The Federal Reserve and Federal Trade Commission proposed new rules on Thursday which would require lenders to inform consumers of unfavourable developments or changes to the terms of their loans.
"Risk-based pricing refers to the practice of using a consumer's credit report, which reflects his or her risk of nonpayment, in setting or adjusting the price and other terms of credit offered or extended to a particular consumer," explained the press release from the Fed. "Many creditors offer more favorable terms to consumers with better credit histories."
Under the proposed regulations, the lenders would also have the option of divulging a consumer's credit risk rating.
By Erik Kevin Franco and edited by Cristina Markham