Monday, July 26, 2010

DOES YOUR “FICO” SCORE DISCRIMINATE?

In the last several weeks, I’ve been asked to deal with credit problems by several clients. When asked to reveal their formulae for calculating FICO scores, each of the major credit bureaus gives the same answer; “it’s proprietary and we do not want to give it out;” presumably because people might use the knowledge to manipulate the score. TRANSLATION: “If you knew how we do it, you could improve your score, so we won’t tell you.”

When FICO scores were used solely to obtain credit, this was significant, but usually not catastrophic. Unfortunately, like most promises, there was never any attempt to adhere to what people expected. There are now a new, “Three Great Lies of Man,” but these exist in the political-economic area.

LIE #1: Federal Income tax is a temporary expedient that will be gone in a few years.

LIE #2: Your Social Security Number will never be used as a National Identification Number.

LIE # 3: Your credit report is protected by law, and your FICO score is only used to calculate your credit worthiness.

 

How many of you believe that the federal income tax is “temporary,” even though that was what was promised? What about your Social Security number? When was the last time you could do anything from opening a bank account to applying for a job without giving them your Social Security Number?  In fact, many employers now require that you bring your original Social Security card with you.

 

Finally, we come to your FICO Score. Certainly it is used for credit, but what else? It is used to decide whether you can buy insurance, get accepted to various programs, and get that job you applied for. Is this discriminatory?

 

There are two tests for discrimination: 1) “Facial Discrimination,” the kind that enforced segregation in the deep South before the Civil Rights Act and, 2) Discriminatory “as applied,” when the law is facially neutral (non-discriminatory) but circumstances cause it to discriminate against certain groups when it is applied. Moreover, while it is true that these are tests applied specifically to laws passed by Congress, it is these same laws that allow your FICO scores to be used as they are.

 

In most urban centers, who are the least affluent, as a whole? It is usually the African-American and Latino populations, as well as other minority groups. Importantly, these are the very groups that are “protected” under anti-discrimination laws, yet they are the ones who are most impacted by the arcane and unreleased formulae for FICO scores. In legal terms, there is a “disparate impact.” Forget whether this is “fair,” I would suggest that it may be illegal and must be stopped.  Because of the cost of litigation, the credit agencies feel free to abuse you as much as they like. They know that the very people they hurt the most are unable to afford legal representation to fight for them! Thus, economic discrimination is a bar to entry into the very judicial system that is supposed to provide a remedy for the injured. Fortunately, there is an answer – CLASS ACTION!

 

If even a small percentage of the people who have been adversely affected by low FICO scores are willing to contribute as little as $100 to a legal fund, it would not take long until there were several hundred thousand dollars in the “war chest,” to enable us to fight the “big boys” on their own terms. In fact, we may even be able to get it heard by a jury of “our” peers, who have suffered equally. Let’s get together and fight this. Contact my office for more information on becoming part of making this action possible. As Benjamin Franklin stated about the American Revolution, “[w]e must all hand together or we will most assuredly all hang separately!

 

CONTACT:

            Eric E. Shore, Esq.

            Kane, Shore & Witcher, LLC

            1616 Walnut Street

            Fifth Floor

            Philadelphia, PA 19103

 

            Telephone: (215) 259-3786

            Email: eshore@KaneShore.com