|Received:||3/16/2005 10:23:52 PM|
|Agency:||Federal Trade Commission|
|Rule:||Notice of Proposed Study on the Effects of Credit Scores and Credit-based Insurance Scores on the Availability and Affordability of Financial Products|
Comments:Thank you for the opportunity to comment on the use of consumer reports for credit-based insurance scores. My opinion is that this practice is unfair to consumers for several reasons. Consumers with good driving records are sometimes forced to pay higher premiums based on information from credit reporting agencies, which could be in error, or based on circumstances beyond the control of the consumer. The Public Interest Research Group (PIRG) estimates that 80% of credit reports contain some type of error, and 25% contain serious errors. Consumers who are victims of ID Theft, or are victims of job loss or illness may be paying higher premiums while maintaining perfect driving records with many years of no claims being filed. Consumers should not be punished for circumstances they cannot control, and are not related to driving or home ownership. The insurance industry counters that "Credit reports are mostly accurate - research suggests that that the error rate (based on the number of consumers who dispute information) is extremely low." (http://www.igate.com/whitepapers/Insurance_Scoring.pdf ). The fact that consumer disputes are low may very well be based on lack of knowledge rather than the possibility of errors. New regulations allowing free credit reports may increase those numbers dramatically, as expected by the national credit reporting agencies. The industry states that insurers must provide consumers with notice of adverse action, and consumers have the right to request that the insurer re-write his or her insurance policy based on the consumer's current insurance score. I have only received an adverse notice on one occasion, when I was denied coverage based on a credit report. I have never received an adverse notice when higher rates were charged due to those same reports. The consumer is not informed at the time of purchase if a consumer report is being used, or if the rate might have been different based on a different report, at least in my personal experience. Without proper notice or knowledge of procedure, I would have nothing to base a dispute on. Studies have also stated: "Insurance scores don’t predict the actual experience of one individual. They predict the average claim behavior of a group of people with essentially the same credit history. A good score is typically above 700 and a poor score is below 600. While on average people who have poor credit scores tend to file more claims, there are always exceptions. Within that group, there may be individuals who have stellar driving records and have never filed a claim, just as there are teenage drivers who have never had a crash, although teenagers as a group have more accidents than people in other age groups." (http://www.iii.org/media/hottopics/additional/texascreditscoring/ ) This is the very reason why this practice should be abolished. Consumers with good driving records are being punished because of the actions of others, or by data and research which is flawed to begin with. The studies mentioned above used two sets of data and merely looked for similarities to back up a conclusion that had already been drawn. I am in favor of making this practice illegal as soon as reasonably possible. Consumers have been overcharged or punished far too long without hope of any recovery of lost funds. Thank you again for the opportunity to comment on this subject.