Reynolds and Reynolds
Risk-based Pricing Rule
Frequently Asked Questions
U.S.
Q: What is Risk-based Pricing?
Q: What should an Exception Notice include?
A: The Risk-based Pricing Rule issued by the FTC
imposes a new notice requirement on dealerships.
It requires dealers and other creditors to provide a
notice to consumers when they are granted
materially less favorable terms than other consumers,
based on data included in their credit report.
Dealerships have two options to comply:
A:
• Risk-based Pricing Notice: Provide a Risk-based
Pricing Notice to consumers who apply for
financing and, based on their credit report, the
financing rate is less favorable than the
financing rate of a substantial proportion of the
dealer’s customers.
- OR -
• Exception Notice: Provide a Credit Score
Disclosure to every consumer.
It is expected that most dealers will use the Exception
Notice as it is easier to implement.
Q: What does Reynolds provide?
The date on which the credit score was created.
• The credit score and the name of the credit
bureau.
• A range of possible credit scores with a bar graph
or statement indicating how the consumer’s score
compares to others.
• Certain statements intended to educate the
consumer about credit reports, credit scores, and
how to obtain a free annual credit report.
Q: When do I need to deliver the Exception Notice
to the consumer?
A: It should be delivered after the credit report has been
pulled and before the consummation of the credit
transaction. It must be presented to the consumer in
writing in a form that the consumer may keep. It must
be clear, conspicuous, and separated from any other
information provided to the consumer.
Appropriate use and distribution of the forms
provides the dealership with safe harbor protection.
“Safe harbor” means that if a dealer, in good faith,
attempts to comply with the Risk-based Pricing Rule,
the dealer will reduce or eliminate its liability.
A: Reynolds provides an Exception Notice through
the Credit Bureau Inquiry solution. Reynolds will
also offer two printed, packaged good forms; a Credit
Score Disclosure Exception Notice for loans which
Q: What if a consumer does not have a credit score
are not secured by residential real property, and a
available with their credit report?
Credit Score is Not Available form to be used in cases A: A “No Score Available Exception Notice” should be
where the credit score is not available.
provided. It will not include the consumer’s credit
score and how they compare to the rest of the
Q: When did the rule become effective?
population. This notice will inform the consumer that
A: The rule became effective January 1, 2011.
a credit score was not available and provide general
Q: Why is this rule being implemented?
information about credit reports and credit scores. It
must be delivered under the same requirements as
A: The rule ensures higher-risk consumers are aware
the regular Exception Notice. The “No Score Available
of the fact that the lender’s (risk-based i.e. based
Exception Notice” is available through both Credit
on the credit score) credit decision could result in the
Bureau Inquiry and CreditMaster.
consumer receiving less favorable terms. The
notice is intended to “complement” the Adverse
Q: What about joint applications?
Action notice requirement.
A: If you obtain a credit report on each consumer, you
will need to provide an Exception Notice to each
consumer.
www.reyrey.com | [email protected]
Reynolds and Reynolds
Risk-based Pricing Rule
Frequently Asked Questions
U.S.
Q: What if I obtain multiple credit scores? What
notice do I provide the consumer?
Q: How can I learn more about the Risk-based
Pricing Rule?
A: If you pull multiple scores but you use one of those
scores in making your decision, you must provide
that score in the Exception Notice. If you pull and
rely on multiple scores, the Exception Notice must
include one of those scores. The Exception Notice
may include more than one credit score.
A: Visit the following Web pages for more information:
www.ftc.gov/os/2009/12/R411009riskbasedpricingfrm.pdf
www.federalreserve.gov/consumerinfo/wyntk_notices.htm
Q: I receive some consumer credit applications
via the Internet. How do I comply?
A You can send via secure email, first class mail, and/
or hand to customers if they come to your store.
The law requires that you deliver the notice in writing
in a form the consumer can keep, and remember
it must be delivered before a credit transaction is
consummated.
Q: If I provide an Adverse Action letter, do I also
have to provide an Exception Notice?
A: If you provide an Adverse Action notice, you are not
required to give any notice under the Risk-based
Pricing Rule. However, if your dealership uses the
Exception Notice, you may not be able to rely on the
Adverse Action notice because the exception Notice
must be given soon after you have obtained the
customer’s credit score. At that time you probably
will not know if you will be able to provide financing,
unless the consumer’s score is very low. The most
cost-effective way to ensure compliance is to provide
an Exception Notice to every consumer you pull
a credit report on, and provide an Adverse Action
notice to those you can’t finance.
Q: What if I don’t comply?
Your Credit Score And The Price You Pay For Credit
[<<Dealer Name>>]
YOUR CREDIT SCORE
<<First Name>> <<Last Name>>
Score:
Date: <<Date>>
<<Score>>
Source: <<Bureau>>
UNDERSTANDING YOUR CREDIT SCORE
What You Should Know About Credit Scores
Your credit score is a number that reflects the information in your credit report.
Your credit report is a record of your credit history. It includes information about whether you pay
bills on time and how much you owe to creditors.
Your credit score can change, depending on how your credit history changes
How We Use Your Credit Score
Your credit score can affect whether you can get a loan and how much you will have to pay for that
loan.
The Range Of Scores
Score ranges from a low of <<low Score>> to a high of <<high Score>> for the <<scorecard>>.
Generally, the higher your score, the more likely you are to be offered better credit terms.
How Your Score Compares To The Scores Of Other Consumers
% of Consumers
With Scores in
a particular
range
|
|
30%
|
18%
XXX
|
IXX
XXX
15%
15%
|
XXX
XXX
XXX
10%
XXX
|
XXX
XXX
XXX
XXX
7%
XXX
|
XXX
XXX
XXX
XXX
XXX
XXX
5%
|
XXX
XXX
XXX
XXX
XXX
XXX
XXX
---------------------------------------------------------300431601651676701735430
600
650
675
700
735
900
SCORE RANGE
CHECKING YOUR CREDIT REPORT
What If There Are Mistakes In Your Credit Report?
You have a right to dispute any inaccurate information in your credit report. If you find mistakes on
your credit report, contact the consumer reporting agency.
It is a good idea to check your credit report to make sure the information it contains is accurate.
How Can You Obtain A Copy Of Your Credit Report?
Under federal law, you have the right to obtain a free copy of your credit report from each of the
nationwide consumer reporting agencies once in a year
To order your free annual credit reportBy telephone:
On the Web :
By mail
:
Call toll-free: 1-877-322-8228
Visit www.annualcreditreport.com
Mail your completed Annual Credit Report Request Form
(which you can obtain from Federal Trade Commission's web site at
http://www.ftc.gov/bcp/conline/include/requestformfinal.pdf) to:
Annual Credit Report Request Service
P.O.Box 105281
Atlanta, GA 30348-5281
How Can You Get More Information?
A: The FTC can use two methods of enforcement:
•$3,500 in civil penalties, or
For more information on credit reports and your rights under federal law, visit the Federal Reserve
Board's website at www.federalreserve.gov, or the Federal Trade Commission's web site at www.ftc.gov.
Sample Exception Notice
•$16,000 in enforcement penalties.
The above questions and answers are offered for informational purposes only and are not intended as legal advice.
You should consult an attorney who is familiar with applicable law and your operations
for guidance on the full scope of your compliance obligations.
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