WASHINGTON (8/20/08)—The Credit Union National Association (CUNA) agrees that the standard annual percentage rate should generally be designated as the credit term for purposes of determining what borrowers should received a risk-based pricing notice, as proposed by the Federal Reserve Board and the Federal Trade Commission (FTC). The joint Fed.-FTC proposal, in its entirety, would implement section 311 of the Fair and Accurate Credit Transactions (FACT) Act of 2003, which amended the Fair Credit Reporting Act. However, in an Aug. 18 comment letter CUNA argued that the risk-based pricing notices should be simplified so creditors will be more likely to use those as opposed to using an exception that allows them to provide credit score information to all consumers, as opposed to the risk-based pricing notice. CUNA also said several clarifications are necessary to the agencies’ joint plan to require disclosures when a consumer is receiving credit on less favorable terms than other consumers with better borrowing histories. For instance, CUNA cited the following examples:
* The proposed rule will require that these notices go to consumers who are receiving “materially less favorable” credit terms. This needs clarification as it may lead to situations in which one creditor would send more risk-based pricing notices than another, even if both offer similar APRs to consumers with similar credit histories. * The terms “most favorable terms” and “substantial portion of consumers” also need further clarification. * The risk-based pricing rule needs further clarification with regard to indirect automobile lending as it is unclear in certain situations as to which party should provide the risk-based pricing notice. CUNA believes the dealer is in the best position to provide the notice. * The proposed rule should also clarify who receives these notices when there is a joint application for credit.
CUNA warns that, as proposed, the requirement to provide risk-based pricing notices will result in delay and inconvenience for members who participate in multi-featured, open-end lending. CUNA believes there should be an exception to the timing requirements in these situations. For CUNA’s compete comments on the Fed/FTC plan, use the resource link below.