Compliance with the New Risk-Based Pricing Rule

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A new rule, issued by the Federal Reserve Board and the Federal Trade Commission, requires any company that uses a credit report or score in connection with a credit decision – including companies such as banks, mortgage bankers, auto lenders, retailers, and public utilities to send notice to a consumer when, based on a credit report or score, the company grants credit on “material terms that are materially less favorable than the most favorable terms available to a substantial proportion of consumers.” See 12 C.F.R pt. 222, 16 C.F.R pt. 640. While these terms are inherently subjective and difficult to define, creating a potential compliance headache for creditors, the Agencies have provided companies with a wide variety of compliance options depending on the business in which they are engaged. Understanding how these options fit together is critical to developing an effective compliance program. In this client alert, we unpack the new rule and offer a succinct summary of these compliance options, including a special section outlining the options by line of business.

Please see full alert below for more information.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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