The next time a consumer asks about his or her credit score, consider it an opportunity.
Recent changes to the Risk-Based Pricing (RBP) rule may provide new opportunities to strengthen relationships by educating consumers about what their credit scores mean, how they’re used, and how they can be improved. For many lenders and other businesses, this could be the first time they’ve had a chance to speak directly and openly with customers about their credit scores.
The RBP rule is intended to improve financial literacy
As we’ve discussed, the Risk-Based Pricing Rule was instituted in response to policymaker concerns that consumers were not being sufficiently informed of the impact that credit reports can have on their annual percentage rate (APR). Now, when a lender makes a credit decision based on a consumer credit report and does not offer the best possible rate, or denies credit, the RBP Rule requires lenders to notify the customer about the decision – through either an explanation of the rate offered or disclosing a credit score.
New requirements take effect on July 21
RBP compliance is changing following recent passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Companies will now be required to provide all customers with a credit score within a Risk Based Pricing Notice, along with educational material.
The new requirement is effective July 21, 2011. This is also the date when the new Bureau of Consumer Financial Protection (CFPB) is set to be fully operational.
How to prepare for consumer questions about credit scores
Experian offers a number of resources to help lenders answer consumer questions. Online resources, including the Ask Experian column and our extensive Credit Education section, provide fundamental information to help consumers better understand credit scores and credit reports.
The Experian Credit Score Basics booklet, plus more than 20 other educational documents, are available electronically and formatted for easy printing and distribution. All documents, PowerPoint presentations, virtual seminars and education videos are available on a free mini-disk.
Customized training and education is available
The Experian Public Education team can also provide customized, live Internet-based training and education for our clients’ employees to help them effectively answer customer questions about credit reports and credit scores.
For a free mini-disk or more information about training events, please contact Rod Griffin, Experian’s Director of Public Education, at 1 (972) 390-3528, or email clientcorner@experian.com.
Take a moment to check out our Risk-Based Pricing microsite, too.
Note: While Experian is happy to provide our observations related to the new Risk-Based Pricing Rule, please work with your own legal counsel to ensure that you comply with your obligations under the rule.