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Consumer Credit Insurance Association
May 28, 2004
Office of the Comptroller of the Currency
250 E Street, S.W.
Public Information Room
Mail Stop 1-5
Washington, D.C. 20219
Attention: Docket No. 04-09
Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve
System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Attention: Docket No. R-1188
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Re: RIN 3064-AC81
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Attention: Docket No. 2004-16
Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428
Re: 12 CFR Part 717
Dear Sirs and Madams:
These comments are submitted on behalf of the Consumer Credit
Insurance Association (CCIA), a national trade association of more than
140 insurance companies engaged in the business of insuring consumer
credit transactions. A number of our member companies also provide
administrative services to financial institutions for their debt
protection programs. Accordingly, CCIA is dedicated to preserving,
promoting, and enhancing the availability, utility, and integrity of
insurance and related debt protection products delivered in connection
with financial transactions.
We welcome the opportunity to offer comment on the proposed
regulations implementing section 411 of the Fair and Accurate Credit
Transactions Act of 2003 (FACT Act). Our comments are limited to
creditors’ use of medical information in connection with credit
insurance, debt cancellation contracts (DCCs), and debt suspension
agreements (DSAs).
CCIA - Page 2 - 6/1/2004
We recommend a specific and equal exception to the prohibition on
such use of medical information to eliminate the ambiguity and
inconsistency we perceive between the treatment of credit insurance,
DCCs, and DSAs under the proposed regulations.
Exceptions (A) and (B) in Subpart D-Medical Information
§__.30(a)(2)(i) (defining “eligibility, or continued eligibility for
credit”) are inconsistent as to insurance products and such debt
protection products as DCCs and DSAs. Exception (A) permits use of
medical information to determine qualification or fitness to be offered
“… insurance products, or other non-credit products or services.”
Exception (B) permits the use of medical information in determining
whether benefits are triggered for “…a debt cancellation contract, debt
suspension agreement, credit insurance product, or similar forbearance
practice or program….”DCCs and DSAs should be included in exception (A),
which permits use of medical information to determine qualification to
be offered particular products. Equally, the general term “insurance
products” should be included in exception (B), which permits the use of
medical information to determine the triggering of benefits. This change
would provide a consistent treatment for both credit insurance and DCCs
and DSAs.
Credit Insurance and DCC and DSA Programs As Functional
Equivalents
Credit insurance and DCCs and DSAs both serve to protect consumer
debt and credit. Since they function equivalently they should be treated
equivalently. While a number of credit lenders have moved from credit
insurance programs to DCC and DSA programs, many banks continue to use
both programs. It would impose an operational hardship for credit
lenders using both types of programs to comply with two separate
regulatory requirements regarding use of medical information: one to
determine qualification for the insurance product and another to
determine the benefits trigger for both the insurance product and the
debt protection product. Moreover, there is no evident justification or
stated reason why DCCs and DSAs are not contained in both exclusions.
Section 411 of the FACT Act expressly empowers the federal banking
agencies and the National Credit Union Administration to except from the
prohibition on the use of medical information those transactions that
are “…necessary and appropriate to protect the legitimate operational,
transactional, risk, consumer, and other needs.” Therefore, consistent
exceptions for use of medical information for determining “qualification
or fitness for” and “triggering of provisions” of both credit insurance
and DCCs and DSAs are within the agencies’ authority.
References to Insurance As Opposed to Credit Insurance Create
Ambiguity
Credit insurance is a narrowly defined type of insurance under state
statutes and regulations. Most states have enacted the NAIC Consumer
Credit Insurance Model Act and the Consumer Credit Insurance Model
Regulation. It is necessarily subsumed under the general term,
insurance. Again, there is no evident justification to use the general
term “insurance” in exception (A) and the specific term “credit
insurance” in exception (B). Creditors may offer other types of
insurance than credit insurance, such as term life, homeowners,
automobile, and other personal lines coverage. Creditors would have a
legitimate reason to use medical information to determine benefits
triggers in those types of insurance as well as credit insurance.
Therefore, the general term “insurance product” should be used in
both exception (B), as well as in exception (A). This would remove any
ambiguity in using a general term in one instance and a specific term in
the other.
We offer the following recommendations:
1. Move the exclusions, with suggested change in wording, currently
in the definition of Eligibility to the Specific Exceptions for
Obtaining and Using Medical Information section.
2. If the exclusions are not moved and remain in the definition of
Eligibility, change the wording of exclusions A and B and their
applicability to DCCs and DSAs to be consistent with and to reflect
Section 411 of the FACT Act.
The suggested alternative language would be as follows:
Current __.30(d)(vii) “As otherwise permitted by order of the OCC”
moved to become new (viii) and replaced with:
(vii) To the extent such information is obtained for purposes of
(A) The consumer’s qualification or fitness to be offered
employment, debt cancellation contracts, debt suspension
agreements, insurance products, or other non-credit products or
services;
(B) Any determination of whether the provisions of a debt
cancellation contract, debt suspension agreement, credit
insurance product, or similar forbearance practice or program are
triggered;
(C) Authorizing, processing, or documenting a payment or
transaction on behalf of the consumer in a manner that does not
involve a determination of the consumer’s eligibility, or continued
eligibility, for credit; or
(D) Maintaining or servicing the consumer’s account in a manner
that does not involve a determination of the consumer’s eligibility
or continued eligibility, for credit.
We appreciate the opportunity to provide these comments.
Yours truly,
Kathleen J. Wharton
Consumer Credit Insurance Association
542 South Dearborn St, Suite 400
Chicago, IL 60605
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