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COMMENTS of the National Consumer Law Center
to the
Office of the Comptroller of the Currency
12 CFR Part 41
Docket No. 04-09
Office of Thrift Supervision
12 CFR 571
No. 2004-16
Federal Reserve System
12 CFR 222
Docket No. R-1188
Federal Deposit Insurance Corporation
12 CFR 334
RIN 3064-AC81
National Credit Union Administration
12 CFR 717
Proposed Fair Credit Reporting Medical Information
Regulations
The National Consumer Law Center ("NCLC")1 submits the
following comments on behalf of its low income clients, as well as the
Access Project2, Consumer Federation of America3,
Consumers Union4, National Association of Consumer Advocates5,
and U.S. Public Interest Research Group6 , regarding the
proposed rule implementing the guidelines for the use of medical
information under the Fair Credit Reporting Act (“FCRA”)7.
This rule creates exceptions to the general prohibition in the FCRA
forbidding creditors from obtaining or using medical information in
connection with credit eligibility determinations8. The FCRA9
requires the federal banking regulatory agencies and the National Credit
Union Administration (“agencies”) to issue regulations strictly
governing the limited use of medical information by the financial
institutions they regulate (generally referred to in these comments as
“banks”) in a manner consistent with the consumer protections of the
Act, yet allowing appropriate exceptions.
We applaud the careful and specific way in which the agencies have
crafted these regulations. Overall, we appreciate the direction and
careful limitations articulated in this rule. We particularly approve of
the two specific consumer protection requirements regarding the use of
medical financial information, as permitted by the regulations, that the
use of medical information must be “no less favorable” than other
information, and that there is a flat prohibition against discrimination
on the basis of medical condition.
Nevertheless, we do have a number of specific comments and
suggestions regarding ways to ensure the consumer protections envisioned
by Congress in the passage of this section. These suggestions address
five areas:
1. The exclusion of individual business credit from the coverage
under these regulatory protections is unjustified by the language or
intent of the Fair and Accurate Credit Transactions Act of 2003 (“FACT
Act”).
2. The adoption of the “no less favorable standard” for the use of
the medical financial information and the prohibition against
discrimination on the basis of medical condition is excellent and
entirely consistent with the language and intent of the FACT Act.
3. The exclusions from the rule should be changed to be considered
exceptions from the rule, and should include an anti-discrimination
standard as well.
4. The exclusionary rule for the use of medical information in
consideration of debt cancellation or credit insurance products must be
narrowed to an exception only permitting the information to be used at
the appropriate time and for relevant products.
5. The reservation of authority for allowing exceptions by order of
the agencies is too broad and contradicts the requirements of the FACT
Act.
Finally, we note with strong support the extensive comments submitted
by Professor Joy Pritts of Georgetown University’s Health Policy
Institute, which address a number of issues not raised in this comment.
We adopt the comments by Professor Pritts as a part of our comments.
1. The exclusion of individual business credit from the coverage
under these regulatory protections is unjustified by the language or
intent of the FACT Act.
The proposed rule includes a limitation for the medical information
protections that is not supported or justified by the statute. The rule
defines “eligibility, or continued eligibility for credit” as “the
consumer’s qualifications or fitness to receive, or to continue to
receive credit, …, primarily for personal, family, or household
purposes.” (emphasis added).10 The last phrase “primarily
for personal, family, or household purposes” significantly limits the
protections against use of medical information by banks to only consumer
credit, leaving banks free to discriminate against individuals seeking
business credit on the basis of medical condition.
This limitation on the medical information protections is not
authorized, and indeed contradicts, the plain language of the statute.
The statute states “a creditor shall not obtain or use medical
information … pertaining to a consumer in connection with any
determination of the consumer's eligibility, or continued
eligibility, for credit.”11 In turn, “consumer” is defined in
the FCRA simply as an “individual.”12 Thus, nothing in the
FACT Act or the FCRA limits the protections of sec. 604(g)(2) to
consumer credit, i.e., credit for personal, family or household
purposes.
Furthermore, such a limitation contradicts the FCRA’s definitions of
“credit” and “creditor”, which specifically refer to the definitions of
those same terms under the Equal Credit Opportunity Act (ECOA).13
The ECOA defines ‘‘credit’’ as “the right granted by a creditor to a
debtor to defer payment of debt or to incur debts and defer its payment
or to purchase property or services and defer payment therefor.”14
The ECOA defines ‘‘creditor’’ in part as “any person who regularly
extends, renews, or continues credit.”15 Neither
definition is limited to consumer credit, and the ECOA clearly applies
to individual business credit. It is important to note that Regulation B
specifically covers business credit and applies the general prohibition
against discrimination to business credit,16 although
business credit is exempted from some requirements.17
Similarly, Congress intended that individuals seeking small business
credit should be protected against discrimination on the basis of
medical condition.
Congress specifically and explicitly chose to use the definition of
credit and creditor under the ECOA, and not the more restrictive
definition under the Truth in Lending Act, a statute which is limited to
consumer credit.18 One of the primary reasons for applying
the ECOA definition of credit to the FCRA, instead of the TILA
definition, was to ensure that all the protection of the FCRA applied to
individuals seeking business credit. The agencies’ attempt to limit the
protections against use of medical information for small business owners
is contrary to Congressional intent.
It is in the context of credit for sole proprietorships or small
businesses where the anti-discrimination provisions for medical
conditions may be most important. Even some of the examples described in
the proposed rule bear this out. Many of these examples involve a
borrower meeting with or having conversations with a bank loan officer
-- not a common situation for many forms of consumer credit, such as
credit cards and auto loans. Where meetings or conversations with bank
loan officers are more common is for small business credit applications.
2. The adoption of the “no less favorable standard” for the use of
the medical financial information and the prohibition against
discrimination on the basis of medical condition is excellent and
entirely consistent with the language and intent of the FACT Act.
We strongly support the rule’s requirement that medical financial
information be treated no less favorably than other financial
information, and that banks may not discriminate on the basis of medical
condition. This provision, contained in proposed section _____.30(c),
permits a bank to treat medically-related financial information the same
as, or better than, similar non-medically related financial information.
It also prohibits a bank from discriminating against consumers based on
their underlying medical condition, treatment, or prognosis.
The primary reason consumers are opposed to banks’ having access to
their medical information is the concern that they will be discriminated
against – or adversely affected – on the basis of the information.
Congress intended to address these concerns and directed the agencies to
promulgate a rule consistent with Congressional intent to restrict the
use of medical information for inappropriate purposes.
Moreover, the establishment of a “no less favorable treatment”
standard affords banks the discretion to treat medically-related debt
and expenses more leniently than other types of debt. Creditors will
sometimes treat medical debt more leniently than non-medical debt for
the reason that medical debt often does not reflect a consumer’s
propensity to pay, because of the circumstances under which medical debt
is incurred.19 For instance, delinquent medical debt reported
to a credit reporting agency sometimes is the result of disputes between
medical providers and insurers, where the consumer is “caught in the
middle”.20 By permitting banks the discretion to treat such
medical debt more favorably than other types of debt, the proposed rule
strikes a reasonable balance between allowing a bank accommodate
consumers, and the need to protect consumers from discrimination based
on their medical condition.
We strongly urge you to retain the requirement that banks treat
medically-related debt no less favorably than other debt as well as the
prohibition against discrimination of consumers based on their physical,
mental, or behavioral health, condition or history, type of treatment,
or prognosis.
3. The exclusions from the rule should be changed to be considered
exceptions from the rule, and should include an anti-discrimination
standard as well.
The proposed rule at ___.30(a)(2)(i) excludes certain products or
actions from the protections against obtaining or using medical
information, by defining such products or actions as not involving
“eligibility or continued eligibility for credit.” We are concerned that
exclusions (B) through (D) of this subsection would permit banks in the
credit context to discriminate against consumers on the basis of medical
condition. To serve the purposes discussed in the Supplementary
Information for which the exclusions were created, i.e., to allow banks
to consider consumers claims for benefits or requests for accommodation
on the basis of medical information, these exclusions should be merged
with the exception for consumer request exception at __.30(d)(vi), and
this exception should also include an anti-discrimination scheme similar
to the one for medical financial information at __.30(c).
In general, anti-discrimination standards need to be carried through
the entire credit transaction process, including delinquency and default
procedures. For example, the Equal Credit Opportunity Act does so,
prohibiting discrimination “with respect to any aspect of a credit
transaction.”21 Indeed, decisions at every part of a credit
transaction involve determinations of the consumer’s “continued
eligibility for credit.” For example, forbearance agreements are a
decision to re-write the terms of credit for a consumer, which is
essentially a decision to continue the eligibility for credit. The
decision to foreclose is the decision to terminate an account, and thus
deny continued eligibility for credit.
In each of these servicing decisions, as well as for credit
insurance/debt cancellation agreements/forbearances agreements/workouts,
a bank should be permitted to use medical information to grant a benefit
for which a claim is made, or accommodate the requests of a consumer on
the basis of medical condition. The banks should also be free to deny
relief on the basis that the triggering event has not happened, or to
ignore medical information when considering requests for accommodation.
However, banks should be prohibited from considering medical information
when the consumer has not requested or made a claim for benefits, or to
discriminate against the consumer because of medical information.
For instance, it should violate the provisions of section 604(g)(2),
for a servicer to accelerate a loan when a consumer is delinquent on the
basis that the consumer has a terminal disease, when the servicer would
not accelerate a loan in a similar situation for a healthy consumer. It
should also violate sec. 604(g)(2) for a bank to deny a property hazard
insurance claim (which is a form of credit insurance) because of the
consumer’s illness.
Thus we would favor eliminating the exclusions at __.30(d)(vi), and
bringing these issues under the framework of the “consumer request”
exception at ___.30(d)(vi) by expanding the exception to consumer
requests and claims for benefits. This would bring all of these “claimed
benefits” and “accommodation” exceptions into one framework, a much
simpler and cleaner method of dealing with these issues. Furthermore, to
prevent discrimination against the consumer, protections similar to
those at ___30(c) should be added, i.e., the banks would be permitted to
consider medical information in the context of credit insurance,
forbearance, or servicing, but could not treat consumers “less
favorably” than similarly-situated consumers or discriminate on the
basis of medical condition.22
4. The exclusionary rule for the use of medical information in
consideration of debt cancellation or credit insurance products must be
narrowed to an exception only permiting the information to be used at
the appropriate time and for relevant products.
If the exclusion for debt cancellation and credit insurance is not
modified as suggested above, the scope of medical information that a
bank can obtain and use under this provision needs to be narrowed.
First, we support Professor Pritts’ suggestion to reshape the exclusion
as an exception and to limit the medical information obtained or used to
only that information necessary to determine whether such provisions
have been triggered. Banks should not be permitted to obtain or use
medical information if the triggering event for the debt cancellation or
credit insurance claim is non-medical, such as unemployment or divorce.
Second, the rule needs to prohibit banks from obtaining and using
medical information to engage in the practice of post-claim
underwriting. Post-claim underwriting occurs when creditors sell credit
insurance to people who may not benefit from it: for example, disability
insurance sold to homeowners who are disabled or already sick; credit
life insurance sold to people who are not eligible because of
pre-existing condition. When the consumer files a claim, the creditor
then conducts an investigation of the consumer’s medical history to
determine that the consumer never qualified for the insurance in the
first place.23
Thus, the rule should be limited to permitting the bank to obtain or
use only that medical information which specifically and directly
relates to the event or condition that the consumer asserts triggered
the debt cancellation or credit insurance agreement. For example, if the
product is credit life insurance, the only medical information necessary
for the creditor to obtain and use is the confirmation of the consumer’s
death. The creditor should not be permitted to delve into the consumer's
medical history after the policy has been written to determine whether
the consumer had a medical condition that disqualified him from
coverage.
5. The reservation of authority for allowing exceptions by order of
the agencies is too broad and contradicts the requirements of the FACT
Act.
The agencies have created an overly broad, unjustified, catch-all
exception to the very important protections for medical information. At
sec. ___.30(d)(vii), the agencies have given themselves the power to
create additional exceptions to the medical information protections by
simply issuing an order. This overly broad reservation of authority is
contrary the language and intent of the FACT Act.
The FACT Act specifically requires the agencies to go through
rulemaking to establish exceptions to section 604(g)(2). Section
604(g)(5)(A) states “[e]ach Federal banking agency and [NCUA] shall,
subject to paragraph (6) and after notice and opportunity for comment,
prescribe regulations that permit transactions under paragraph (2) that
are determined to be necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs” In fact,
this subsection is even entitled “Regulations required.” Thus, it is
contrary to the statutory language for the agencies to establish any
other exceptions without going through the rulemaking process.
Some might argue that sec. 604(g)(2) does give the agencies the
authority to establish exceptions with a mere order because it refers to
exceptions “pursuant to paragraph (3)(c)….” Paragraph 3(c) in turn does
mention the ability of the agencies and the FTC to establish exceptions
by regulation or by order. However, paragraph 603(c) specifically deals
with exceptions to the restrictions for affiliate-sharing of medical
information. Thus, this exception does not deal with when a bank can
obtain medical information, except when the information is from an
affiliate, and it does not deal at all with the use of medical
information.
Thus, the agencies are permitted to establish by order when a bank
may obtain medical information from an affiliate.24 It does
not, however, permit the agencies to create additional exceptions
permitting banks to use medical information or to obtain it from other
non-affiliate sources, without going through the notice and comment
procedures of rulemaking.
Finally, we note that there are no standards in ___.30(d)(vii) for
the agencies to create exceptions by order. Unlike the statute itself,
there is no requirement that the exception be consistent with the intent
of sec. 604(g)(2) to restrict the use of medical information or that the
agencies make a determination that the exception is necessary and
appropriate to protect legitimate operational, transactional, risk, or
consumer needs. It is a standardless, wide open reservation of
authority, which is not what the statute contemplates.
Conclusion
We support what appears to be the general intent of the proposed
rule, allowing banks to accommodate consumers on the basis of medical
information while prohibiting banks from obtaining or using medical
information to discriminate against consumers. Our suggestions are all
based on that framework. We believe all consumers, including applicants
for small business credit, deserve to be considered based on their
creditworthiness, not their medical condition, when seeking credit.
Chi Chi Wu
Staff Attorney
National Consumer Law Center
77 Summer St., 10th Fl.
Boston, MA 02110
1 The National Consumer Law Center is a nonprofit
organization specializing in consumer credit issues on behalf of
low-income people. We work with thousands of legal services, government
and private attorneys around the country, representing low-income and
elderly individuals, who request our assistance with the analysis of
credit transactions to determine appropriate claims and defenses their
clients might have. As a result of our daily contact with these
practicing attorneys, we have seen numerous examples of invasions of
privacy, embarrassment, loss of credit opportunity, employment and other
harms that have hurt individual consumers as the result of violations of
the Fair Credit Reporting Act. It is from this vantage point – many
years of dealing with the abusive transactions thrust upon the less
sophisticated and less powerful in our communities – that we supply
these comments. Fair Credit Reporting (5th ed. 2002) and Credit
Discrimination (3rd ed. 2002) are two of the eighteen practice treatises
that NCLC publishes and annually supplements. These comments were
written by Chi Chi Wu, Staff Attorney, and Margot Saunders, Managing
Attorney, and are submitted on behalf of the Center’s low-income
clients.
2
The Access Project is a national resource center for local communities
working to improve health and health care access. It conducts community
action research in cooperation with local leaders to improve the quality
of relevant information needed to change the health system.
3
The Consumer Federation of America is a nonprofit association of over
300 consumer groups, established in 1968 to advance the consumer
interest through research, education, and advocacy.
4 Consumers Union is the nonprofit publisher of Consumer Reports magazine,
is an organization created to provide consumers with information,
education and counsel about goods, services, health, and personal
finance; and to initiate and cooperate with individual and group efforts
to maintain and enhance the quality of life for consumers. Consumers
Union's income is solely derived from the sale of Consumer Reports, its
other publications and from noncommercial contributions, grants and
fees. Consumers Union's publications carry no advertising and receive no
commercial support.
5 The National Association of Consumer Advocates (NACA) is a
non-profit corporation whose members are private and public sector
attorneys, legal services attorneys, law professors, and law students,
whose primary focus involves the protection and representation of
consumers. NACA’s mission is to promote justice for all consumers.
6 The U.S. Public Interest Research Group is the national lobbying office
for state PIRGs, which are non-profit, non-partisan consumer advocacy
groups with half a million citizen members around the country.
7 § 604(g)(5) of the FCRA, 15 U.S.C. 1681b(g)(5).
8 § 604(g)(2) of the FCRA, 15 U.S.C. 1681b(g)(2).
9 § 604(g)(5).
10 Proposed section __.30 (a)(2)(i).
11 FCRA, § 604(g)(2), 15 U.S.C. 1681b(g)(2) (emphasis added).
12 FRCA, § 603(c),15 U.S.C. § 1681a(c).
13 FCRA, § 603(r)(5), 15 U.S.C. § 1681a(r)(5).
14 15 U.S.C. 1691a(d).
15 15 U.S.C. § 1691a(e).
16 Reg. B, 12 C.F.R. § 202.4; see Official Staff Commentary to Reg. B, 12
C.F.R. § 202.3-1 (“All classes of transactions remain subject to the
general rule in § 202.4”).
17 See, e.g., Reg. B, 12 C.F.R. § 202.9 (modifying the ECOA adverse action
notices for business credit).
18 The initial bills introduced in both the House and the
Senate used the TILA definition of credit. House Rep. No. 108-263, at 3
(2003) and S.1753, 108th Cong. (2003).
19 Eve Tahmincioglu, Is Your Health Insurance Hurting Your Credit?, New
York Times, May 12, 2002.
20 Jennifer Steinhauer, Will Doctors Make Your Credit Sick?, New York
Times, February 4, 2001; Consumer Federation of America and National
Credit Reporting Association, Credit Score Accuracy and Implications for
Consumers, December 17, 2002, at 31, available at www.consumerfed.org/121702CFA_NCRA_Credit_Score_Report_Final.pdf.
21 15 U.S.C. § 1691.
22 In the Supplementary Information, the agencies ask for
comment as to whether the procedural aspects of the consumer request
exception are too burdensome. We believe that the procedures are not too
burdensome, but what is more important for this exception is that once
banks have the medical information, it not be turned around and used to
treat the consumer less favorably.
23 Unlike ordinary insurance sales, with post-claim underwriting abuse, the
consumer’s medical history is not reviewed prior to the issuance of
insurance to determine eligibility for benefits (note that such
pre-claim underwriting would be permissible under the exclusion for
insurance). Instead, only after a claim is filed are eligibility factors
such as medical condition checked to see grounds exist for denying
coverage. Many policies simply provide that the policy will be canceled
and the premium refunded if ineligibility is determined. The result of
this arrangement is that creditors and insurance companies keep the
premiums paid by ineligible debtors who never file an insurance claim,
while refusing to pay on the same policies if claims are ever filed. For
more on post-claim underwriting in credit insurance, see National
Consumer Law Center, The Cost of Credit: Regulation and Legal Challenges
§8.5.5 (2d ed. 2000 and Supp.).
24
In her comments, Professor Pritts of Georgetown analyses why the agencies
should not create a broad exception allowing sharing of medical
information between banks and their affiliate, a position that we also
support.
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