Fair Credit Reporting Risk-Based Pricing Regulations, 41602-41626 [2011-17649]

Agencies

• FEDERAL RESERVE SYSTEM
• FEDERAL TRADE COMMISSION

[Federal Register Volume 76, Number 136 (Friday, July 15, 2011)]
[Rules and Regulations]
[Pages 41602-41626]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-17649]


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FEDERAL RESERVE SYSTEM

12 CFR Part 222

[Regulation V; Docket No. R-1407]
RIN 7100-AD66

FEDERAL TRADE COMMISSION

16 CFR Parts 640 and 698

RIN R411009


Fair Credit Reporting Risk-Based Pricing Regulations

AGENCIES: Board of Governors of the Federal Reserve System (Board) and 
Federal Trade Commission (Commission).

ACTION: Final rules.

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SUMMARY: On January 15, 2010, the Board and the Commission published 
final rules to implement the risk-based pricing provisions in section 
311 of the Fair and Accurate Credit Transactions Act of 2003 (FACT 
Act), which amended the Fair Credit Reporting Act (FCRA). The final 
rules generally require a creditor to provide a risk-based pricing 
notice to a consumer when the creditor uses a consumer report to grant 
or extend credit to the consumer on material terms that are materially 
less favorable than the most favorable terms available to a substantial 
proportion of consumers from or through that creditor. The Board and 
the Commission are amending their respective risk-based pricing rules 
to require disclosure of credit scores and information relating to 
credit scores in risk-based pricing notices if a credit score of the 
consumer is used in setting the material terms of credit. These final 
rules reflect the new requirements in section 615(h) of the FCRA that 
were added by section 1100F of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act.

DATES: These rules are effective August 15, 2011.

FOR FURTHER INFORMATION CONTACT: Board: Krista P. Ayoub, Counsel; 
Mandie K. Aubrey or Nikita M. Pastor, Senior Attorney; or Catherine 
Henderson, Attorney, Division of Consumer and Community Affairs, (202)

[[Page 41603]]

452-3667 or (202) 452-2412, Board of Governors of the Federal Reserve 
System, 20th and C Streets, NW., Washington, DC 20551. For users of a 
Telecommunications Device for the Deaf (TDD) only, contact (202) 263-
4869.
    Commission: Manas Mohapatra and Katherine White, Attorneys, 
Division of Privacy and Identity Protection, Bureau of Consumer 
Protection, (202) 326-2252, Federal Trade Commission, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION \1\:
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    \1\ The Board is placing the final rules in the part of its 
regulations that implements the FCRA--12 CFR PART 222. For ease of 
reference, the discussion in the SUPPLEMENTARY INFORMATION section 
uses the numerical suffix of each of the Board's regulations. The 
FTC also is placing the final rules and model forms in the part of 
its regulations implementing the FCRA, specifically, 16 CFR part 
640. However, the FTC uses different numerical suffixes that equate 
to the numerical suffixes discussed in the SUPPLEMENTARY INFORMATION 
section as follows: suffix .70 = FTC suffix .1, suffix .71 = FTC 
suffix .2, suffix .72 = FTC suffix .3, suffix .73 = FTC suffix .4, 
suffix .74 = FTC suffix .5, and suffix .75 = FTC suffix .6.
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I. Background

    The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) 
was signed into law on December 4, 2003. Public Law 108-159, 117 Stat. 
1952. Section 311 of the FACT Act added section 615(h), 15 U.S.C. 
1681m(h), to the Fair Credit Reporting Act (FCRA) to address risk-based 
pricing. Risk-based pricing refers to the practice of setting or 
adjusting the price and other terms of credit offered or extended to a 
particular consumer to reflect the risk of nonpayment by that consumer. 
Information from a consumer report is often used in evaluating the risk 
posed by the consumer. Creditors that engage in risk-based pricing 
generally offer more favorable terms to consumers with good credit 
histories and less favorable terms to consumers with poor credit 
histories.
    Under section 615(h) of the FCRA, a person generally must provide a 
risk-based pricing notice to a consumer when the person uses a consumer 
report in connection with an extension of credit and, based in whole or 
in part on the consumer report, extends credit to the consumer on terms 
that are materially less favorable than the most favorable terms 
available to a substantial proportion of consumers. The risk-based 
pricing notice is designed primarily to improve the accuracy of 
consumer reports by alerting consumers to the existence of negative 
information in their consumer reports, so that consumers can, if they 
choose, check their consumer reports for accuracy and correct any 
inaccurate information. The Board and the Commission (the Agencies) 
jointly published regulations implementing these risk-based pricing 
provisions on January 15, 2010, which had a mandatory compliance date 
of January 1, 2011. 75 FR 2724 (January 2010 Final Rule).
    On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act) was signed into law. Pub. L. 111-203, 
124 Stat. 1376. Section 1100F of the Dodd-Frank Act amends section 
615(h) of the FCRA to require that additional content be disclosed to 
consumers in risk-based pricing notices; specifically, if a credit 
score is used in making the credit decision, the creditor must disclose 
that score and certain information relating to the credit score. The 
effective date of these amendments is July 21, 2011.\2\
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    \2\ Section 1100H of the Dodd-Frank Act provides that the 
amendments in Subtitle H of Title X, which includes Section 1100F, 
become effective on a ``designated transfer date.'' The Secretary of 
the Treasury set the designated transfer date as July 21, 2011. 75 
FR 57252 (Sept. 20, 2010).
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    The Agencies published proposed regulations and model forms to 
reflect these requirements on March 15, 2011. 76 FR 13902. The comment 
period closed on April 14, 2011, and comments on the Paperwork 
Reduction Act analysis closed on May 16, 2011. The Agencies received 
more than 35 comment letters regarding the proposal from banks and 
other creditors, industry trade associations, consumer groups, 
individual consumers, and others.
    Title X of the Dodd-Frank Act also establishes a Bureau of Consumer 
Financial Protection (the Bureau), to which rulewriting authority for 
certain consumer protection laws will transfer. Section 1088(a)(9) of 
the Dodd-Frank Act amends section 615(h)(6) to provide that rulewriting 
authority for section 615(h) will transfer to the Bureau. Pursuant to 
section 1100H of the Dodd-Frank Act, however, this rulewriting 
authority does not transfer to the Bureau until July 21, 2011.\3\ Thus, 
rulewriting authority for the risk-based pricing provisions of the 
FCRA, including the amendments prescribed by section 1100F of the Dodd-
Frank Act, will not be vested in the Bureau until the date that the 
section 1100F amendments become effective.
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    \3\ Section 1100H of the Dodd-Frank Act provides that the 
amendments in Subtitle H of Title X, which includes Section 1088, 
become effective on a ``designated transfer date.'' The Secretary of 
the Treasury set the designated transfer date as July 21, 2011. 75 
FR 57252 (Sept. 20, 2010).
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    The Agencies believe it is important to have implementing 
regulations and revised model forms in place as close as possible to 
July 21, 2011. This will help ensure that consumers receive consistent 
disclosures of credit scores and information relating to credit scores, 
and will help facilitate uniform compliance when section 1100F of the 
Dodd-Frank Act becomes effective.
    Accordingly, the Agencies are finalizing amendments to the risk-
based pricing rules and notices to incorporate the additional content 
required by section 1100F of the Dodd-Frank Act, pursuant to their 
existing authority under section 615(h) of the FCRA. Section 615(h) 
gives the Agencies the authority to issue rules implementing the risk-
based pricing provisions, and requires the Agencies to address in those 
rules the form, content, timing, and manner of delivery of risk-based 
pricing notices.
    In particular, section 615(h)(5) prescribes certain content 
requirements for the risk-based pricing notices, but provides that the 
required content elements are the minimum that must be disclosed. 
Moreover, section 615(h)(6)(B)(iv) provides that the Agencies must 
provide a model notice that can be used to comply with section 615(h). 
Therefore, the Agencies have the authority to add content to the risk-
based pricing notices that they deem appropriate. 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 to avoid consumer confusion, and 
to ensure timely and consistent compliance with the new content 
provisions.
    As discussed more fully below, the Agencies received some comments 
from industry and consumer advocates that did not relate to the changes 
to the model notices to incorporate the section 1100F requirements, 
such as a new request to exempt certain entities from the risk-based 
pricing rules entirely. Given the impending transfer of rulemaking 
authority to the Bureau, however, the Agencies are not making changes 
to the risk-based pricing rules and notices beyond those required by 
section 1100F of the Dodd-Frank Act. Such changes are beyond the scope 
of this rulemaking.

II. Section-by-Section Analysis

Section ----.73 Content, Form, and Timing of Risk-Based Pricing 
Notices.

Section ----.73(a) Content of the Notice
Content
    Section 615(h) of the FCRA requires a person to include certain 
information in a risk-based pricing notice. The January 2010 Final Rule 
implements the general

[[Page 41604]]

content requirements for risk-based pricing notices in Sec.  
222.72(a)(1) and Sec.  640.3(a)(1) (hereafter ``general risk-based 
pricing notice''). The January 2010 Final Rule also sets forth the 
content requirements for any risk-based pricing notice required to be 
given as a result of the use of a consumer report in an account review 
in Sec.  222.72(a)(2) and Sec.  640.3(a)(2) (hereafter ``account review 
notice'').
    Section 1100F of the Dodd-Frank Act amends section 615(h) of the 
FCRA to require that creditors disclose additional information in risk-
based pricing notices. Consistent with section 1100F of the Dodd-Frank 
Act, proposed ----.73(a)(1) and (a)(2) amended the content requirements 
of the general risk-based pricing notice and the account review notice, 
pursuant to section 615(h) of the FCRA. Proposed ----.73(a)(1)(ix) 
required a person to provide the additional content in a general risk-
based pricing notice if a credit score of the consumer to whom a person 
grants, extends, or otherwise provides credit is used in setting the 
material terms of credit. Similarly, proposed ----.73(a)(2)(ix) 
required a person to provide the additional content in an account 
review notice if a credit score of the consumer whose extension of 
credit is under review is used in increasing the annual percentage 
rate.
    Specifically, Sec.  ----.73(a)(1)(ix)(B)-(F) and Sec.  ----
--.73(a)(2)(ix)(B)-(F) of the proposed rules required the following 
disclosures: (1) the credit score \4\ used by the person in making the 
credit decision; (2) the range of possible credit scores under the 
model used to generate the credit score; (3) all of the key factors 
that adversely affected the credit score, which shall not exceed four 
key factors, except that if one of the key factors is the number of 
enquiries made with respect to the consumer report, the number of key 
factors shall not exceed five; (4) the date on which the credit score 
was created; and (5) the name of the consumer reporting agency or other 
person that provided the credit score. In addition, to provide context 
for the additional content requirements, proposed Sec.  --
--.73(a)(1)(ix)(A) and Sec.  ----.73(a)(2)(ix)(A) required a statement 
that a credit score is a number that takes into account information in 
a consumer report, and that a credit score can change over time to 
reflect changes in the consumer's credit history.
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    \4\ ``Credit score'' is defined in the January 2010 Final Rule 
in ------.71(l) to have the same meaning as in section 609(f)(2)(A) 
of the FCRA, 15 U.S.C. 1681g(f)(2)(A). This is consistent with the 
definition of ``numerical credit score'' in section 1100F of the 
Dodd-Frank Act.
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    Industry commenters generally supported the additional content. 
Some industry commenters, however, requested additional flexibility in 
disclosing the factors that adversely affect the credit score, as 
discussed below. Consumer advocates suggested that the Agencies add 
additional information related to credit scores to the risk-based 
pricing notices, as discussed below. For the reasons discussed below, 
the final rules adopt the changes to Sec.  ----.73(a)(1)(ix)(A)-(F) and 
Sec.  ------.73(a)(2)(ix)(A)-(F), as proposed, with an addition to 
clarify that the credit score was used in setting the terms of credit.
    Key factors. Several industry commenters and a consumer advocate 
argued that creditors should have flexibility to disclose only factors 
that substantially affected the credit score. They asserted that 
requiring creditors to disclose the top four key factors (or five 
factors if the number of enquiries made with respect to that consumer 
report is one of the key factors) was burdensome and expensive for 
creditors, and confusing and of limited value to consumers. In 
contrast, one commenter stated that creditors should be required to 
disclose all factors that affected the credit score, not just the top 
four key factors (or five factors if the number of enquiries made with 
respect to that consumer report is a key factor).
    Section 1100F of the Dodd-Frank Act requires a person engaging in 
risk-based pricing to provide the consumer the information set forth in 
subparagraphs (B) through (E) of section 609(f)(1) of the FCRA. Section 
609(f)(1)(C) of the FCRA requires disclosure of all of the key factors 
that adversely affected the credit score of the consumer in the model 
used, up to four, subject to section 609(f)(9) of the FCRA. This 
section requires that if the key factors that adversely affected the 
credit score include the number of enquiries made with respect to the 
consumer report, the number of enquiries must also be disclosed as a 
key factor. Because the statutes thus require disclosure of the top 
four (or five) key factors that adversely affected the credit score, 
the Agencies adopt Sec.  ----.73(a)(1)(ix)(B)-(F) and Sec.  --
--.73(a)(2)(ix)(B)-(F) as proposed.
    An industry commenter requested clarification that a creditor is 
permitted to rely on and disclose the key factors provided with the 
scores purchased from consumer reporting agencies, without 
verification. The commenter further asked for guidance in the event 
that a consumer reporting agency does not provide the key factors with 
the score.
    Under section 1100F of the Dodd-Frank Act, the person setting the 
material terms of credit is responsible for providing the credit score 
disclosure, including the key factors adversely affecting the credit 
score. If a creditor is using a credit score purchased from a consumer 
reporting agency, the consumer reporting agency is in the best position 
to identify the key factors that affected the score. Thus, the creditor 
would need to and could rely on that information in its disclosure to 
consumers. With respect to the manner in which this information may be 
obtained from the consumer reporting agencies, the Agencies acknowledge 
that the contractual arrangements between creditors and consumer 
reporting agencies may vary as to how creditors will receive the credit 
score information necessary to comply with section 1100F, but do not 
believe that imposing specific disclosure requirements on consumer 
reporting agencies is within the scope of this rulemaking. In any 
event, creditors have two options: (1) they can write their contracts 
with consumer reporting agencies to require the consumer reporting 
agencies to provide them the key factors adversely affecting the credit 
score, or (2) they can choose to send credit score disclosure exception 
notices to all consumers applying for non-mortgage credit. See 
Exception Notices, below.
    Number of enquiries. Several industry commenters suggested that 
creditors not be required to disclose the number of enquiries as a key 
factor that adversely affected the credit score if the number of 
enquiries is not one of the top four key factors. In these cases, the 
commenters said that the effect of the number of enquiries on the 
credit score is marginal, so that disclosing the number of enquiries as 
a key factor may be confusing to consumers.
    As discussed above, section 609(f)(9) of the FCRA states that if 
the number of enquiries is a key factor that adversely affected the 
consumer's credit score, that factor must be disclosed pursuant to 
section 609(f)(1)(C) of the FCRA, without regard to the numerical 
limitation. The FCRA accordingly requires disclosure of the number of 
enquiries as a key factor, regardless of whether it is one of the top 
four key factors. Thus, the Agencies adopt the proposed provision 
without change.
    Additional information regarding credit scores. Consumer advocates 
suggested that the Agencies add additional information related to 
credit scores to the risk-based pricing notices. Specifically, consumer 
advocates suggested that the risk-based pricing notice include an 
explanation that the

[[Page 41605]]

consumer does not have a single credit score, and that the credit score 
may vary with the consumer reporting agency, scoring model provider, or 
particular credit product for which the consumer applied. These 
commenters indicated that consumers need this information to help them 
understand why they are receiving a particular score that may not be 
the same as a generic score, such as a FICO or Vantage score.
    The Agencies believe that requiring these additional disclosures 
might create ``information overload'' for consumers, and detract from 
the primary purpose of the credit score information, which is to inform 
consumers of the credit score that has been used to set the material 
terms of credit, or used in the review of the account. The Agencies 
agree, however, that a disclosure that informs the consumer that the 
disclosed score was used in setting the credit terms, or in review of 
the credit terms, would further consumer understanding. The Agencies 
are thus adding a requirement that the notice include this information. 
In addition, the Agencies are revising the model forms H-6 and H-7 in 
the Board's rule and B-6 and B-7 in the Commission's rule to add the 
statement: ``We used your credit score to set the terms of credit we 
are offering you,'' in the ``What you should know about your credit 
score'' box on the model forms. This statement mirrors a sentence on 
the current risk-based pricing notice, informing consumers that their 
credit report was used to set the terms of credit being offered.
    Other comments on content. The January 2010 Final Rule requires 
that the risk-based pricing notice include a statement that the terms 
offered, such as the annual percentage rate, have been set based on 
information from a consumer report. Model Form H-1 adopted as part of 
the January 2010 Final Rule, and proposed Model Form H-6 state ``We 
used information from your credit report(s) to set the terms of the 
credit we are offering you, such as [Annual Percentage Rate/down 
payment].''
    Some industry commenters objected to language in the final rules 
and model forms adopted as part of the January 2010 Final Rule that 
indicated that the terms of credit were ``set'' or ``based on'' 
information from a consumer report. These commenters instead 
recommended language stating that the terms of credit were ``based in 
whole or in part on information from a consumer report.'' The final 
rules retain the current language in the regulation and model forms, as 
described above. The Agencies believe that the current language in the 
regulation and model forms is more concise and understandable to 
consumers than the language suggested by the commenters.

Proprietary Scores

    As discussed above, proposed ----.73(a)(1)(ix) required a person to 
provide the additional content (i.e., the credit score and related 
information) in a general risk-based pricing notice if a credit score 
of the consumer to whom a person grants, extends, or otherwise provides 
credit is used in setting the material terms of credit. Similarly, 
proposed ----.73(a)(2)(ix) required a person to provide the additional 
content in an account review notice if a credit score of the consumer 
whose extension of credit is under review is used in increasing the 
annual percentage rate.
    Some industry commenters specifically asked when a proprietary 
score would be deemed a credit score for purposes of Sec.  ----.73. 
Proprietary scores are those developed by creditors themselves or for 
specific creditors, as opposed to those developed by consumer reporting 
agencies or large scoring companies such as FICO or Vantage Score for 
use by individual creditors. Commenters also asked for clarification 
regarding the information a creditor should disclose under Sec.  --
--.73 and the model form a creditor should use when a creditor uses a 
proprietary score in setting the material terms of credit. Some 
industry commenters indicated that a proprietary score should not be 
required to be disclosed under section 1100F of the Dodd-Frank Act 
because Congress intended for this provision to apply only to credit 
scores that are obtained from consumer reporting agencies, and 
disclosing proprietary scores would be confusing to consumers. Consumer 
advocates suggested that all proprietary scores, in particular credit-
based insurance scores, be subject to disclosure under Sec.  ----.73.
    ``Credit score'' for purposes of section 1100F of the Dodd-Frank 
Act and Sec.  ----.71(1) of the January 2010 Final Rule is defined to 
have the same meaning as section 609(f)(2)(A) of the FCRA, 15 U.S.C. 
1681g(f)(2)(A). Specifically, section 609(f)(2)(A) of the FCRA defines 
a credit score to mean ``a numerical value or a categorization derived 
from a statistical tool or modeling system used by a person who makes 
or arranges a loan to predict the likelihood of certain credit 
behaviors, including default[.]'' Accordingly, scores not used to 
predict the likelihood of certain credit behaviors, such as insurance 
scores or scores used to predict the likelihood of false identity, are 
not credit scores by definition, and thus are not required to be 
disclosed.
    Most credit scores that meet the FCRA definition are scores that 
creditors obtain from consumer reporting agencies. Section 609(f)(2)(A) 
of the FCRA specifically excludes some--but notall--proprietary scores. 
The definition of credit score does not include any mortgage score or 
rating of an automated underwriting system that considers one or more 
factors in addition to credit information, including the loan-to-value 
ratio, the amount of down payment, or the financial assets of a 
consumer.
    Thus, if a creditor uses a proprietary score that is based on one 
or more of these factors in addition to information obtained from a 
consumer reporting agency, this proprietary score is not a credit score 
for purposes of Sec.  ----.71(1) and ----.73 and thus does not need to 
be disclosed to the consumer. If, however, the creditor uses both a 
proprietary score that does not meet the definition of a credit score 
and a credit score from a consumer reporting agency in setting the 
material terms of credit or reviewing the account, the creditor would 
disclose the credit score from the consumer reporting agency under 
Sec.  ----.73(a)(1)(ix) and ----.73(a)(2)(ix), as applicable. 
Similarly, if a creditor uses a credit score from a consumer reporting 
agency as an input to a proprietary score, but that proprietary score 
itself is not a credit score, the creditor would disclose the credit 
score from the consumer reporting agency under Sec.  ----.73. The 
creditor may use the ``Your Credit Score and Understanding Your Credit 
Score'' section of Forms H-6 and H-7 of the Board's rules and Forms B-6 
and B-7 of the Commission's rules for these disclosures.
    In contrast, if a creditor uses a proprietary score that only 
includes information acquired from a consumer reporting agency in 
setting the material terms of credit or reviewing the account, the 
proprietary score would be a credit score under section 609(f)(2)(A) of 
the FCRA. Commenters asked for guidance on how to disclose information 
required under Sec.  ----.73(a)(1)(ix) and ----.73(a)(2)(ix) when a 
creditor uses only a proprietary score deemed a credit score under 
609(f)(2)(A) of the FCRA.
    These commenters also suggested that the rules should permit 
creditors to purchase a credit score from a consumer reporting agency 
and disclose that credit score, instead of disclosing the proprietary 
score that is used in setting the material terms of credit or reviewing 
the account. Section 1100F of the Dodd-Frank Act requires disclosure of 
the

[[Page 41606]]

credit score used in setting the material terms of credit or reviewing 
the account. The Agencies do not believe that a creditor would comply 
with the statute by disclosing a different credit score purchased after 
setting the material terms of credit based on a proprietary score.
    In these situations, the creditor should modify the ``Your Credit 
Score and Understanding Your Credit Score'' section of Forms H-6 and H-
7 of the Board's rules and Forms B-6 and B-7 of the Commission's rules 
to reflect that the creditor did not obtain a credit score from a 
consumer reporting agency, but rather used a proprietary score that met 
the definition of a credit score under 609(f)(2)(A) of the FCRA in 
setting the material terms of credit or reviewing the account. The 
creditor should disclose the value of the proprietary score, the date, 
the range of proprietary scores, and the key factors adversely 
affecting the consumer's proprietary score. The creditor should 
indicate that it is the source of the proprietary score. Alternatively, 
the creditor has the option of providing all consumers requesting an 
extension of credit with a credit score disclosure exception notice 
pursuant to the January 2010 Final Rule discussed below.
    Commenters also asked for guidance on what information to disclose 
under Sec.  ----.73(a)(1)(ix) and ----.73(a)(2)(ix) when a creditor 
uses both a proprietary score that meets the definition of a credit 
score, and a credit score from a consumer reporting agency in setting 
the material terms of credit or reviewing the account. Both scores 
would be deemed credit scores under section 609(f)(2)(A) of the FCRA. 
In such cases where both credit scores are used, a creditor has the 
option to choose which credit score to disclose, as detailed in Sec.  
----.73(d) discussed below. The creditor may use Forms H-6 and H-7 of 
the Board's rules and Forms B-6 and B-7 of the Commission's rules to 
comply with the requirements of Sec.  ----.73(a)(1)(ix) and --
--.73(a)(2)(ix). If the creditor chooses to disclose the proprietary 
score, it would amend the model forms as discussed above. If the 
creditor chooses to disclose the credit score from a consumer reporting 
agency, the creditor would disclose the value of that credit score, the 
date, the range of credit scores, and the key factors adversely 
affecting the consumer's credit score. The creditor would indicate the 
consumer reporting agency that is the source of the credit score.

Use of a Credit Score

    Section 1100F of the Dodd-Frank Act requires a risk-based pricing 
notice to include disclosure of a credit score used by a person in 
making the credit decision. A person who is required to provide a 
general risk-based pricing notice or account review notice may use a 
consumer report to set the credit terms offered or extended to 
consumers without using a credit score. In a case where a person does 
not use a credit score in making the credit decision requiring a risk-
based pricing notice or account review notice, the person is not 
required to disclose a credit score and information relating to a 
credit score.
    Several industry commenters agreed that creditors should not 
disclose a credit score when they do not use a credit score in making 
the credit decision. These commenters also asked that a creditor not be 
required to disclose credit score information when a creditor obtains 
but does not use a credit score, or when the credit score was not the 
cause of the risk-based pricing.
    Section 1100F of the Dodd-Frank Act requires disclosure if a credit 
score was used in setting the material terms of credit. A creditor that 
obtains a credit score and engages in risk-based pricing would need to 
disclose that score, unless the credit score played no role in setting 
the material terms of credit. Moreover, even if the credit score was 
not a significant factor in setting the material terms of credit but 
was a factor in setting those terms, the creditor will have used the 
credit score for purposes of section 1100F of the Dodd-Frank Act.
    With respect to the scope of the term ``use,'' the Agencies 
received one comment suggesting that the original creditor in certain 
three-party financing transactions should be considered outside the 
scope of the risk-based pricing rules altogether and, therefore, would 
not be required to provide a risk-based pricing notice. The risk-based 
pricing rules apply to the original creditor if that person ``uses a 
consumer report in connection with'' an application for credit. 15 
U.S.C. 1681m(h)(1). The commenter contended that the original creditor 
does not obtain and thus does not ``use'' a consumer report; rather the 
consumer report is ``used'' by an underlying finance source. The 
Commission believes that this view of ``use'' is too narrow.
    The specific financing situation raised in the comment involves an 
automobile financing transaction where an automobile dealer is the 
original creditor. In this three-party financing transaction, a 
consumer visits the automobile dealer and applies for financing by 
completing a loan application with the dealer. The dealer submits the 
loan application to one or more unrelated finance sources, which 
finance source(s) then conducts underwriting on the consumer's credit 
application. Based in whole or in part on the consumer report, the 
finance source(s) provides the dealer with an approval of the 
consumer's application and the wholesale buy rate at which the finance 
source(s) will purchase the resulting credit contract from the dealer. 
The dealer then selects the finance source to which it intends to 
assign the contract and determines which credit terms, including a 
retail finance rate (``APR''), it will offer the consumer. The 
commenter asserts that because the original creditor (the automobile 
dealer) does not directly obtain the consumer report and/or credit 
score from a consumer reporting agency, and instead relies upon the buy 
rates from the underlying financing sources, the original creditor does 
not ``use'' the consumer report and is outside the scope of the risk-
based pricing rules. The Commission disagrees. The automobile dealer 
must provide the consumer with a risk-based pricing notice.\5\
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    \5\ If the finance source used a credit score in its 
underwriting, that automobile dealer must include that score in the 
risk-based pricing notice.
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    The original creditor has ``used'' a consumer report in connection 
with an application for credit because the original creditor initiated 
the request that caused the financing source to obtain the consumer 
report and used the resulting information from the financing source to 
set the rate offered to consumers. Applying a causal, transaction-based 
analysis to the term ``use'' is consistent with the clear intent of 
Congress to provide consumers with information about the role that 
their credit history plays in setting the terms for credit.\6\ In the 
scenario set forth above, the consumer report was used in connection 
with the application for credit made by the consumer to the automobile 
dealer because the consumer report was obtained by the financing source 
in order to fulfill a request made to it by the automobile dealer. The 
finance source has not obtained and used the consumer report and/or 
credit score independently of the automobile dealer. The finance 
source, at the behest of the automobile dealer, has obtained the 
reports and performed underwriting and has told the automobile dealer 
the wholesale buy rate at which it will

[[Page 41607]]

purchase the contract.\7\ The original creditor incorporated the 
wholesale buy rate in the rate offered to the consumer, establishing a 
causal connection between the consumer report and the ultimate rate 
offered to the consumer.\8\ The original creditor has therefore 
``used'' the consumer report.\9\
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    \6\ This interpretation of ``use'' is also consistent with the 
January 2010 Final Rule, where the Agencies noted that the 
``automobile dealer's use of a consumer report to determine which 
third-party financing source is likely to purchase the retail 
installment sales contract and at what `buy rate' is conduct that 
fits squarely within the description of risk-based pricing in [the 
final rules].'' 75 FR 2730.
    \7\ Indeed, it is unity of interest in the same credit 
transaction between the original creditor/automobile dealer and the 
underlying finance source that provides the permissible purpose 
pursuant to which the finance sources may obtain the consumer's 
report.
    \8\ The Commission notes that the statute employs the word 
``obtain'' when addressing physical possession, lending further 
support that ``use'' must be a broader concept. See section 604(f) 
(providing that ``[a] person shall not use or obtain a consumer 
report for any purpose unless * * * the consumer report is obtained 
for a purpose for which the consumer report is authorized to be 
furnished [under the FCRA]''); section 604(b)(1)(a) (a consumer 
reporting agency cannot provide a consumer report for employment 
purposes unless the person who ``obtains'' the report provides a 
certification to the consumer reporting agency that, among other 
things, it will not be ``used'' in violation of state or federal 
law).
    \9\ The risk-based pricing rules require the ``original 
creditor'' to provide consumers with the necessary notices. If the 
automobile dealer, the original creditor in the situation described 
above, was not required to provide the risk-based pricing notice, 
consumers purchasing automobiles in three-party financing 
transactions would never receive a risk-based pricing notice or, in 
the alternative, a credit score disclosure exception notice. 
Further, if the responsibility for providing the risk-based pricing 
notice was to be shifted to the underlying finance sources in these 
types of transactions, consumers could receive multiple risk-based 
pricing notices per transaction from unfamiliar entities, a result 
which would not be beneficial to consumers. See 75 FR at 2730 (``a 
consumer would not benefit from receiving more than one risk-based 
pricing notice in connection with a single extension of credit and 
requiring multiple notices would increase compliance burdens and 
costs'').
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Guarantors and Co-Signers

    In some cases, a creditor may use the credit score of a guarantor, 
co-signer, surety, or endorser, but not a credit score of the consumer 
to whom it extends credit or whose extension of credit is under review. 
Proposed Sec. Sec.  ----.73(a)(1)(ix) and ----.73(a)(2)(ix) required a 
person to disclose a credit score and information relating to a credit 
score only when using the credit score of the consumer to whom it 
grants, extends, or otherwise provides credit or whose extension of 
credit is under review. As discussed in the January 2010 Final Rule, a 
person is not required to provide a risk-based pricing notice to a 
guarantor, co-signer, surety, or endorser.\10\ A person may be 
required, however, to provide a risk-based pricing notice to the 
consumer to whom it grants, extends, or otherwise provides credit, even 
if the person only uses the consumer report or credit score of the 
guarantor, co-signer, surety, or endorser.
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    \10\ See 75 FR at 2731 (Jan. 15, 2010).
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    Some industry commenters and consumer advocates supported the 
proposed rules governing guarantors and co-signers. The Agencies 
continue to believe that the credit score of one consumer, such as a 
guarantor, co-signer, surety, or endorser, should not be disclosed to a 
different consumer entitled to receive a risk-based pricing notice. 
Therefore, when a person uses a credit score only of a guarantor, co-
signer, surety, or endorser to set the terms of credit for the consumer 
to whom it extends credit or whose extension of credit is under review, 
a person shall not include a credit score in the general risk-based 
pricing notice or account review notice provided to the consumer.

Exception Notices

    The Agencies note that the January 2010 Final Rule provides 
exceptions to the requirements to provide general risk-based pricing 
notices for persons that provide credit score disclosure exception 
notices to consumers who request credit. See Sec. Sec.  222.74(d), (e), 
and (f); Sec. Sec.  640.5(d), (e), and (f).
    Many industry commenters argued that section 1100F of the Dodd-
Frank Act does not affect creditors' option to provide credit score 
disclosure exception notices to all consumers instead of risk-based 
pricing notices. Consumer advocates, however, urged the Agencies to 
eliminate the credit score disclosure exceptions. Consumer advocates 
argued that giving creditors the option to provide exception notices 
would result in creditors rarely providing risk-based pricing notices. 
They stated that a key benefit of the exception notices in comparison 
to the risk-based pricing notices was that consumers received a free 
credit score. They asserted that section 1100F of the Dodd-Frank Act 
eliminated this comparative benefit of the exception notices by 
requiring that risk-based pricing notices also disclose credit scores. 
Consumer advocates argued that Congress did not eliminate the exception 
notices in the Dodd-Frank Act because the notices were created by 
regulation, and were not the product of Congress. Finally, consumer 
advocates stated that section 1100F of the Dodd-Frank Act required 
disclosure of the actual credit score used by the creditor, while 
exception notices could contain a generic credit score.
    After the Dodd-Frank Act, there remain strong arguments for 
retaining the credit score disclosure exceptions. The January 2010 
Final Rule, which includes the credit score disclosure exceptions, was 
published in January 2010 and became effective on January 1, 2011. 
Because the rules were published more than six months before the Dodd-
Frank Act was enacted, Congress could have eliminated the credit score 
disclosure exceptions but did not do so. Moreover, the Agencies believe 
that the credit score disclosure exception notices continue to be 
consistent with the goals of, and underlying reasons for, the risk-
based pricing rule, which are to provide consumers with education about 
their credit profiles and alert them to potentially inaccurate 
information in their consumer reports that could have a negative effect 
on the credit terms being offered to them. Eliminating the exception 
notices would result in fewer consumers receiving their credit score 
for free. To use the exception notice provision, a creditor must 
provide exception notices to all consumers who apply for credit. By 
contrast, a creditor must provide risk-based pricing notices only to 
consumers receiving less favorable terms from that particular creditor. 
Thus, whether a consumer with a particular credit profile would receive 
a risk based pricing notice may depend upon the creditor to which the 
consumer applies. As a result, some consumers of a given creditor may 
not get risk-based pricing notices because they do not receive 
materially less favorable terms from that creditor, even though they 
would generally receive materially less favorable terms from other 
creditors based on their credit profiles. The credit score disclosure 
exceptions arguably achieve a better result--by requiring creditors 
using the exception to provide notices to all consumers who apply for 
credit--consumers that would not have gotten any notice would instead 
receive a free credit score.\11\ In addition, consumers are given 
exception notices earlier in the credit decision process, thus giving 
consumers an earlier opportunity to identify any potential inaccuracies 
in their consumer report.\12\ Consumers benefit from knowing their 
credit score earlier, even if they do not yet know

[[Page 41608]]

what terms of credit they will be offered. This earlier notice gives 
consumers more time to consider, given their current credit profile, 
whether they want to continue with a credit transaction at that time.
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    \11\ In addition, some consumers may not receive a risk-based 
pricing notice even if they did not receive the most favorable terms 
from that creditor because creditors may not be able to precisely 
distinguish those consumers who received the most favorable terms 
from those who did not (or may have used a proxy method). See 75 FR 
2736. By virtue of the fact that exception notices are provided to 
all consumers who apply for credit, the credit score disclosure 
exceptions avoid this problem.
    \12\ Credit score disclosure exceptions must be given as soon as 
is reasonably practicable and, in any event, no later than before 
consummation of the transaction, whereas risk-based pricing notices 
are required to be provided after the terms of credit are set.
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    On the other hand, by requiring that risk-based pricing notices 
disclose credit scores when the credit scores were used to set the 
terms of credit, section 1100F of the Dodd-Frank Act has eliminated one 
of the key comparative benefits of the credit score disclosure 
exception notices over the risk-based pricing notices.\13\ Moreover, 
while the exception notices contain valuable information about how a 
consumer's credit score compares with the credit scores of others, it 
does not inform consumers that they may be receiving less favorable 
credit terms or an increase in their interest rate based on their 
consumer report and/or their credit score.
---------------------------------------------------------------------------

    \13\ See 75 FR at 2742 (highlighting benefit to consumers of 
providing credit scores to consumers in exception notices).
---------------------------------------------------------------------------

    The Agencies note that eliminating the credit score disclosure 
exception notice would fundamentally change the structure of the risk-
based pricing rules and may substantially affect compliance costs. 
Given that rulemaking authority will be transferred to the Bureau on 
July 21, 2011, the Agencies do not believe that it is appropriate to 
make a substantial and fundamental change to the rules at this time. 
The final rules are limited to implementing the requirements of section 
1100F of the Dodd-Frank Act. Thus, the final rules retain the credit 
score disclosure exception notices.
Section ----.73(b) Form of the Notice
    The Agencies provided model forms that may be used for compliance 
with the risk-based pricing requirements in Appendices H and B of the 
January 2010 Final Rule. Paragraph (b)(2) of section ----.73 of the 
January 2010 Final Rule clarifies how each of the model forms of the 
risk-based pricing notices required by Sec. Sec.  ----.72(a) and (c), 
and by Sec.  ----.72(d) may be used. Paragraph (b)(2) provides that 
appropriate use of the model forms contained in Appendices H-1 and H-2 
of the Board's rules and Appendices B-1 and B-2 of the Commission's 
rules is deemed to comply with Sec. Sec.  ----.72(a) and (c), and Sec.  
----.72(d), respectively. Use of these model forms is optional.
    Under the proposal, the Agencies amended Appendices H and B of the 
January 2010 Final Rule to add two new model forms in Appendices H-6 
and H-7 of the Board's proposed rules and Appendices B-6 and B-7 of the 
Commission's proposed rules, for situations where a credit score and 
information relating to such credit score must be disclosed. See Model 
Forms, below. Proposed paragraph (b)(2) clarified that appropriate use 
of Model Form H-1 or H-6, or B-1 or B-6, is deemed to comply with the 
requirements of Sec. Sec.  ----.72(a) and (c). It also clarified that 
appropriate use of Model Form H-2 or H-7, or B-2 or B-7, is deemed to 
comply with the requirements of Sec.  ----.72(d).
    The final rules adopt Sec.  ----.73(b) as proposed. The comments 
received on the proposed model forms are discussed below. See Model 
Forms, below.
Section ----.73(d) Multiple Credit Scores
    Some creditors may obtain multiple credit scores from consumer 
reporting agencies in connection with their underwriting processes. A 
creditor may use one or more of those scores in setting the material 
terms of credit. Section 1100F of the Dodd-Frank Act only requires a 
person to disclose a single credit score that is used by the person in 
making the credit decision. The Agencies proposed Sec.  ----.73(d) to 
address situations where a creditor obtains multiple credit scores from 
consumer reporting agencies, or obtains a credit score from a consumer 
reporting agency in addition to using a proprietary score deemed a 
credit score under the FCRA, and must provide either a general risk-
based pricing notice or an account review notice to a consumer.
    Proposed Sec.  ----.73(d)(1) provided that when a person uses one 
of those credit scores in setting the material terms of credit, for 
example, by using the low, middle, high, or most recent score, the 
general risk-based pricing and account review notices are required to 
include that credit score and information relating to that credit score 
as required by proposed Sec. Sec.  ----.73(a)(1)(ix) and (a)(2)(ix). 
When a person uses two or more credit scores in setting the material 
terms of credit, for example, by computing the average of all the 
credit scores obtained, the notices are required to include any one of 
those credit scores and information relating to the credit score as 
required by proposed Sec. Sec.  ----.73(a)(1)(ix) and (a)(2)(ix). The 
notice may, at the person's option, include more than one credit score, 
along with the information specified in proposed Sec. Sec.  --
--.73(a)(1)(ix) and (a)(2)(ix) for each credit score disclosed.
    Proposed Sec.  ----.73(d)(2) provided examples to illustrate the 
notice requirements for creditors that obtain multiple credit scores 
from consumer reporting agencies. The first example described in 
proposed Sec.  ----.73(d)(2)(i) applied when a person that uses 
consumer reports to set the material terms of credit cards granted, 
extended, or provided to consumers regularly requests credit scores 
from several consumer reporting agencies and uses the low score when 
determining the material terms it will offer to the consumer. Under the 
proposed rules, that person must disclose the low score in its notices. 
The example described in proposed Sec.  ----.73(d)(2)(ii) applied when 
a person that uses consumer reports to set the material terms of 
automobile loans granted, extended, or provided to consumers regularly 
requests credit scores from several consumer reporting agencies, each 
of which it uses in an underwriting program in order to determine the 
material terms it will offer to the consumer. Under the proposal, that 
person could choose any one of these scores to include in its notices.
    A consumer advocate and several industry commenters supported the 
Agencies' proposal. Other consumer advocates recommended that creditors 
disclose all the credit scores used. For the reasons described below, 
the final rules adopt Sec.  ----73(d) as proposed with revisions to 
make clear that these rules apply to use of proprietary scores that 
meet the definition of ``credit score'' in Sec.  ----.71(l) as well as 
credit scores obtained from consumer reporting agencies.
    The final rules do not require creditors to disclose all the credit 
scores used if a creditor uses multiple credit scores in setting the 
material terms of credit. The final rules permit creditors at their 
option to disclose all the credit scores used. As noted above, although 
a creditor may use multiple credit scores in setting the material terms 
of credit, section 1100F of the Dodd-Frank Act only requires a person 
to disclose a single credit score that is used by the person in making 
the credit decision. Further credit scoring models may differ 
considerably in nature and range. The Agencies believe that disclosing 
multiple credit scores may confuse consumers and provide them little 
value. Consumers may not understand the extent to which credit scoring 
models differ, and may try to compare the different credit scores. Such 
comparisons may confuse consumers and lessen the value of the credit 
score disclosures.
    Moreover, the Agencies do not believe that requiring disclosure of 
a particular credit score, for example, the lowest score, would be in 
the best interest of

[[Page 41609]]

consumers when multiple scores are used. The lowest score may not truly 
be the ``worst'' score, since credit scoring models differ, and 
requiring businesses to identify the ``worst'' score would add a layer 
of complexity without a clear benefit to consumers. The Agencies also 
note that the Dodd-Frank Act requires the Bureau to ``conduct a study 
on the nature, range, and size variations'' of different credit scoring 
systems, and on whether these variations disadvantage consumers. 
Section 1078(a). The Bureau must submit a report to Congress with the 
results of this study within one year after the Dodd-Frank Act 
enactment date. Section 1078(b). That study may shed light on the 
extent to which disclosure of multiple credit scores would benefit 
consumers, and the Bureau could revisit the Agencies' judgment in view 
of the results of its study.
    For the reasons discussed above, the final rules do not require 
that creditors always disclose the lowest credit score if a creditor 
uses two or more credit scores in setting the material terms of credit. 
The Agencies believe that section 1100F of the Dodd-Frank Act does not 
mandate that a person disclose the lowest credit score that is used by 
the person in making the credit decision, if the person uses multiple 
credit scores in setting the material terms of credit. The person must 
simply disclose a credit score used.

Section ----.75 Rules of construction

Section ----.75(c) Multiple Consumers
    The proposed rules amended Sec.  ----.75(c) to address 
circumstances where a person must provide multiple consumers, such as 
co-borrowers, with a risk-based pricing notice in a transaction. The 
proposed rules retained the rule of construction that clarifies that in 
a transaction involving two or more consumers who are granted, 
extended, or otherwise provided credit, a person must provide a risk-
based pricing notice to each consumer. The proposed rules, however, 
amended the rules addressing the provision of a risk-based pricing 
notice when the consumers have the same address and when the consumers 
have different addresses, to account for situations where a risk-based 
pricing notice contains a consumer's credit score.
    Proposed Sec.  ----.75(c)(1) provided that whether the consumers 
have the same address or not, the person must provide a separate notice 
to each consumer if a notice includes a credit score(s). Each separate 
notice that includes a credit score(s) must contain only the credit 
score(s) of the consumer to whom the notice is provided, and not the 
credit score(s) of the other consumer. If the consumers have the same 
address, and the notice does not include a credit score(s), a person 
may satisfy the requirements by providing a single notice addressed to 
both consumers.
    The proposed rules also amended Sec.  ----.75(c)(3)(i) to provide 
an example illustrating the notice requirements when a person must 
provide a risk-based pricing notice that includes credit score 
information to multiple consumers. Proposed Sec.  ----.75(c)(3)(i) 
clarified that, in a situation where two consumers jointly apply for 
credit with a creditor and the credit decision is based in part on the 
consumers' credit scores, a separate risk-based pricing notice must be 
provided to each consumer whether the consumers have the same address 
or not. Each separate risk-based pricing notice must contain the credit 
score(s) of the consumer to whom the notice is provided.
    Consumer advocates supported the proposed rules governing multiple 
consumers. Several industry commenters asked that creditors have the 
option to provide risk-based pricing notices to all the applicants or 
only to the applicant whose credit score was used in setting the 
material terms of credit. Some industry commenters also argued that co-
applicants elect to share information with one another, and that 
creditors cannot prevent co-applicants from accessing each other's 
risk-based pricing notices.
    Under section 615(h) of the FCRA, a person generally must provide a 
risk-based pricing notice to a consumer when the person uses a consumer 
report in connection with an extension of credit and, based in whole or 
in part on a consumer report, extends credit to the consumer on 
material terms that are materially less favorable than the most 
favorable terms available to a substantial proportion of consumers. A 
creditor therefore must provide a risk-based pricing notice to all co-
applicants, and not only to the applicant whose credit score was used 
in setting the material terms of credit.\14\ Further, the Agencies do 
not believe co-applicants necessarily choose, merely by applying for 
credit together, to share sensitive information with one another, in 
particular, credit scores. The Agencies understand that creditors may 
not be able to prevent co-applicants from accessing each other's risk-
based pricing notices. Yet the Agencies believe that creditors must 
provide each risk-based pricing notice to the corresponding applicant, 
in keeping with privacy concerns.
---------------------------------------------------------------------------

    \14\ As noted above, a creditor that obtains a credit score and 
engages in risk-based pricing would need to disclose that score, 
unless the credit score played no role in setting the material terms 
of credit. If the credit score obtained for an applicant played no 
role in setting the material terms of credit, then the creditor does 
not need to include a credit score in the risk-based pricing notice 
provided to that applicant.
---------------------------------------------------------------------------

Appendix H of the Board's Rules and Appendix B of the Commission's 
Rules

Model Forms

    Appendix H of the Board's rules and Appendix B of the Commission's 
rules contain five model forms that the Agencies prepared to facilitate 
compliance with the rules. Two of the model forms are for risk-based 
pricing notices and three of the model forms are credit score 
disclosure exception notices. Each of the model forms is designated for 
use in a particular set of circumstances as indicated by the title of 
that model form. Model forms H-1 and B-1 are for use in complying with 
the general risk-based pricing notice requirements in Sec.  ----.72. 
Model forms H-2 and B-2 are for use in complying with the risk-based 
pricing notices given in connection with account review in Sec.  --
--.72.
    The proposed rules added two new forms that could be used when a 
person must disclose credit score information to a consumer. Model 
forms H-6 and B-6 set forth a risk-based pricing notice with credit 
score information that could be used to comply with the general risk-
based pricing requirements if the additional content requirements of 
Sec.  ----.73(a)(1)(ix) apply. Model forms H-7 and B-7 set forth an 
account review risk-based pricing notice with credit score information 
that could be used to comply with the account review notice 
requirements if the additional content requirements of Sec.  --
--.73(a)(2)(ix) apply.
    Model forms H-1 and H-2, and B-1 and B-2, are retained. The general 
risk-based pricing and account review notices could continue to be used 
to comply with Sec.  ----.72 when the additional content requirements 
discussed in Sec. Sec.  ----.73(a)(1)(ix) and (a)(2)(ix) do not apply. 
As with the other model forms, use of the model forms H-6 or H-7, or B-
6 or B-7, by creditors is optional. If a creditor appropriately uses 
Model Form H-6 or H-7, or B-6 or B-7, or modifies a form in accordance 
with the rules or the instructions to the appendix, that creditor will 
be within the rules' safe harbor and is deemed to be acting in 
compliance with the general risk-based pricing notice or account review 
notice requirement when the content provisions of Sec. Sec.  --
--.73(a)(1)(ix) or (a)(2)(ix) apply.

[[Page 41610]]

    Finally, the proposal amended instructions 1. and 2. to Appendices 
H and B to reflect the addition of H-6 and H-7, and B-6 and B-7. The 
Agencies did not receive comments on the proposed changes to 
instructions 1. and 2. to Appendices H and B. The Agencies are adopting 
the changes to instructions 1. and 2. to Appendices H and B as proposed 
in the final rules.
    In addition, as discussed in more detail above, model forms H-6 and 
H-7 of the Board's rules and B-6 and B-7 of the Commission's rule are 
also revised to add the statement: ``We used your credit score to set 
the terms of credit we are offering you,'' in the ``What you should 
know about your credit score'' box on the model forms. See Additional 
Information Regarding Credit Scores, above.
    The Agencies received several comments on the proposed model forms, 
as discussed in more detail below. The final rules adopt model forms H-
6 and H-7 of the Board's rule and B-6 and B-7 of the Commission's rule 
as proposed with one revision pertaining to the disclosure of contact 
information for the entity that provided the credit score.
    Contact information for the entity that provided the credit score. 
An industry commenter asked that the Agencies add language to the model 
forms directing the consumer to the consumer reporting agency for more 
information about the credit score. The commenter believed that 
consumers may otherwise contact creditors with questions about their 
credit score, but that creditors are not in a position to answer those 
questions.
    The Agencies are adding optional language to model forms H-6 and H-
7 of the Board's rule and B-6 and B-7 of the Commission's rule 
directing the consumer to the entity (which may be a consumer reporting 
agency or, in the case of a proprietary score that meets the definition 
of a credit score, the creditor itself) that provided the credit score 
for any questions about the credit score, along with the entity's 
contact information. Creditors may use or not use the additional 
language without losing the safe harbor, since the language is 
optional. The final rules add new instruction 4. to Appendices H and B 
to make clear that this disclosure of the entity's contact information 
is optional.
    Co-applicants, guarantors, and co-signers. An industry commenter 
recommended providing creditors with the flexibility to add language to 
the model forms to indicate that for co-applicants, the terms of credit 
may be based on either or both of the applicants' credit information. A 
consumer advocate similarly suggested adding language to the model 
forms indicating that for applications with a guarantor or co-signer, 
the terms of credit may be based on either or both of the applicant's, 
guarantor's, or co-signer's credit information. The commenters 
explained that such language would decrease consumer confusion, since 
an applicant with an excellent credit profile who receives a risk-based 
pricing notice may not realize that the risk-based pricing decision may 
have been made because of the co-applicant's, guarantor's, or co-
signer's credit profile.
    The Agencies believe the additional language may simply complicate 
the disclosures without providing a substantial benefit to consumers. 
An applicant with strong credit who receives a risk-based pricing 
notice will likely understand that the adverse decision was based on 
the co-applicant, guarantor, or co-signer's credit information or will 
contact the creditor to inquire.
    Disclosure that no credit score is available. In some cases, a 
creditor may try to obtain a credit score for an applicant, but the 
applicant may have insufficient credit history for the consumer 
reporting agency to generate a credit score. One commenter asked that 
the creditor have the option to amend the model forms to provide the 
applicant notice that no credit score was available from a consumer 
reporting agency in the space available on the model forms for the 
credit information disclosure.
    Section 1100F only applies when a creditor uses a credit score in 
setting the material terms of credit. The creditor cannot and is not 
required to disclose credit score information if an applicant has no 
credit score. Nothing in section 1100F of the Dodd-Frank Act prevents a 
creditor from providing the applicant notice that no credit score was 
available from a consumer reporting agency, although section 1100F does 
not require such notice.
    Order of content. The Agencies specifically solicited comment on 
the ordering of the content in Model Forms H-6 and H-7, and B-6 and B-
7, and whether the credit score and information relating to a credit 
score should be presented prior to the information on consumer reports.
    Some commenters indicated that the Agencies should not change the 
order of the content in the model forms to present the credit score and 
information relating to the credit score prior to information on 
consumer reports. One commenter indicated that changing the order of 
content would impose additional compliance burdens on creditors without 
providing significant additional benefits for consumers.
    Another commenter proposed that the credit score information should 
be moved up and incorporated into the information on consumer reports, 
instead of disclosed separately at the bottom of the notice. The final 
rules retain the order of the content in the model forms as proposed. 
The Agencies believe that it is appropriate to disclose the information 
related to credit reports first because the primary purpose of the 
risk-based pricing notices is to alert consumers that risk-based 
pricing occurred as a result of their consumer reports. Further, in 
retaining the proposed order of the content, the model forms more 
logically progress from more general consumer report information to 
more specific credit score information. In addition, given that a 
creditor may s