Rep. Rashida Tlaib on Thursday plans to introduce legislation that would prevent consumer credit data from being used to set auto insurance rates, a practice that the Michigan Democrat says leads to discrimination against low-income Americans.
It’s a battle that the insurance industry has fought before but is taking seriously again as House Financial Services Chairwoman Maxine Waters (D-Calif.) — who proposed a similar bill more than a decade ago — crafts sweeping legislation to overhaul the credit reporting system.
For Tlaib, it’s a critical local issue because Michigan has some of the highest auto insurance rates in the country.
“It is one of the issues that brings all my residents together,” she said. “They don’t want their credit score shared with the car insurance industry because they know it has no linkage, no connection, with their driving record, and it’s unfair.”
Tlaib’s proposal is one of the first examples of the new class of progressive freshman wielding legislation to crack down on the finance industry.
As of Wednesday, Tlaib had collected several co-sponsors for her bill, including fellow Democrats on the House Financial Services Committee. The list included Reps. Alexandria Ocasio-Cortez (D-N.Y.), Ilhan Omar (D-Minn.), Ayanna Pressley (D-Mass.), Emanuel Cleaver (D-Mo.) and Cedric Richmond (D-La.).
Waters, Tlaib said, “wants to have further discussion about it” and is “very familiar” with the practice.
In a letter to colleagues seeking their support, Tlaib asked lawmakers to join her “in fighting for all consumers against this exploitative practice.”
“Historically marginalized populations have already had less access to wealth and credit building opportunities, and the continued use of credit histories to set auto insurance pricing compounds racial discrimination and exacerbates wealth inequality,” she said.
Tlaib put a spotlight on the issue during one of the Financial Services Committee’s first major hearings of the year, when she asked top executives from credit reporting companies Equifax, Experian and TransUnion to weigh in on her proposal.
The executives were unable to respond when she asked how the consumer information they collected and provided was helpful in determining a driver’s risk for accidents. Two even encouraged her to look into it further when she asked if they would support her proposal.
“It’s a complex issue that sounds like it’s definitely worthy of further study,” Experian North America CEO Craig Boundy said.
Though insurers don’t expect the bill to become law, the industry is keeping a close eye on the legislation and whether Tlaib — one of the most high-profile freshman Democrats — offers it as an amendment to the broader credit reporting overhaul Waters is drafting.
The industry argues that a consumer’s credit information is a proven indicator of auto risk and can lead to discounts. Insurers want the issue to stay under the purview of state regulators that have the primary responsibility of policing the industry in the U.S. — and who often resist federal intrusion into their domain.
The National Association of Insurance Commissioners, which represents state regulators, hasn’t taken a position on the bill, but a spokesperson said the group has historically supported maintaining states’ flexibility to oversee underwriting rules in their own markets, including the use of credit scores.
“Legislation like this would hurt consumers by hindering the ability of state-regulated insurers to accurately assess risk, essentially punishing those drivers with good credit without providing any benefit for consumers as a whole,” said Jimi Grande, senior vice president of government affairs at the National Association of Mutual Insurance Companies. “Insurance is a state regulated industry, and policy decisions like this are better handled by state lawmakers and insurance regulators that are closer to consumers and better understand their local marketplace.”