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Hoping to prove that federal legislation to regulate credit
history scores isn’t necessary, Rep. George Keiser (R-N.D.), secretary of the National
Conference of Insurance Legislators (NCOIL), testified to members of a U.S.
House Subcommittee on Oversight and Investigations in Washington, D. C. that an
NCOIL insurance scoring model act provides a critical balance between consumer and
other interests.
In his testimony, Keiser noted that 26 states have based
their oversight on the 2002 NCOIL Model Act Regarding Use of Credit Information
in Personal Insurance. He acknowledged
that credit history may be an effective predictor of risk, but he assured
fellow lawmakers that NCOIL believes insurers should not have free reign.
“Our group feels strongly that state legislators have a
responsibility to shield consumers from potential abuse and to encourage state
laws that go beyond a one-size-fits-all approach,” Keiser said.
The NCOIL model law prohibits credit experience from being
the sole factor influencing a personal-lines underwriting or rating decision
and provides for use of updated credit information, among other things.
Keiser spoke of important protections built into the NCOIL
model, including prohibiting adverse actions based on “thin” credit files or
the absence of a credit card—language that would benefit consumers such as
young persons just starting out, the elderly, and new citizens.
The NCOIL model also allows that people may struggle financially
after a personal hardship, such as an extended illness or death of a spouse. Under
the model, insurers could go easy on those affected by extreme circumstances.
“Extraordinary events of this nature are likely no one’s
fault—and our laws should not pretend that they are,” Keiser said.
Keiser touted the “commonsense restrictions” set forth in
the NCOIL model concerning the way insurers can treat certain data, including inquiries
that credit card companies make before sending out promotional offers,
inquiries that occur when a consumer shops around for the best deals on auto
and home loans, and collection accounts related to medical events.
The congressman urged the subcommittee not to preempt state efforts,
as contemplated under two pending bills that would prevent or prohibit use of
insurance scoring.
“The 26 states around the country that regulate based on the
NCOIL model responded effectively to an emerging issue that demanded a public
policy response,” he said. “Federal legislation that would set aside these
strong laws is unneeded and may actually bring unintended, unfortunate consequences,
such as higher rates for consumers who benefit from their good credit.”
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