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June 07, 2011

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Comments

Zachary

Hey Steve,

Assuming nothing happens between now and July 21st on this issue. What does the credit union need to do to be compliant on July 21?

Steve Van Beek

Zachary,
The biggest change is the credit union will need to make sure it is disclosing the credit score information on its risk-based pricing notices. Assuming the CU is using the traditional RBPN, this is going to require an updating from following the H-1 model form to the new H-6 model form.

The H-6 model form will be the credit union's best guide for how to include the credit score information. When the rule is finalized, review the final model form and be sure the CU has all the require information. Also, review your procedures to be sure any RBPN that includes credit score information is sent individually to a member. A notice with credit score information cannot be sent to multiple members (even if they are co-applicants).

Frank

Steve:

Does the new requiremnt apply to only those accounts which are denied due to credit scores , i.e. D paper denied second mortgages, or does it apply to all risk based if the credit score is used to determine rates?

Steve Van Beek

Frank,
The risk-based pricing rules apply when credit is granted on less favorable terms (i.e., higher APR) than other members. If you are denying credit, you'd be triggering an adverse action notice.

One of the exceptions to the risk-based pricing notice requirements is if you send an adverse action notice. 12 C.F.R. 222.74(b).

Dianna

I hope I haven't missed the opportunity to receive a reply on this subject since I'm commenting at such a late date . . . ?
If we use the combined (Reg B and FCRA) Adverse Action form, will we have to send to both applicants regardless of whose credit score was deemed the reason for the disapproval of the loan?

debra

I am looking for the same answer as Diana - it appears that an adverse action notice should include the score that was used to determine whether the deal was doable (for mortgages). In most cases that is the lower middle score of all applicants. If I have to send the notice out to each co-applicant - someone is receiving information about a credit score that does not pertain to them individually AND is actually the private information of another person. This seems ripe for trouble. I am thinking about having co-applicants sign a waiver at the outset of the loan that allows us to disclose the determinative credit score to co-applicants.

Linda Factory

Is there a certain number of days that this notice must be given after the application has been taken?

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