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Introduced by Representatives Keenan of St. Albans City, Acinapura of Brandon, Bostic of St. Johnsbury, Heath of Westford, Hunt of Essex, Hutchinson of Randolph, Johnson of South Hero, Larson of Burlington, Miller of Shaftsbury and Morley of Barton

Referred to Committee on


Subject:  Banking and insurance; use of credit history

Statement of purpose:  This bill proposes to require insurers to notify applicants when the insurer takes an adverse action as a result of the applicant's credit score.


It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1.  8 V.S.A. § 4724a is added to read:


(a)  When used in this section:

(1)  “Adverse action” means a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of any insurance, existing or applied for, in connection with the underwriting of personal insurance.

(2)  “Affiliate” means any company that controls, is controlled by, or is under common control with another company.

(3)  “Applicant” means an individual who has applied to be covered by a personal insurance policy with an insurer.

(4)  “Consumer” means an insured or an applicant for a personal insurance policy whose credit information is used or whose insurance score is calculated in the underwriting or rating of a personal insurance policy.

(5)  “Consumer reporting agency” means any person that, for monetary fees or dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information about consumers for the purpose of furnishing consumer reports to third parties.

(6)  “Credit information” means any credit-related information derived from a credit report, found on a credit report itself, or provided on an application for personal insurance.  Information that is not credit-related shall not be considered “credit information,” regardless of whether it is contained in a credit report or in an application or is used to calculate an insurance score.

(7)  “Credit report” means any written, oral, or other communication of information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, or credit capacity that is used or expected to be used or collected in whole or in part for the purpose of serving as a factor to determine personal insurance premiums, eligibility for coverage, or tier placement.

(8)  “Insurance score” means a number or rating that is derived from an algorithm, computer application, model, or other process that is based in whole or in part on credit information for the purposes of predicting the future insurance loss exposure of an individual applicant or insured.

(9)  “Personal insurance” means private passenger automobile, homeowners’, motorcycle, mobile-homeowners’ and noncommercial dwelling fire insurance policies, and boat, personal watercraft, snowmobile, and recreational vehicle policies.  Such policies must be individually underwritten for personal, family, or household use.  No other type of insurance shall be included as personal insurance for the purpose of this section.

(b)  Adverse action notification.  If an insurer takes an adverse action based upon credit information, the insurer must meet all of the notice requirements of this section.  The insurer shall:

(1)  Provide notification to the consumer that an adverse action has been taken in accordance with the requirements of the federal Fair Credit Reporting Act, 15 U.S.C. § 1681m(a).

(2)  Provide notification to the consumer explaining the reason for the adverse action.  The reasons must be provided in sufficiently clear and specific language so that a person can identify the basis for the insurer’s decision to take an 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 section. Standardized credit explanations provided by consumer reporting agencies or other third party vendors are deemed to comply with this section.

(c)  A violation of this section is defined as an unfair method of competition or unfair or deceptive act or practice in the business of insurance.


This act shall take effect on October 1, 2007.

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont