Keeping score

Although 2006 is safely behind us, some sticky issues are on the horizon as we edge our way into 2007. Case in point is the pending Supreme Court cases of Safeco v. Burr and GEICO v. Edo. The cases are about notification requirements for consumers when credit scoring is used by insurance companies, and 13 states have signed on to an amicus brief in support of the plaintiffs.

Credit scoring cases have sprung up in the past, but the issue being heard by the high court deals with whether consumers should receive notice that a poor credit score impeded their ability to receive the best insurance rates. The consumers in the cases claim that insurance companies Safeco and GEICO violated the federal Fair Credit Reporting Act (FRCA). The defendants said that when a consumer’s credit information resulted in receiving a higher rate, insurers should have sent out “adverse action notices” required under FRCA. They said the insurers acted in “willful” disregard of the Act by not doing so.

FCRA adverse action notices are sent to consumers by banks, landlords and others when a consumer’s credit report has caused them to be denied for a loan or a lease. Thirteen insurance commissioners told the Supreme Court that they were filing their brief to “further their collective mission of protecting consumers by supporting interpretations of the FCRA that (a) put valuable information in the hands of consumers, (b) provide appropriate incentives for insurance companies that use consumer credit information to adopt procedures that assure compliance with the law, and (c) hold insurance companies accountable when they adopt policies that recklessly disregard consumer rights in contravention of the FCRA.”

The brief urges the Supreme Court to uphold the decisions of the 9th Circuit Court of Appeals in the Safeco and GEICO cases. States that signed on to the amicus brief include those from Arkansas, California, Georgia, Iowa, Kansas, Michigan, Montana, New Mexico, North Dakota, Oklahoma, Utah and Washington.

Arkansas Insurance Commissioner Julie Benafield Bowman said in a statement released by the Arkansas Insurance Department that she felt it was important to join in the filing of the brief as all consumers deserve to know if something in their credit score has resulted in higher rates for their auto insurance.

Generally, the companies in question followed the guidelines of the Federal Trade Commission and deny any willful intent at disregarding the FRCA Act. Furthermore, the companies said notifying customers would be burdensome, and the notification would be discarded by consumers in the mountain of junk mail they probably receive from other sources.

Eighty percent of Safeco’s new customers, and 90 percent of GEICO’s new customers would require notices, if the court rules against the insurers, they claimed.

The AP reported that during oral arguments, several Supreme Court Justices seemed “taken aback” at the magnitude their eventual ruling will have.

While the Supreme Court likely will settle this dispute in 2007, the overall credit scoring issue has more prickly prongs than this one case. After all, when personal information affects individual and corporate finances, it matters to a whole lot of people who’s keeping score.