(3) Examples. (i) Two consumers jointly apply for credit with a
creditor. The creditor obtains credit scores on both consumers.
[rtrif]Based in part on the credit scores, t[ltrif][T]he creditor
grants credit to the consumers on material terms that are materially
less favorable than the most favorable terms available to other
consumers from the creditor. [The two consumers reside at different
addresses.] The creditor provides risk-based pricing notices to satisfy
its obligations under this subpart. The creditor must provide a risk-
based pricing notice to each consumer [at the address where each
consumer resides.][rtrif]whether the consumers have the same address or
not. Each separate risk-based pricing notice must contain only the
credit score(s) of the consumer to whom the notice is provided.[ltrif]
* * * * *
PART 698--MODEL FORMS AND DISCLOSURES
4. The authority citation for part 698 continues to read as
follows:
Authority: 15 U.S.C. 1681e, 1681g, 1681j, 1681m, 1681s, and
1681s-3; Pub. L. 108-159, sections 211(d), 214(b), and 311; 117
Stat. 1952.
5. In Part 698, Appendix B is amended by revising paragraphs 1. and
2. and adding Model Forms B-6 and B-7 to read as follows:
Appendix B to Part 698--Appendix B--Model Forms for Risk-Based Pricing
and Credit Score Disclosure Exception Notices
1. This appendix contains [two] [rtrif]four[ltrif] model forms
for risk-based pricing notices and three model forms for use in
connection with the credit score disclosure exceptions. Each of the
model forms is designated for use in a particular set of
circumstances as indicated by the title of that model form.
2. Model form B-1 is for use in complying with the general risk-
based pricing notice requirements in Sec. 640.3[rtrif]if a credit
score is not used in setting the material terms of credit[ltrif].
Model form B-2 is for risk-based pricing notices given in connection
with account review [rtrif]if a credit score is not used in
increasing the annual percentage rate[ltrif]. Model form B-3 is for
use in connection with the credit score disclosure exception for
loans secured by residential real property. Model form B-4 is for
use in connection with the credit score disclosure exception for
loans that are not secured by residential real property. Model form
B-5 is for use in connection with the credit score disclosure
exception when no credit score is available for a consumer.
[rtrif]Model form B-6 is for use in complying with the general risk-
based pricing notice requirements in Sec. 640.3 if a credit score is
used in setting the material terms of credit. Model form B-2 is for
risk-based pricing notices given in connection with account review
if a credit score is used in increasing the annual percentage
rate.[ltrif] All forms contained in this appendix are models; their
use is optional.
* * * * *
[rtrif]B-6 Model form for risk-based pricing notice with credit
score information
B-7 Model form for account review risk-based pricing notice with
credit score information[ltrif]
* * * * *
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By order of the Board of Governors of the Federal Reserve
System, March 1, 2011.
Jennifer J. Johnson,
Secretary of the Board.
By the direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2011-5413 Filed 3-14-11; 8:45 am]
BILLING CODE 6210-01-P, 6750-01-C