March 23, 2021 – The Washington Insurance Commissioner Mike Kreidler has issued an emergency order temporarily prohibiting the use of credit history in determining premiums and eligibility for private automobile, homeowners, and renter’s insurance policies. The commissioner has taken this step in light of the coronavirus pandemic and the financial effect it has had on consumers who may have lost income due to state mandated closings. The governor has issued several emergency proclamations restricting state agencies from charging late fees and penalties for a variety of debts.
The parameters of the CARES Act is such that the information credit bureaus are collecting is inaccurate for some consumers, and is therefore unreliable and a predictive tool for insurers. The commissioner finds that these protections have disrupted the credit reporting process, having negative consequences disproportionately for people of color. When the CARES Act expires a large volume of negative credit corrections will flood consumer’s credit histories, and this factor has not been accounted for in current credit scoring models. This would make using existing models of credit scoring unfairly discriminatory under certain statutes.
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