Supreme Court to Hear Consumer Credit Case

Playing Hugh Beaumont to the insurance companies’ Tony Dow and consumer advocates’ Jerry Mathers (as “the Beaver”), the United States Supreme Court is expected to rule on a dispute between the two bratty factions over whether consumers should be notified when their bad credit is used against them.

From the looks of the Fair Credit Reporting Act, passed back in the ‘70s, businesses are liable when they fail to inform consumers of adverse decisions made because of credit reports.  Add to that a decision made a year ago by the 9th U.S. Circuit Court of Appeals in San Francisco, which would make it easier for consumers to prevail when they sue corporations for allegedly violating the law.

So why not just tell consumers that they’re getting a raw deal on car insurance because of a couple missed credit card payments and an overdue medical bill from ’86?  Well, it’s car insurance.  One would think that how one spends has little to do with how one drives.  And such tactics – declining to insure based on credit – has the looks of profiling; insurance is mandatory to own and drive a car, yet if one has bad credit, one could find oneself on the wrong side of the law if one continues driving.

Much of the business community has lined up behind the insurers, telling the justices in a brief that the appeals court ruling "may increase even more the risk of enormous damage recoveries."

Consumer groups say the insurance companies are weakening the system by looking for ways to avoid notifying customers when it uses a credit report in making a decision.

The biggest issue in the case is the legal standard for finding that the insurance companies willfully broke the law. The 9th U.S. Circuit Court of Appeals said the standard is reckless disregard for the law. The companies say the standard is higher: actual knowledge on the part of the companies that they are breaking the law.