The Federal Reserve and the Federal Trade Commission (FTC) jointly issued final rules to implement the credit score disclosure requirements of the Dodd-Frank Act, and the FTC separately issued a new rule that bans deceptive claims about consumer mortgages in advertising or other types of commercial communications. The credit score disclosure rules released on July 6 implement a requirement under the Dodd-Frank Act that creditors disclose credit scores and related information to consumers in notices under the Fair Credit Reporting Act (FCRA) if a credit score is used in setting material terms of credit or in taking adverse action. The final rules amend the Federal Reserve’s Regulation V (Fair Credit Reporting) to revise the content requirements for risk-based pricing notices, and to add related model forms that reflect the new credit score disclosure requirements. The FTC is placing the final rules and model forms in the part of its regulations implementing FCRA. The final rules also amend certain model notices in the Federal Reserve’s Regulation B (Equal Credit Opportunity), which combine the adverse action notice requirements under Regulation B and FCRA, to reflect the new credit score disclosure requirements. The amendments to Regulations V and B are effective on August 15.
Nutter Notes: The FTC’s new mortgage advertising rule issued on July 19 applies to mortgage lenders, brokers and servicers, real estate agents and brokers, advertising agencies, home builders, lead generators, rate aggregators and other entities within the FTC’s jurisdiction that commonly do business with depository institutions. While the rule does not apply to banks and thrifts, the examples of prohibited deceptive claims provided by the rule could serve as guidance to state attorneys general or other governmental authorities about types of advertising practices that are generally considered unfair or deceptive in the enforcement of state consumer protection laws against depository institutions, such as Chapter 93A of the General Laws of Massachusetts. Examples of prohibited deceptive claims under the new FTC rule include misrepresentations about the existence, nature, or amount of fees or costs to the consumer associated with a mortgage; the terms, amounts, payments, or other requirements relating to taxes or insurance associated with a mortgage; and the variability of interest, payments, or other terms of a mortgage. The rule provides for the assessment of civil penalties among other remedies for violations of the prohibition against deceptive mortgage advertising. The Consumer Financial Protection Bureau (CFPB) and state law enforcement authorities also may bring actions to enforce the rule, which becomes effective on August 19.