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New Risk-Based Pricing Requirements

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Lenders who charge some borrowers more than others will face new requirements next week.

Final rules announced today by the Federal Reserve Board and the Federal Trade Commission generally require mortgage lenders to provide a consumer notice when the borrower is given a loan on less favorable terms than provided to other borrowers.

The rules take effect on Jan. 1, 2010.

“The final rules implement section 311 of the Fair and Accurate Credit Transactions Act of 2003, which amends the Fair Credit Reporting Act,” the government said.

The rules impact the practice of risk-based pricing, where lenders base the pricing on the creditworthiness of the borrower.

Several methods of determining which borrowers must receive risk-based pricing notices were outlined in a 202-page Federal Register Notice.

Lenders, however, can avoid the notice requirement by providing loan applicants with a free credit score.

read full Federal Register Notice

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