On June 4, 2007, the United States Supreme Court held that the Fair Credit Reporting Act (“FCRA”) requires insurance companies to provide an adverse action notice to applicants if the initial premium quoted is increased due in whole or in part to information contained in consumer reports, such as credit scores.
Two cases were considered, Safeco Insurance Company of America v. Burr (No. 06-84) and GEICO General Insurance Company v. Edo (No. 06-100). Under the facts of Edo, GEICO quoted an insurance premium rate to an applicant that was higher than the company’s most favorable rate, but did not inform the applicant that the rate quoted was higher.
Nonetheless, the rate quoted would have been the same whether or not GEICO had considered the applicant’s credit score. The Court held that GEICO had not taken an adverse action under FCRA, and so did not violate FCRA by failing to provide an adverse action notice to the applicant. The Court reasoned that, because GEICO quoted the same rate as it would have offered without considering the applicant’s credit score, the applicant was not adversely impacted by GEICO’s consideration of his credit score. Since the applicant was no worse off than he would have been had GEICO not considered the credit score, the applicant was not entitled to an adverse action notice pursuant to FCRA.
By contrast, under the facts of Burr, Safeco considered applicants’ credit scores and quoted higher rates than would have applied had the credit scores not been considered. Since the applicants’ quoted rates might have been lower but for Safeco’s consideration of their credit scores, the Court concluded that the initial quote for new insurance applicants can constitute an adverse action under FCRA. As such, Safeco should have provided an adverse action notice to the applicant, just as it would have if it had denied or cancelled a policy based in whole or in part on a consumer report.