Minnesota Commerce Commissioner Jim Bernstein has fined Harleysville Insurance Co. $80,000 for sending deceptive credit authorization forms to its policyholders in 2002.

According to Minnesota insurance regulators, the Harleysville letter states that under Minnesota law:

• The insurer must get written permission from policyholders to allow the insurer to order their credit scores to determine if they are eligible for good-credit discounts.
  
• The insurer must remove any good-credit discount if a policyholder doesn't respond to the insurer's request for authorization.

There is no Minnesota law that requires the removal of the good-credit discount if a policyholder does not sign the form. Although the insurer is allowed to remove the discount if the policyholder refuses to sign the authorization, they are not required by state law to do so.

Minnesota law does require the insurer to receive a signed authorization form from the policyholder or applicant before it can collect or disclose personal information.

"The use of credit scoring by insurance companies to determine rates is bad enough," says Bernstein. "Being deceptive about it makes it worse. Only a handful of Minnesota consumers with higher credit scores get better rates while many more with lower scores pay higher premiums, if they can get insurance at all."

A Harleysville spokesperson confirmed the insurer has paid the fine but declined further comment.

On Aug. 1, 2002, Gov. Jesse Ventura signed legislation that prohibits insurers from rejecting, canceling, or not renewing auto or home insurance solely on the basis of "credit scores," a number derived from a person's credit history. See How your credit history affects your auto and home insurance premiums.

This law also requires insurers to produce evidence that shows their use of credit scoring is "legitimate, lawful, and fair."