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FACTA -- Are You Out of Compliance?

Many mortgage professionals are out of compliance with the FACT Act. Enacted in 2004, FACTA (Fair and Accurate Credit Transaction Act) amended the FCRA, adding many components that affect mortgage brokers and lenders. The overwhelming majority of brokers are either unaware of or confused about one of the key sections. The Notice To Home Loan Applicant requirement (§ 609g) stipulates that when a consumer’s credit score is reviewed in association with a mortgage transaction, the requesting entity (broker or lender) must provide the consumer the “Notice To Home Loan Applicant,” which includes the “Consumer Score Disclosure.” (To see a sample disclosure, click here.)

When you review a borrower’s credit score for mortgage purposes, you must provide the Notice to Home Loan Applicant and Consumer Score Disclosure to the borrower in writing.

Let’s dispel a few common myths regarding the FACTA score disclosure requirement.

• The requirement is not based on applications or closings; it is based on obtaining a credit score for mortgage use. This includes simply obtaining a score when conducting a pre-qual conversation that does not result in an application for mortgage.
• It does not matter how many bureaus or scores are obtained. If you look at a single credit score, you must still provide the disclosure.
• If you run a single bureau score as a pre-qual, then later add additional bureaus/scores to the file, you must provide a second disclosure containing the newly obtained credit scores.
• It does not matter that you are only brokering the loan; if you run the consumer’s credit score, you must provide the disclosure.

The FACT Act does not stipulate how the disclosure must be provided so long as it given in writing. Acceptable delivery methods include hand delivery, mail, fax, or courier, and you do not need to keep a copy of the notice or obtain the consumer’s signature to show delivery. Since the issue of the credit score disclosure in cases of credit rescoring is ambiguous in the language of the Act, it is best to provide an additional disclosure each and every time a file is rescored.

Credit Technologies provides three options for handling the consumer disclosure requirement.

1) You can create the required disclosures at any time from the credit file page of any credit report from within the CreditTechnologies.com system. Then print and provide the disclosure to the consumer in person, via fax, mail or courier.

2) At your request, Credit Technologies can append each credit report with a copy of the required disclosure, so it is automatically printed each time you print the credit report.

3) Credit Technologies can automate your consumer disclosure compliance. Our FACTA Certificate Service will generate and issue via first class mail the required disclosure for each applicant on whom you process a credit score. We will also provide a certificate of compliance that can be used to satisfy any lender request, or audit inquiry. To activate automated disclosures on your account, please send your request to CustSvc@CreditTechnologies.com. We will begin issuing the required disclosures, and provide your certificate of compliance the same day.

For more information on automating your FACTA compliance or any other Credit Technologies product or service, please call us toll-free at 800.455.4922. We'll be happy to answer any questions you may have. Not a member yet? - Join Now.

Thank you for considering Credit Technologies.

This information is an overview of the FACT ACT and does not contain the complete text of the act, nor can it be construed in any way as legal advice. There is no guarantee written or implied as to the accuracy or completeness of the information contained in this document. Credit Technologies, Inc. cannot provide legal advice on this or any other matter. Please consult your compliance or legal department to ensure your compliance with the FACT ACT.