When consumers apply for a loan, the lender will often use their credit report to not only decide if they qualify, but also determine the interest rate they pay on their credit card debt. Now, if a person gets a less than favorable rate, the lender must tell them the aspects of their credit history that were used to derive it.
Beginning on January 1, lenders were required to tell consumers that so-called "risk-based pricing" was used to determine the interest rates they pay on their credit card debt if it was worse than what others received, according to a report in the Dallas Morning News. Previously, this was only required for those lenders who dealt with home loans.
As an alternative, lenders also have the option of providing an applicant with a free copy of their credit score and explaining some of the information on it to them. In addition, if there is an "adverse action" – a consumer getting a worse rate on their credit card debt – the report said.
Risk-based pricing is often used by lenders who deal with credit card debt to determine loan eligibility and rates.