Changes to the Risk-Based Pricing Rule create new opportunities
The start of the new year means it’s time for many companies to ramp up compliance programs related to the Risk-Based Pricing Rule. While the rule just went into effect Jan. 1, 2011 modifications are already planned for later this year. Still, those changes could present new opportunities for businesses to strengthen customer relationships.
The Risk-Based Pricing (RPB) Rule was approved last year by the Federal Reserve in an effort to addresses a concern that consumers are not sufficiently informed of the impact their credit reports can have on the price of new credit. Now when a lender makes a credit decision based on a consumer credit report and does not offer the best rate possible, the RBP Rule gives them a choice: Either provide a notice that the customer did not receive the best rate possible, or provide the consumer with a credit score, along with educational information.
With passage of the Dodd-Frank Act earlier this year, the compliance decisions for lenders and many businesses are becoming more complicated. As early as July 21, 2011, companies will be required to provide all customers with a credit score within a Risk-Based Pricing notice. Standard adverse action notices, given when the consumer is denied credit, will also have to include a score disclosure.
Clearly, disclosing a credit score will lead to questions from consumers about what the number means and what they can do to improve it. For many lenders and other businesses, it will be the first time they will have such direct conversations about credit reports and credit scores with their customers. Changes to the rule could provide new opportunities to strengthen relationships by educating consumers about what credit scores mean to them and how they’re used.
Experian® has available a number of resources to help our clients respond effectively to those questions. Online resources, including the Ask Experian column and our extensive Credit Education section provide fundamental information to help consumers better understand credit scores and credit reports.
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