Insurer Wins at US Supreme Court On Credit Score Use

The Supreme Court ruled in favor of two large insurers, limiting the circumstances under which companies must tell customers their credit ratings are affecting the amount they pay.

 

The U.S. Supreme Court limited the rights of consumers under a federal credit-reporting law in a victory for insurers Safeco Corp. and Geico Corp. and other financial services companies.

 

In Safeco's case, two customers said they should have been notified that better credit scores would have reduced their premiums for their auto and renters insurance policies. In the Geico case, a would-be customer said he wasn't told that his credit history prevented him from getting the company's lowest rate when he called for a quote.

 

The Fair Credit Reporting Act requires companies to notify consumers when they take an "adverse action," such as increasing rates, based on credit reports.

 

The dispute asked the Supreme Court to decide whether insurers had to notify every customer who would have received a better rate with a perfect credit score. Disclosure is required under the fair-credit law only when a low credit score results in an ``adverse action.''

 

The justices said the Fair Credit Reporting Act doesn't require insurers to notify every consumer who is offered something short of the lowest premiums when seeking a rate quote or applying for a policy.

 

The ruling may also bolster other financial services companies, including credit-card companies fighting lawsuits over pre-approval letters sent to consumers and retailers defending against claims that center on the inclusion of expiration dates on credit-card receipts.

 

The insurers believe that there is a strong correlation between a customer's credit history and the likelihood that a customer will file a claim.