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View Full Version : Credit History Use in Insurance, Employment Draws Congressional Scrutiny




bobbyw24
05-13-2010, 05:01 AM
By Margaret Collins

May 12 (Bloomberg) -- Congress is examining the use of consumer credit history by employers to make hiring decisions or insurers to set premiums, said U.S. Representative Luis Gutierrez, an Illinois Democrat.

“Credit scores and reports are used by insurance companies to pick their customers and are used to exclude those most likely to file a claim,” said Gutierrez in a statement, whose Subcommittee on Financial Institutions and Consumer Credit held a hearing today in Washington on the issue. “We are watching very closely and will take action if and when we find their practices out of line.”

Lenders use credit scores, such as the one developed by Minneapolis-based FICO, as a measure of credit worthiness in providing credit cards, mortgages and auto loans. Insurance companies use the scores to predict the likelihood of a claim and employers may check credit reports when hiring to determine how honest an employee may be, said Liz Pulliam Weston, author of “Your Credit Score.”

Nearly half of employers use credit reports in employment decisions, according to the National Consumer Law Center, a nonprofit based in Boston. Credit checks in hiring discriminate against African American and Latino job applicants and don’t predict job performance, said Chi Chi Wu, a staff attorney for the law center.

‘Unfair to Workers’

“It’s harmful and unfair to American workers,” Wu said at the hearing. Credit reports may contain errors and may be compromised by identity theft, according to the law center. Unemployed individuals may also fall behind on bills and have difficulty getting a job to help pay off debts because employers consider their credit history, Wu said.

The unemployment rate rose to 9.9 percent in April from 9.7 percent the prior month, according to the Department of Labor.

Congressional representatives including Gutierrez pressed witnesses on how credit history helps determine the likelihood of a driving accident or property damage. Gutierrez said he wondered how someone becoming unemployed and falling behind on bills would make the person a higher risk for a fire in their home.

There’s a “very strong relationship” between good credit and how much individuals may cost an insurance company, said Weston in an interview. The concern is whether the information will be used to discriminate against those with low incomes as well as minorities who may have lower scores, she said.

Used in Pricing

About 90 percent of individual insurers use credit information in their risk assessment and pricing, said David Snyder, vice president and associate general counsel of the American Insurance Association, an industry trade group based in Washington. The use of credit information is already “heavily regulated,” and “has proven to be very important for the market,” Snyder said.

“It predicts the likelihood of having a claim,” Snyder said, and has helped companies insure more people because companies can assess individual risk.

Forty-eight states regulate the use of credit scores for insurance, said Michael McRaith, director of the Illinois Department of Insurance. “Typically states will not allow credit-based insurance scores to be used as the sole basis for increasing rates or denying, canceling or non-renewing policies,” he said.

Credit information can benefit borrowers and individuals seeking policies such as property and casualty insurance because those with higher scores generally receive better terms, Weston said.

Medical Debt . . .

http://www.bloomberg.com/apps/news?pid=20603037&sid=aphtndvX4ojA

Inflation
05-13-2010, 07:31 PM
They are dividing Americans into a Kosher-certified Brahmin caste, and an untouchable Dalit caste.

Credit score and political belief are the indicators for which caste you and all your descendants will go into.