The Supreme Court handed down two anticipated FCRA decisions yesterday, Safeco v. Burr and Geico v. Edo. Consumer Law & Policy has a detailed report on the decisions, and will no doubt analyze them in greater detail in the coming days. In brief, the cases were a victory for consumers, but not quite cause for celebration.
The FCRA requires certain entities to notify consumers when they take an adverse action based on the consumer’s credit report. As you may recall, insurance companies have been using credit reports as a component of setting insurance premiums for some time. Safeco and Geico both deal with this.
In Safeco v. Burr, the Court decided that a defendant commits a “willful” violation of the FCRA if he or she recklessly disregards the law (in this case, requiring an insurance company to notify the consumer when taking an adverse action–setting a higher premium–based on their credit report). The insurance companies hoped for a looser interpretation, that would allow them to violate the law if they didn’t know (and didn’t care) they were violating it.
Overall, however, the cases are not so positive for consumers, because an insurance company that takes an adverse action against an insurance customer based on his or her credit report can apparently escape liability under the FCRA if the consumer got the same rate with or without taking the score into account (the facts in Geico). Safeco, it turns out, was not reckless because it had no guidance on FCRA notification from the FTC or courts of appeals.
In other words, you are liable if you act with reckless disregard for the law, but you aren’t liable if your reckless disregard doesn’t harm the consumer. This sort of conflates the two components of any case, liability and damages.
On balance, however, this means that consumers should see a bit more transparency when it comes to credit reports and insurance premiums. On the other hand, a number of open questions as a result of the decisions mean it may be years before the credit report/insurance premium issue reaches any real resolution.
To find a consumer or bankruptcy lawyer, use the Caveat Emptor Consumer & Bankruptcy Lawyer Directory.
