Don't Risk It! Merchant Billing And Compliance With The Risk-Based Pricing Rule

A recent Federal Trade Commission (FTC) enforcement action highlights the need for merchants that provide credit to consumers to review their policies and procedures for compliance with the Risk-Based Pricing Rule under the Fair Credit Reporting Act (FCRA). This Rule requires a creditor—defined to include a merchant that bills on a deferred basis—to provide consumers with a risk-based pricing notice if the creditor offers the consumer credit on less favorable terms based on information from the consumer's credit report or score.

On October 21, 2015, the FTC announced a proposed settlement with Sprint concerning allegations that the company had failed to provide consumers with risk-based pricing notices in connection with wireless phone contracts as required by the Risk-Based Pricing Rule. Thus, while the Risk-Based Pricing Rule applies broadly to traditional creditors like banks, credit card companies, and mortgage and auto lenders, the Sprint settlement underscores