Supreme Court

Seen on the newswires:

The Bush administration cannot legally detain a U.S. resident it believes is an al-Qaida sleeper agent without charging him, a divided federal appeals court ruled Monday. The court said sanctioning the indefinite detention of civilians would have “disastrous consequences for the constitution — and the country.”[...]

“To sanction such presidential authority to order the military to seize and indefinitely detain civilians, even if the President calls them ‘enemy combatants,’ would have disastrous consequences for the constitution — and the country,” the court panel said.

And sanity prevails!

I don’t think anybody disputes that it’s a good idea to detain suspect terrorists before they do harm, assuming the suspicion is based on something more substantive than administrative paranoia.

However, one of the principles that our country is built on is that even the most vile individual is entitled to due process. In this case, you can’t just “disappear” the suspect; he/she is entitled to defend him/herself.

It’s been 5½ years since 9/11. You’d think that during those 5½ years legislation could have been passed, procedures implemented, and if necessary staffing changes made that would permit the preservation of civil rights without sacrificing national security.

A couple of days ago, I put together some quick thoughts on the Supreme Court ruling on the FCRA cases brought against GEICO and Safeco.

Scott Nelson has posted a more eloquent analysis on CL&P Blog.

In particular, I like his discussion of the idea that “adverse” means “worse than neutral” rather than “not best price”:

What this meant in this particular case was that the plaintiff had not been adversely treated because the insurance rate he received based on his actual credit score was the same he would have gotten with a “neutral” credit score — even though he was denied a more favorable rate solely because his credit report was not better. More generally, the Court’s ruling means that GEICO could refuse to give notice to anyone with average or better credit, because such a customer would never be treated worse than someone with a “neutral” credit score — even though the customer’s credit report might contain mistakes that, if corrected, could entitle the consumer to a more favorable rate. Thus, roughly half of all consumers would be denied the information that the notice requirement is supposed to give them: that they have suffered in the marketplace because of their credit report and could benefit from the elimination of errors in the report that might have contributed to their adverse treatment.

But the potential loophole is even worse than that. After all, it is solely GEICO’s choice to offer an average rate to consumers whose credit it does not check. A company could just as easily adopt a policy of offering only its worst rates to consumers whose credit it does not check (or even, as Justice Stevens pointed out, refusing altogether to do business with such consumers). Such a company would, by definition, never treat someone whose credit it checked worse than someone whose credit it didn’t check, and thus would never be obligated to give anyone notice, no matter how significantly their credit report affected the rates they paid.

It can hardly have been Congress’s intent to allow the notice obligation to be so manipulable and, potentially, so meaningless. The Court’s sole rationale for its reading of the statute was the fear that a contrary reading would lead to too many adverse-action notices, including notices to any consumer with less than “gilt-edged” credit.

I agree in part, and disagree in part.

Scott correctly notes that the “neutral” standard opens the door to the possibility that consumers with errors on their report could be paying more than they would be if those errors were corrected. Rather than giving consumers a heads up about this possibility, it increases the onus on consumers to periodically review their credit reports on their own.

True, that’s behavior that should be occurring anyway…but it still seems a little unfair. (Again, I disclaim that that’s a personal opinion, and not necessarily one held by past or present employers.)

Fortunately, the regs in several states specify that the “not best price” standard should be used in determining when an adverse action notice is required in insurance rating and underwriting.

I am, however, less concerned about the “neutral” standard itself. There is a certain amount of history in the definition of “neutral” when it comes to credit scoring in insurance, arising from the discussion of how consumers without credit files, or with credit files too thin to score should be treated.

The consensus generally reached between the industry and legislators/regulators was that these thin-file or no-hit results should be treated “neutrally” unless filing approval was granted for different treatment based on statistical evidence.

In this context, “neutrally” should mean “the rate/tier that would be awarded in an equivalent scheme that didn’t consider credit”.

Oversimplifying, when comparing rating schemes that do or don’t rely on credit, we find that about 2/3rds of consumers see a decrease in their rates when credit is brought into the picture, while 1/3rd see an increase.

If you think of the decreases as manifesting as “multiply the non-credit rate by a factor less than 1″ and the increases as “multiply the non-credit rate by a factor greater than 1″, then “neutral” means a 1.000 relativity. It’s “average” (but not “median”).

At least that’s my opinion. However, I can see where there is some room for game-playing. And because of that and the whole fairness issue, I still think “not best price” would have been a better standard to settle upon.

You may have already seen the story by now, but in case you haven’t… on Monday, the Supreme Court ruled on the FCRA cases brought against Safeco and Geico, reversing some adverse rulings in those cases.

The best synopsis I’ve seen is at SCOTUSblog. However, my own quick summary (with editorialization) is as follows:

It appears that there were two main points decided:

First, the SCOTUS ruled that the term “willfully” (as in “willfully violated”) should be interpreted as “reckless disregard” rather than “knowingly” or even “carelessly”. In other words, a relatively high bar has been set for determining fineable violations of the FCRA, and industry is protected from being burdened with massive fines for the annoying stupid, non-malicious mistakes that will sometimes happen in any organization. It’s a good stance for the industry, although I could appreciate a consumer advocate argument about a need for there to be some incentive for businesses to take reasonable care to avoid those stupid mistakes.

The more interesting part of the ruling from my point of view / given my credit background is that the Supreme Court has ruled that “adverse action” in insurance terms means an increase from a “neutral rate”, rather than the “not best price” standard that the FTC has advocated.

This is another ruling that’s on-the-surface good for the insurance industry, insomuch as some insurers that followed the “neutral” standard are protected from complaints against the FCRA, and there is a reduction in red tape and hoops that must be jumped through when writing business.

However, personally, I’m not entirely happy with that. (And here, I should re-disclaim that the opinions expressed here are mine, and not those of my employers past or present.) It seems just common sense that if a rating or underwriting decision is being based on records that have some notoriety over the occasional inaccuracy, then the consumer ought to be advised when he/she is not being offered the best possible price, just in case there’s an error in his/her credit report that ought to be corrected.

When crafted correctly, it’s an easy enough notification to make…and it’s one that probably will be ignored anyway, since most folks don’t read the fine print in all their insurance paperwork. But it seems only sporting that an opportunity be explicitly offered to correct any erroneous information.

I don’t seem to be alone in this view. A couple of insurers (Progressive, Travelers) seem to have done a pretty good job about being forthright about their use of credit scoring, and in attempting to arm consumers with information to become educated on the subject.

Also, in many states, the “not best price” standard has been codified in state laws or regulations, which I think (but I’m not a lawyer) remain in force in spite of this ruling.

I’m disappointed in the stance the SCOTUS seems to be taking, but I’m not going to miss the litigation circus that was percolating and which should now be defused.

One other disappointment I have is that had the Supreme Court followed the “not best price” standard, it could have had an impact on the banking industry. The term “adverse action” in the FCRA is not limited to insurance; it’s applicable to any decision made by a user of consumer report information.

Ever since I worked in credit scoring, I was very aware of the lack of adverse action notices accompanying (e.g.) credit card paperwork. If I’m not mistaken, your credit data affects not only whether or not you’re offered a card, it also impacts the interest rate, the credit limit offered…. I even wouldn’t be surprised to learn that credit bureau data affects how aggressively consumers are pursued in the event of delinquency.

It would really suck if consumers weren’t being offered the best possible / most favorable decisions available to them otherwise if there were an error on their credit report…which leads to my belief that any user of credit data ought to disclose the factors influencing their decisions.

Oh well. This just increases the importance of consumers’ regularly pulling their own credit reports to check for errors.

By now, you’ve probably heard the pro-life crowd celebrating and the pro-choice crowd regrouping in the wake of yesterday’s Supreme Court ruling upholding a federal partial birth abortion ban. For example, from Tom DeLay’s blog:

It appears that the nation is beginning to reap the benefits of President Bush’s two traditionalist appointments - Justices Roberts and Alito - without them this decision would not have been possible. We can only hope that this now leads to more state level efforts to restrict abortion and eventually bring Roe v. Wade up for review before the court, finally righting a 30 year old wrong.

Meanwhile, Cecile Richards at HuffPo writes:

Unfortunately, it’s a world all American women are now forced to imagine for themselves. In the last 24 hours, people all across America have expressed their outrage at a Supreme Court ruling that has brought about this seismic shift on reproductive freedom. The court told women that, with their health at risk during a pregnancy, deciding what to do is no longer up to them and their doctors. The Bush Supreme Court has let politicians come barging into that most personal of decisions.

Initially, I wasn’t too bothered by the law or the ruling. I am kind of miffed with the idea of politicians without medical degrees telling doctors how to do their jobs, but if the law’s authors are correct in that there are other viable procedures available and unaffected by the law.perhaps the intervention is marginally tolerable.

I had thought that there was an exception in the law permitting the procedure in the event that it was medically necessary, making it more of a “limitation to last resort” rather than a ban. The law includes the the following clauses:

(d)(1) A defendant accused of an offense under this section may seek a hearing before the State Medical Board on whether the physician’s conduct was necessary to save the life of the mother whose life was endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.

(2) The findings on that issue are admissible on that issue at the trial of the defendant. Upon a motion of the defendant, the court shall delay the beginning of the trial for not more than 30 days to permit such a hearing to take place.

But apparently Ginsburg disagrees with that sentiment:

For the first time since Roe, the Court blesses a prohibition with no exception protecting a woman’s health.

Am I missing something here? The two clauses I quoted sound like a medical exception..which is necessary to make the law tolerable in my view. Banning a doctor from taking the acts necessary to protect the life and health of a patient would be beyond criminal in my mind.

I can’t help but think that Ginsburg was reacting to the Right’s war against Roe, rather than the question of whether it’s appropriate for Congress to legislate that a medical procedure should be the last tool in a doctor’s arsenal to be considered.

As seen the Washington Post, the Supreme Court has handed down a ruling on the EPA’s declining to regulate CO₂ emissions from vehicles.

The case dates from 1999, when the International Center for Technology Assessment and other groups petitioned the EPA to set standards for greenhouse gas emissions for new vehicles. Four years later, the EPA declined, saying that it lacked authority to regulate greenhouse gases and that even if it did, it might not choose to because of “numerous areas of scientific uncertainty” about the causes and effects of global warming. Massachusetts, along with other states and cities, took the agency to court.

The court majority said that the EPA clearly had the authority to regulate the emissions and that its “laundry list” of reasons for not doing so were not based in the law. “We need not and do not reach the question whether on remand EPA must make an endangerment finding. . . . We hold only that EPA must ground its reasons for actions or inaction in the statute,” Stevens wrote.

In other words, a majority of Supreme Court justices are saying to the EPA, “you can’t play ’see no evil / hear no evil / speak no evil’ unless specifically permitted by statute.”

Nice.

As reported on the AP wire:

During an hour of argument, several justices seemed taken aback at 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 major issue in the case is the legal standard for finding that the insurance companies willfully violated the 37-year-old credit reporting law. The 9th U.S. Circuit Court of Appeals said the standard is reckless disregard for the statute’s notification requirement. The companies say the standard is higher — actual knowledge on the part of the companies that they are breaking the law.[...]

A copy of the transcript of today’s arguments is available at the SCOTUS web site. Looking at some of the discussion…. I begin to wonder if I have a big mouth. I’ve made no bones about my belief that users of credit data should disclose, and, well…

What can I say. I’m an actuary, not a lawyer.

As seen at Insurance Journal:

Delaware Insurance Commissioner Matt Denn has taken arguments against insurance industry use of credit scoring to the U.S. Supreme Court, filing a brief in a pending case involving the practice.

Denn recruited 12 other state insurance commissioners to join Delaware in filing the brief.[...]

Denn and the 12 other insurance commissioners told the Supreme Court that they were filing their brief to “further their collective mission of protecting consumers by supporting interpretations of the FCRA that (a) put valuable information in the hands of consumers, (b) provide appropriate incentives for insurance companies that use consumer credit information to adopt procedures that assure compliance with the law, and (c) hold insurance companies accountable when they adopt policies that recklessly disregard consumer rights in contravention of the FCRA.”

The 13 states involved are Arkansas, California, Delaware, Georgia, Iowa, Kansas, Michigan, Montana, New Mexico, North Dakota, Oklahoma, Utah and Washington.

The case is one where Safeco and GEICO have been found guilty in lower courts of failing to make the appropriate disclosures required under the FCRA in conjunction with their use of scoring.

While I am pro-credit scoring when it comes to insurance rating and underwriting, I’m also pro-consumer when it comes to the disclosure requirements associated with scoring.

I think that insurers and consumers ought to be on a level playing field for fairness’ sake when it comes to the information considered when underwriting or pricing personal insurance. While disclosure practices can be messy to implement (both technically and from a customer-relations standpoint), fairness dictates that an insurer advise a consumer what’s going into the decision being made. The consumer needs to be empowered to correct any errors in the information being used.

While things have improved dramatically since the days when I started working intimately with insurance credit scoring, this case has thankfully gotten some of the folks in the “we have to keep this a secret” camp on implementing scoring to move into the sunshine.

From a wire service story:

The Supreme Court agreed Tuesday to hear arguments in a case that could make it easier for consumers to hold insurers, banks and other businesses liable for failing to notify them about adverse information in credit reports.[...]

Four large insurance companies argued that notification is not required when applicants are asked to pay more on an initial insurance policy based on adverse information from a credit report. Offering a substandard rate when buying a policy does not qualify as an “increase” under the law unless a lower rate had been offered previously, the companies say.

The Supremes will be hearing about the GEICO and Safeco cases.

I should point out that many insurers decided a few years ago to take a position of disclosing unless the consumer has the very-best score. In my (not-a-lawyer and not-in-a-decision-making-role) opinion, that’s probably a better position to take as a matter of public policy.

The blogosphere has been abuzz with talk about yesterday’s ruling by the Supreme Court that the military tribunals established by President Bush to try the “unlawful combatants” aren’t legal.
Rather than link to everybody who’s been writing on the issue, I thought I’d offer the two thoughts that are at the top of my mind on the issue:

1. I agree wholeheartedly with the sentiment that the Executive cannot create an all-new judicial process by fiat alone. If the President needs new tools to protect the country, it shouldn’t be a problem to go to Congress to create appropriate, legal, mechanisms.
2. I’m still uncomfortable with the whole “unlawful combatant” wishy-washy matter. If the folks at Gitmo are de facto prisoners of war, they should be treated as such, and be detained until they are not threats. And, of course, their captors should be held accountable for abiding by the standards imposed by the international agreements which the United States is party to.
    
   However, if they’re criminals, they are entitled to a fair trial, with the ability to challenge their accusers, see the evidence against them, and to not be detained indefinitely without a hearing. These are things that our Founding Fathers fought for, due to the abuse they received at the hands of the British.
    
   Has political thought in the U.S. degenerated to the point where we say, “it wasn’t OK for the British to do this to us, but it is OK for us to do it to everybody else”?

I hope to write more on this later, as I’m a bit busy at the moment, but I
did want to mention that news on the SCOTUS’s ruling on Gitmo tribunals is hitting the wires:

The Supreme Court ruled Thursday that President Bush
overstepped his authority in ordering military war crimes trials for
Guantanamo Bay detainees.

The ruling, a rebuke to the administration and its aggressive anti-terror
policies, was written by Justice John Paul Stevens, who said the proposed
trials were illegal under U.S. law and Geneva conventions.