Fed Finalizes Adverse Action and Risk-Based Pricing Notices

Written by Steve Van Beek

Yesterday, the Federal Reserve finalized rules on model adverse action notices and risk-based pricing notices to implement Section 1100F of Dodd-Frank.  Section 1100F of Dodd-Frank required "credit score information" to be added to both Fair Credit Reporting Act (FCRA) adverse action notices and risk-based pricing notices (required by FCRA and implemented in Reg V).  

The Fed issued two separate final rules to implement Section 1100F:  

1. A final rule amending Regulation B's Model Forms - which include combined Reg B/FCRA adverse action notices.
2. A final rule amending the Federal Reserve's Regulation V - which requires risk-based pricing notices.

Effective Date.  Both rules carry an effective date of 30 days after the rules are published in the Federal Register (which might not be until early next week).  We will post a notice on the blog when the rules are published in the Federal Register.    

Note that the Federal Reserve provided the absolute bare minimum of compliance leadtime (30 days).  Here is how the Fed discussed the implementation date in the Reg V final rule (page 21-22 of the PDF):

"Even if the Agencies did not modify the model forms to incorporate this additional minimum content, creditors would be required to disclose this information pursuant to the statute.      

    Rather than have creditors create their own notices in order to comply with section 1100F of the Dodd-Frank Act, the Agencies are exercising their existing authority to amend the model notices to reflect these changes to avoid consumer confusion, and to ensure timely, consistent, and uniform compliance with the new content provisions.  Section 615(h) gives the Agencies the authority to issue rules implementing the risk-based pricing provisions, including authority to address “the form, content, timing, and manner of delivery” of risk-based pricing notices. 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.  These final rules are thus effective and compliance is mandatory beginning 30 days after the date of publication in the Federal Register."

Wow - the Fed almost makes it sound like they are doing credit unions a favor by waiting until 15 days prior to the July 21, 2011 date to finalize the model forms.  The Fed included similar language in the Reg B final rule (pages 17-18).

***

We will have more on these final rules in the near future.  For now, know that the Fed did not provide any wiggle room on the implementation date and credit unions need to make sure their notices are being updated with the new required information.