NAFCU, Other Lender Associations Seek Early Input in FACTA Risk-Based Pricing Notification

WASHINGTON-NAFCU joined a coalition of associations representing lenders in signing onto a letter requesting a meeting with the Federal Reserve Board and Federal Trade Commission regarding how to handle the risk-based pricing notifications required under the Fair and Accurate Credit Transactions Act. The group fears that the agencies may make Section 311 of FACTA into another instance where consumers could request a free credit report, which they state it is not. “This particular provision of FACTA is difficult to interpret and could have far reaching effects on the credit industry,” the Sept. 9 letter read. In addition to NAFCU, the American Bankers Association, America’s Community Bankers, Consumer Data Industry Association, Consumer Mortgage Coalition, Electronic Financial Services Council, the Financial Services Roundtable, the Independent Community Bankers of America, and the Mortgage Bankers Association signed the letter. “Some have suggested that the risk-based pricing notice triggers a new right to a free consumer report under the Fair Credit Reporting Act (“FCRA”), in addition to the other free reports explicitly called for under the statute,” the coalition’s letter read. Specifically, it points out there are four situations where consumers are entitled to a free credit report, including (1) once a year; (2) after placing a fraud alert on their file; (3) if the consumer is unemployed, a recipient of public welfare, or has reason to believe that the information in the consumer’s file is due to fraud; or (4) if an adverse action has been taken. “To suggest that Section 311 creates a new right to a free credit report ignores the statutory scheme developed in FACTA and would overburden the credit reporting industry, without creating significant benefits for consumers,” the coalition said. The letter explained that when the universal annual free credit report was included, it was “carefully crafted to avoid overburdening” credit bureaus with requests for reports. “A more appropriate interpretation of the disclosure provision of Section 311,” the letter continued, “would be that, when a risk-based pricing notice is provided at application, the notice should remind the consumer of the availability of the free annual consumer disclosure provided by new Section 612(a).” Additionally, the group recommended that the disclosures provided in risk-based pricing should be delivered early in the process to be the most advantageous for consumers. “Timing of delivery is a key to meeting the goal of the notice, which is to educate consumers about the use of consumer reports in establishing the terms of the credit they seek and to encourage them to better understand what information is contained in consumer reports,” according to the letter. Earlier on in the process, when consumers are focused on the issue, it would give consumers time to shop around and determine whether to accept the offer of credit or not. “By adopting regulations implementing the FACTA provisions described above, the agencies will not only be protecting the best interests of consumers but also assuring the continued integrity and efficiency of our retail credit markets. We request a meeting to further discuss these issues with you,” the letter concluded. -