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On the theory that knowledge is power, more information usually better than less. In that vein, new regulations passed by the FTC and The Federal Reserve Board will require banks to give consumers more information regarding why they are receiving less than favorable terms on their loans. The new banking regulations will apply to all types of credit such as credit cards, auto loans, mortgages and student loans. The rules will apply to banks as well as lenders such as auto dealers and financing firms.

When a borrower is given a loan at terms ?materially less favorable? than ?a substantial proportion? of the lenders? other customers, according to the Federal Register, the bank will be required to give notice and a free credit report or score to the borrower. Currently, banks are not required to explain why a borrower is given the terms set by the lender.

It might be helpful for some consumers to receive a clear indication of problems with their credit score, but consumers should know that these regulations ask lenders to do something that they can do for themselves, right now. Although in its report on the new regulations, Bloomberg notes that credit reports usually have a fee attached, they also list several services which provide one free credit report a year: Equifax Inc., Experian PLC and TransUnion LLC. Go to www.annualcreditreport.com to obtain a copy. In other words, don't wait for these regulations to take effect or for a bank to hit you with high interest rates on your next car loan, protect yourself by understanding your credit before you apply for a loan or credit card. It can only be hoped that lenders will not use these regulations as an excuse to raise fees to pay for the new "service" of notifying consumers of their credit rating.

These regulations were written to comply with a 2003 bill passed by Congress to improve the accuracy of credit reports, combat identity theft and give consumers more control over solicitations. They do not take effect until Jan. 1, 2011.

Related Resources:

• Fed, FTC to Require Notices for Credit Decisions (Bloomberg)
• New Rules Require Lenders To Say Why They're Gouging You (Consumerist)
• Filing a Consumer Complaint About a Bank (FindLaw)
• Consumer Credit (FindLaw)