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Letter in Support of House Bill 1222

February 24, 2004

Testimony in  Support for HB 1222, “Private Passenger Motor Vehicle Insurance – Use of Credit History - Prohibition”

The Maryland Public Interest Research Group (MaryPIRG) and the Maryland Consumer Rights Coalition join in supporting HB 1222, “Private Passenger Motor Vehicle Insurance – Use of Credit History – Prohibition.”

In 2002, the Maryland legislature enacted legislation limiting the use of credit histories by insurance companies. The legislation passed in 2002 prohibits the use of credit histories for homeowners insurance and limits its use for auto insurance to new policies. HB1222 would prohibit the use of credit histories for any type of private passenger motor vehicle insurance.

A series of research reports on the accuracy of consumer credit reports have documented frequent inaccuracies in reports, which result in inaccurate credit scores.  A 1998 report by the state PIRGS, Mistakes Do Happen [http://www.pirg.org/reports/consumer/mistakes/index.htm], found that 29% of credit reports surveyed contained errors serious enough to cause the denial of credit, insurance, employment or other benefits.  Consumers Union , publishers of Consumer Reports Magazine, has had similar findings in its studies. 

A credit score is merely a mathematical summary derived from a narrative credit report.  If the credit report contains missing information, or falsely derogatory information, the consumer’s score will be deflated. Low income consumers, who often do not have the best credit ratings, suffer the most from the use of credit histories to price insurance. For consumers on the margins, errors resulting in a decreased credit score can result in insurance denial or significantly higher insurance premiums.

The unreliability of credit scores make them an unfair factor to use when rating insurance, therefore, MaryPIRG and the Maryland Consumer Rights Coalition respectfully request a favorable report of HB 1222. 

Gigi Kellett                                           Cheryl L. Hystad

Public Interest Advocate                       Executive Director

MaryPIRG                                           Maryland Consumer Rights Coalition

190 Duke of Gloucester Street             3000 Chestnut Avenue, Suite 203

Annapolis, MD 21401                        Baltimore, MD 21211

410-267-1160                                      410-366-1965

gkellett@marypirg.org                          chystad@mdconsumers.org                                                                   

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