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Clearing up Confusion Regarding The FACTA RBPD Requirements

We've seen lots of confusion regarding who is required to comply with FACTA 311, specifically the Risk-Based Pricing Disclosure requirements. The short answer is - Anyone that uses a credit score in association with a residential lending transaction. Here are the key points,

While FACTA 311 identifies the RBPD as a "Lender" requirement, due to broker/correspondent/lender workflows it would be very difficult for a lender to satisfy the requirements as the credit report is typically acquired by the broker or correspondent. As a result, virtually every lender requires the party originating the loan to comply with the RBPD requirements. Some lenders go beyond the requirements of FACTA 311 and mandate a copy of the disclosure be printed and maintained in the file. A few have gone even further requiring the consumer sign the form. It should be noted that neither of these lender mandates are required under FACTA 311.

While FACTA 311 associates the RBPD requirements with a risk-based lending decision, even if you are not using risk-based pricing, you still have FACTA disclosure requirements. This is due to the safe-harbor component within section 311. Complying with the RBPD requirements provides safe harbor for FCRA 609(g) disclosure requirements (Notice to Home Loan Applicant and Consumer Score Disclosure)

The entity that acquires a consumer credit score for residential lending purposes is required to issue the disclosures identified in 609(g) of the FCRA to EVERY consumer on which they process a credit score (not just those that are going to close.)

If a RBPD is not issued to every consumer on which a credit score is obtained, the consumer must then be issued the disclosures required under 609(g).

To simplify and guarantee compliance, Credit Technologies has developed a turn-key method to automate these requirements through our FACTA Compliance Service (FCS.) This includes the existing FACTA Notice to Home Loan Applicant and Consumer Score Disclosures in addition to the new Risk Based Pricing Disclosure requirements (view a sample report.) This includes calculating each consumer’s comparative score and national score average per scoring model utilizing the form B-3/H-3 or B-5/H-5 exception method (example contained on page 195 of the final rulemaking.)

  • Creating the required Risk-Based Pricing Disclosure, Score Disclosure and related required language
  • Creating the required Notice to Home Loan Applicant
  • Issuing the combined disclosures via First Class US Mail to each applicant individually
  • Providing a Certificate of Compliance to each end user for use in the event of audit or investigation
  • Maintaining historical records sufficient to satisfy compliance with any lender or agency inquiry or audit as it applies to the above FACTA disclosure requirements (view a sample audit report)

For more information on Credit Technologies' FACTA Compliance Service,please call 800.445.4922.

This information is an overview of the FACT ACT and does not contain the complete text of the act, nor can it be construed in any way as legal advice. There is no guarantee written or implied as to the accuracy or completeness of the information contained in this document. Credit Technologies, Inc. cannot provide legal advice on this or any other matter. Please consult your compliance or legal department to ensure your compliance with the FACT ACT.

 

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