[Congressional Bills 108th Congress]
[From the U.S. Government Publishing Office]
[H.R. 1473 Introduced in House (IH)]







108th CONGRESS
  1st Session
                                H. R. 1473

   To amend the Fair Credit Reporting Act to provide disclosures of 
   credit-based insurance scoring information by insurers and credit 
              reporting agencies, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             March 27, 2003

Mr. Gutierrez introduced the following bill; which was referred to the 
                    Committee on Financial Services

_______________________________________________________________________

                                 A BILL


 
   To amend the Fair Credit Reporting Act to provide disclosures of 
   credit-based insurance scoring information by insurers and credit 
              reporting agencies, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Insurance Credit Score Disclosure 
and Reporting Act''.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds as follows:
            (1) According to the Insurance Information Institute, 90 
        percent of property insurers now use insurance credit scoring 
        in some way in their underwriting decisions.
            (2) According to Consumer Reports, 70 percent of consumer 
        reports have some kind of error and 29 percent have at least 1 
        major error.
            (3) Since insurance credit scores are based on credit 
        bureau data, the accuracy of the data is essential to achieving 
        accurate scores.
            (4) No insurance credit scoring modeling company has been 
        able to identify the exact relationship between credit 
        characteristics and loss ratios.
            (5) In January 2002, the Florida Task Force on the Use of 
        Credit Reports in Underwriting Automobile and Homeowners 
        Insurance concluded that the use of consumer reports has a 
        negative impact on young people, minorities and people with low 
        incomes.
            (6) The Fair Credit Reporting Act requires that insurers 
        disclose the specific credit criteria used to raise rates or to 
        render a consumer ineligible for a discounted premium.
            (7) Corporate research conducted by Fair, Isaac & Company 
        found that residents of ZIP codes with high minority 
        populations scored substantially lower than residents than 
        residents of other ZIP codes.
    (b) Purposes.--The purposes of this Act are as follows:
            (1) To protect insurance applicants and policyholders from 
        insurers taking adverse action regarding insurance coverage and 
        premiums based solely on credit history or insurance credit 
        score.
            (2) To require insurers to disclose the use of insurance 
        credit scoring to insurance applicants and policyholders prior 
        to original application and to disclose the insurance credit 
        scoring criteria used by insurers to assess risk of applicant.
            (3) To enhance the availability and affordability of 
        insurance products and services to individuals and small 
        businesses of all economic circumstances and in all geographic 
        areas.
            (4) To facilitate the enforcement of Federal and State laws 
        that prohibit illegally discriminatory insurance practices.

SEC. 3. ESTABLISHMENT OF GENERAL REQUIREMENTS.

    (a) Disclosure of Use of Insurance Credit Score and Consumer 
Report.--An insurer who uses, or may use, a consumer report or 
insurance credit score as a factor in underwriting an insurance 
application or policy in a designated line of insurance shall disclose 
to the applicant for such insurance, including a person renewing an 
existing policy of insurance, at the time of the original application 
for the policy or the renewal of the policy that--
            (1) the insurer will, or will not, gather credit 
        information, as the case may be; and
            (2) the cost, coverage, and availability of insurance 
        policy will, or will not, be affected by the consumer report or 
        the insurance credit score of the applicant, as the case may 
        be.
    (b) Information Concerning Use of Consumer Reports and Insurance 
Credit Scores.--An insurer who uses, or may use, a consumer report or 
insurance credit score as a factor in underwriting an insurance 
application for, or the renewal of, an insurance policy for a 
designated line of insurance shall provide to the applicant or 
policyholder all relevant information on the use of such report or 
scores and the relationship between the use of insurance credit scores 
or any other risk scores or predictors and the cost and the scope of 
the coverage of such insurance to the applicant or policy holder, 
including the following:
            (1) A clear, concise, and detailed summary of how the 
        scores and predictors are derived.
            (2) All factors taken into account in deriving a score or 
        predictor.
            (3) How such factors are applied to the applicant or 
        policyholder.
            (4) How the applicant or policyholder scored on all 
        factors.
            (5) The relative weight given to each factor.
            (6) The manner and extent to which such factors raise or 
        lower the score or predictor.
    (c) Prohibition on Use of Adverse Information in Dispute.--
            (1) In general.--An insurer may not take any type of 
        adverse action with respect to any application for, or renewal 
        of, an insurance policy in a designated line of insurance that 
        takes into account an insurance credit score or credit 
        information contained in a consumer report that the insurer 
        knows to be in dispute.
            (2) Disclosure of maximum possible and actual insurance 
        credit score.--Additionally, for each industry trade line 
        total, an insurer shall disclose to the applicant or policy 
        holder--
                    (A) the highest insurance credit score that it is 
                possible to achieve for each such line; and
                    (B) the actual insurance credit score determined 
                for the applicant or policy holder for such line 
                pursuant to the insurance credit scoring model.
            (3) Redetermination of underwriting following correction of 
        consumer report.--If an insurer has taken adverse action with 
        respect to any insurance policy in a designated line of 
        insurance based on inaccurate information contained in a 
        consumer report or utilized in computing an insurance credit 
        score, and that inaccurate information is subsequently 
        corrected, the insurer shall re-underwrite the impacted policy 
        and refund any premium decrease to the insured retroactive to 
        the inception date of the policy.
    (d) Prohibition on Use of Low Insurance Credit Scores Resulting 
From Medical Emergencies or Other Special Circumstances.--An insurer 
may not make an adverse inference in underwriting an insurance 
application or policy in a designated line of insurance based on a low 
insurance credit score as a result of little or no credit information, 
unusually high bills associated with medical emergencies, or other 
special circumstances.
    (e) Actions Required in Case of Adverse Action Based on Consumer 
Report or Insurance Credit Scores.--If the use of a consumer report or 
insurance credit score in underwriting an insurance application or 
policy in a designated line of insurance results in an adverse action 
to an applicant or policyholder, the insurer shall--
            (1) inform the applicant or policyholder that a consumer 
        report or insurance credit score adversely affected the 
        underwriting of the insurance application or policy;
            (2) provide the applicant or policyholder with a copy of 
        the consumer report used by the insurer on which the action was 
        based, together with a detailed explanation, in easy to 
        understand terminology, of--
                    (A) the specific detailed credit characteristics on 
                which the adverse action was based; and
                    (B) the specific actions the applicant or 
                policyholder can take to improve the insurance credit 
                score;
            (3) ensure that the consumer report provided to applicant 
        or policy holder has the name, address, and a toll-free 
        telephone number of the consumer reporting agency that 
        furnished the credit information;
            (4) inform the applicant or policyholder of his or her 
        right to verify any credit information with that consumer 
        reporting agency (and include the names of any other consumer 
        reporting agencies which provided information in the consumer 
        report used by the insurer and provide the applicant or 
        policyholder with the addresses and toll-free telephone numbers 
        of such other consumer reporting agencies); and
            (5) inform the applicant or policyholder of his or her 
        right to lodge a dispute with a consumer reporting agency in 
        order to have any erroneous or incomplete information corrected 
        in accordance with the Fair Credit Reporting Act.
    (f) Premium Payment Plan Requirements.--
            (1) Based on insurance payment history.--An insurer that 
        offers premium payment plans to applicants and policyholders in 
        a designated line of insurance may not deny or condition such 
        payment plans on anything other than the payment history of 
        such applicant or policyholder with that insurance company.
            (2) Evenhanded reporting of payment history.--An insurer 
        that offers premium payment plans to applicants and policy 
        holders in a designated line of insurance shall report both the 
        favorable and unfavorable payment history of the insured to a 
        nationally recognized consumer reporting agency at least 
        monthly, quarterly, semi-annually, or annually pursuant to 
        policy requirements.
            (3) Recordkeeping requirement.--An insurer shall compile 
        and maintain, in accordance with regulations, a record of the 
        information provided by applicant or policyholder with respect 
        to a designated line of insurance, together with the credit 
        history or consumer report obtained by insurer and used in 
        underwriting.
            (4) Insurance credit scorers.--
                    (A) In general.--Any person involved in creating, 
                compiling, or providing insurance credit scores to or 
                on behalf of an insurer relating to a designated line 
                of insurance shall not provide or sell to any party, 
                other than the insurer, information or mailing lists 
                that include an insurance credit score or any other 
                information that, in whole or in part, is generated or 
                derived from credit inquiries or consumer reports of 
                insured persons or insurance applicants.
                    (B) Scope of application.--The information to which 
                subparagraph (A) applies includes information that may 
                identify time periods during which an insurance policy 
                of the applicant or insured in a designated line of 
                insurance may expire or an estimated range within which 
                the credit score of a person may fall.
                    (C) Certain information not subject to this 
                paragraph.--This paragraph shall not be construed as 
                limiting or prohibiting the exchange of information 
                that is specifically authorized under the Fair Credit 
                Reporting Act or this Act.

SEC. 4. ESTABLISHMENT OF GENERAL REQUIREMENTS TO SUBMIT INSURANCE 
              CREDIT SCORING MODELS AND INSURANCE CREDIT SCORES USED BY 
              INSURERS IN UNDERWRITING.

    The Federal Trade Commission shall, by regulation, establish 
requirements for insurers to compile and submit insurance credit score 
information with respect to designated lines of insurance to the 
Commission for each annual reporting period, in accordance with this 
Act.

SEC. 5. REPORT ON RELATIONSHIP BETWEEN CREDIT AND INSURANCE CREDIT 
              SCORES AND THE RACE, INCOME, GEOGRAPHIC LOCATION AND AGE 
              OF INSURANCE APPLICANTS AND POLICYHOLDERS.

    (a) Study Required.--The Federal Trade Commission shall conduct a 
comprehensive investigation of the relationship between use by insurers 
of credit information and insurance credit scores, with respect to 
designated lines of insurance, and risk factor of loss, including the 
impact by race, income, geographic location and age.
    (b) Report Required.--Before the end of the 15-month period 
beginning on the date of the enactment of this Act, the Commission 
shall submit a report to the Congress of the findings and conclusions 
of the Commission with regard to the study under subsection (a), 
together with such recommendations for legislative or administrative 
action as the Commission may determine to be appropriate.

SEC. 6. DESIGNATIONS.

    (a) Designation of Lines of Insurance.--
            (1) In general.--For purposes of this Act, the Commission 
        shall, by regulation, designate lines of insurance as 
        designated lines of insurance as follows:
                    (A) Automobile.--The Commission shall designate 
                private passenger automobile insurance and shall also 
                designate any sublines and coverage types of private 
                passenger automobile insurance that the Commission 
                considers appropriate, after comparing the 
                availability, affordability, and type of coverage in 
                such lines by geographic area.
                    (B) Noncommercial insurance for residential 
                property.--
                            (i) In general.--The Commission shall 
                        designate homeowners insurance, including 
                        mobile homeowners, manufactured homeowners, 
                        condominium owners, and renters' coverage, 
                        dwelling fire and allied lines, earthquake 
                        coverage for a residence or personal property, 
                        personal liability and theft coverage, 
                        mechanical breakdown coverage for personal auto 
                        or home appliances, and shall distinguish the 
                        coverage types in such lines by the perils 
                        covered and by market or replacement value.
                            (ii) Nature of offering.--With respect to 
                        lines of insurance designated under clause (i), 
                        the Commission shall also require insurers to 
                        inform the Commission as to whether the 
                        insurance is offered voluntarily or in 
                        conjunction with a residual market mechanism.
                    (C) Small business.--The Commission shall designate 
                as designated lines of insurance any lines of small 
                business insurance, and any sublines and coverage types 
                of small business insurance, that the Commission 
                determines to be appropriate after comparing the 
                availability, affordability, and type of coverage in 
                such lines by geographic area.
            (2) Report on nondesignated lines.--At any time the 
        Commission determines that any line of insurance not described 
        in paragraph (1) should be a designated line because 
        disparities in coverage provided under such line exist among 
        geographic areas having different income levels or racial 
        composition, the Commission shall submit a report recommending 
        designating such line of insurance as a designated line for 
        purposes of this Act to the Committee on Financial Services of 
        the House of Representatives and to the Senate.
    (b) Duration of Designation.--
            (1) In general.--Except as provided in paragraph (2), the 
        Commission shall make the designations under this section once 
        every 5 years, by regulation.
            (2) Alteration of designation.--During any 5-year period 
        referred to in paragraph (1) in which designations are in 
        effect, the Commission may amend or revise the designated 
        lines, sublines, and coverage types only by regulation and only 
        in accordance with the requirements of this section.
    (c) Notice of Designations.--Before the end of the 90-day period 
beginning on the date a designation of a line of insurance is made 
under this section, the Commission shall notify any person who has an 
interest in or is affected by such designation of the designation.
    (d) Obtaining Information.--The Commission may require insurers to 
submit to the Commission such information as the Commission considers 
necessary to make designations specifically required under this Act.

SEC. 7. ENFORCEMENT.

    (a) Civil Penalties.--Any insurer who is determined by the 
Commission, after providing opportunity for a hearing on the record, to 
have violated any requirement of this Act or any regulation prescribed 
under this Act shall be subject to a civil penalty of not to exceed 
$5,000 for each day during which such violation continues.
    (b) Injunction.--The Commission may bring an action in an 
appropriate United States district court for appropriate declaratory 
and injunctive relief against any insurer who violates the requirements 
of this Act.
    (c) Insurer Liability.--An insurer shall be responsible under this 
section for any violation of a statistical agent acting on behalf of 
the insurer.

SEC. 8. RELATION TO OTHER LAWS.

    (a) State Law.--No provision of this Act shall be construed as 
annulling, altering, or affecting the laws of any State or any 
political subdivision of a State relating to public disclosure, 
submission of information, and record keeping or exempting any insurer 
subject to this Act from any obligation under, or an obligation to 
comply with, any such law.
    (b) Other Federal Law.--This Act relates specifically to the 
business of insurance.

SEC. 9. REGULATIONS.

    (a) In General.--The Commission shall prescribe, after notice and 
opportunity for comment, such regulations as may be necessary to carry 
out this Act and prevent evasions of this Act and such regulations.
    (b) Factors To Be Considered.--In prescribing regulations under 
this Act, the Commission shall take into consideration the 
administrative, paperwork, and other burdens on insurance agents, 
including independent insurance agents, involved in complying with the 
requirements of this Act and shall minimize the burdens imposed by such 
requirements with respect to such agents.

SEC. 10. DEFINITIONS.

    For purposes of this Act, the following definitions shall apply:
            (1) Adverse action.--The term ``adverse action''--
                    (A) means a denial or cancellation of, an increase 
                in any charge for, or a reduction or other adverse or 
                unfavorable change in the terms of coverage or amount 
                of, any insurance, existing or applied for, in 
                connection with the underwriting of insurance; and
                    (B) includes the nonrenewal of an existing 
                insurance policy.
            (2) Commission.--The term ``Commission'' means the Federal 
        Trade Commission.
            (3) Consumer reporting agency.--The term ``consumer 
        reporting agency'' has the same meaning as in section 603(f) of 
        the Fair Credit Reporting Act.
            (4) Consumer report.--The term ``consumer report''--
                    (A) when used in connection with insurance issued 
                primarily for personal, family, or household purposes, 
                has the same meaning as in section 603(d) of the Fair 
                Credit Reporting Act; and
                    (B) when used in connection with small business 
                insurance, has the meaning given such term by the 
                Commission in regulations.
            (5) Insurance application.--The term ``insurance 
        application'' means an application for insurance, as determined 
        by the Commission, made by any means, including in writing, 
        orally, and by electronic means.
            (6) Insurance credit score.--The term ``insurance credit 
        score'' means a numerical representation of the insurance risk 
        a person presents using the person's attributes derived from a 
        consumer report or credit information in a formula to assess 
        insurance risk on an actuarial or statistical basis.
            (7) Insurance policy.--The term ``insurance policy'' means 
        a policy, contract, or certificate or evidence of insurance.
            (8) Insurer.--The term ``insurer''--
                    (A) means any corporation, association, society, 
                order, firm, company, mutual, partnership, individual, 
                aggregation of individuals, or any other legal entity 
                that is authorized to transact the business of property 
                or casualty insurance in any State or that is engaged 
                in a property or casualty insurance business; and
                    (B) does not include an individual or entity which 
                represents an insurer as agent solely for the purpose 
                of selling or which represents a consumer as a broker 
                solely for the purpose of buying insurance.
            (9) Residual market mechanism.--The term ``residual market 
        mechanism'' means any assigned risk plan, private insurance 
        placement facility, joint underwriting association, or similar 
        mechanism established by a State or pursuant to any State law 
        to provide property and casualty insurance for property owners 
        who are unable to obtain such coverage in the voluntary market. 
        Such term includes each State-wide plan of any State to assure 
        fair access to insurance requirements under part A of title XII 
        of the National Housing Act.
            (10) Small business.--The term ``small business'' means any 
        business that meets the criteria established under and pursuant 
        to section 3 of the Small Business Act for a small-business 
        concern.
            (11) Small business insurance.--The term ``small business 
        insurance''--
                    (A) means property and casualty insurance 
                specifically covering loss of, or damage to, the small 
                business property, including insurance against loss of 
                income or extra expense incurred because of loss of, or 
                damage to, property, and insurance against third party 
                liability claims caused by negligence or imposed by 
                statute or contract; and
                    (B) does not include workers' compensation, 
                professional liability, or title insurance.
            (12) Underwriting.--The term ``underwriting'' means the 
        selection of the risk that will be assumed by the insurer on a 
        contract, and specifically the decision whether to accept, 
        deny, renew, not renew, reduce, or increase the amount of 
        benefits payable or types of coverages under the contract.

SEC. 11. EFFECTIVE DATE OF REGULATIONS.

    Except as otherwise provided in this Act, regulations necessary to 
implement the requirements of this Act, and prevent evasions of the Act 
and regulations prescribed under this Act, shall be prescribed in final 
form before the end of the 18-month period beginning on the date of the 
enactment of this Act.
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