Groups Demand New U.S. Credit Score Study

WASHINGTON--A consortium of consumer groups called on Congress today to reject the Federal Trade Commission's recently completed study on credit scoring and order the agency to conduct "an objective, independent study."

The FTC in a report last week said credit scores are an "effective predictor" in rating customer risk factors for automobile insurance policies.

In objecting to the FTC findings, the consumer organizations said that "based on the available evidence of racial discrimination, Congress should ban the use of insurance credit scoring."

"The relationship between insurance credit scores and race is so strong that even though the FTC used data handpicked by the industry, it found that credit scoring discriminates against low-income and minority consumers, and that insurance scoring was a proxy for race," the statement said.

The comments released by the Consumer Federation of America, the National Fair Housing Alliance, the National Consumer Law Center, and the Center for Economic Justice were made in advance of a hearing set for Friday on the FTC report.

The groups said the FTC study is fatally flawed because the insurance industry controlled the data used in the analysis.

"Instead of requiring the submission of comprehensive policy data by a large number of insurers, the FTC used data handpicked by the insurance industry," the groups charged in their statement.

"Buried in the report," the organizations said, is the fact that the FTC said in its study that "the alleged correlation between risk and credit-based insurance scores might be explained by other factors."

"To add insult to injury, the FTC report mimics the insurance industry's blaming-the-victim psychobabble of claiming credit history is related to responsibility and risk management," said Shanna L. Smith, National Fair Housing Alliance president and chief executive officer.

"A look at the actual scoring models shows that socio-economic factors have more impact on the score than loan payment history and that an insurance credit score has little to do with personal responsibility and everything to do with economic and racial status," she added.