Many lenders offer borrowers rates and terms based on their credit reports, which reflect the borrowers' ability to repay loans. The practice is called "risk-based pricing."

Under the proposal, a notice "would generally be provided to the consumer after the terms of credit have been set, but before the consumer becomes contractually obligated on the credit transaction," the Federal Reserve and the Federal Trade Commission said in a joint release.

Congress directed the Fed and the FTC to take the action under a 2003 law. The provisions announced yesterday are aimed at helping borrowers better understand the rates they are being offered on certain loans and get more information about their credit reports, Federal Reserve lawyers said.

The notification would kick in when a lender, based on the borrower's credit report, "offers or provides credit to the consumer on terms less favorable than the terms it offers or provides to other consumers," the regulators said.

If the lender offers a higher rate not related to the borrower's credit report - for instance because less money was provided as a down payment on a loan - the notice would not be required, the lawyers said.

"The proposed rules would apply, with certain exceptions, to all creditors that engage in risk-based pricing," the regulators said. One of the most significant exceptions, regulators said, would allow lenders to skip the notice if they "provide all of their consumers with their credit scores and explanatory information," the regulators said.

The public, industry and others will have an opportunity to weigh in on the proposal, which is subject to change, before a final plan is adopted.