PAID Act
Bill: H.R.1270 | Sponsor: Rep. Watson Coleman, Bonnie (D-NJ)
Policy area: Finance and Financial Sector

Summary:
Prohibit Auto Insurance Discrimination Act or the PAID Act
This bill prohibits an automobile insurer from considering specified factors when determining a consumer's insurance rates or eligibility. These prohibited factors include
Automobile insurers must make underwriting rules and rate filings available to the public.
The Federal Trade Commission may enforce a violation of these requirements as an unfair or deceptive act or practice.

To prohibit private passenger automobile insurers from using certain 
      income proxies to determine insurance rates and eligibility.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Prohibit Auto Insurance 
Discrimination Act'' or the ``PAID Act''.

SEC. 2. FINDINGS.

    Congress finds the following:
            (1) Private passenger automobile insurance companies are 
        institutions which help spread risk of loss over a collective 
        group of policyholders.
            (2) Private passenger automobile insurance is mandated in 
        all States but New Hampshire. Legal penalties for operating a 
        vehicle without liability insurance in these States range from 
        fines, to license suspensions or revocations, to imprisonment.
            (3) The private passenger automobile insurance industry 
        uses different variables to predict the overall costs and risks 
        of drivers. The analysis and use of these variables ultimately 
        help the automobile insurer set premium rates charged to 
        consumers which the automobile insurer determines to be 
        actuarially supported.
            (4) A pure loss ratio, a measurement of profitability in 
        insurance, is defined as losses divided by premiums. 
        Statistical correlations between certain variables and pure 
        loss ratios should be interpreted to mean that the selected 
        variable relates to profitability, but not necessarily to the 
        risk that an individual will get into an automobile accident.
            (5) A growing trend in the private passenger automobile 
        insurance industry is to use income proxies for underwriting 
        and rating. The use of income proxies such as a driver's 
        education level, occupation, employment status, home ownership 
        status, credit score, consumer report, previous insurer, and 
        prior purchase of insurance by the industry as variables that 
        significantly influence the insurance premiums charged to 
        drivers has become commonplace. Use of these income proxies in 
        this fashion results in higher rates being charged to lower 
        income drivers while lower rates are being charged to the more 
        affluent driver.
            (6) The American public is largely unaware that a person's 
        education level, occupation, employment status, home ownership 
        status, credit score, consumer report, zip code, census tract, 
        previous insurer, and prior purchase of insurance may be 
        significant factors used to determine eligibility for preferred 
        auto insurance rates regardless of the person's driving 
        history. As a result of the individual's ineligibility for 
        preferred rates, the driver's policy and rate will be only 
        offered from an affiliate company that has higher rates.

SEC. 3. REQUIREMENTS FOR PRIVATE PASSENGER AUTOMOBILE INSURERS.

    (a) Use of Certain Factors and Income Proxies Prohibited.--It shall 
be unlawful for a private passenger automobile insurer, or any of its 
affiliate insurers, to take into consideration any of the factors 
described in subsection (b) relating to a consumer in determining that 
consumer's eligibility for automobile insurance or in calculating the 
rate for that consumer.
    (b) Factors.--The factors referred to in subsection (a) are--
            (1) gender;
            (2) level of education;
            (3) occupation;
            (4) employment status;
            (5) home ownership status;
            (6) zip code or adjacent zip codes;
            (7) census tract;
            (8) marital status;
            (9) credit score or credit-based insurance score;
            (10) consumer report;
            (11) previous insurer; or
            (12) prior purchase of insurance of a consumer from that 
        automobile insurer.
    (c) Public Availability of Information.--All underwriting rules and 
rate filings for use by any private passenger automobile insurer shall 
be available for public inspection and may not be considered 
proprietary trade secret information.
    (d) Reasonable Procedures To Assure Compliance.--No person shall be 
held liable for any violation of this Act if the person shows by a 
preponderance of the evidence that at the time of the alleged violation 
the person maintained reasonable procedures to assure compliance with 
the provisions of this Act.
    (e) Rules of Construction.--
            (1) Factors and methods influencing premiums.--For the 
        purposes of this Act, a violation of subsection (a) shall be 
        considered to have occurred whenever the consideration of any 
        of the factors described in subsection (b) prevents the 
        consumer from obtaining insurance at the lowest rate available 
        to the consumer from a private passenger automobile insurer or 
        any of its affiliates. Actions considered a violation of such 
        subsection include the usage or consideration of any such 
        factor resulting in--
                    (A) the determination of a consumer's eligibility 
                for automobile insurance or the calculation of the rate 
                for that consumer;
                    (B) an action which prevents a consumer from 
                receiving certain rebates or discounts;
                    (C) an action which prevents a consumer from 
                obtaining insurance from an automobile insurer or any 
                of its affiliate companies;
                    (D) a denial, cancellation, non-renewal, or change 
                in policy or coverage terms; or
                    (E) any other impact on a consumer's premium for 
                insurance.
            (2) Authority of federal and state agencies.--Nothing in 
        this Act is intended to affect the authority of any Federal or 
        State agency to enforce a prohibition against unfair or 
        deceptive acts or practices, including the making of false or 
        misleading statements in connection with a credit or insurance 
        transaction that is not initiated by the consumer.

SEC. 4. ENFORCEMENT.

    (a) Enforcement by Federal Trade Commission.--
            (1) Unfair or deceptive acts or practices.--A violation of 
        this Act shall be treated as an unfair and deceptive act or 
        practice proscribed under section 5 of the Federal Trade 
        Commission Act (15 U.S.C. 57a(a)(1)(B)).
            (2) Powers of commission.--The Federal Trade Commission 
        shall enforce this Act in the same manner, by the same means, 
        and with the same jurisdiction, powers, and duties as though 
        all applicable terms and provisions of the Federal Trade 
        Commission Act (15 U.S.C. 41 et seq.) were incorporated into 
        and made a part of this Act. Any person who violates this Act 
        shall be subject to the penalties and entitled to the 
        privileges and immunities provided in the Federal Trade 
        Commission Act.
            (3) Amount of penalty.--Notwithstanding the penalties set 
        forth in section 5 of such Act, a person who violates this Act 
        shall be liable for a civil penalty of not less than $2,500 per 
        violation.
            (4) Regulations.--The Federal Trade Commission shall 
        prescribe, in accordance with section 553 of title 5, United 
        States Code, such regulations as are necessary to carry out the 
        purposes of this Act, including regulations as may be necessary 
        or appropriate to administer and carry out the purposes and 
        objectives of this Act, and to prevent evasions thereof or to 
        facilitate compliance therewith.
    (b) Actions by Consumers.--
            (1) Willful violations.--Any private passenger automobile 
        insurer who willfully violates this Act with respect to any 
        consumer is liable to that consumer in an amount equal to the 
        sum of--
                    (A) any actual damages sustained by the consumer as 
                a result of the failure;
                    (B) such amount of punitive damages as the court 
                may allow; and
                    (C) in the case of any successful action to enforce 
                any liability under this paragraph, the costs of the 
                action together with reasonable attorneys' fees as 
                determined by the court.
            (2) Negligent violations.--Any private passenger automobile 
        insurer who is negligent in failing to comply with any 
        requirement imposed under this Act with respect to any consumer 
        is liable to that consumer in an amount equal to the sum of--
                    (A) any actual damages sustained by the consumer as 
                a result of the failure; and
                    (B) in the case of any successful action to enforce 
                any liability under this paragraph, the costs of the 
                action together with reasonable attorneys' fees as 
                determined by the court.
            (3) Attorneys' fees.--Upon a finding by the court that an 
        unsuccessful pleading, motion, or other paper filed in 
        connection with an action under this subsection was filed in 
        bad faith or for purposes of harassment, the court shall award 
        to the prevailing party attorney's fees reasonable in relation 
        to the work expended in responding to the pleading, motion, or 
        other paper.
            (4) Jurisdiction of courts; limitation of actions.--An 
        action to enforce any liability created under this subsection 
        may be brought in any appropriate United States district court, 
        without regard to the amount in controversy, or in any other 
        court of competent jurisdiction, not later than the earlier 
        of--
                    (A) 2 years after the date of discovery by the 
                plaintiff of the violation that is the basis for such 
                liability; or
                    (B) 5 years after the date on which the violation 
                that is the basis for such liability occurs.
    (c) Actions by States.--
            (1) In general.--In any case in which the attorney general 
        of a State, or an official or agency of a State, has reason to 
        believe that an interest of the residents of such State has 
        been or is threatened or adversely affected by an act or 
        practice in violation of this Act, the State, as parens 
        patriae, may bring a civil action on behalf of the residents of 
        the State in an appropriate State court or an appropriate 
        district court of the United States to--
                    (A) enjoin such act or practice;
                    (B) enforce compliance with this Act;
                    (C) obtain damages, restitution, or other 
                compensation on behalf of residents of the State; or
                    (D) obtain such other legal and equitable relief as 
                the court may consider to be appropriate.
            (2) Notice.--Before filing an action under this subsection, 
        the attorney general, official, or agency of the State involved 
        shall provide to the Federal Trade Commission a written notice 
        of such action and a copy of the complaint for such action. If 
        the attorney general, official, or agency determines that it is 
        not feasible to provide the notice described in this paragraph 
        before the filing of the action, the attorney general, 
        official, or agency shall provide written notice of the action 
        and a copy of the complaint to the Federal Trade Commission 
        immediately upon the filing of the action.
            (3) Authority of federal trade commission.--On receiving 
        notice under paragraph (2) of an action under this subsection, 
        the Federal Trade Commission shall have the right--
                    (A) to intervene in the action;
                    (B) upon so intervening, to be heard on all matters 
                arising therein; and
                    (C) to file petitions for appeal.
            (4) Rule of construction.--For purposes of bringing a civil 
        action under this subsection, nothing in this Act shall be 
        construed to prevent an attorney general, official, or agency 
        of a State from exercising the powers conferred on the attorney 
        general, official, or agency by the laws of such State to 
        conduct investigations, administer oaths and affirmations, or 
        compel the attendance of witnesses or the production of 
        documentary and other evidence.

SEC. 5. RELATION TO STATE LAW.

    This Act does not annul, alter, affect, or exempt any person 
subject to the provisions of this Act from complying with the laws of 
any State with respect to the collection, distribution, or use of any 
information on consumers, the prevention or mitigation of identity 
theft, or the regulation of the business of insurance, except to the 
extent that those laws are inconsistent with any provision of this Act, 
and then only to the extent of the inconsistency.

SEC. 6. DEFINITIONS.

    For the purposes of this Act, the following definitions apply:
            (1) Affiliate.--The term ``affiliate'' means an entity 
        that, directly or indirectly, through one or more 
        intermediaries, controls, is controlled by, or is under common 
        control with another entity. For purposes of this paragraph, 
        the term ``control'' means the possession, directly or 
        indirectly, of the power to direct or cause the direction of 
        the management and policies of the entity, whether--
                    (A) through the ownership of voting securities;
                    (B) by contract other than a commercial contract 
                for goods or non-management services;
                    (C) by contract for goods or non-management 
                services where the volume of activity results in a 
                reliance relationship; or
                    (D) by common management.
        Control shall be presumed to exist if an entity and its 
        affiliates directly or indirectly own, control, hold with the 
        power to vote, or hold proxies representing 10 percent or more 
        of the voting interests of an entity.
            (2) Automobile insurer.--The term ``automobile insurer'' 
        means an insurer authorized to transact or transacting 
        automobile insurance, motor vehicle insurance, automobile or 
        motor vehicle liability insurance, or any similar insurance 
        business in the United States.
            (3) Census tract.--The term ``census tract'' means any 
        small, relatively permanent statistical subdivision of a 
        county, as used by the United States Census Bureau.
            (4) Consumer report.--The term ``consumer report'' has the 
        meaning given such term in section 603 of the Fair Credit 
        Reporting Act (15 U.S.C. 1681a), except that such term does not 
        include any communication to the extent such communication 
        relates to the driving history or place of residence of a 
        consumer.
            (5) Credit-based insurance score.--The term ``credit-based 
        insurance score'' means a rating based in whole or in part on a 
        consumer's credit information used in underwriting and rating 
        of consumers that takes into account certain elements of an 
        individual's credit history to predict how likely such 
        individual is to have an insurance loss.
            (6) Credit score.--The term ``credit score'' has the 
        meaning given such term in section 609(f)(2) of the Fair Credit 
        Reporting Act (15 U.S.C. 1681g(f)(2)).
            (7) Employment status.--The term ``employment status'' 
        means a consumer's status as a current full-time employee, 
        part-time employee, employed, unemployed, underemployed, or any 
        other such designation which indicates a consumer's work 
        status.
            (8) Home ownership status.--The term ``home ownership 
        status'' refers to whether a consumer currently owns any real 
        property which may be used as a residence.
            (9) Level of education.--The term ``level of education'' 
        refers to the highest grade level completed in a secondary 
        school or trade school, a professional licensure or 
        certification, or the highest undergraduate or graduate college 
        degree obtained. Such term does not include the completion of a 
        traffic safety course or scholastic achievement while enrolled 
        in a school, college, or university.
            (10) Occupation.--The term ``occupation'' means a 
        consumer's current lawful employment position in a career or 
        identifiable trade category.
            (11) Private passenger automobile.--The term ``private 
        passenger automobile'' means a 4-wheel motor vehicle, whether 
        owned or leased to an individual or individuals, and that is of 
        a private passenger or station wagon type, or that is a motor 
        vehicle with a pickup body, a delivery sedan, a passenger van, 
        a sports utility vehicle, or a panel truck or a camper type 
        vehicle, and that--
                    (A) is not used as a public or livery conveyance 
                for passengers;
                    (B) is not rented to others;
                    (C) has a gross vehicle weight of less than 15,000 
                pounds; and
                    (D) is not primarily used in the course of an 
                occupation, profession, or business of a person other 
                than farming or ranching.
        Such term includes a motor vehicle owned by a farm family co-
        partnership or farm family corporation, which is principally 
        garaged on a farm or ranch and otherwise meets the definition 
        contained in this paragraph.

SEC. 7. EFFECTIVE DATE.

    This Act shall take effect 1 year after the date of enactment of 
this Act.
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