In December, 2010, the Dodd-Frank Act amended the Fair Credit Reporting Act of 1970. The Federal Trade Commission has been in charge of enforcing the FCRA. In forty years time, the FTC has used their authority to impose enforcement actions 87 times. Does that sound like a lot, or a surprisingly few?
At any rate, July 21, 2011 marks the first anniversary of the Dodd-Frank Act. Also on this date the Consumer Financial Protection Bureau took over responsibility from the FTC for rule making and interpreting the FCRA. Summarizing it’s tenure, the FTC published a major staff report and imposed new rules before relinquishing it’s control of the legislation.
Chief among the changes for the mortgage industry is the requirement to disclose credit scores with adverse-action decisions. Previously, reasons for the adverse action had been required, but not the scores.
Also new is a requirement that lenders must provide the consumer a special notice advising that they are granting or amending credit on terms that are “materially less favorable” than what many other people would receive.
Mortgage Loan Officers will undoubtedly be seeing new disclosure changes and documents being added by lenders. More paperwork and explanations make for more job security, right?
The Federal Reserve Board has also recently amended their rules in Regulation B regarding adverse-action and risk-based pricing to accommodate the new FRCA amendments as they relate to the Equal Credit Opportunity Act (ECOA).
Typically, the new rules caused many questions. To show how basic some of the considerations are, among the issues is “What exactly is a credit score?”
But don’t worry… there’s a ruling on that!