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American Council of Life Insurers
May 28, 2004
Jennifer J. Johnson, Secretary
Board of Governors of the
Federal Reserve System
20th Street and Constitution Ave., NW
Washington, DC 20551
Docket Number R-1188
Office of the Comptroller of the Currency
250 E Street, SW
Public Information Room, Mail Stop 1-5
Washington, DC 20219
Docket Number 04-09
Robert E. Feldman, Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
RIN 3064-AC81
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G St., NW
Washington, DC 20552
Attention: No. 2004-16
Ms. Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428
Re: Fair Credit Reporting Medical Information Regulations
Ladies and Gentlemen:
These comments are submitted by the American
Council of Life Insurers (“ACLI”) in
connection with the Agencies’1 notice of proposed rulemaking
to implement § 411 of the
Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”) (69 Fed.
Reg. 23380)
(April 28, 2004). Section 411 of the FACT Act amends the Fair Credit
Reporting Act
(“FCRA”) to restrict the circumstances under which consumer reporting
agencies may
furnish consumer reports that contain medical information about
consumers. Section 411
also prohibits creditors from obtaining or using medical information
pertaining to a
consumer in connection with any determination of the consumer’s
eligibility or continued
eligibility for credit. Finally, § 411 restricts the sharing of medical
information and
related lists or descriptions with affiliates.
ACLI is the principal trade association of life insurance companies
whose 368 member
companies account for 69 percent of life insurance premiums, 76 percent
of annuity
considerations, 53 percent of disability income insurance premiums and
72 percent of
long-term care insurance premiums in the United States among legal
reserve life
insurance companies. ACLI members are also major participants in the
pension and
reinsurance markets.
As the Agencies are aware, ACLI member companies actively use medical
information in
connection with the business of insurance and annuities. Continued
access to and use of
medical information is critical to life insurers’ continued ability to
serve and fulfill basic
insurance functions for their existing and prospective customers.
Section 411 of the
FACT Act was carefully crafted by Congress to ensure that insurers’
ability to obtain and
use medical information would not be restricted. Accordingly, ACLI and
its member
companies have a significant interest in the Agencies’ proposed rules.
Generally, ACLI believes that the Agencies’ proposals reflect the
intent of Congress in
enacting § 411 of the FACT Act. However, as indicated below, ACLI
believes that the
purpose and scope sections of the proposed rules of the Federal Reserve,
the FDIC and
the OTS fail to adequately take into account the unique status of
insurers. ACLI believes
that it is important for the rules of all of the Agencies to address
this jurisdictional issue
consistently. Specifically, we believe that all the proposed rules
should reflect the fact
that insurers that are affiliates or subsidiaries of depository
institutions and bank holding
companies are functionally regulated and therefore are subject to the
jurisdiction of state
insurance authorities rather than the Agencies. This approach is taken
by the OCC and
NCUA, but not by the Federal Reserve, FDIC and OTS. We believe that the
failure to
accurately and consistently reflect the status of insurers could have an
adverse effect on
the life insurance industry. Accordingly, we urge the Agencies to modify
the proposed
rules of the Federal Reserve, FDIC and OTS to provide that they do not
apply to affiliates
or subsidiaries such as insurers that are regulated by another
functional regulator.
PURPOSE AND SCOPE OF COVERAGE
ACLI is concerned that the purpose and scope sections of the proposed
rules of Federal
Reserve, FDIC and OTS do not adequately take into account the unique
status of insurers
as functionally regulated on the state level and subject to the
jurisdiction of the state
insurance authorities. ACLI is also concerned that the different rules
of the Agencies are
inconsistent with each other in this respect.
The OCC’s proposal provides in Section 41.1(b)(2) that the proposed
rule does not apply
to subsidiaries of national banks that are functionally regulated as
provided in
section 5(c)(5) of the Bank Holding Company Act of 1956, as amended (12
U.S.C.
§ 1844(c)(5)) (the “BHCA”). This section of the BHCA provides that the
term
“functionally regulated subsidiary” includes any company that (1) is not
a bank holding
company or a depository institution; (2) is an insurance company, with
respect to
insurance activities of the insurance company and activities incidental
to such insurance
activities, and (3) is subject to supervision by a state insurance
regulator. 12 U.S.C.
§ 1844(c)(5)(B)(iv).2 Accordingly, the OCC’s proposal does
not apply to insurers that
are subsidiaries of national banks.
The NCUA proposal provides in Section 717.1(b)(2) that the proposed
rule is applicable
to federal credit unions only.
Section 334.1 of the FDIC’s proposal provides that the proposed rule
is applicable to
banks and their affiliates and subsidiaries, but contains an express
exception only for
subsidiaries that are persons providing insurance, brokers, dealers,
investment advisors or
investment companies. Accordingly, the FDIC’s proposal would appear to
apply to
entities that are affiliates of state nonmember banks.
The Federal Reserve’s proposal applies to bank holding companies and
affiliates of such
holding companies. Section 222.1 of the Federal Reserve’s proposal
provides no general
exception for affiliates of such holding companies such as insurers that
are functionally
regulated. Section 571.1 of the OTS proposal also does not provide an
exception for
affiliates of saving associations that are functionally regulated.
The administrative enforcement provisions of the FCRA, set forth in
FCRA § 621,
provide no authority for the OCC, NCUA, FDIC or OTS to enforce the FCRA
against
insurers that are affiliated with banking organizations, savings
associations or federal
credit unions. In this regard, FCRA § 621(b)(1)(A) provides that the OCC
has
enforcement authority with respect to national banks and federal
branches and federal
agencies of foreign banks only; FCRA § 621(b)(3) and § 621(e)(2) provide
that the
NCUA possesses enforcement authority and the authority to prescribe
regulations only
with regard to federal credit unions; FCRA § 621(b)(1)(C) provides that
the FDIC has
enforcement authority over banks insured by the FDIC (other than members
of the
Federal Reserve System) and insured branches of foreign banks; and FCRA
§ 621(b)(2)
and § 621(e)(1) grant the OTS enforcement authority and the authority to
prescribe
regulations only with respect to insured savings associations. To the
extent the proposals
of any of these Agencies seek to impose jurisdiction on insurers, they
are inconsistent
with the administrative enforcement provisions of § 621 of the FCRA (15
U.S.C.
§ 1681s).
While FCRA § 621(e)(1) authorizes the Federal Reserve to prescribe
regulations
consistent with the regulations of the other Agencies with respect to
bank holding
companies and their affiliates, ACLI believes that the Federal Reserve
should not
exercise such authority with respect to functionally regulated
industries such as the
insurance industry. The concept of functional regulation is reflected
throughout the
Gramm-Leach-Bliley Act (“GLBA”). For example, Title V of the GLBA
expressly
provides that with respect to insurers, the privacy provisions of the
GLBA are to be
enforced by the State insurance authorities.
ACLI believes that functional regulation is the correct approach in
view of the current
state regulatory structure in effect for insurers. In addition, while
FCRA § 621(e)
provides the Federal Reserve authority to prescribe regulations to
enforce the FCRA with
respect to affiliates of bank holding companies, it does not require the
Federal Reserve to
prescribe such regulations. At the same time, FCRA § 621(e) requires
that any
regulations prescribed by the Federal Reserve must be consistent with
the joint
regulations of the other banking regulators described in FCRA § 621(b).
ACLI believes
that the concept of functional regulation suggests that the rules
adopted by the Agencies
should be consistent and should not apply to persons engaged in
providing insurance.
In view of insurers’ unique status as functionally regulated on the
state level and the
administrative enforcement provisions of FCRA § 621 and to achieve
consistency among
the Agencies’ proposals, the ACLI specifically requests that the Federal
Reserve, FDIC
and OTS adopt the approach taken by the OCC and NCUA that exempt from
the
proposed rules affiliates and subsidiaries such as insurers that are
subject to functional
regulation.
DEFINITION OF MEDICAL INFORMATION
The FACT Act definition of the term “medical information” was also
carefully
considered by Congress at the time the Act was being enacted. The
proposed definition
of “medical information” contained in the Agencies’ proposed rules is
virtually identical
to the definition of the term contained in the FACT Act. ACLI believes
that the
definition the Agencies have proposed should be adopted.
GENERAL PROHIBITION
Section 411(a) of the FACT Act amends the FCRA to prohibit creditors
from obtaining
or using medical information about a consumer in connection with any
determination of
the consumer’s eligibility or continued eligibility for credit. Nothing,
however, prohibits
the use of medical information for other purposes such as in connection
with a
determination of a consumer’s eligibility for an insurance product.
Accordingly, the
Agencies’ proposed rule would confirm that an insurer is permitted to
obtain and use
medical information in connection with the business of insurance and
annuities.
The general rule prohibits a creditor from obtaining and using medical
information in
connection with determining a person’s eligibility or continued
eligibility for credit. The
Agencies’ proposed rules would clarify that the term “eligibility, or
continued eligibility
for credit” does not include the consumer’s qualification for insurance
and certain other
products or any determination of whether the provisions of a credit
insurance product are
triggered. ACLI supports these proposed clarifications that ensure that
there will be a
bright line between what constitutes permissible and impermissible uses
of medical
information.
SHARING MEDICAL INFORMATION WITH AFFILIATES
Section 411(b) of the FACT Act amends the FCRA to restrict a company
from sharing
with affiliates medical information, an individualized list or
description based on
payment transactions of the consumer for medical products or services,
or an aggregate
list of identified consumers based on payment transactions of the
consumer for medical
products or services. Such information, however, may be shared with
affiliates in the
same manner as nonmedical information if the information is disclosed to
an affiliate in
connection with the business of insurance or annuities.
The Agencies’ proposed rules mirror the provisions of the FACT Act
relating to the
sharing of medical information with affiliates. The proposed rules
provide that a
company may rely upon the exceptions from the term “consumer report” if
medical
information or lists of payment transactions for medical products or
services are shared
with affiliates in connection with the business of insurance or
annuities in accordance
with the procedures set forth in the FCRA. The proposed rules also
expressly permit
sharing of such information or lists with affiliates in accordance with
the other statutorily
specified exceptions. ACLI believes that it is appropriate for the
Agencies’ rules to
follow similar provisions of the FACT Act. Accordingly, ACLI supports
these
provisions of the proposed rules.
REDISCLOSURE OF INFORMATION
The Agencies’ proposed rules also provide that a person may not
disclose medical
information received from a consumer reporting agency or from an
affiliate to any other
person except as necessary to carry out the purpose for which the
information was
initially disclosed or as otherwise permitted by statute, order or
regulation. This
provision restates the restriction contained in § 411(a) of the FACT
Act. Because
medical information is permitted to be shared with a person in
connection with the
business of insurance or annuities and as permitted under the other
statutorily specified
exceptions, this proposed rule should not interfere with the usual and
customary flow of
medical information between insurers and their affiliates when such
information is used
for insurance purposes and not in connection with credit decisions.
Accordingly, ACLI
supports inclusion of the provision in the proposed rule.
CONCLUSION
In view of insurers’ unique status as functionally regulated by the
state insurance
regulators and to achieve consistency among the Agencies’ proposals,
ACLI strongly
urges that the Federal Reserve, FDIC, and OTS adopt the approach taken
by the OCC and
NCUA to exempt from their proposals affiliates and subsidiaries such as
insurers that are
subject to functional regulation.
ACLI thanks the Agencies for their consideration of its views.
Sincerely,
Roberta B. Meyer
American Council of Life Insurers
101 Constitution Ave., NW, Suite 700
Washington, DC 20001
1 The term “Agencies” means the Federal Deposit Insurance
Corporation (“FDIC”), the Board of
Governors of the Federal Reserve System (“Federal Reserve”), the Office
of Thrift Supervision (“OTS”),
the Office of the Comptroller of the Currency (“OCC”) and the National
Credit Union Administration
(“NCUA”).
2 The term also includes a broker or dealer registered with
the Securities and Exchange Commission,
registered investment advisors, investment companies registered under
the Investment Company Act of
1940 and a person subject to regulation by the Commodity Futures Trading
Commission. 12 U.S.C.
§ 1844(c)(5)(B)(i), (ii), (iii), and (v).
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