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State Bank of Southern Utah
From: David Eberhard [mailto:DEberhard@sbsu.com]
Sent: Wednesday, May 26, 2004 6:55 PM
To: Comments
Subject: FDIC RIN 3064-AC81
Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429
RE: Fair and Accurate Credit Transaction Act of 2003
Fair Credit Reporting Medical Information Regulations
Thank you for the opportunity to comment on the proposed rulemaking
for the Fair Credit Reporting Medical Information Regulations. Although
medical information is not routinely obtained in our institution, the
rules provide guidance that is needed in obtaining and using medical
information in certain circumstances. I believe for the most part, the
proposed rules provide an adequate balance between permitting creditors
to obtain and use medical information where necessary, and restricting
the use of medical information for inappropriate purposes. My specific
comments are as follows.
General prohibition on obtaining or using medical information
I generally agree with the proposed rule that a creditor may not
obtain or use medical information pertaining to a consumer in connection
with any determination of the consumer's eligibility for credit with
certain exceptions. I believe that it would be more appropriate to grant
an exception to permit creditors to obtain and use medical information
in connection with debt cancellation, debt suspension, or credit
insurance products rather than issuing an interpretation that obtaining
information necessary for coverage of these product is excluded from the
general definition. A specific exception would give clearer guidance on
the appropriateness of obtaining and using medical information for these
products.
Receiving Unsolicited Medical Information
Creditors may receive unsolicited medical information without
specifically asking for such information. The proposal states that a
creditor would not violate the prohibition on obtaining medical
information when the creditor does not specifically ask for or request
such information, yet the consumer or other person provides that
information to the creditor. The proposal asks whether this rule should
be drafted as a rule of construction or as an exception to the general
prohibition. Again, I would encourage the agencies to include this as an
exception to provide clearer guidance.
Exception for Obtaining and Using Medical Information
The proposed rule contains a financial information exception for
instances where a creditor may obtain and use medical information. I
generally agree with the first element of the exception in that a
creditor may obtain and use medical information so long as the
information relates to debts, expenses, income, benefits, collateral or
the purpose of the loan, including the use of proceeds. I also agree
with the second element that the creditor may use the medical
information in a manner and to an extent that is no less favorable than
it would use comparable information that is not medical information in a
credit transaction. I generally agree with the third element that the
creditor may not take the consumer's physical, mental, or behavioral
health, condition or history, type of treatment, or prognosis into
accout as part of any determination of the consumer's eligibility, or
continued eligibility, for credit.
I think the examples provided in the proposal adequately describe the
intent of the rule. The only example I have a specific comment on is the
second example in proposed paragraph (c)(2)(iii) which illustrates the
use of medical information that is inconsistent with the exception.
In the example, a consumer meets with a loan officer of a creditor to
apply for a mortgage loan. While filling out the loan application, the
consumer informs the loan officer orally that she has a potentially
terminal disease. The loans officer recommends to the credit committee
that the consumer be denied credit because the consumer has that
disease. According to the rule, the creditor has used medical
information in a manner inconsistent with the exception. In reading
this, I can see a potential safety and soundness concern in that the
consumer may not be able to repay the loan because of the potentially
terminal disease. My question is whether the creditor can further
inquire of the applicant and consider the repayment ability of the
borrower. I am reminded of Regulation B (Equal Credit Opportunity Act)
and the prohibition of considering an applicant's age in determining
eligibility. In the Official Staff Commentary, it states, "A creditor
may consider the applicant's occupation and length of time to retirement
to ascertain whether the applicant's income (including retirement
income) will support the extension of credit to its maturity."
Also in the model application form in Appendix B of Regulation B, one
of the questions on the form is "Is any income listed in this Section
likely to be reduced before the credit requested is paid off?" Next to
the "Yes" box it states "Explain in detail on a separate sheet." If a
consumer explains that he/she has a terminal condition, will a creditor
be able to use that information and information about the consumer's
ability to maintain adequate income to support the repayment of the loan
and then deny the credit based on the repayment ability? I would like to
request that the agencies provide more guidance in this area.
The proposed rule in paragraph (d) also provides specific exceptions
for obtaining and using medical information. I agree with these
exceptions provided. These exceptions are necessary for a creditor to be
able to use information in the specific circumstances provided in the
exceptions.
Finally, as rediculous as it may sound, I would like to see specific
guidance that "death" would not be considered a medical condition under
the definitions of the regulation. I can just imagine a future court
case in which a creditor terminated "a consumer's continued eligibility
for credit" based upon the death of the consumer and having the estate
of the consumer sue the creditor stating that death is a medical
condition under the regulation. Definite guidance is needed for
creditors to be able to enforce their legal and contractual rights upon
the death of a consumer.
Thank you,
David Eberhard
State Bank of Southern Utah
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