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FCRA Now Mandates Credit Score Disclosures

August 24, 2012

This week we celebrated the one-month anniversary of a relatively new FCRA provision that requires creditors that use credit scores to provide those scores to consumers in certain circumstances.  (Well, maybe you celebrated it; I forgot until now).  I thought I’d use the occasion to provide a quick overview of how the FCRA’s free disclosure provisions have developed over time.  Our story goes like this:

In 2003, Congress passed a law called the FACTA, which amended the FCRA in a number of different ways.  Among other things, it required the three main credit bureaus (Experian, Equifax, and Trans Union) to provide one free credit report to each consumer each year, and to create a website – http://www.annualcreditreport.com – that consumers could use to get these free reports.  This requirement, along with a number of old and new rules about when and how much the bureaus can charge for credit reports (e.g., if you want more than one report a year) can be found at 15 U.S.C. Sec. 1681j.

Under this FACTA provision, consumers now had the right to receive a free copy of their credit report.  But they didn’t have any free way to obtain their credit score.  Until last month, that is.

In2010, Congress passed the Dodd-Frank Act, which made more changes to consumer financial regulations than you can shake a stick at.  Just one of them concerns us here.  Congress amended the FCRA by changing 15 U.S.C. Sec. 1681m.  The provisions in Section 1681m had for some time required anyone who used a credit report to tell consumers if their credit report had been negative in some way.  For example, if a bank offered you a loan, but did so using a higher interest rate than it might have otherwise, it had to tell you that under Section 1681m.

In 2010, Congress changed Section 1681m to say that any creditor who is required to give consumers notice that their credit report is negative in some way must also give those consumers the credit score that the creditor used, along with some context.  Using our example above, if a bank offers you a loan but at a less-than-perfect interest rate, it now must:  a) tell you so; b) give you a copy of the credit score that it used; and c) give you the range of possible scores.  As avid readers will remember, there are different credit scores with different ranges:  the FICO scale is 300-850, but the Experian scale is 330-830, and the VantageScore scale is 501-990.

These changes to Section 1681m went into effect last month – on July 21, 2012 – so consumers will start seeing their credit scores on letters after they apply for credit.  Note that the FCRA does not yet provide consumers will an easy way to get their credit report and credit score for free.  You can get a free credit report once a year per Section 1681j; and you can now get a free credit score (usually) if you apply for credit per Section 1681m; but there’s no one-stop shop to get both for free.  Lots of places will sell you both, and they are subject to Section 1681j as well.

Categories: Uncategorized
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