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640.1

Federal Register / Vol. 86, No. 178 / Friday, September 17, 2021 / Rules and Regulations Scope.

a Coverage1 In general. This part applies to any motor vehicle dealer as defined in 640.2 of this part that both i Uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to a consumer that is primarily for personal, family, or household purposes; and ii Based in whole or in part on the consumer report, grants, extends, or otherwise provides credit to the 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 motor vehicle dealer.
2 Business credit excluded. This part does not apply to an application for, or a grant, extension, or other provision of, credit to a consumer or to any other applicant primarily for a business purpose.
b Enforcement. The provisions of this part will be enforced in accordance with the enforcement authority set forth in sections 621a and b of the FCRA.
640.2

Definitions.

For purposes of this part, the following definitions apply:
a Adverse action has the same meaning as in 15 U.S.C. 1681ak1A.
b Annual percentage rate has the same meaning as in 12 CFR 1026.14b with respect to an open-end credit plan and as in 12 CFR 1026.22 with respect to closed-end credit.
c Closed-end credit has the same meaning as in 12 CFR 1026.2a10.
d Consumer has the same meaning as in 15 U.S.C. 1681ac.
e Consummation has the same meaning as in 12 CFR 1026.2a13.
f Consumer report has the same meaning as in 15 U.S.C. 1681ad.
g Consumer reporting agency has the same meaning as in 15 U.S.C. 1681af.
h Credit has the same meaning as in 15 U.S.C. 1681ar5.
i Creditor has the same meaning as in 15 U.S.C. 1681ar5.
j Credit card has the same meaning as in 15 U.S.C. 1681ar2.
k Credit card issuer has the same meaning as in 15 U.S.C. 1681ar1A.
l Credit score has the same meaning as in 15 U.S.C. 1681gf2A.
m Firm offer of credit has the same meaning as in 15 U.S.C. 1681al.
n Material terms means 1i Except as otherwise provided in paragraphs n1ii and n3 of this section, in the case of credit extended under an open-end credit plan, the annual percentage rate required to be
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disclosed under 12 CFR 226.6a1ii or 12 CFR 226.6b2i, excluding any temporary initial rate lower than the rate that will apply after the temporary rate expires, any 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, and any fixed annual percentage rate option for a home equity line of credit;
ii In the case of a credit card other than a credit card used to access a home equity line of credit or a charge card, the annual percentage rate required to be disclosed under 12 CFR 226.6b2i that applies to purchases purchase annual percentage rate and no other annual percentage rate, or in the case of a credit card that has no purchase annual percentage rate, the annual percentage rate that varies based on information in a consumer report and that has the most significant financial impact on consumers;
2 In the case of closed-end credit, the annual percentage rate required to be disclosed under 12 CFR 226.17c and 226.18e; and 3 In the case of credit for which there is no annual percentage rate, the financial term that varies based on information in a consumer report and that has the most significant financial impact on consumers, such as a deposit required in connection with an extension of credit.
o Materially less favorable means, when applied to material terms, that the terms granted, extended, or otherwise provided to a consumer differ from the terms granted, extended, or otherwise provided to another consumer from or through the same motor vehicle dealer such that the cost of credit to the first consumer would be significantly greater than the cost of credit granted, extended, or otherwise provided to the other consumer. For purposes of this definition, factors relevant to determining the significance of a difference in cost include the type of credit product, the term of the credit extension, if any, and the extent of the difference between the material terms granted, extended, or otherwise provided to the two consumers.
p Motor vehicle dealer means any person excluded from Consumer Financial Protection Bureau jurisdiction as described in 12 U.S.C. 5519.
q Open-end credit plan has the same meaning as in 15 U.S.C. 1602j, as interpreted by the Board in Regulation Z and the Official Staff Commentary to Regulation Z.
r Person has the same meaning as in 15 U.S.C. 1681ab.

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640.3 General requirements for riskbased pricing notices.

a In general. Except as otherwise provided in this part, a motor vehicle dealer must provide to a consumer a notice risk-based pricing notice in the form and manner required by this part if the motor vehicle dealer both 1 Uses a consumer report in connection with an application for, or a grant, extension, or other provision of, credit to that consumer 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 motor vehicle dealer.
b Determining which consumers must receive a notice. A motor vehicle dealer 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 designed for similar purposes.
Examples of a specific type of credit product include new automobile loans and used automobile loans. As an alternative to making this direct comparison, a motor vehicle dealer may make the determination by using one of the following methods:
1 Credit score proxy methodi In general. A motor vehicle dealer 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
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