Have you been offered a bad credit deal by a lender but don't know why? Starting in January 2011, banks will have to tell you why and give you free access to your credit report any time you're given less-favorable terms, according to final rules issued Tuesday by the Federal Reserve and the Federal Trade Commission.

Until that time, lenders don't have to explain why you're getting particular terms on any form of consumer credit, including credit cards, auto loans, mortgages and student loans. The rule change doesn't impact business lending.


Starting in 2011, lenders will be required to send you a notice when you're granted terms "materially less favorable" than "a substantial proportion" of the lenders' other customers.

Unfortunately, this doesn't mean you're going to get a better deal. All the rule does is provide you with an opportunity to review your credit report for errors and contest any rates you think might have been determined based on incorrect data.

Even better than depending on this new rule would be to request a free copy of your credit report from all three credit reporting agencies before you even apply for credit and avoid needing to use this rule at all. You can even take advantage of those free reports starting today, though you're only allowed one free report per agency each year.

The final rule for this new "risk-based pricing notice" includes two key terms: "material terms" and "materially less favorable." Material terms can include an annual percentage rate or, if there is no annual percentage rate, can include an annual membership fee or required deposit.

The key will be whether these material terms are "materially less favorable" compared to the type of credit being extended by the company to other consumers that will result in you having higher costs for credit.

Lenders must provide a "risk-based pricing notice" if they reviewed a consumer report in connection with the application to make a decision and if this credit report was used in whole or in part to make the decision about the terms to be offered. Lenders are required to make this determination on a case-by-case basis but are allowed to use two alternatives that will be less time consuming and cumbersome:

  • Credit score proxy method. This method assumes a credit score is a numerical representation of a consumer's credit risk based on information in the consumer's credit file. The creditor will set a cutoff score for the best credit terms, which they will grant, extend or provide to at least more than 40% of consumers. Anyone below this cutoff point would receive risk-based pricing notices. The creditor must periodically update the cutoff score.
  • Tiered pricing method. Creditors using this method will set the material terms of credit by assigning each consumer to one of a discrete number of pricing tiers, based in whole or in part on a consumer report. Any consumer not assigned to the top pricing tier or tiers must be sent a risk-based pricing notice. The number of tiers to whom the notice is required to be given depends upon the total number of tiers.
Once this rule goes into effect about a year from now, you'll receive a notice any time you're not given the best terms. It will then be up to you to determine whether you want to accept the "materially less favorable" terms or reject the card and apply elsewhere. You'll also be given the option to review your credit report, correct any errors and then ask for a new review of your application.

Lita Epstein has written more than 25 books including "The Complete Idiot's Guide to Improving Your Credit Score."

Increase your money and finance knowledge from home

What is Inflation?

Why do prices go up?

View Course »

Understanding Credit Scores

Credit scores matter -- learn how to improve your score.

View Course »

Add a Comment

*0 / 3000 Character Maximum

2 Comments

Filter by:
Dereck

Do yourself a "HUGE FAVOR" and carefully read this:

The 21st Century Act: Final Amendments to Regulation CC Section:
"Prohibits" reimbursement of Credit, Loan, and Finance Balances to a "Bank Entity" leaving only "Nonbank Consumers" able to receive reimbursement, as specified on Pages 85 and 86.

The 21st Century Act states on pg. 85 and 86 that "Only Nonbank Consumers can suffer losses and File for
Re-credit or Re-claim on any Accounts under the Federal Reserve System" also “Any Second or Third Party Presenters utilizing a Banks Documentation, Contracts and/or Agreements to seek Claims shall be considered to be that Bank under the Rules and Regulations”, the Expanded Definitions also includes Credit Cards and Home Equity Lines of Credit.
Also on Pages 100 and 101 "In any Financial Claims the Indemifying Bank (Parent Bank) must be Identified".

(Left-Click to Search Link)
21st Century Act: Final Amendments to Regulation CC http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20040726/attachment.pdf

This Federal Law signed January 1, 2006 makes it "Fraudulent" and therefore "Illegal" for the 3 Major Personal Credit Reporting Agencies: Equifax, Experian, and TrasUnion to allow the Banks and the Banks "Third Party Presenters" to place any claim of "Negative" or "Potentially Negative" Accounts on your Personal Credit Based upon the fact that they have no "Legal Grounds or Claim" to the Money.

This is an "Unfair Practice" that diminishes our Financial ability to support ourselves and adversely affects our ability to gain work in many areas which breaks "Antitrust Laws".

These Rules also back claims of: "Aiding and Abetting" Racketeering and Extortion (of Finance Accounts and Personal Credit Reports), Pandering (of Credit and Loan Accounts, and Conspiracy to wit), Theft, Fraud, Federal Mail Fraud, and Telephone Harassment. Also "Threatening of the U.S. Financial Infrastructure", which is a "Capital Crime".

In order to engage the Federal Trade Commission to act against this injustice we must File many Claims, as these Reports must be Filed by a large number of people in order for the Federal Trade Commission to pursue
"Legal Action".

(Left -Click to engage Email Address)

antitrust@ftc.gov

This is way easier than "Occupying Wall Street"!

March 11 2012 at 6:23 PM Report abuse rate up rate down Reply
Carol

While I was looking for a credit report site, my firend told me about a site, that offer:

- 100% Free 3 in 1 Credit Report
- Credit Monitoring
- Fraud Protection

All in one...

I tried it and I'm so satisfied with them.I just wanted to recommend you that site:

---www.CreditReportFrees.info---

January 12 2012 at 5:33 AM Report abuse rate up rate down Reply