[Federal Register Volume 76, Number 50 (Tuesday, March 15, 2011)]
[Proposed Rules]
[Pages 13902-13921]
From the Federal Register Online via the Government Printing 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: regs.comments@federalreserve.gov. 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: regs.comments@federalreserve.gov. 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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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].
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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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[GRAPHIC] [TIFF OMITTED] TP15MR11.053

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