Agencies Issue Proposed Rules on Risk-Based Pricing Notices
May 8, 2008
Circular No. 11953

The Federal Reserve Board and the Federal Trade Commission have announced proposed regulations that generally would require a creditor to provide a consumer with a risk-based pricing notice when, based in whole or in part on the consumer's credit report, the creditor offers or provides credit to the consumer on terms less favorable than the terms it offers or provides to other consumers.

Risk-based pricing refers to the practice of using a consumer's credit report, which reflects his or her risk of nonpayment, in setting or adjusting the price and other terms of credit offered or extended to a particular consumer.  Many creditors offer more favorable terms to consumers with better credit histories.  The proposed rules would apply, with certain exceptions, to all creditors that engage in risk-based pricing.  Under these rules, a risk-based pricing notice would generally be provided to the consumer after the terms of credit have been set, but before the consumer becomes contractually obligated on the credit transaction.

See the press release for full details.

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