The Board of Governors of the Federal Reserve System is expanding the mandates of the Equal Credit Opportunity Act, which requires a creditor to notify an applicant when an extension of credit is denied, based in whole or in part on information in a consumer report.
Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, consumers who are denied credit or whose existing credit arrangement becomes less favorable - or even worse - gets revoked, based on a credit score will be able to get free access to that score and other related information.
The creditor will have to provide a statement giving the reasons for taking an adverse action against the consumer and also a notice that discloses the applicant's right to a statement of reasons, right to a free credit report and right to dispute the accuracy or completeness of information in the consumer report used by the creditor to make a lending decision.
Under the Fair Credit Reporting Act, consumers also are entitled to know the numerical credit score used in making the credit decision; the range of possible scores under the model used to generate the score; up to four key factors that adversely affected the consumer's credit score; the date on which the score was generated; and the name of the person or entity that provided the score.
The changes take effect July 21.
The Equal Credit Opportunity Act makes it unlawful for creditors to discriminate on the basis of sex, race, color, religion, national origin, marital status, age or because all or part of an applicant's income derives from public assistance.
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