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What's in the credit score disclosure

Unlike the risk-based pricing notice, which provides general information about credit reports and an explanation that the consumer may have received worse terms than the terms offered to borrowers with better credit histories, the credit score disclosure will include several elements that are specific to the consumer.

A model form created for lenders to use as a safe harbor lays out the components that the notice will have. As the sample shows, the notice will include the person's credit score, the source that provided it, the range of possible scores, and where the consumer's score ranks relative to other consumers scored under the same model. Lenders can't make big changes to the content presented in the model form and still qualify for the safe harbor.

What isn't clear in the model form is how much detail the consumer will be given about the version of the scoring model used to compute his or her score. For instance, it's unspecified whether the notice will say that the score is a FICO 8 score, or just a FICO score.

"It's going to tell you the company whose information was used, the source of the score," says Kuehn. "Some lenders may disclose more."

There is an exception if the creditor uses an in-house, proprietary score. "If they have a custom score, the rule actually states they can output another generic score or they can disclose their custom score," says Peng. Since the introduction of an unfamiliar scoring system "opens up more questions for the consumer," creditors may opt to disclose a generic credit score from a consumer reporting agency.

Confusing overlap with part of the Dodd-Frank Act

The risk-based pricing rules overlap in a confusing way with a provision in the Dodd-Frank Wall Street Reform and Consumer Protection Act. "The Dodd-Frank Act provision requires disclosure of the actual credit score used by the creditor in both adverse action AND risk-based pricing notices," Chi Chi Wu, a staff attorney at the National Consumer Law Center, wrote in an e-mail.

This provision contradicts the risk-based rules, which require creditors to provide risk-based pricing notices without credit scores to certain consumers or as an exception, credit score disclosures to every consumer.

"Obviously, this exception no longer makes sense after the Dodd-Frank Act disclosure," Wu writes.

The designated transfer date of functions to the Consumer Financial Protection Bureau, set for July 21, 2011, triggers the effective date of the Dodd-Frank provision.

Regulators may provide clarification before then.

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"We're expecting that the Federal Reserve ... will put out a proposal that will reconcile the differences between the existing law and the law that goes into effect July 22 on the transfer date," says Nessa Feddis, vice president and senior counsel for regulatory compliance at the American Bankers Association.

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