Consumer Compliance Outlook > Outlook Live > Archives > Risk Based Pricing Notices

Recent Events

Risk Based Pricing Notices

Outlook Live Webinar
February 16, 2011

The mandatory compliance date for the risk-based pricing notice requirements was January 1, 2011. The rules generally require creditors to provide a notice to consumers when, based in whole or part on information in a consumer report, the creditor grants credit to the consumer on material terms that are materially less favorable than the most favorable terms available from the creditor to a substantial proportion of other consumers.

To facilitate compliance, the rules provide different methods that a creditor can use to determine when it is offering credit to a consumer on materially less favorable terms than it provides to other consumers, thus triggering a risk-based pricing (RBP) notice to the consumer. The various methods for determining whether or not a RBP notice is required include the case-by-case method, the credit score proxy method and the tiered pricing method. Creditors who provide RBP notices need to evaluate which method for identifying consumers receiving less favorable terms works best for their specific credit products.

As an alternative to providing RBP notices, the rules permit creditors to provide a credit score exception notice to all consumers who request credit. Creditors may provide these credit score exception notices in lieu of RBP notices. These notices provide consumers with a free credit score and information about their score. If a creditor is unable to obtain a score for a particular consumer, the creditor may provide a notice stating that a credit score was unavailable, which may indicate a lack of credit history.

The RBP notices and credit score exception notices are intended to educate consumers about the connection between the quality of their credit data and the resulting credit costs. Consumers who receive a RBP notice are able to obtain a free credit report to review the accuracy of their report, in addition to their free annual reports.

Please join us as Senior Attorney Mandie Aubrey from the Board of Governors and Supervisory Examiner Rebecca Reagan from the Federal Reserve Bank of Richmond discuss the new regulatory requirements for the RBP notice requirements.

This webinar is part of an ongoing series of events focused specifically on consumer compliance issues. The “Outlook Live” Audio Conference is a Federal Reserve System initiative produced in conjunction with the quarterly newsletter Consumer Compliance Outlook.