J. Wade Barnette, Managing Member Apex Credit Services, LLC
Fair Isaac ( hereinafter, “FICO” ) is the company which designs and implements the most universally accepted scoring model today. It is commonly known as the FICO score. Today, the three major credit reporting agencies, Equifax, Experian, and Trans Union, permit FICO to apply models to their data. All consider “authorized user” accounts and are in compliance with the Equal Credit Opportunity Act ( “ECOA” ).
Nevertheless, FICO proposed in June of 2007 a new scoring model which would completely disregard authorized user accounts. It has not and may never happen. Equifax has recently stated that they will not allow FICO to apply this model to their data. The other two credit reporting agencies are set to "review" the model at some point in 2008 however, each and every request as to whether any credit reporting agency is going to permit this model to be applied to their data is garnering a more tenuous and ambiguous response.
Why, because this proposed model is illegal pursuant to the ECOA. One can review the following pertinent provision of the aforementioned Act and find this to be true:
( 6 ) Credit history. To the extent that a creditor considers credit history in evaluating the creditworthiness . . . in evaluating an applicant's creditworthiness a creditor shall consider: ( i ) The credit history, when available, of accounts designated as accounts that the applicant and the applicant's spouse are "permitted" to use . . .
As anyone can discern, the law clearly states that "any" account which an applicant is permitted to use must be considered. This certainly envelopes authorized user accounts. With that in mind, it is only reasonable to forecast a windfall of class litigation for any creditor who uses the aforesaid model.
In short, using this model just doesn't make sense from a legal or business perspective. This is why FICO 08' has yet to happen. In all honesty, we at Apex Credit Services, LLC cannot envision FICO 08’ moving forward as proposed in light of its illegality and as such, we will continue to offer our account tradelines in the spirit of the ECOA.
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