A Look at the FACT Act

President Bush signed into law the Fair and Accurate Credit Transactions Act (the FACT Act) on December 4, 2003. The FACT Act reauthorized provisions of the Fair Credit Reporting Act (FCRA) that would have expired at the end of 2003. Outlined below are the relevant disclosure provisions of the FACT Act.

Definition
“Person” means any individual, partnership, corporation, trust, estate, cooperative association, government agency or subdivision, or other entity.

Effective Date
The Federal Trade Commission and the
Board of Governors of the Federal Reserve
System adopted final joint rules that establish
December 1, 2004 as the effective date for the
disclosure of credit scores as required under
Section 212 of the FACT Act.

Disclosure of Credit Scores
Section 212 of FACT Act amends section 609 of the FCP.A by imposing disclosure requirements on “any person who makes or arranges loans” and uses consumer credit scores. The statutory requirements are limited to applications initiated or sought by a consumer for a closed or open-end loan secured by one to four units of residential real property. If these conditions are satisfied, a “person” must disclose the following information as soon as reasonably practicable:

a. the current credit score of the consumer or the most recent credit score of the consumer that was previously calculated by the credit reporting agency (CRA) related to the extension of credit;
b. the range of possible credit scores;
c. the key factors that adversely affect
the credit score of the consumer in the model used (the total number of which must not exceed four);
d. the date the credit score was created; and
e. the name of the person or entity that provided the credit score or credit file upon which the credit score was created. The FACT Act further requires “any personwho makes or arranges loans” to provide a copy of the information obtained from the CRA to the consumer and a written notice containing the name, address and telephone number of the CRA providing the credit score used. The information given to the consumer must also include the following statement:

The credit score is a computer generated summary calculated at the time of the request and based on information that a consumer reporting agency or lender has on file. The scores are based on data about your credit history and payment patterns. Credit scores are important because they are used to assist the lender in determining whether you will obtain a loan. They may also be used to determine what interest rate you may be offered on the mortgage. Credit scores can change over time, depending on your conduct, how your credit history and payment patterns change, and how credit scoring technologies change.

Because the score is based on information in your credit history, it is very important that you review the credit—related information that is being furnished to make sure it is accurate. Credit records may vary from one company to another.

If you have questions about your credit score or the credit information that is furnished to you, contact the consumer reporting agency at the address and telephone number provided with this notice, or contact the lender, if the lender developed or generated the credit score. The consumer reporting agency plays no part in the decision to take any action on the loan application and is unable to provide with specific reasons for the decision on a loan application.

If you have questions concerning the terms of the loan, contact the lender.

Any “person” subject to these provisions who uses an automated underwriting system may satisfy,' the obligation to disclose the consumer's credit score to the consumer by supplying the credit score and the associated key factors received from a CRA subject to certain restrictions that apply when numerical credit scores are disclosed.

Any “person” using a credit score other than a score provided by a CRA may satis6y the obligations to provide the consumer's credit score by disclosing a credit score and associated key factors supplied by any CRA to the consumer.

These provisions do not require “any person who makes or arranges loans” to:
• explain the information provided to consumers;
• disclose any information other than a credit score and key factors;
• disclose any credit score or related information after the loan closes;
• provide more than one disclosure per loan; or
• to provide the disclosures when someone else has made the required disclosures to the borrower for the loan.

The provisions of this section are limited solely to providing a copy of the information received from the CRA. No “person” has any liability for the content of that information for the omission of any information within the report provided by the CRA.

Contractual provisions that prohibit the disclosure of credit scores are unenforceable and void.

This provision preempts state law. However, certain states need to follow their own statutes in whole or part: California Colorado , Georgia , Maine , Maryland Massachusetts , New Jersey , and Vermont .

The preceding information is for informational purposes and does not constitute leg al advice. Readers should not rely on it as suc h Please contact an attorney for comp liance and/or legal advice.

FOR MORE INFORMATION ON THE FACT ACT PLEASE CONTACT YOUR
FINANCIAL LINK SERVICES REPRESENTATIVE 800-273-3489