New York Gov. Eliot Spitzer's recent veto of legislation to limit use of credit scores generated from consumer mortgage and auto loan inquiries is drawing praise from insurance industry trade groups.
The governor on Wednesday vetoed the measure (A.1416/S.4566) that would have prohibited insurers from considering home mortgage and auto loan inquiries in determining credit scores.
"This veto protects insurers' ability to use valid and predictive information," said Paul Tetrault, state affairs manager for the Northeast United States for the National Association of Mutual Insurance Companies.
"If this legislation had been enacted, it could have increased the cost and decreased the availability of coverage," he said.
Paul Magaril, regional manager and counsel for the Property Casualty Insurers Association of America, said PCI supported the veto because the bill "ignored the role that credit scores play in assessing insurance risks."
He said the bill was "unnecessary, and may have had the unintended consequence of increasing the cost of mortgage and automobile loans as well as the cost of insurance for the very consumers lawmakers wanted to protect."
In a letter to Gov. Spitzer, NAMIC's Mr. Tetrault said the legislation could have resulted in some consumers being unable to obtain coverage from companies that would have otherwise offered them coverage had the insurers been able to utilize the credit inquiry information.
Other consumers would have had to pay more than they would if insurers were able to use the information, he said.
"The legislation also would have required insurers to alter their underwriting business practices, incurring costs that would ultimately be borne by consumers," Mr. Tetrault said. "We commend the governor for having the foresight to reject this anti-insurance and anti-consumer legislation."
Before the veto action, Assemblyman Adam Bradley, D-White Plains, who introduced the bill, argued that the legislation was not intended to affect insurers' use of credit scoring as a risk management tool and did not do that.
Mr. Bradley said the bill supported consumers and its purpose was to keep good consumers from being penalized with an adverse score because they shopped around for a lower rate.
"It is an unfair penalty on consumers who are doing what they should be doing," said Mr. Bradley.
While some credit reporting companies may observe a 30- to 45-day rule on loan inquiries, others do not. In some cases it can take a consumer longer than the 30 days to shop for a loan, and that should not be a penalty, he said.
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