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.
The Risk-Based Pricing Rule was established by the Federal Reserve Board and the Federal Trade Commission (FTC) due to a concern that consumers are not 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.
Effective 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 are not 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.
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.
To find out how Experian can help you comply with the Risk-Based Pricing Rule, contact your local Experian sales representative, request more information by requesting more information, or call 1-888-414-1120.
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.
Experian can help you comply with the Risk-Based Pricing Rule.
Find answers in this comprehensive document developed by Experian credit experts.
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: May 2020.
Graph and Table Data
|FICO® Auto Score|
|FICO® Bankcard Score|
|FICO® Bankruptcy Score|
|FICO® Installment Score|
|FICO® Mortgage Score|
|FICO® Personal Score|
|FICO® Risk Score, Classic|
|FICO® Risk Score, NextGen|
|Bankruptcy Plus Rescaled|
|National Equivalency Score|
|Telecom Industry Risk Scores|
Learn how mounting regulatory pressures are impacting how financial service companies deal with data reporting and accuracy.
If your institution plans to comply with the upcoming rule via the Risk-based Pricing Notice option, the following Experian contact information should be included in the notices:
For additional information contact your local Experian sales representative or call 1-888-414-1120