Management is revisiting the need to even obtain the credit score in light of the FCRA changes in January and recently. The reason being that they state they don't even use it - that all they go by is what is actually in the credit history. We'd still have to obtain it on the real estate side since we sell to the secondary market. They feel these new disclosures are too confusing to the consumer, particularly when it says that we use the credit score when we really don't.

Have any of your banks stopped obtaining the score? Or...for those who never did get credit scores in the first place, have you found any downside to that? Do your banks have it split like that where you still get scores on the real estate side but not on the consumer side? Any downside to that?

Thank you!

I floated the idea to our chief credit officer and one of our branch managers. While we don't "use" it in some cases, we do "use" it when reviewing our Home Equity Lines of Credit to make sure we should keep the line open (recent housing value declines have made many LTV's go south on HELOC's and we've found some borrowers keeping our loan current while defaulting on their first).

I would have preferred to stop the credit score from appearing but it's clear this has been a helpful risk management tool.

I was trying to figure out if it is possible to stop obtaining credit scores and still comply with the RBP requirements. We are required to provide an RBP notice when we use a consumer report to grant/extend credit on less favorable terms. BUT, the newest rule requires a credit score to be on that notice.

So I am not sure how to get around obtaining a credit score if it needs to be on the RBP notice? Maybe I am overanalyzing, or maybe I am underanalyzing.

It is possible. The new rule only requires credit score disclosure IF you use a credit score. You can still use the H-1 form - that form didn't change. They just established a new H-6 form which is the H-1 plus the new information for when you do use a credit score.

So, you could use the H-1, but you would have to only give it to those who are getting less favorable scores.

Ahhh I see. We chose the Credit Exemption Score route.

We don't use the score (per our Consumer Loan Policy), but as I have heard from several others, it will be hard to convince examiners of that since the score will be in the file. So we are sort of stuck disclosing it on the AAN when we use information on the Credit Report as a basis for denial.

It just bothers me that the RBP Rule that went into effect 1/1/11 says "consumer report" and the newest Reg V/B rules say "credit score". Consistency is definitely not the regulators' strong suit.

The inconsistency actually came from Congress, not the regulators. The FACT Act that created the RBP requirement back in 2003 said they were triggered by use of a "consumer report", while the Dodd-Frank changes specifically related to credit scores.

Here are some of the challenges I see for our shop if we stop getting the credit score (aside from the fact that despite what we say, I think some of our officers have relied to some degree on those scores):

1. We would still have to comply with the RBP notice - we do not give the same rate/terms all the time to all people for each product. We have "guidelines" for how/when you can deviate from the stated rate sheet, but it's not real specific (let's not get into a fair lending discussion here, though)

2. We don't have a tiered approach to pricing.

3. So, if we were to stop getting credit scores, then it seems we'd only be left with the direct comparison approach which appears to me to be quite confusing and labor intensive.

Hence the reason I recommended the credit score exception notice in the first place.

I guess I lump them all into one group.

Dodd-Frank/CFPB/FRB/FDIC/OCC/FTC/State Law

Laws are laws, final rules are final rules

Same here! And I thought I was ahead of the game back in January because heard that Dodd-Frank would require us to disclose the credit scores eventually. Silly me.

We have been obtaining credit scores for quite some time now, but have never used them in our decision making. Nor do we tier rates, or engage in risk-based pricing.

I am currently contemplating NOT getting them on any credit reports, except for MI loans, since the MI companies require them. I'm thinking that there's no real benefit in obtaining the scores, and additional requirements (and costs) in disclosing them.

We currently do not get a credit score.

We are using the tiered pricing method on the risk based pricing. We have created a pricing sheet that shows the best rate we would give on a specific loan type. If the customer does not qualify for the best rate available, we're giving the risk based pricing notice.

We have not been through an examination or an external audit yet...

"We currently do not get a credit score.

We are using the tiered pricing method on the risk based pricing."

How are you establishing your tiered pricing???

I know of one small commercial bank that stopped making consumer mortgage loans (including junior liens) in January 2010 because they did not have the documentation software or staff knowledge to comply with the new RESPA disclosures. Not a big loss since they only made perhaps 2 or 3 in any given year.

As of 7/29/2011 they stopped making HELOCS because they looked at what was required for SAFE Act and decided it wasn't worth it for the 1 or 2 HELOCS they might make in a year and they don't want to be second guessed during an exam regarding registration.

On 7/21/2011 they stopped receiving credit scores because they really didn't use them anyways. It was more of "window dressing" on the credit memo, but it was going to cause all kinds of havoc with the roughly 5 or 6 consumer declines a month. They have pricing set by product, term and collateral and only make pricing concessions for large relationships and even then it's a rare situation.

I'll find out in the next few months if they miss having the score.

Forgot to mention, they also do not make loans for the purpose of Private Education expenses and decline any such requests as "We do not grant credit for the purpose requested."

And yes, the Bank President does wonder how much longer the regulators will allow them to make any kind of loan without a gazillion disclosures.

Not looking forward to the data collection requirements for business loans......

We do not have the credit score on the credit report or risk based pricing. We do offer standard rates based on product. If you qualify for a loan you get the same rate as everyone else.

We recently had a compliance exam with the FDIC and they were fine with how we priced our loans since everyone was treated the same. They were not happy with our denials. Their stance was that we would need to be very specific on our qualifying factors. This leaves us with either going back to credit scores or devising specific credit report criteria to establish what qualifies or disqualifies an applicant. We are still working on the qualifying factors but are leaning towards using credit scores again.

Having written credit standards is not a new concept. Bank's have had to have them for years, regardless of whether you have a credit score on a credit report or not.

Truthfully, credit scores are a fairly 'new' concept. I made many a mortgage loan before credit scores ever existed. We used things such as good credit...no derogatory credit more than X. Letters of explanation on 'unusual' credit characteristics/collections/etc. Paid/unpaid collections/Lenghth of employment/residence.


ETA: I've never been a fan of credit scores...if you really look at a bunch of credit reports and the scores that are derived as a result of that credit...often they make absolutely no sense!

I agree and I just wanted to let those who rely on credit scores as the determining factor on a loan decision to be aware that detailed standards are needed if not already in place. We turned off our credit scores without having our loan standards in place and now are trying to catch up.