House Dems look to ban auto insurers from using credit scores to set rates

Two House Democrats from Michigan have proposed legislation that would prevent auto insurance companies from using credit scores as a factor in determining auto insurance rates, a change that would dramatically reduce these rates in their home state and around the country.

Reps. Hansen Clarke (D) and John Conyers Jr. (D) last week introduced the Ban the Use of Credit Scores in Auto Insurance Act, along with Rep. Bennie Thompson (D-Miss.). The bill would amend the Fair Credit Reporting Act so that reports on consumer credit could not be used to set auto insurance rates.

Clarke has said that using consumer credit reports as a factor in setting insurance rates has had a crushing impact on Michigan drivers as the recession hit Michigan particularly hard, leading to plunging credit scores and sharply rising auto insurance rates. Michigan reportedly has the highest auto insurance rates in the country, and an unemployment rate that is higher than the nationwide average.

"The cost of insurance for everyday people is simply too high," Clarke said on his website. "We have to end insurance rating factors that are unfair. Companies penalizing citizens for their credit score and other 'redlining' practices must end."

Conyers said on his Facebook page last week that "Auto insurance rates should be based on your skills and responsibility behind the wheel, not extraneous factors outside your control."

Insurance companies are likely to oppose the bill, as they see consumer credit scores as a sign of the ability of people to pay their bills. Like other financial institutions, auto insurers have increased their premiums as non-payment risk increases.

Clarke has introduced several bills aimed at helping his constituents in Michigan and other states, including bills to forgive all student loan debt and direct more federal money for Detroit-area infrastructure projects.

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