The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) required institutions to disclose to bank customers and applicants a credit score and information related to that score if used as part of an adverse action decision.1 The new credit score disclosure requirement, which reflects an amendment to the Fair Credit Reporting Act’s (FCRA) section 615(a), became effective on July 21, 2011.
The disclosure of credit scores for deposit-related transactions may be new for some banks. FCRA requires an institution to provide notice if taking adverse action on a requested or existing deposit account based on information in a credit report. Similarly, if the institution takes such action based on credit score information, it must now provide the credit score and related disclosures in writing or electronically. In addition to the credit score, the following information must be included:
- The range of possible credit scores under the model used;
- All the key factors that adversely affected the credit score of the consumer in the model used, the total number of which shall not exceed four;
- The date on which the credit score was created; and
- The name of the person or entity that provided the credit score or credit file upon which the credit score was created.
Some banks have asked if they must disclose the QualiFile score provided by Chex Systems, Inc., under the new credit score requirement. Chex Systems, Inc., has recommended disclosure of the QualiFile score if used in deposit-related adverse action decisions. We recommend that banks contact Chex Systems, Inc., to obtain additional information regarding this guidance if relevant. Additional information regarding FCRA’s credit score disclosure requirements is available here.
Endnote
1 The law also required the disclosure of credit scores in risk-based pricing notices in certain situations. A recent Consumer Compliance Outlook article provides more information regarding credit scores and risk-based pricing notices.
