Credit Scoring — The U.S. Supreme Court To Weigh In

According to the Professional Insurance Agents (PIA) Association January 22, 2007 newsletter the Supreme Court will be looking into what insurance companies must do when they charge a consumer more based on the consumers credit history.

The credit scoring controversy has been debated in state legislatures for years and last November Oregonians had a chance to say how they felt about the practice at the ballot box and overwhelmingly answered that it was okay.

Now the highest court in the land — the U.S. Supreme Court — will have a say.

Some justices wondered aloud in last week’s session about the practicality of insurers notifying consumers when a credit check turns into a higher premium. The court is hearing an appeal sent their way by the 9th U.S. Court of Appeals in San Francisco. That court said consumers must be notified and that the two insurers, Safeco and GEICO, violated the Fair Credit Reporting Act by not telling their customers that they were not receiving the best rate available and why.

Commenting on Safeco Insurance verses Burr and the GEICO case, Justice Stephen Breyer said, “If the court adopts the consumers’ argument, there will be tens of millions of notices being sent out. It will have the same effect as consumers receiving privacy notices. It will become meaningless and they will all wind up in the waste basket.”

Safeco’s representative Maureen Mahoney told the high court that credit scoring is only one of 15 criteria used to determine whether a customer’s rates are raised. And she argued if the court upholds the 9th circuit court’s decision each consumer impacted is entitled to receive $1000 — a cost that could make Safeco and GEICO shell out billions of dollars.