Tuesday, 26 March 2019 22:43

Tlaib Bill Would Prohibit Use of Credit Scores To Set Car Insurance Rates

Written by Melissa Nann Burke, The Detroit News



New legislation introduced in Congress by freshman Rep. Rashida Tlaib would block insurers from factoring in a consumer's credit history when setting auto rates.


Tlaib, a Democrat, said credit history or scores have nothing to do with how people drive, and results in discrimination against low-income consumers.


"It's a new form of red-lining. If you have a low credit score, [if] you're low-income, if you're financially burdened, does that make you less of a safe driver? No," Tlaib said. "It's just unfair. Most of my neighbors and residents, they don't have access to credit, and they shouldn't be punished for being poor."


Tlaib represents parts of Detroit, which has the highest auto insurance rates in the nation, but said the issue is one of fairness that resonates with her colleagues from around the country.


She already has 25 co-sponsors for her bill but will be fighting the insurance lobby, which opposes the legislation as "well-intentioned" but flawed.


"This bill would make underwriting less accurate and could lead to an increase in premiums for auto insurance policyholders,” said Jimi Grande, senior vice president of government affairs for the National Association of Mutual Insurance Companies.


The trade association also argued that Congress should respect the states' role in regulating the insurance industry, "rather than imposing a needlessly broad and counterproductive ban on this useful underwriting metric."


But while the states regulate insurance, Congress oversees the credit bureaus, Tlaib noted.


"This is just one small part that I can do on the federal level," she said.


Her bill, HR 1756, would prohibit the three credit bureaus from providing consumer reports or consumer information "to any person for use in making any decision to underwrite or rate auto insurance."


It would also prohibit the use of consumer information for auto insurance underwriting or rating of any consumer in connection with an auto insurance transaction.


In a letter to colleagues seeking their support, Tlaib wrote that the use of credit histories places an "undue burden on low-income communities."


"Historically marginalized populations have already had less access to wealth and credit-building opportunities and the continued use of credit histories to set auto insurance pricing compounds racial discrimination and exacerbates wealth inequality," Tlaib wrote.

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