QUESTION
We are a lender that has some clients that require their credit score
to be rescored via rapid rescore. We order this service through our credit
vendor for each bureau that we need updated at a cost of $35 per account per
credit bureau. In many cases, these costs can add up quickly. Can we pass this
cost on to the applicant?
ANSWER
The short answer is no, you may not directly or indirectly charge the consumer
for the rapid rescore.
Rapid rescoring is an expedited process used to update or correct a
consumer’s credit file. The rapid rescore process involves the mortgage lender
submitting proof from the consumer to the consumer reporting agency that
information on the consumer’s report is erroneous. The consumer reporting
agency, in turn, presents this information to the three national repositories
of consumer information (Experian, TransUnion, and Equifax), also known as the
national credit bureaus, for investigation. Depending upon the results of the investigation, the consumer’s credit
file is corrected and updated, often within 72 hours as opposed to 30-45 days
if the consumer were to go through the normal dispute process.
If you review your contract with your credit vendor, you will, in all
likelihood, find a prohibition against directly or indirectly charging the
consumer this fee. In turn, the consumer reporting agency’s contracts with the
national credit bureaus contain a similar prohibition against passing this fee
on to the borrower. The root of this prohibition can be found in the Fair
Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681.
The Fair Credit Reporting Act sets forth the procedures to be followed
if a consumer disputes the completeness or accuracy of any item of information
contained in a consumer’s file at consumer reporting agency. In instances in
which the consumer directly notifies a national credit bureau of the dispute or
indirectly, through a reseller such as the credit vendor, the bureau must
investigate the dispute within thirty days of receipt of notice of the dispute
at no charge to the consumer. [15 U.S.C.
§ 1681i(a)(1)(A)]
However, nothing prevents the bureau from charging the consumer
reporting agency for expediting the dispute process, which charge the credit
vendor then passes on to the mortgage lender. However, in light of the
foregoing FCRA provisions, the mortgage lender cannot pass the charge on to the
consumer.
Charging a consumer for a repaid rescore can have harsh consequences,
including termination of access to credit reports. Additionally, for a willful
violation, the lender can be held liable for actual and punitive damages. [15
U.S.C. § 1681n]
Joyce Wilkins Pollison
Director/Legal & Regulatory Compliance
Lenders Compliance Group
