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Financial Services Law Insights and Observations

CFPB and Arkansas AG settle with company for failing to provide risk-based pricing notices

Federal Issues CFPB State Attorney General Enforcement Credit Scores Consumer Finance FCRA

Federal Issues

On December 11, the CFPB and the Arkansas attorney general announced a proposed settlement with a Utah-based home-security and alarm company for allegedly failing to provide proper notices under the FCRA. According to the complaint filed in the U.S. District Court for the Eastern District of Arkansas, the company allows consumers to defer payment for the alarm and security-system equipment over the life of a long-term contract, and therefore extends credit to its customers. The company—in extending credit to its customers—allegedly obtained and used consumers’ credit scores to determine the amount of activation fees it would charge for its products and services, and then charged consumers who had lower credit scores higher fees without providing those consumers with required risk-based pricing notices. Under the FCRA and implementing regulation, Regulation V, companies are required to provide notice to consumers if a consumer receives less favorable credit terms based on a review of his or her credit report. Under the proposed settlement, the company is required to pay a $600,000 civil money penalty, of which $100,000 will be offset provided the company pays that amount to settle related litigation with the State of Arkansas that is currently pending in state court. The company will also be required to provide proper risk-based pricing notices under the FCRA.

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