First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED SENATE SPONSORSHIP

Transcription

1 First Regular Session Sixty-eighth General Assembly STATE OF COLORADO INTRODUCED LLS NO Kate Meyer HOUSE BILL - HOUSE SPONSORSHIP Kagan, Carroll, SENATE SPONSORSHIP House Committees State, Veterans, & Military Affairs Senate Committees 1 A BILL FOR AN ACT CONCERNING THE PERMISSIBLE USE OF CONSUMER CREDIT INFORMATION. Bill Summary (Note: This summary applies to this bill as introduced and does not reflect any amendments that may be subsequently adopted. If this bill passes third reading in the house of introduction, a bill summary that applies to the reengrossed version of this bill will be available at The bill specifies the purposes for which consumer credit information (i.e., consumer credit reports and credit scores) can be used in certain situations. Section 1 of the bill restricts an employer's use of consumer credit information for employment purposes and requires an employer to Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment. Capital letters indicate new material to be added to existing statute. Dashes through the words indicate deletions from existing statute.

2 disclose to an employee or applicant for employment when the employer uses the employee's or applicant's consumer credit information to take adverse action against the employee or applicant and the particular credit information upon which the employer relied. Section amends the current law regarding the permissible use of credit information by an insurer offering personal lines of property and casualty insurance (insurer) as follows:! Makes the filing of actuarial justification mandatory for insurers that use insurance scores to underwrite and rate risk; and! Clarifies that "adverse action", with regard to insurance, includes denying a consumer a discount or placing a consumer in a higher tier. Section removes a separate statutory section pertaining to the use of credit information in automobile underwriting or rating, and instead requires automobile insurers to comply with the same provisions governing use of credit information as property and casualty insurers. Current law requires a consumer reporting agency (agency) to notify a consumer when the agency receives information that would add negative information to the consumer's file. Section adds to the notification requirement consumers who are cosigners to a debt. Section allows landlords to use consumer credit information of a potential tenant (applicant) only to evaluate the applicant's payment history for prior tenancies. When an applicant's consumer credit information adversely impacts the landlord's decision, section also requires landlords to disclose this fact to the applicant. 1 Be it enacted by the General Assembly of the State of Colorado: SECTION 1. Part 1 of article of title, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: --1. Employer use of consumer credit information - violation - definitions. (1) AS USED IN THIS SECTION: (a) "ADVERSE ACTION" MEANS: (I) FOR AN APPLICANT, DENIAL OF EMPLOYMENT; AND (II) FOR AN EMPLOYEE, REASSIGNMENT, DENIAL OF PROMOTION, OR TERMINATION OF EMPLOYMENT. -- HB-

3 (b) "CONSUMER CREDIT INFORMATION" MEANS A WRITTEN, ORAL, OR OTHER COMMUNICATION OF INFORMATION BEARING ON A CONSUMER'S CREDITWORTHINESS, CREDIT STANDING, CREDIT CAPACITY, OR CREDIT HISTORY. "CONSUMER CREDIT INFORMATION" INCLUDES A CREDIT SCORE. (c) "CREDIT SCORE" MEANS A QUANTIFICATION OF THE CREDIT RISK A PERSON PRESENTS USING THE PERSON'S HISTORY, CHARACTERISTICS, OR ATTRIBUTES IN A FORMULA DESIGNED TO OBJECTIVELY RATE CREDIT RISK. (d) "EMPLOYEE" HAS THE MEANING SET FORTH IN SECTION (e) "EMPLOYER" HAS THE MEANING SET FORTH IN SECTION (f) "EMPLOYMENT PURPOSES" MEANS EVALUATING A PERSON FOR EMPLOYMENT, PROMOTION, REASSIGNMENT, OR RETENTION AS AN EMPLOYEE. () AN EMPLOYER SHALL NOT USE CONSUMER CREDIT INFORMATION FOR EMPLOYMENT PURPOSES UNLESS: (a) THE INFORMATION IS SUBSTANTIALLY JOB-RELATED, MEANING THAT THE POSITION OF THE PERSON FOR WHOM THE INFORMATION IS SOUGHT HAS ACCESS TO MONEY, OTHER ASSETS, OR TRADE SECRETS OR OTHER CONFIDENTIAL INFORMATION; OR (b) THE POSITION OF THE PERSON FOR WHOM THE REPORT IS SOUGHT IS ANY OF THE FOLLOWING: POSITION; OR (I) A MANAGERIAL POSITION; (II) A POSITION IN THE DEPARTMENT OF LAW; (III) A SWORN PEACE OFFICER OR OTHER LAW ENFORCEMENT -- HB-

4 (IV) A POSITION FOR WHICH THE INFORMATION IS REQUIRED TO BE DISCLOSED BY LAW OR TO BE OBTAINED BY THE EMPLOYER. () IF AN EMPLOYER RELIES, IN WHOLE OR IN PART, ON CONSUMER CREDIT INFORMATION TO TAKE ADVERSE ACTION REGARDING THE EMPLOYEE OR APPLICANT FOR EMPLOYMENT WHOSE INFORMATION WAS OBTAINED, THE EMPLOYER MUST DISCLOSE THAT FACT, AND THE PARTICULAR INFORMATION UPON WHICH THE EMPLOYER RELIES, TO THE EMPLOYEE OR APPLICANT. THE EMPLOYER SHALL MAKE THE DISCLOSURE REQUIRED UNDER THIS SUBSECTION () TO AN EMPLOYEE IN WRITING OR, FOR AN APPLICANT FOR EMPLOYMENT, USING THE SAME MEDIUM IN WHICH THE APPLICATION WAS MADE. () A PERSON WHO IS INJURED BY A VIOLATION OF THIS SECTION MAY BRING A CIVIL ACTION IN A COURT OF COMPETENT JURISDICTION TO OBTAIN INJUNCTIVE RELIEF OR DAMAGES, OR BOTH. THE COURT SHALL AWARD REASONABLE COSTS AND ATTORNEY FEES TO A PREVAILING PARTY IN AN ACTION BROUGHT UNDER THIS SUBSECTION (). () IT IS THE DUTY OF THE DIRECTOR OF THE DIVISION OF LABOR IN THE DEPARTMENT OF LABOR AND EMPLOYMENT TO ENFORCE THIS SECTION. SECTION. -- (1) (f), (), (), and () (a), Colorado Revised Statutes, are amended to read: --. Use of credit information. (1) An insurer that offers personal lines of property and casualty insurance shall not: (f) Take an adverse action against a consumer based on credit information unless the insurer obtains and uses a credit report issued, or an insurance score calculated, within ninety days before the date the policy is first written or renewal is issued; -- HB-

5 () If an insurer takes RELIES ON CREDIT INFORMATION IN WHOLE OR IN PART TO TAKE an adverse action, based upon credit information, the insurer shall meet the notice AND DISCLOSURE requirements of this subsection (). Specifically, an insurer shall: (a) Provide notification to the consumer that an adverse action has been taken, in accordance with the requirements of the federal "Fair Credit Reporting Act", 1 U.S.C. sec. m (a); and (a.) PROVIDE THE CONSUMER GENERAL INFORMATION REGARDING THE METHODS, FORMULAS, AND FACTORS USED BY THE INSURER, INCLUDING THE RANGE OF CREDIT SCORES OR INSURANCE SCORES; AND (b) Provide notification to the consumer explaining the CREDIT-RELATED reason for the adverse action, INCLUDING THE PARTICULAR COMPONENTS OF CREDIT INFORMATION THAT FACTORED INTO THE DECISION TO TAKE THE ADVERSE ACTION AND THE WEIGHT ACCORDED EACH COMPONENT. The reasons shall be provided in sufficiently clear and specific language so that a person may identify the PARTICULAR basis OR BASES for the insurer's decision to take adverse action. The notification shall include a description of up to four factors that were the primary influences of the adverse action. The use of generalized terms such as "poor credit history", "poor credit rating", or "poor insurance score" does not meet the explanation requirements of this subsection (). Standardized credit explanations provided by consumer reporting agencies or other third-party vendors are deemed MAY BE USED to comply with this subsection (). () An insurer that uses insurance scores to underwrite and rate risk shall file its scoring models or other scoring processes with the commissioner. A third party may file scoring models on behalf of an -- HB-

6 insurer. A filing that includes insurance scoring may MUST include loss experience justifying ACTUARIAL JUSTIFICATION FOR the use of credit information. The insurer may request that information requested pursuant to this subsection () not be open to public inspection or considered an open record pursuant to article of title, C.R.S. () For the purposes of this section, unless the context otherwise requires: (a) "Adverse action" means a denial or cancellation of, an increase in any charge for, DENIAL OF A DISCOUNT FOR, PLACEMENT INTO A HIGHER TIER, or a reduction or other unfavorable change in the terms of coverage or amount of any insurance existing or applied for in connection with the underwriting of personal lines of property and casualty insurance coverages COVERAGE. SECTION. --1, Colorado Revised Statutes, is amended to read: --1. Use of credit reports. (1) (a) Insurers using new or updated credit information in insurance underwriting or rating shall notify applicants or policyholders that their credit information will be used for underwriting or rating AN INSURER ISSUING POLICIES UNDER THIS PART SHALL COMPLY WITH SECTION --. (b) When an insurer uses a producer for such disclosure, the insurer shall provide the producer with the form of such notice and use a reasonable means to verify that such notice is given. The disclosure notice form shall be developed by the insurer. (c) Upon request by an applicant or policyholder, an insurer or producer shall provide an explanation of the significant characteristics of the credit information that impact the policyholder's insurance score. This -- HB-

7 information may be included in the disclosure notice form. () If the use of credit information results in an adverse action to a consumer, the insurer shall comply with the notice requirements of the federal "Fair Credit Reporting Act", 1 U.S.C. sec. et seq. Such notice shall include, but is not limited to: (a) The identity, telephone number, and address of any consumer reporting agency from whom a credit report was obtained; (b) Notice of the consumer's right to receive a free credit report from the consumer reporting agency for a period of sixty days if such report resulted in an adverse action; and (c) Notice of the consumer's right to lodge a dispute with the consumer reporting agency and have any erroneous information corrected in accordance with the federal "Fair Credit Reporting Act", 1 U.S.C. sec. et seq. () For the purposes of this section, "adverse action" means a denial, cancellation, or nonrenewal of, an increase in any charge for, a placement into a higher tier, or a reduction or unfavorable change in the terms of coverage or amount of insurance in connection with underwriting of existing insurance or an application for insurance. SECTION () (a) (II), Colorado Revised Statutes, is amended to read: Disclosures to consumers. () (a) A consumer reporting agency shall notify a consumer, by letter sent by first-class mail, that the consumer reporting agency will provide the consumer with a disclosure copy of his or her consumer file at no charge and a toll-free telephone number to call to provide the consumer reporting agency with the information necessary to request such copy, when one of the -- HB-

8 following events occurs within a twelve-month period: (II) The consumer reporting agency has received a report, INCLUDING A REPORT PERTAINING TO AN APPLICATION FOR CREDIT OR ANY OTHER APPLICATION OR TRANSACTION TO WHICH THE CONSUMER IS A COSIGNER, that would add negative information to a consumer's file. SECTION. Article 1 of title, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PART to read: PART USE OF CONSUMER CREDIT INFORMATION Definitions. AS USED IN THIS PART, UNLESS THE CONTEXT OTHERWISE REQUIRES: (1) "APPLICANT" MEANS A PERSON APPLYING TO RENT OR LEASE A DWELLING UNIT. () "CONSUMER CREDIT INFORMATION" MEANS A CONSUMER CREDIT REPORT OR A CREDIT SCORE. () "CONSUMER CREDIT REPORT" MEANS A WRITTEN, ORAL, OR OTHER COMMUNICATION OF INFORMATION BY A CONSUMER REPORTING AGENCY BEARING ON A CONSUMER'S CREDITWORTHINESS, CREDIT STANDING, OR CREDIT CAPACITY. () "CREDIT SCORE" MEANS A QUANTIFICATION OF THE CREDIT RISK A PERSON PRESENTS USING THE PERSON'S HISTORY, CHARACTERISTICS, OR ATTRIBUTES IN A FORMULA DESIGNED TO OBJECTIVELY RATE CREDIT RISK. () "DWELLING UNIT" MEANS A STRUCTURE, OR PART OF A STRUCTURE, THAT IS USED AS A HOME, RESIDENCE, OR SLEEPING PLACE BY ONE OR MORE INDIVIDUALS. () "LANDLORD" MEANS THE OWNER, MANAGER, LESSOR, OR -- HB-

9 SUBLESSOR OF A DWELLING UNIT. () "RENTAL APPLICATION" MEANS THE APPLICATION FOR USE AND OCCUPANCY OF A DWELLING UNIT Use of credit reports - disclosure. (1) A LANDLORD IS PERMITTED TO USE AN APPLICANT'S CONSUMER CREDIT INFORMATION ONLY TO ASSESS THE APPLICANT'S PAYMENT HISTORY WITH PRIOR LANDLORDS. () IF A LANDLORD RELIES, IN WHOLE OR IN PART, ON AN APPLICANT'S CONSUMER CREDIT INFORMATION TO REJECT THE APPLICANT'S RENTAL APPLICATION, THE LANDLORD MUST DISCLOSE THAT FACT TO THE APPLICANT. () NOTHING IN THIS SECTION SHALL BE CONSTRUED TO PROHIBIT A LANDLORD FROM INVESTIGATING THE HISTORY OF AN APPLICANT, WITH REGARD TO ANY OTHER MATTER AND IN ACCORDANCE WITH ANY OTHER APPLICABLE LAW, TO DETERMINE THE SUITABILITY OF THE APPLICANT AS A TENANT. SECTION. Effective date - applicability. This act shall take effect July 1, 0, and shall apply to acts occurring on or after said date. SECTION. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety. -- HB-