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Free Credit Scores Are Coming

March 4, 2011

The Dodd-Frank Act of last year, best known for trying to upgrade financial regulations in the wake of the Great Recession, contained amendments to 15 USC Sec. 1681m, which requires businesses that use credit reports in evaluating applications to provide certain disclosures when they take an “adverse action.”  An “adverse action” is now generally understood as giving a consumer anything but the best possible deal.

Under Sec. 1681m, end users who took adverse actions formerly had to advise consumers that the end users had obtained a credit report, and that the consumer could obtain a free copy of that report if it contacted the entity that provided the report.  The end users also had to list any factors in the report that may have had a negative impact (e.g., too short of a credit history, too much debt given credit limits, too many inquiries, etc.).

Under the Dodd-Frank amendments, end users will have to do all this and more – they will also have to tell the consumer the credit score that was used in evaluating the application.  The FTC and Federal Reserve Board have now issued proposed regulations regarding these amendments.  After public comments are received, the final regulations will be issued and we’ll be off to the races.  So in a few months, consumers who don’t get the best rates and terms will be seeing their credit scores on the disclosures that they receive.

As to whether seeing these scores will consumers to get copies of their credit reports, request a reinvestigation, or even file suit … time will tell.

FTC document describing this:  http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20110301a1.pdf

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