Consumer Bankers 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
Jennifer J. Johnson
Secretary
Board of Governors of the Federal Reserve
System
20th Street and Constitution Avenue, N.W.
Washington, D.C. 20551
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Regulation Comments
Chief Counsel’s Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, D.C. 20552
Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, Virginia 22314-3428
This
comment letter is submitted on behalf of the Consumer Bankers Association
(CBA) in response to the proposed
rule (Proposed Rule) issued by the Board of Governors of the Federal
Reserve System, the Federal Deposit Insurance Corporation, National
Credit Union Administration, the Office of the Comptroller of the
Currency, and the Office of Thrift Supervision (Agencies) with
respect to medical information. The CBA1 has
a strong interest in the Proposed Rule and this letter includes our
comments on it.
SUMMARY
The Agencies have been charged by Congress
to issue regulations that permit creditors to obtain and use medical
information in connection with a determination of a consumers eligibility,
or continued eligibility, for credit (eligibility for credit or eligibility)
when necessary and appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs
consistent with the
intent
to restrict the use of medical information for inappropriate
purposes. In general, CBA believes the Agencies have crafted a
Proposed Rule that meets this congressionally mandated objective
with respect to certain creditors. We have concerns, however, that
the Agencies have limited the scope of the Proposed Rules applicability
in an unnecessarily narrow fashion which may result in unnecessary
problems for many consumers. Furthermore, CBA commends the Agencies
for establishing a workable framework with respect to obtaining and
using medical information in legitimate circumstances and we offer
our constructive thoughts as to how the framework could be improved.
ISSUES
RELATED TO SCOPE OF §___.30
According to the Agencies, any final
rule issued to implement the Proposed Rule (Final Rule) will apply
only to certain creditors described by the Agencies. Therefore,
a large number of entities, such as many finance companies and arrangers
of loans, would apparently not be able to take advantage of the Final
Rules interpretations and exceptions with respect to obtaining and
using medical information in connection with the determination of
a consumers eligibility for credit. This would eliminate the ability
of countless numbers of consumers from obtaining financing for medical
procedures. It would also call into question the legality of the
credit granting process as a whole for many finance companies and
other creditors not described in the Proposed Rule in instances where
they receive medical information on an unsolicited basis, or when
they evaluate debts that also qualify as medical information. We
do not believe that there is a public policy justification for excluding
such creditors from coverage in the Proposed Rule. In fact, we believe
it to be contrary to public policy to suggest that certain
types of lenders should not be permitted to obtain and use medical
information as necessary and appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs.
CBA also respectfully notes that the
limited scope of the Proposed Rule is not consistent with the statutory
language. Congress directed the Agencies to prescribe regulations
that permit transactions [that are otherwise prohibited] that are
determined to be necessary and appropriate to protect legitimate
operational, transactional, risk, consumer, and other needs. Congress
did not state that such regulations would apply only to the entities
subject to the Agencies respective jurisdictions; indeed, the regulations
are to apply simply to transactions that are determined to be necessary
and appropriate, regardless of the Agencies respective enforcement
jurisdiction. The fact that Congress did not intend to limit the
scope of the Proposed Rule becomes clearer when reviewing other directives
for federal agencies to issue regulations under the Fair Credit Reporting
Act (FCRA). In particular, section 605(g)(3)(C) of the FCRA requires
the Agencies and the Federal Trade Commission (FTC) to issue regulations
specifically limited in scope with respect to any financial institution
subject to the jurisdiction of such [Agency].2 There
are many other examples of similar language elsewhere in the FCRA,
such as under section 621(e) (permitting the Agencies to issue regulations
under the FCRA with respect to certain types of entities) and under
section 623(e) (requiring the Agencies and the FTC to issue guidelines with
respect to the entities that are subject to their respective enforcement
authority under section 621). Therefore, we believe that the plain
language of Section 605(g)(5)(A), especially when viewed in contrast
to other provisions in the FCRA, indicates that the scope of the
Final Rule should not be arbitrarily limited. CBA strongly urges
the Agencies to expand the scope of the Final Rule to include any
creditor that obtains or uses medical information in connection with
a determination of a consumers eligibility for credit.
The limited scope of these proposed
regulations will also affect the financial institutions that are
covered by the proposal because covered institutions often originate
loans through or purchase loans or other extensions of credit from
non-covered creditors, such as mortgage brokers and correspondents
or automobile dealers. As a result, the proposed approach taken
by the agencies would negatively affect businesses that were meant
to be covered.
CBA has a very active Automobile Finance
Committee. Its members provide both direct and indirect (through
auto dealers) auto financing to consumers. As the rule stands, the
same transactions could be treated differently because the delivery
channel differs.
If the Agencies determine not to provide
for a scope that covers all creditors, CBA requests that the Final
Rule apply to those creditors that are working in conjunction with
an entity that falls within the scope of the Final Rule. In this
regard, the Final Rule should not eliminate many types of delivery
channels used by entities within the scope of the Final Rule. We
do not believe Congress intended to limit the scope of the Final
Rule at all, but Congress certainly did not intend to eliminate entire
categories of loans for banks and thrifts simply because the loan
may be arranged by another entity.
EXAMPLES
The Proposed Rule includes several examples
illustrating how the Proposed Rule would be applied to specific fact
patterns. According to the Proposed Rule, [c]ompliance with an
example, to the extent applicable, constitutes compliance with the
Proposed Rule and apparently any other rules issued to implement
the FCRA. We commend the Agencies for including useful examples
in the Proposed Rule and we urge the Agencies to include examples
in the Final Rule. We believe that illustrative examples provide
useful guidance for entities seeking to understand how the Final
Rule will be applied. Furthermore, we agree that compliance with
an example should constitute compliance with the Final Rule to the
extent applicable. The Agencies should retain this approach in the
Final Rule.
DEFINITION
OF MEDICAL INFORMATION
The Agencies proposed to adopt a definition
of medical information that is similar to the definition provided
in the statute. CBA believes this definition is appropriate. However,
we strongly urge the Agencies to clarify that information obtained
from a consumer reporting agency that is coded pursuant to section
604(g)(1)(C) of the FCRA is not medical information for purposes
of the Final Rule. Such an approach is consistent with the statutory
definition of medical information and with the congressional intent
as it relates to such coded information. The statute excludes from
the definition of medical information any information that does
not relate to the physical, mental, or behavioral health or condition
of a consumer. Coded information received from a consumer reporting
agency does not relate to the health or condition of a consumer,
and therefore falls outside the definition of medical information. Furthermore,
Congress specifically addressed how information relating to medical
furnishers should be handled and provided the appropriate protections
for such information. We do not believe that Congress further intended
for the Agencies to impose additional restrictions with respect to
information addressed specifically and elsewhere in the statute.
DEFINITION
OF ELIGIBILITY,
OR CONTINUED ELIGIBILITY, FOR CREDIT
The Agencies have provided a definition
of the term eligibility, or continued eligibility, for credit (as
provided above, eligibility for credit or eligibility) as such
term is used in the Proposed Rule. The term would mean the consumers
qualification or fitness to receive, or continue to receive, credit,
including the terms on which credit is offered, primarily for personal,
family, or household purposes. CBA believes that the Agencies have
correctly limited the definition to circumstances in which credit
is offered or provided only for consumer purposes. The proposed
definition is consistent with the general scope of the FCRA, which
has traditionally been limited to circumstances involving personal,
family, or household transactions. We do not believe it would appropriate
for the Agencies to deviate from this longstanding approach. Therefore,
we urge the Agencies to retain the concept of limiting the definition
of eligibility to consumer types of credit.
The Proposed Rule also indicates what
is excluded from the term eligibility for credit. The term would
not include:
· AThe
consumer's qualification or fitness to be offered employment,
insurance products,
or other non-credit products or services;
· Any
determination of whether the provisions of a debt cancellation
contract, debt suspension agreement, credit insurance product,
or similar forbearance
practice or program (collectively, forbearance product) are triggered;
· Authorizing,
processing, or documenting a payment transaction on behalf of the
consumer in a manner that does not involve a determination of the
consumers eligibility for credit; or
· Maintaining
or servicing the consumers account in a manner that does not involve
a determination of the consumers eligibility for credit.
CBA
agrees that the examples provided in the Proposed Rule do not
relate to the consumers eligibility for credit. However,
we believe a better approach to explaining what is excluded from
the definition of eligibility for credit would be to provide a
general statement that the term does not include any issues or circumstances
not directly related to the consumers qualification to receive,
or continue to receive, credit, and to provide a non-exclusive list
of examples of what is not deemed to be eligibility for credit. With
one exception, we believe the examples provided in the Proposed
Rule should be retained in the Final Rule for this purpose.
Use of medical information in connection
with forbearance products such as Debt Cancellation Contracts (DCC)
and Debt Suspension Agreements (DSA)
A number of CBA members offer products
such as Debt Cancellation Contracts and Debt Suspension Agreements. Under
a debt cancellation contract, a bank agrees to cancel all or part
of a customers loan upon the occurrence of a specified event. Debt
suspension agreements call for the suspension of some or all of a
customers obligation to repay an extension of credit upon the
occurrence of a specified event.
With respect to the examples of what
is not included in the term eligibility for credit, the Agencies
have provided that any determination of whether the provisions of
a forbearance product are triggered would be excluded. CBA believes
that the definition should exclude the offering or provision of forbearance
products from the definition of eligibility, not just whether the
provisions of such a product are triggered. As a general matter,
a consumers purchase or participation in a forbearance product is
not considered part of the consumers eligibility for
credit. Therefore,
we do not believe it would be appropriate to imply that the offering
or providing of such products should be treated as though it were
an evaluation of the consumers creditworthiness.
Alternatively, if the Agencies believe
that issues involving forbearance products, other than whether the
provisions of such products are triggered, are to be deemed part
of a consumers eligibility for credit, we believe that an entity
should be able to obtain and use medical information in connection
with providing forbearance products, and an exception should be provided
in the Final Rule. Entities that provide forbearance products may
need to obtain limited amounts of information relating to the consumers
health. For example, if the forbearance product offers coverage
related to the death of the borrower, the creditor may ask the borrower
questions related to borrowers health. The creditor needs this
type of information in order to control for risk when offering the
consumer such a forbearance product. If the Agencies determine that
such activities are deemed to be eligibility, then an exception
should be provided to allow an entity to obtain and use medical information
for such products as necessary and appropriate to protect legitimate
risk
needs as
specified in the FCRA.
GENERAL PROHIBITION AND RULE
OF CONSTRUCTION
The Proposed Rule establishes a general
prohibition stating that a creditor may not obtain or use medical
information pertaining to a consumer in connection with any determination
of the consumers eligibility, or continued eligibility, for credit except
as provided in the Proposed Rule. The general prohibition is essentially
a restatement of the statutory prohibition in the FCRA. The Agencies
have included a rule of construction, however, to clarify when a
creditor will not be deemed to have obtained medical information. In
particular, a creditor does not obtain medical information for purposes
of the general prohibition if it [r]eceives medical information
pertaining to a consumer in connection with any determination of
the consumers eligibility, or continued eligibility, for credit
without specifically requesting medical information and it [d]oes
not use that information in determining whether to extend or
continue to extend credit to the consumer and the terms on which
credit is
offered or continued.
CBA commends the Agencies for recognizing
that a creditor should not be held in violation of the FCRA or the
Final Rule if the creditor receives medical information on an unsolicited
basis and the creditor does not use such information in determining
whether to extend or continue to extend credit to the consumer. We
believe that such an approach is not only appropriate, but absolutely
necessary. A creditor simply cannot be held liable for being the
recipient of unsolicited medical information if the creditor does
not use such information. We urge the Agencies to retain this concept
in the Final Rule. We also urge the Agencies to permit a creditor
to use such information in order to assist consumers, grant a
request, or provide them some other benefit.
FINANCIAL INFORMATION EXCEPTION
A creditor may obtain and use medical
information under the Proposed Rule so long as: (1) the information
relates to debts, expenses, income, benefits, collateral, or the
purpose of the loan, including the use of proceeds; (2) the creditor
uses the medical information in a manner and to an extent no less
favorable than it would use comparable non-medical information in
a credit transaction; and (3) the creditor does not take the consumers
physical, mental, or behavioral health, condition or history, type
of treatment, or prognosis into account as part of any credit determination. CBA
believes that the Agencies have included a proper exception to the
general prohibition on obtaining or using medical information when
such information relates to information ordinarily used in connection
with credit underwriting. We urge the Agencies to retain such an
exception, with one modification, in the Final Rule. In particular,
there may be types of information other than that which relates to
debts, expenses, income, benefits, collateral, or the purpose of
the loan that a creditor would legitimately need in connection with
making an underwriting decision, such as assets. Rather than attempting
to describe such types of information that may be necessary now or
in the future, we believe the Agencies should simply permit creditors
to use medical information as may be necessary to underwrite a loan
so long as such information is treated no less favorably than other
information and the creditor does not take the consumers health,
history, etc. into account.
Additionally, if the Agencies determine
that coded information received from consumer reporting agencies
is in fact medical information, we urge that such information be
afforded the treatment provided under the financial information exception
in the Proposed Rule. In this regard, the information relates
to information legitimately used in credit underwriting (e.g.,
it is included in a consumer report), and the creditor should be
permitted to take it into account in a no less favorable way than
other information would be taken into account.
SPECIFIC EXCEPTIONS
The Agencies would permit a creditor
to obtain and use medical information in connection with any determination
of the consumers eligibility for credit in certain specified circumstances. In
general, CBA commends the Agencies for creating exceptions for legitimate
purposes, such as for fraud prevention or to comply with applicable
legal requirements. We ask the Agencies to clarify the exception
pertaining to a determination of whether the use of a power of attorney
or legal representative is necessary or appropriate so as to ensure
that creditors can evaluate the legal competency of a consumer. If
the consumer is not competent to enter into a contract, the creditor
should be able to determine that the use of a legal representative
is necessary in such circumstances before lending to the consumer.
CBA is also concerned that the Agencies
may have unnecessarily limited the ability of a creditor to obtain
the consumers, or the consumers representatives, request to use
medical information. The Proposed Rule would permit a creditor to
use medical information if the consumer (or representative) requests
in writing, on a separate form signed by the consumer (or representative),
that the creditor use specific medical information for a specific
purpose in determining the consumers eligibility for credit.
We agree with the exception to use medical
information pursuant to a consumers request. However, the Supplementary
Information to the Proposed Rule appears to limit the usefulness
of this exception by indicating that the consumers consent cannot
be obtained as part of loan applications or documentation and that
the exception would not be met by a form that contains a preprinted
description of various types of medical information and the uses
to which it might be put. The Agencies apparently envision an
individualized process in which the consumer informs the creditor
about the specific medical information that the consumer would like
the creditor to use and for what purpose. CBA respectfully suggests
that such limitations by the Agencies will limit the ability of consumers
to request creditors to take medical hardships into account. Many
creditors may not be able to evaluate individualized, handwritten
(since the requests apparently cannot be preprinted or part of an
application) requests for use of medical information in an efficient
mannerand therefore may not honor such requests. This obviously
harms consumers in need of unique evaluations based on medical hardships. However,
if a creditor can establish forms for use in connection with automated
underwriting systems or other needs, the creditor may be better prepared
to take consumers health-related hardships into account.
We also ask the Agencies to allow creditors
to assess medical information in connection with loans above a certain
size. CBA understands that Congress intended to protect against
the use of medical information with respect to credit underwriting. However,
we believe that it is appropriate for creditors to obtain and use
medical information in connection with significant personal loans
somewhere between $1 million and $10 million for a secured loan and
less than that for unsecured loans. We believe that when loan amounts
reach such significant levels, the safety and soundness needs of
the institution may outweigh the benefit of not obtaining or using
medical information. We also note that consumers seeking loans
of those sizes are generally more sophisticated and will understand
the need for obtaining and using medical information in such circumstances.
LIMITS ON REDISCLOSURE OF INFORMATION
The Proposed Rule states that if a person
subject to the scope of the Proposed Rule receives medical information
about a consumer from a consumer reporting agency or its affiliate,
the creditor must not disclose that information 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, regulation,
or order. This provision is consistent with the statutory language
in the FCRA. We urge the Agencies to provide clarification that
a person may redisclose medical information for a purpose authorized
under Section 502(e) of the Gramm-Leach-Bliley Act (GLBA) if such
disclosure is related to the purpose for which it was obtained. We
do not believe the Agencies intend to restrict the redisclosure of
medical information to law enforcement, to prevent fraud, or to the
persons auditors, accountants, or attorneys, for example. Therefore,
we suggest the appropriate clarification be provided.
SHARING MEDICAL
INFORMATION WITH AFFILIATES
Section 602(d)(3) of the FCRA states
that the statutory exclusions to the definition of a consumer report shall
not apply with respect to information disclosed to any affiliate
if the information is: (1) medical information; (2) an individualized
list or description based on the payment transactions of the consumer
for medical products or services; or (3) an aggregate list of identified
consumers based on payment transactions for medical products or services. Section
602(d)(3) does not apply to information disclosed: (1) in connection
with the business of insurance or annuities; (2) for any purpose
permitted without authorization under certain regulations promulgated
under the Health Insurance Portability and Accountability Act (HIPAA);
or (3) as otherwise determined to be necessary and appropriate by
regulation or order by the Agencies or the FTC with respect to the
financial institutions subject to such agencies jurisdiction. The
Agencies have proposed to provide additional exceptions for disclosures: (1)
for any purpose referred to in section 1179 of HIPAA; (2) for any
purpose described in section 502(e) of the GLBA; (3) in connection
with a determination of the consumers eligibility for credit consistent
with the Final Rule; or (4) as permitted by order. We believe
these exceptions are appropriate and should be retained in the
Final Rule.
Thank
you for the opportunity to comment. If you have any questions,
please contact me.
Very Truly Yours,
Marcia Z. Sullivan
Vice President & Director,
Government Relations
Consumer Bankers Association
1000 Wilson Boulevard, Suite 2500
Arlington, VA 22209
1 The Consumer
Bankers Association is the recognized voice on retail banking
issues in the nation's capital. Member institutions
are the leaders in consumer financial services, including auto
finance, home equity lending, card products, education loans,
small business services, community development, investments,
deposits and delivery. CBA was founded in 1919 and provides
leadership, education, research and federal representation
on retail banking issues such as privacy, fair lending, and
consumer protection legislation/regulation. CBA members include
most of the nation's largest bank holding companies as well
as regional and super community banks that collectively hold
two-thirds of the industry's total assets.
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