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FICO 08 - Contradicting the law with regards to AU's?

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MidnightVoice
Super Contributor

Re: FICO 08 - Contradicting the law with regards to AU's?



Boscoe wrote:
Both of the Mods here make good points,


I see only one  Smiley Happy
 
 


Boscoe wrote:

 
If someone could verify that section of the ECOA that discusses spouse's rights and post it, that would add some credence to the non-removed article.   I agree that these outfits have an ax to grind to prevent FICO 08, but since we live in such a litiguous society, I find it hard to believe that someone won't start filing lawsuits or maybe even injunctions to ensure compliance with ECOA.


(a) It shall be unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction--
(1) on the basis of race, color, religion, national origin, sex or marital status, or age (provided the applicant has the capacity to contract);
(2) because all or part of the applicant's income derives from any public assistance program; or
(3) because the applicant has in good faith exercised any right under the Consumer Credit Protection Act.
 
 
 
Fair Isaac does not gice credit.
 
(e) The term "creditor" means any person who regularly extends, renews, or continues credit; any person who regularly arranges for the extension, renewal, or continuation of credit; or any assignee of an original creditor who participates in the decision to extend, renew, or continue credit.
 
 

 
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 11 of 20
Dawn
Established Contributor

Re: FICO 08 - Contradicting the law with regards to AU's?

Does this cover it? 
 
 
 
§ 202.10  Furnishing of credit information.

  (a)  Designation of accounts.  A creditor that furnishes credit information shall designate:
    (1)  Any new account to reflect the participation of both spouses if the applicant's spouse is permitted to use or is contractually liable on the account (other than as a guarantor, surety, endorser, or similar party); and
    (2)  Any existing account to reflect such participation, within 90 days after receiving a written request to do so from one of the spouses.
  (b)  Routine reports to consumer reporting agency.  If a creditor furnishes credit information to a consumer reporting agency concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in a manner that will enable the agency to provide access to the information in the name of each spouse.
  (c)  Reporting in response to inquiry.  If a creditor furnishes credit information in response to an inquiry, concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in the name of the spouse about whom the information is requested.

[Codified to 12 C.F.R. § 202.10]

Edit:  Darn ... this is really only in regard to reporting ... I haven't found where it says what anyone has to do with what is reported.  It's beyond me. Smiley Sad

I thought the article was a little "off-base" in claiming FICO 08 to be illegal.  It seems to me that the legality will revolve around what creditors do with the information that is or is not made available to them when making lending decisions.

However, I don't have a horse in this race ... I'm still keeping my life simple ... making sure I have my own accounts. Smiley Happy




Message Edited by Dawn on 04-06-2008 02:42 PM
Message 12 of 20
MidnightVoice
Super Contributor

Re: FICO 08 - Contradicting the law with regards to AU's?



Dawn wrote:
Does this cover it?
 
 
 
§ 202.10  Furnishing of credit information.

  (a)  Designation of accounts.  A creditor that furnishes credit information shall designate:
    (1)  Any new account to reflect the participation of both spouses if the applicant's spouse is permitted to use or is contractually liable on the account (other than as a guarantor, surety, endorser, or similar party); and
    (2)  Any existing account to reflect such participation, within 90 days after receiving a written request to do so from one of the spouses.
  (b)  Routine reports to consumer reporting agency.  If a creditor furnishes credit information to a consumer reporting agency concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in a manner that will enable the agency to provide access to the information in the name of each spouse.
  (c)  Reporting in response to inquiry.  If a creditor furnishes credit information in response to an inquiry, concerning an account designated to reflect the participation of both spouses, the creditor shall furnish the information in the name of the spouse about whom the information is requested.

[Codified to 12 C.F.R. § 202.10]


That deadly word creditor again!!  FI does not loan money  Smiley Very Happy
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 13 of 20
Anonymous
Not applicable

Re: FICO 08 - Contradicting the law with regards to AU's?

Midnight Voice -   Everyone here is well aware that Fair Isaac does not loan money or make credit decisions.   But if they are the ones responsible for developing a widely used method of credit scoring, they have to do it in a way that does not discriminate against anyone, especially spouses.
 
AU's are authorized users of valid credit card accounts.    It is my opinion that they cannot unilaterally dump these users from the credit scoring process and not expect legal challenges.   The better solution would be to provide lenders with 2 scores, a with and without AU score, so the lender can initiate a manual review to determine lending terms.  I believe something like that already exists out there.
 
But just to strip away all AU effect, if they follow through with this as it appears, all I say is this - get your legal team ready.
 
One last thought:   Has anyone at FICO said these exact words?  "Authorized Users will NOT be considered AT ALL in the new scoring system (i.e. FICO 08)?"  Are we all assuming this based on similar sounding words that they have said?   Maybe it is a reduced effect, closer to 0 than 100%, but at least some effect is considered?
Message 14 of 20
MidnightVoice
Super Contributor

Re: FICO 08 - Contradicting the law with regards to AU's?



Boscoe wrote:
 
But if they are the ones responsible for developing a widely used method of credit scoring, they have to do it in a way that does not discriminate against anyone, especially spouses.
 


Morally - yes.
 
Legally, I am not sure.  Manufacturers of guns are not normally help responsible (legally) for the fact that some people decide to use them for illegal purposes  Smiley Happy


Message Edited by MidnightVoice on 04-06-2008 03:06 PM
The slide from grace is really more like gliding
And I've found the trick is not to stop the sliding
But to find a graceful way of staying slid
Message 15 of 20
haulingthescoreup
Moderator Emerita

Re: FICO 08 - Contradicting the law with regards to AU's?

I would point out that the change in scoring that removes AU accounts from consideration came at the request of the CRA's and the lenders. FICO is the collection of wonks and propeller-beanies that comes up with the formulas. I don't know how much that muddies up the legal waters.

I would also note that FICO 08 was supposed to implement in September 07, and here we are, 7 months later! And per my scores pulled the other day, my AU card is still being counted, which is evident because its history is what shows for my oldest account, so it's pretty evident to me that it's not yet up and running.

I'm also interested in the political repercussions of screwing over many older women (generally speaking; yes I know that there are other AU's) in an election year. Not very smart.

There are many hurdles on the road to implementation! Smiley Wink
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 16 of 20
Anonymous
Not applicable

Re: FICO 08 - Contradicting the law with regards to AU's?

Yes, I totally agree with Hauling.   My main point with all of this is that let's not automatically assume that FICO 08 is a done deal.   EQ is going to sit back and watch the fireworks, and I am pretty sure we will see some...........
 
Lots of spouses (most likely the majority of which will be female) are going to see their scores tank.   This is no way to get the female vote!
Message 17 of 20
ralbusta
Frequent Contributor

Re: FICO 08 - Contradicting the law with regards to AU's?

Hi I'm new to posting in these forums, but I have been using the advice for a while. It's improved my score by 100 points over the year so thanks. In regard to the legality of FICO '08 I believe that Midnight is close to being right.
Since FI is not a lender it can't be held liable for discrimination as far as extension of credit is concerned. It is up to the individual lenders to insure that they comply with the law. Any lender that does not consider the whole credit picture of an individual when extending credit is opening itself up to problems anyway in my opinion.
If FI does get sued I believe they are probably covered if they remove the AU benifit across the board only. If they invoke some program that considers spouses, then non-spouse AU's have a valid discrimination claim.
It's going to be intresting to see what happens. A law will have to pass making sale of AU's illegal.(If there is not one already?)
 
Sorry to muddy up the picture even more. 
Message 18 of 20
Anonymous
Not applicable

Re: FICO 08 - Contradicting the law with regards to AU's?

 
FICO can't retain AU status for spouses only.
 
To do so, it would need to collect data on marital status.  According to Fair Isaac, "sex" and "marital status" are  factors that are not considering in scoring because "US law prohibits scoring from considering these facts."
Message 19 of 20
haulingthescoreup
Moderator Emerita

Re: FICO 08 - Contradicting the law with regards to AU's?


@Anonymous wrote:

FICO can't retain AU status for spouses only.

To do so, it would need to collect data on marital status.  According to Fair Isaac, "sex" and "marital status" are  factors that are not considering in scoring because "US law prohibits scoring from considering these facts."
Good point! About all that's left is common addresses, and that doesn't cover all the legit AU's, although I suppose it would get most.
* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 20 of 20
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