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Credit History for Insurance, Hiring Eyed by Congress

Source: BusinessWeek

May 12 (Bloomberg) -- Congress is examining the use of consumer credit history by employers to make hiring decisions or insurers to set premiums, said U.S. Representative Luis Gutierrez, an Illinois Democrat. “Credit scores and reports are used by insurance companies to pick their customers and are used to exclude those most likely to file a claim,” said Gutierrez in a statement, whose Subcommittee on Financial Institutions and Consumer Credit held a hearing today in Washington on the issue. “We are watching very closely and will take action if and when we find their practices out of line.” Lenders use credit scores, such as the one developed by Minneapolis-based FICO, as a measure of credit worthiness in providing credit cards, mortgages and auto loans. Insurance companies use the scores to predict the likelihood of a claim and employers may check credit reports when hiring to determine how honest an employee may be, said Liz Pulliam Weston, author of “Your Credit Score.” Nearly half of employers use credit reports in employment decisions, according to the National Consumer Law Center, a nonprofit based in Boston. Credit checks in hiring discriminate against African American and Latino job applicants and don’t predict job performance, said Chi Chi Wu, a staff attorney for the law center.

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