All in FCRA

Using a Credit Score Disclosure in Lieu of the Adverse Action Notice

This Compliance Clip (video) answers the question of whether the FCRA pieces of the AA Notice must be completed every time, or if creditors can combine certain FCRA disclosures with the AA Notice. Adam attempts a new approach to adding a bit of humor to a mundane compliance topic and fails terribly. He makes a promise to never attempt this approach again (unless he is asked).

Over the years, I have seen quite a bit of confusion relating to requirements under the Fair Credit Reporting Act (FCRA) when it comes to risk-based pricing.  One misunderstanding I have seen several times is that some believe a “credit score disclosure” is required for non-real estate applications, even if a financial institution does not set rates based on the risk (credit score) of the customer.  As I will explain below, this is not a correct understanding.

In discussing the Fair Credit Reporting Act, one question I often receive is whether or not the credit score exception notice must be provided when an application is denied and the applicant is receiving an adverse action notice.  The thought is that the credit score information is included on the adverse action notice, so why would the credit score exception notice - that basically provides the exact same information - still be required? Believe it or not, this question is actually quit complex, so I will do my best to explain this for you.  

The requirements for risk-based pricing notices and credit score disclosures can be extremely confusing at times.  Trust me, I know.  As was the case for me in the past, most bankers don’t have to worry about understanding the different disclosure options available as a bank will only use one form or another and will never have a need for the other disclosure options.  That said, however, understanding which disclosures are required is important to...