Said Racicot, “The Federal Reserve’s findings track closely with those in the FTC’s recent study. Both clearly prove that credit is a reliable risk predictor and that credit scoring has little to no effect as a proxy for race or ethnicity. Credit scoring has also benefited consumers in terms of both the availability and affordability of financial services products.”
“It is worth noting, because of the criticism the FTC study has received from certain interest groups, that the data set used by the Federal Reserve was different from that of the FTC’s study. Yet, stunningly the same conclusions were reached by both studies as to the numerous positive benefits of a credit-based risk evaluation system for financial services companies, be they lenders or insurers.”
“It is compelling evidence to see a second report with similar results, strongly suggesting that there are significant benefits from practices such as credit-based insurance scores which provide insurers a greater degree of precision when measuring risk to the benefit of a majority of consumers. We believe that these conclusions speak volumes about the efficacy of credit information and credit-based insurance scores.”
The National Association of Mutual Insurance Companies (NAMIC) weighed in on the report findings, as well.
“Once again, the federal government has undertaken an exhaustive study of credit scoring and whether it unfairly discriminates against certain population groups for higher rates on insurance and other financial products,” said Carl Parks, NAMIC’s senior vice president for government affairs. “Once again, the government found that credit scoring is generally not a proxy for race or ethnicity.”
Parks pointed out that the latest report on credit scoring used different data from that in the FTC’s report. “Despite using a different data set, the conclusions reached by the Federal Reserve were the same as the FTC’s,” Parks said. “This should put to rest, once and for all, the notion that credit scoring is anything less than a valuable tool for predicting risk that helps lower rates of financial products – including insurance – for the majority of Americans.”