Supreme Court Case to Watch Carefully - Can Insurance Companies Use Credit Reports to Set Rates Without Telling the Consumer?

This is one to keep an eye on and will have huge implications for consumers throughout the country.

After pouring in millions and millions of dollars on the state level, insurance companies have won most of the highest profile initiatives placed on the ballot during the last election aimed at stopping the use of credit reports to set rates. The most successful tactic used was the claim by the insurance companies that all rates would go up if they couldn't target the reprobates who had bad scores.

This Supreme Court decision would require the consumer to at least be notified if credit reports were used to set the rate and would allow the consumer to sue the insurance companies for violating the FCRA if they don't notify.

With 70% of all credit reports containing serious errors, there is room for significantly higher rates, and therefore higher profits, to be imposed on an uninformed consumer with no knowledge of erroneous information existing on their report. Not to mention the nightmare the consumer will face getting incorrect negative items off their report.

If the insurance companies win this case, rates can be based on credit report information (whether correct or not) without the knowledge of the consumer and without them ever having to be notified. Nice.

Posted: 1/16/2007 10:39:00 AM

Court ponders insurance credit scores
Source: AP


SUPREME COURT -- Should auto insurance companies be required to inform consumers when their credit scores are used against them?

That's the issue today before the Supreme Court in the case of an Oregon man who didn't get a preferred rate from GEICO. He said he should have been told that his credit scores weren't high enough to lower his rate.

The Fair Credit Reporting Act holds businesses liable when they fail to inform customers of adverse decisions made because of credit reports.

GEICO and another insurance company, Safeco, are appealing a federal appeals court's decision that would make it easier for consumers to prevail when they sue corporations for allegedly violating the law.

Much of the business community has lined up behind the insurers. But consumer groups complain that insurance companies are looking for ways to avoid notifying customers when credit reports are used in making a decision.