source:
  type: regulation
  id: reg-v-1022.72
  authority: 12 CFR §1022.72 — General requirements for risk-based pricing notices
    (Regulation V)
  description: 12 CFR §1022.72 — General requirements for risk-based pricing notices.
  coverage_tier: operative
obligations:
- id: reg-v-1022.72-full
  canonical_id: reg-v-1022.72-full
  section: 12 CFR §1022.72 — General requirements for risk-based pricing notices
  type: do
  tags:
  - regulator-direct
  - fcra
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: 12 CFR §1022.72 — General requirements for risk-based pricing notices
      (Regulation V)
    source_class: cfpb-regulation
    source_url: https://www.law.cornell.edu/cfr/text/12/1022.72
    snapshot_id: dd735dabe070a849
    fetched_at: '2026-05-22T18:52:52Z'
    content_hash: sha256:1a6c24dff478a223aeb936cb0196cb20f4e8b010e5c880bd74f7761f420f607d
    paragraph_quote: '§ 1022.72 General requirements for risk-based pricing notices.
      (a) In general. Except as otherwise provided in this subpart, a person must
      provide to a consumer a notice (“risk-based pricing notice”) in the form and
      manner required by this subpart if the person both: (1) Uses a consumer report
      in connection with an application for, or a grant, extension, or other provision
      of, credit to that consumer that is primarily for personal, family, or household
      purposes; and (2) Based in whole or in part on the consumer report, grants,
      extends, or otherwise provides credit to that consumer on material terms that
      are materially less favorable than the most favorable material terms available
      to a substantial proportion of consumers from or through that person . (b) Determining
      which consumers must receive a notice. A person may determine whether paragraph
      (a) of this section applies by directly comparing the material terms offered
      to each consumer and the material terms offered to other consumers for a specific
      type of credit product. For purposes of this section, a “specific type of credit
      product” means one or more credit products with similar features that are designed
      for similar purposes. Examples of a specific type of credit product include
      student loans, unsecured credit cards, secured credit cards, new automobile
      loans, used automobile loans, fixed-rate mortgage loans, and variable-rate mortgage
      loans. As an alternative to making this direct comparison, a person may make
      the determination by using one of the following methods: (1) Credit score proxy
      method —(i) In general. A person that sets the material terms of credit granted,
      extended, or otherwise provided to a consumer , based in whole or in part on
      a credit score, may comply with the requirements of paragraph (a) of this section
      by: (A) Determining the credit score (hereafter referred to as the “cutoff score”)
      that represents the point at which approximately 40 percent of the consumers
      to whom it grants, extends, or provides credit have higher credit scores and
      approximately 60 percent of the consumers to whom it grants, extends, or provides
      credit have lower credit scores; and (B) Providing a risk-based pricing notice
      to each consumer to whom it grants, extends, or provides credit whose credit
      score is lower than the cutoff score. (ii) Alternative to the 40/60 cutoff score
      determination. In the case of credit that has been granted, extended, or provided
      on the most favorable material terms to more than 40 percent of consumers, a
      person may, at its option, set its cutoff score at a point at which the approximate
      percentage of consumers who historically have been granted, extended, or provided
      credit on material terms other than the most favorable terms would receive risk-based
      pricing notices under this section. (iii) Determining the cutoff score —(A)
      Sampling approach. A person that currently uses risk-based pricing with respect
      to the credit products it offers must calculate the cutoff score by considering
      the credit scores of all or a representative sample of the consumers to whom
      it has granted, extended, or provided credit for a specific type of credit product.
      (B) Secondary source approach in limited circumstances. A person that is a new
      entrant into the credit business, introduces new credit products, or starts
      to use risk-based pricing with respect to the credit products it currently offers
      may initially determine the cutoff score based on information derived from appropriate
      market research or relevant third-party sources for a specific type of credit
      product, such as research or data from companies that develop credit scores.
      A person that acquires a credit portfolio as a result of a merger or acquisition
      may determine the cutoff score based on information from the party which it
      acquired, with which it merged, or from which it acquired the portfolio. (C)
      Recalculation of cutoff scores. A person using the credit score proxy method
      must recalculate its cutoff score(s) no less than every two years in the manner
      described in paragraph (b)(1)(iii)(A) of this section. A person using the credit
      score proxy method using market research, third-party data, or information from
      a party which it acquired, with which it merged, or from which it acquired the
      portfolio as permitted by paragraph (b)(1)(iii)(B) of this section generally
      must calculate a cutoff score(s) based on the scores of its own consumers in
      the manner described in paragraph (b)(1)(iii)(A) of this section within one
      year after it begins using a cutoff score derived from market research, third-party
      data, or information from a party which it acquired, with which it merged, or
      from which it acquired the portfolio. If such a person does not grant, extend,
      or provide credit to new consumers during that one-year period such that it
      lacks sufficient data with which to recalculate a cutoff score based on the
      credit scores of its own consumers , the person may continue to use a cutoff
      score derived from market research, third-party data, or information from a
      party which it acquired, with which it merged, or from which it acquired the
      portfolio as provided in paragraph (b)(1)(iii)(B) until it obtains sufficient
      data on which to base the recalculation. However, the person must recalculate
      its cutoff score(s) in the manner described in paragraph (b)(1)(iii)(A) of this
      section within two years, if it has granted, extended, or provided credit to
      some new consumers during that two-year period. (D) Use of two or more credit
      scores. A person that generally uses two or more credit scores in setting the
      material terms of credit granted, extended, or provided to a consumer must determine
      the cutoff score using the same method the person uses to evaluate multiple
      scores when making credit decisions. These evaluation methods may include, but
      are not limited to, selecting the low, median, high, most recent, or average
      credit score of each consumer to whom it grants, extends, or provides credit.
      If a person that uses two or more credit scores does not consistently use the
      same method for evaluating multiple credit scores ( e.g., if the person sometimes
      chooses the median score and other times calculates the average score), the
      person must determine the cutoff score using a reasonable means. In such cases,
      use of any one of the methods that the person regularly uses or the average
      credit score of each consumer to whom it grants, extends, or provides credit
      is deemed to be a reasonable means of calculating the cutoff score. (iv) Credit
      score not available. For purposes of this section, a person using the credit
      score proxy method who grants, extends, or provides credit to a consumer for
      whom a credit score is not available must assume that the consumer receives
      credit on material terms that are materially less favorable than the most favorable
      credit terms offered to a substantial proportion of consumers from or through
      that person and must provide a risk-based pricing notice to the consumer . (v)
      Examples. (A) A credit card issuer engages in risk-based pricing and the annual
      percentage rates it offers to consumers are based in whole or in part on a credit
      score. The credit card issuer takes a representative sample of the credit scores
      of consumers to whom it issued credit cards within the preceding three months.
      The credit card issuer determines that approximately 40 percent of the sampled
      consumers have a credit score at or above 720 (on a scale of 350 to 850) and
      approximately 60 percent of the sampled consumers have a credit score below
      720. Thus, the card issuer selects 720 as its cutoff score. A consumer applies
      to the credit card issuer for a credit card. The card issuer obtains a credit
      score for the consumer . The consumer ''s credit score is 700. Since the consumer
      ''s 700 credit score falls below the 720 cutoff score, the credit card issuer
      must provide a risk-based pricing notice to the consumer . (B) A credit card
      issuer engages in risk-based pricing, and the annual percentage rates it offers
      to consumers are based in whole or in part on a credit score. The credit card
      issuer takes a representative sample of the consumers to whom it issued credit
      cards over the preceding six months. The credit card issuer determines that
      approximately 80 percent of the sampled consumers received credit at its lowest
      annual percentage rate , and 20 percent received credit at a higher annual percentage
      rate . Approximately 80 percent of the sampled consumers have a credit score
      at or above 750 (on a scale of 350 to 850), and 20 percent have a credit score
      below 750. Thus, the card issuer selects 750 as its cutoff score. A consumer
      applies to the credit card issuer for a credit card. The card issuer obtains
      a credit score for the consumer . The consumer ''s credit score is 740. Since
      the consumer ''s 740 credit score falls below the 750 cutoff score, the credit
      card issuer must provide a risk-based pricing notice to the consumer . (C) An
      auto lender engages in risk-based pricing, obtains credit scores from one of
      the nationwide consumer reporting agencies, and uses the credit score proxy
      method to determine which consumers must receive a risk-based pricing notice.
      A consumer applies to the auto lender for credit to finance the purchase of
      an automobile. A credit score about that consumer is not available from the
      consumer reporting agency from which the lender obtains credit scores. The lender
      nevertheless grants, extends, or provides credit to the consumer . The lender
      must provide a risk-based pricing notice to the consumer . (2) Tiered pricing
      method —(i) In general. A person that sets the material terms of credit granted,
      extended, or provided to a consumer by placing the consumer within one of a
      discrete number of pricing tiers for a specific type of credit product, based
      in whole or in part on a consumer report, may comply with the requirements of
      paragraph (a) of this section by providing a risk-based pricing notice to each
      consumer who is not placed within the top pricing tier or tiers, as described
      below. (ii) Four or fewer pricing tiers. If a person using the tiered pricing
      method has four or fewer pricing tiers, the person complies with the requirements
      of paragraph (a) of this section by providing a risk-based pricing notice to
      each consumer to whom it grants, extends, or provides credit who does not qualify
      for the top tier (that is, the lowest-priced tier). For example, a person that
      uses a tiered pricing structure with annual percentage rates of 8, 10, 12, and
      14 percent would provide the risk-based pricing notice to each consumer to whom
      it grants, extends, or provides credit at annual percentage rates of 10, 12,
      and 14 percent. (iii) Five or more pricing tiers. If a person using the tiered
      pricing method has five or more pricing tiers, the person complies with the
      requirements of paragraph (a) of this section by providing a risk-based pricing
      notice to each consumer to whom it grants, extends, or provides credit who does
      not qualify for the top two tiers (that is, the two lowest-priced tiers) and
      any other tier that, together with the top tiers, comprise no less than the
      top 30 percent but no more than the top 40 percent of the total number of tiers.
      Each consumer placed within the remaining tiers must receive a risk-based pricing
      notice. For example, if a person has nine pricing tiers, the top three tiers
      (that is, the three lowest-priced tiers) comprise no less than the top 30 percent
      but no more than the top 40 percent of the tiers. Therefore, a person using
      this method would provide a risk-based pricing notice to each consumer to whom
      it grants, extends, or provides credit who is placed within the bottom six tiers.
      (c) Application to credit card issuers —(1) In general. A credit card issuer
      subject to the requirements of paragraph (a) of this section may use one of
      the methods set forth in paragraph (b) of this section to identify consumers
      to whom it must provide a risk-based pricing notice. Alternatively, a credit
      card issuer may satisfy its obligations under paragraph (a) of this section
      by providing a risk-based pricing notice to a consumer when: (i) A consumer
      applies for a credit card either in connection with an application program,
      such as a direct-mail offer or a take-one application, or in response to a solicitation
      under 12 CFR 1026.60 , and more than a single possible purchase annual percentage
      rate may apply under the program or solicitation ; and (ii) Based in whole or
      in part on a consumer report, the credit card issuer provides a credit card
      to the consumer with an annual percentage rate referenced in § 1022.71(n)(1)(ii)
      that is greater than the lowest annual percentage rate referenced in § 1022.71(n)(1)(ii)
      available in connection with the application or solicitation . (2) No requirement
      to compare different offers. A credit card issuer is not subject to the requirements
      of paragraph (a) of this section and is not required to provide a risk-based
      pricing notice to a consumer if: (i) The consumer applies for a credit card
      for which the card issuer provides a single annual percentage rate referenced
      in § 1022.71(n)(1)(ii) , excluding a temporary initial rate that is lower than
      the rate that will apply after the temporary rate expires and a penalty rate
      that will apply upon the occurrence of one or more specific events, such as
      a late payment or an extension of credit that exceeds the credit limit; or (ii)
      The credit card issuer offers the consumer the lowest annual percentage rate
      referenced in § 1022.71(n)(1)(ii) available under the credit card offer for
      which the consumer applied, even if a lower annual percentage rate referenced
      in § 1022.71(n)(1)(ii) is available under a different credit card offer issued
      by the card issuer. (3) Examples. (i) A credit card issuer sends a solicitation
      to the consumer that discloses several possible purchase annual percentage rates
      that may apply, such as 10, 12, or 14 percent, or a range of purchase annual
      percentage rates from 10 to 14 percent. The consumer applies for a credit card
      in response to the solicitation . The card issuer provides a credit card to
      the consumer with a purchase annual percentage rate of 12 percent based in whole
      or in part on a consumer report. Unless an exception applies under § 1022.74
      , the card issuer may satisfy its obligations under paragraph (a) of this section
      by providing a risk-based pricing notice to the consumer because the consumer
      received credit at a purchase annual percentage rate greater than the lowest
      purchase annual percentage rate available under that solicitation . (ii) The
      same facts as in the example in paragraph (c)(3)(i) of this section, except
      that the card issuer provides a credit card to the consumer at a purchase annual
      percentage rate of 10 percent. The card issuer is not required to provide a
      risk-based pricing notice to the consumer even if, under a different credit
      card solicitation , that consumer or other consumers might qualify for a purchase
      annual percentage rate of 8 percent. (d) Account review —(1) In general. Except
      as otherwise provided in this subpart, a person is subject to the requirements
      of paragraph (a) of this section and must provide a risk-based pricing notice
      to a consumer in the form and manner required by this subpart if the person:
      (i) Uses a consumer report in connection with a review of credit that has been
      extended to the consumer ; and (ii) Based in whole or in part on the consumer
      report, increases the annual percentage rate (the annual percentage rate referenced
      in § 1022.71(n)(1)(ii) in the case of a credit card). (2) Example. A credit
      card issuer periodically obtains consumer reports for the purpose of reviewing
      the terms of credit it has extended to consumers in connection with credit cards.
      As a result of this review, the credit card issuer increases the purchase annual
      percentage rate applicable to a consumer ''s credit card based in whole or in
      part on information in a consumer report. The credit card issuer is subject
      to the requirements of paragraph (a) of this section and must provide a risk-based
      pricing notice to the consumer .'
  judgment: false
