March 17, 2008
Rep. Luis Gutierrez (D-IL) introduced H R 5633 ” To amend the Fair Credit Reporting Act to prohibit certain discriminatory uses of consumer reports and consumer information in connection with certain personal lines of insurance, and for other purposes.”
The bill is co-sponsored by Rep. Melvin Watt [D-NC] and Rep. Barney Frank [D-MA].
When I see those three names together my first though is now what! followed by how much will this cost me?
Reading the full text of the bill is a bit legalese to me, I’ll bring it up with an attorney and report back when I’ve had it interpreted; bottom line I can’t quite figure out if:
a. The Feds are trying to ban the use of credit scoring altogether OR
b. The Feds are banning the use of credit scoring to determine ethnicity of applicants.
My guess is the bill sponsors are writing the bill to ’solve’ problem b and in effect it will ’solve’ problem a.
PCI thinks this is move to totally ban credit scoring of personal lines insurance policies.
I’d tend to agree since credit reports don’t currently report the race of the consumer. Any person who is adversely impacted by a bad credit score could argue they were discriminated against forcing the insurers and credit reporting agencies to prove it wasn’t racism.
Rather than fight such lawsuits, most insurers would remove credit scoring from rating formulas.
Kind of a back-door approach to legislating what you want.
