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ICBA Urges Careful Balance for Risk-Based Pricing Notices

Washington, D.C. (Aug. 18, 2008)—The Independent Community Bankers of America (ICBA) generally supports a proposed federal regulation to notify consumers who receive materially less favorable terms due to information in their credit reports. The Federal Reserve and Federal Trade Commission proposal, which would help encourage consumers to be more aware of and take greater responsibility for information in their credit reports, implements one of the last pending requirements under the Fair and Accurate Credit Transactions Act of 2003 (FACT Act).

"ICBA supports alerting consumers to the importance of credit report information and how it can affect their access to and terms of credit, and we want to be sure this proposal is as beneficial as possible to consumers and their community banks," said Cynthia Blankenship, ICBA chairman and vice chairman and chief operating officer of Bank of the West, Grapevine, Texas. "We are grateful the agencies have been open to input on the rule to ensure it is practical for community banks and their customers."

The proposal would require the notice when creditors use consumer reports and, as a result of information in the reports, offer consumers terms that are less favorable than the most favorable available. ICBA supports using the annual percentage rate (APR) as the benchmark to identify who should receive the notice but raised concerns about some of the mechanisms involved in determining who should be notified. ICBA also urged the agencies to use the new requirement as a teaching opportunity for all consumers, because by the time a consumer applies for credit, the ability to take steps to change the information in a credit report is minimal. Information that can assist consumers would be more effective if provided before consumers contact creditors.

ICBA continues to believe that a uniform notice at application would be simpler, less expensive and more effective. In addition, ICBA reminded the agencies to be sensitive to the fact that higher compliance costs could make affordable credit less available for consumers with poor or marginal credit scores. That could drive consumers to less reputable creditors.

Finally, ICBA said additional guidance may be needed as the agencies and creditors gain experience with the final rule and recommended that creditors be given at least two years from the publication of the final rule to develop and adjust their systems and procedures.

Read the ICBA comment letter at www.icba.org.