House Dem proposes banning use of credit scores for auto insurance

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WASHINGTON — A first-term Democrat on the House Financial Services Committee is introducing legislation to ban the use of credit reports and scores in determining auto insurance rates.

Rep. Rashida Tlaib of Michigan has sponsored the Prevent Discrimination in Auto Insurance Act to prevent “undue burden” on low-income individuals seeking auto insurance.

In a letter to her colleagues, Tlaib said using credit reports "for the determination of auto insurance rates serves no purpose in determining the safety of the driver" and "does nothing to keep other drivers safe."

“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,” she wrote.

Specifically, the legislation would prohibit consumer reporting agencies from furnishing reports for the use of underwriting an auto insurance policy and setting a consumer's rate. It also prevents insurers from using or obtaining credit reports or other consumer information in connection with underwriting or pricing.

The bill comes after a February House hearing in which the chief executives of the three major credit reporting agencies — Equifax, Experian and TransUnion — testified and members of both parties described the current credit reporting system as "broken."

At the hearing, Tlaib said auto insurance rates in her district are some of the highest in the country due to their credit history.

“What does a credit score say about the person's driving history or their potential for accidents? … More and more of our residents are driving without car insurance because of this issue around credit score, with the use of credit score,” Tlaib said at the hearing. “And so I want to bring that to your attention, and I hope that you all will work with me and many of my colleagues that will be in full support of saying we have to restrict the use of credit scoring as the basis or a circumstance for auto insurance companies as a driving record standard.”

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