Risk-based pricing refers to the practice of setting or adjusting the interest rate and other terms of credit provided to a particular consumer based on the consumer’s credit data and other factors used to measure risk. Consumers can also include business owners who are consumers of business loans.
The Risk-Based Pricing Rule was established by the Federal Reserve Board and the Federal Trade Commission (FTC) due to a concern that consumers aren’t adequately informed of the effect that credit report data has on the APR consumers are charged when obtaining new credit. As a result, the Board and the FTC published this new rule.
Beginning Jan. 1, 2011, companies that use a credit report or score in connection with a credit decision must send notice to a consumer when, based on a credit report or score, the company grants credit on material terms that aren’t the most favorable terms offered to a substantial proportion of consumers. In most cases, the rule defines “material terms” as the loan’s annual percentage rate.
We can help lenders comply with risk-based pricing notices or credit score disclosure exception notices.
Experian® consultants perform a thorough review of your business’s scorecards and portfolio to provide regulatory-compliant reports and more.
Customized service offerings can provide clients with the ability to assist consumers with various issues, including dispute processing.
Clickto download the PDF booklet containing graph and table data.
Clickto request the table data in an Excel version.
File date for graph and table data: April 2023
Graph and Table Data
|FICO® Auto Scores|
|FICO® Bankcard Scores|
|FICO® Bankruptcy Scores|
|FICO® Installment Scores|
|FICO® Mortgage Scores|
|FICO® Personal Scores|
|FICO® Risk Scores, Classic|
|FICO® Risk Scores, NextGen|
|Bankruptcy Plus Rescaled|
|National Equivalency Scores|
|Telecom Industry Risk Scores|
|Clear Early Risk Scores|
To determine the most appropriate compliance method, organizations should begin to evaluate their underwriting processes to gain an understanding of the rule’s impact on both resources and technologies and prepare to respond to consumer questions about the credit information provided.
Not only does the rule establish different methods to determine if a risk-based pricing notice is necessary, but it also provides a variety of options to structure a successful compliance program.
Note: While Experian is happy to provide our observations related to the new Risk-Based Pricing Rule, please work with your own legal counsel to ensure that you comply with your obligations under the rule.