- The Washington Times - Tuesday, January 16, 2007


Two large insurers yesterday defended their decision not to tell customers about their less-than-perfect credit, as the Supreme Court debated the legal standard for finding the companies liable under federal law.

During an hour of argument, several justices seemed taken aback by the magnitude of a federal appeals court ruling. Under that ruling, Geico Corp. and Safeco Insurance Co. would have to notify nearly all their customers that they aren’t getting the best rates because their credit scores aren’t the highest.

The consumers sued Geico and Safeco because the companies used a less-stringent policy and thus notified far fewer customers.

The case casts a spotlight on the business world’s vast credit reporting system, which has compiled files on 200 million Americans.

Congress passed the Fair Credit Reporting Act in 1970 to protect consumers from flaws in the system and improve the reliability of reports.

Chief Justice John G. Roberts Jr. pointed out that federal law entitles consumers to a free copy of their credit report from the three major credit bureaus once a year. Scott Shorr, a lawyer representing the plaintiffs, said alerting the consumer at a critical time when money is at issue is important so that the customer can send for a copy and check it for accuracy.

If the appeals court ruling stands, Safeco would be required to send notices of “adverse actions” to 80 percent of the company’s new customers, said Maureen Mahoney, an attorney for the two companies. At Geico, 10 percent of new customers qualify for the top tier of credit, Miss Mahoney said.

Justice Stephen G. Breyer said that implementing an expansive notification requirement would be like the “boy who cried wolf” and that notices likely would “go right in the wastebasket.”

Also yesterday, the court refused to consider an appeal brought by a group of IBM Corp. employees who accused the company of age discrimination when it altered its pension plan. The lawsuit could have cost the company $1.4 billion.

The court also declined to rule on a separate dispute between IBM and a former employee who accused the company of retaliation after he complained about how company managers handled overtime.

In the pension case, a former IBM employee named Kathi Cooper served as the lead plaintiff in a class-action suit brought on behalf of 250,000 current and former IBM workers. The suit argued that IBM’s “cash balance” pension plan was discriminatory because it allowed younger workers to accrue benefits in the plan at a faster rate.

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