Michigan Atty. Gen’l. Demands Hearings on Credit Scoring

Jennifer M. Granholm, Michigan’s Attorney General, announced that she has filed a “Petition for Contested Case Hearing” with Financial and Insurance Services Commissioner Frank M. Fitzgerald that demands “a formal examination into the legality of using credit scores in determining home and auto insurance premiums.”

“Consumers who pay thousands of dollars a year for insurance deserve to know how their premiums are set. In order to ensure that insurance premiums in Michigan are based on fair and objective criteria, I ask that these formal hearings take place immediately,” Granholm stated.”

A court decision in the case of Smith v Globe Life interpreting Michigan’s Consumer Protection Act limited the right of the AG’s office to bring legal actions on behalf of consumers who feel they’ve been victims of “credit scoring” abuses. While the Commissioner’s office has held meetings on the subject there have been no formal hearings concerning it. Granholm feels that “it is time for an open, honest discussion between the state, insurance companies, and the consumers of this state.”

The bulletin indicated that “Currently, 11 of the 15 largest auto insurance companies and 8 of the 21 largest homeowners insurance companies doing business in Michigan use credit scoring to help determine premiums. Frequently, insurers obtain credit scores from third-party companies that are not regulated by either federal or state law and whose formulas for determining scores are secret. As a result, consumers have no way of knowing what specific steps they can take to improve their credit scores and reduce their insurance premiums.”

Granholm stated that “It is absolutely outrageous to think that Michigan consumers may be paying higher insurance premiums because they purchase a new home, switch balances on a credit card to save money, or even because of a careless mistake by a credit rating company.” She was supported by Jim Guest, President of Consumers Union, the publisher of Consumer Reports, who took the position that, “Every state should ban companies from using credit scores to set premiums.”

“Credit scoring affects every driver and property owner in the state. While my hands may be tied from taking legal action against this practice at this time, I will continue the fight to ensure that insurance premiums are set in a fair fashion,” Granholm concluded.

Topics Michigan