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The Consumer Credit Reporting Agencies Act is urgency legislation effective in California on July 1, 2001 which adds “credit score” information disclosure requirements to the existing obligations of users of consumer credit reports (California Civil Code Section 1785.20.2). Practically, in most cases, it is the lender which will satisfy these additional requirements. As only one user is required to make this disclosure, a broker or other user should ensure, rather than simply assume, that its lender is satisfying the requirements.

These new provisions are applicable to any person “who makes or arranges loans and who uses a consumer credit score” in connection with an application initiated or sought by a consumer for a closed end loan or establishment of an open end loan for a consumer purpose that is secured by one to four units of residential real property (the “User”). Civil Code Section 1785.20.2. For purposes of this act, “credit score” means a numerical value or a categorization derived from a statistical tool or modeling system used by a person who make or arranges a loan to predict the likelihood of certain credit behaviors, including default. Section 1785.15.1.

USER DISCLOSURE DUTIES

Section 1878.20.2 requires the User to provide to the consumer as soon as reasonably practicable:

The notice required by the statute [set forth below], and a copy of the information that was obtained from a credit reporting agency or was developed and used by the user of the information, including 

      (A) The consumer’s current credit score or the consumer’s most recent credit score that was previously calculated by the credit reporting agency for a purpose related to the extension of credit; 

      (B) The range of possible credit scores under the model used; 

      (C) All the key facts that adversely affected the consumer’s credit score in the model used, the total
number of which shall not exceed four; 

      (D) The date the credit score was created; 

      (E) The name of the person or entity that provided the underlying credit score or credit file.

If a User uses an automated underwriting to underwrite a loan, or a credit score provided by a consumer reporting agency, that person may satisfy the obligation to provide a credit score by disclosing a credit score and associated key factors supplied by a consumer credit reporting agency. Section 1885.20.2(b), (c). The obligation pursuant to this section is limited solely to providing a copy of the information that was received from the consumer credit reporting agency, without liability for the content of that information or the report provided by the consumer credit reporting agency. Section 1785.20.2(f).

This section does not require any person to do the following: 

      (1) Explain the information provided;

      (2) Disclose any information other than a credit score or key factor, defined as any relevant element or reason adversely affecting the credit score for the particular individual listed in the order of its importance based on its effect on the credit score; 

      (3) Disclose any credit score or related information obtained by the User after a loan has closed; 

      (4) Provide more than one disclosure per loan transaction; or 

      (5) Provide the disclosure required by this section when another person has made the disclosure to the consumer for that loan transaction. Section 1785.20.2(e) (emphasis added).

NOTICE TO THE HOME LOAN APPLICANT

The notice below must be provided to the consumer, and also must include the name, address, and telephone number of each credit bureau providing a credit score that was used. Section 1785.20.2(d).

In connection with your application for a home loan, the lender must disclose to you the score that a credit bureau distributed to users and the lender used in connection with your home loan, and the key factors affecting your credit scores.

The credit score is a computer generated summary calculated at the time of the request and based on information a credit bureau or lender has on file. The scores are based on data about your credit history and payment patterns. Credit scores are important because they are used to assist the lender in determining whether you will obtain a loan. They may also be used to determine what interest rate you may be offered on the mortgage. Credit scores can change over time, depending on your conduct, how your credit history and payment patterns change, and how credit scoring technologies change.

Because the score is based on information in your credit history, it is very important that you review the credit-related information that is being furnished to make sure it is accurate. Credit records may vary from one company to another.

If you have questions about your credit score or the credit information that is furnished to you, contact the credit bureau at the address and telephone number provided with this notice, or contact the lender, if the lender developed or generated the credit score. The credit bureau plays no part in the decision to take any action on the loan application and is unable to provide you with specific reasons for the decision on a loan application.

If you have questions concerning the terms of the loan, contact the lender.

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