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#1473867 - 11/30/10 07:12 PM
Re: Risk-based pricing (FACTA 1/1/11)
Sewanee, CRCM
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10K Club
Joined: Nov 2002
Posts: 20,656
The Swamp
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Okay, I need to make something perfectly clear because I seem to have seen conflicting answers on this. If using the exception notice and the timing:
222.74(e)(3) says that: "The notice described in paragraph (e)(1)(ii) of this section must be provided to the consumer as soon as reasonably practicable after the credit score has been obtained, but in any event at or before consummation in the case of closed-end credit or before the first transaction is made under an openend credit plan."
Is it correct that you do not arbitrarily give these out on denied loans. (The NTHLA would be)
It would seem that we would follow the general rule of "shortly after receiving the CR", like we do with the NTHLA...and therefore some loans may end up not originating...but it's not required to be given unless the loan is expected to originate...correct???
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1474043 - 11/30/10 09:42 PM
Re: Risk-based pricing (FACTA 1/1/11)
RR Joker
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Diamond Poster
Joined: Sep 2008
Posts: 2,481
Midwest
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From what I read you only have to give to customers who accept credit but MAY give to all who apply. We have decided to go ahead and give to all who apply (approved and denied).
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#1474047 - 11/30/10 09:46 PM
Re: Risk-based pricing (FACTA 1/1/11)
ahkcompliance
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Diamond Poster
Joined: Sep 2008
Posts: 2,481
Midwest
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If we rely on a credit report that is 6 months old, do we still have to give the exeption notice?
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#1474100 - 12/01/10 02:18 AM
Re: Risk-based pricing (FACTA 1/1/11)
DD Regs
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Power Poster
Joined: Nov 2008
Posts: 4,132
Somewhere in the middle
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Let me see if I have this right:
If you go with RBPN, it does not go out to those who receive and AAN, but what about if you go with the Exception methods (H3,4,5), it doesn't make since that you would send it out to those who get the ANN? Would Ted or one of the guru's mind chiming in on this question. It has been asked several time but with no direct assured answer.
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#1474334 - 12/01/10 04:28 PM
Re: Risk-based pricing (FACTA 1/1/11)
Ted Dreyer
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Platinum Poster
Joined: Sep 2007
Posts: 937
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Has anyone found out from the CRAs what they will provide in the form of exception notices like the H-3 or B-3 to aid in complying with these new rules? Some earlier discussions on this topic were only touched upon and time is running out. There still seems to be a considerable amount of confusion on this issue. Thanks everyone.
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#1474358 - 12/01/10 04:47 PM
Re: Risk-based pricing (FACTA 1/1/11)
ccman
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Diamond Poster
Joined: Sep 2008
Posts: 2,481
Midwest
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THe loans secured by real estate our CRA will provide H-3 or H-5, but for loans not secured by real estate, the CRA is not going to provide H-4. I have created our own form to use for those types of loans.
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#1474366 - 12/01/10 04:56 PM
Re: Risk-based pricing (FACTA 1/1/11)
ahkcompliance
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Platinum Poster
Joined: Sep 2007
Posts: 937
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Thanks for the reply. I just received a report from our CRA with the B-3 notice. Could we still provide the B-3 notice for non-real estate secured loans minus the NHLA page. The B-4 is the same except for the missing "Key Factors" paragraph on the B-3. Would providing more information be acceptable?
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#1476667 - 12/06/10 09:47 PM
Re: Risk-based pricing (FACTA 1/1/11)
ahkcompliance
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Gold Star
Joined: Jul 2007
Posts: 320
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If we rely on a credit report that is 6 months old, do we still have to give the exeption notice? This is a question that I've seen many times in the threads, but don't feel like I have seen an answer for. In a previous discussion a few pages back, I think it was decided that you'd have to fall back to the "direct compare" method. If that's the case - yuck! We're planning on giving out the exception notices (H3, H4, H5) because we don't have an automated method in place for logging and tracking scores. If the option on old reports really is to do a direct-compare annd provide an actual RBPN if needed, would it just be easier to pull a new Credit Report all the time?
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#1476671 - 12/06/10 09:52 PM
Re: Risk-based pricing (FACTA 1/1/11)
cloudy
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Platinum Poster
Joined: Mar 2008
Posts: 808
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What is the difference between the B notices and the H notices?
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#1476754 - 12/07/10 12:44 AM
Re: Risk-based pricing (FACTA 1/1/11)
SUSANE1
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10K Club
Joined: Jul 2001
Posts: 84,160
Galveston, TX
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Nothing, same regulation, different regulator, just different letter for the appendix.
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#1476877 - 12/07/10 03:12 PM
Re: Risk-based pricing (FACTA 1/1/11)
pacar
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Joined: Nov 2002
Posts: 20,656
The Swamp
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If we rely on a credit report that is 6 months old, do we still have to give the exeption notice? This is a question that I've seen many times in the threads, but don't feel like I have seen an answer for. In a previous discussion a few pages back, I think it was decided that you'd have to fall back to the "direct compare" method. If that's the case - yuck! We're planning on giving out the exception notices (H3, H4, H5) because we don't have an automated method in place for logging and tracking scores. If the option on old reports really is to do a direct-compare annd provide an actual RBPN if needed, would it just be easier to pull a new Credit Report all the time? The answer you should be finding regarding the re-use of an older credit report is that you don't have a permissible purpose for using that CR on a new request. You should be pulling a new credit report, thus solving your problem all together. ![wink wink](/forum/images/graemlins/default/wink.gif)
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1477596 - 12/08/10 03:31 PM
Re: Risk-based pricing (FACTA 1/1/11)
Queen Mum
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Gold Star
Joined: Jul 2007
Posts: 320
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Thanks, RRJoker ... appreciate the clarification (and tip!).
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#1477775 - 12/08/10 05:47 PM
Re: Risk-based pricing (FACTA 1/1/11)
pacar
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Power Poster
Joined: Nov 2003
Posts: 3,737
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Ok - I just read this and I am completely confused! I am told we do not RBP except with the secondary market stuff. So secondary market provides the H-3, right? For all other loans, even though a credit score is pulled, the rate is based on a rate sheet or the customer's relationship with the bank or some other factor not related to the score - so NO RBPN is required, correct? The credit score is used to approve/deny a loan but has no bearing on the rate you are given.
I have this correct, right?????
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#1477799 - 12/08/10 06:06 PM
Re: Risk-based pricing (FACTA 1/1/11)
Tesla
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Power Poster
Joined: Mar 2001
Posts: 3,920
OK
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If you use tiered pricing that is based on a loan applicant's credit history, then you can decide who receives the notice based on the number of tiers you have. Your pricing tiers could be reflected in a rate sheet that listst different rates available to the consumer depending upon information in a consumer report, such as the consumer's credit score, among other factors.
For example, if you offer car loans for which the annual percentage rate will be set at 7, 9, or 11 percent based in whole or in part on information from a consumer report, you only have to consider which annual percentage rate pricing tier applies to a consumer in order to determine whether the consumer should receive a risk-based pricing notice, even if factors other than the consumer report influence the APR received by the consumer.
When there are four or fewer pricing tiers, you must provide a risk-based pricing notice to each consumer who does not qualify for the top, or lowest-priced, tier. Where there are five or more pricing tiers, you must send a risk-based pricing notice to each consumer who does not qualify for the top twi tiers (lowest-priced) and any other tier that represents at least the 30 percent but no more than the top 40 percent of the total number of tiers.
You may use different pricing tiers for different types of credit products, such as car loans and boat loans. If you do, then you have to do a separate analysis to see who gets the notice.
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#1477802 - 12/08/10 06:07 PM
Re: Risk-based pricing (FACTA 1/1/11)
Queen Mum
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Joined: Nov 2002
Posts: 20,656
The Swamp
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If we use the Exception Notice will we be required to always pull a credit report? What if we decide based on other factors that we are not going to do a loan. If we send adverse action it is not required. Am I correct? No..if you deny prior to pulling credit...no notice would be required.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1477813 - 12/08/10 06:12 PM
Re: Risk-based pricing (FACTA 1/1/11)
RR Joker
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Joined: Nov 2002
Posts: 20,656
The Swamp
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SkiDoo..in addition to what QM posted...you could also use the exception notices if info contained in a credit report factors in to the final rate you give a customer. that way, you don't have all the "math" to contend with! ![wink wink](/forum/images/graemlins/default/wink.gif)
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1477844 - 12/08/10 06:29 PM
Re: Risk-based pricing (FACTA 1/1/11)
Queen Mum
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New Poster
Joined: Jan 2010
Posts: 8
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We have several questions...
1) We know that if the file is denied we don't have to do a Consumer Credit Score Disclosure Notice, but what if the customer withdraws the application in the case of a consumer car loan?
2) We currently give all customers that apply for a residential RE loan a Consumer Credit Score Disclosure with all scores pulled. Do we now just have to do the Exception Notice using only the credit score used?
Thanks!
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#1477895 - 12/08/10 07:01 PM
Re: Risk-based pricing (FACTA 1/1/11)
Queen Mum
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Power Poster
Joined: Nov 2003
Posts: 3,737
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Thanks, Joker. I should have kept going. I see where she was talking about the H-3 Exception Notice. Use that on RE loans and the H-4 on all other and the H-5 if they have no credit score.
We are going with the Exception Notices and will be pulling credit reports on all applications unless we can tell from other factors that the loan will be denied and then we will not need to pull the credit report and no Exception Notice is needed.
OK - but what I am confused about is why do we have to give any notice at all? We have a rate sheet that says "if you want a car loan and your car is 10 years old the rate is x%". This has nothing to do with a person's credit score. We might adjust the rate up or down because you decide to use automatic transfer or have millions of dollars in the bank, but that is still not based on the credit report. So I believe we do not need to provide any of the H1-5 forms. For a HELOC, our rates are based on the amount of money you want to borrow - again- has nothing to do with your credit score. In reading through this threads - it seems like people are providing the H-3 form if the loan is secured by a 1-4 family dwelling regardless of how the product is priced. So my question is - is my understanding of this rule-wrong? The explanation people have provided for providing the H-3 in every instance is that they pulled a credit score. My concern here is - yes, we pull a credit score - but it is used to determine if you get the loan. Your rate for that product will be whatever the pricing committee set on the rate sheet and pricing committee uses a comparison of peer bank rates to set the rate. SO - after all that ![smile smile](/forum/images/graemlins/default/smile.gif) - am I just off my rocker or what?????
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#1477933 - 12/08/10 07:26 PM
Re: Risk-based pricing (FACTA 1/1/11)
Queen Mum
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Joined: Nov 2002
Posts: 20,656
The Swamp
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Skidoo..if you'll notice, I said the if you are using info in the credit report and that info might factor into the rate, you would...if it has zero affect...you don't need to worry about it.
We have certain products that the rate is what it is..those won't be included in RBP.
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My opinion only. Not legal advice. Say you'll haunt me - Stone Sour
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#1477968 - 12/08/10 07:56 PM
Re: Risk-based pricing (FACTA 1/1/11)
RR Joker
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Power Poster
Joined: Nov 2003
Posts: 3,737
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Thanks you guys! Like I said the more I read this thread the more I questioned my thinking on this issue.
Thanks for clearing it up!
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It's not that I take life for granted. It's only that the good won't make it. Innocence dies, while Villany Thrives.
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