GE Consumer Finance
May 28, 2004
Robert E. Feldman
Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429
Public Information Room
Office of the Comptroller of the Currency
250E Street,
SW
Mail Stop 1-5
Washington, DC 20219
Attention: Docket No. 04-09
Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314
Jennifer J. Johnson Secretary
Board of Governors of the Federal Reserve System
20th Street and Constitution
Avenue, NW
Washington, DC 20551
Attention: Docket No, R.-1188
Regulation Comments
Chief Counsel's Office
Office of Thrift Supervision
1700 G Street, NW
Washington, DC 20552
Attention: Docket No. 2004-16
Re: Fair Credit Reporting Medical Information Regulations
Ladies and Gentlemen:
This comment letter is
submitted on behalf of GE Consumer Finance - Americas ("GECF") in response to the notice of proposed rulemalang ("proposed
Rule") issued by the Board of Governors of the Federal Reserve System
(``FRB"), the Federal Deposit Insurance Corporation ("FDIC"),
the National Credit Union Administration, the Office of the Comptroller of
the Currency and the Office of Thrift Supervision (collectively, the "Agencies")
concerning the medical information regulations required by the Fair Credit
Reporting Act ("FCR ''), as amended by the Fair and Accurate Credit Transactions
Act of 2003 ("FACT Act"). The Proposed Rule, in part, would provide
exceptions to the FCRA's broad prohibition on creditors obtaining or using
medical information for credit eligibility decisions. GECF appreciates the
opportunity to comment on this very important topic.
GECF, a unit of General
Electric Company ("GE"), with $107.4 billion
in assets, is a leading provider of credit services to consumers, retailers
and auto dealers in 38 countries around the world. GE Consumer Finance, based
in Stamford, Conn., offers a range of financial products, including private
label credit cards, personal loans, bank cards, auto loans and leases, mortgages,
corporate travel and purchasing cards, debt consolidation and home equity loans
and credit insurance.
GE (NYSE: GE) is a diversified technology, media and financial services company
with operations worldwide. More information about GE can be
found online at www.ge.com.
BACKGROUND
Section 411 of the FACT
Act amends section 604 of the FCRA to limit the ability of creditors to obtain
or use
medical information.1 Section
604(g)(2) of the FORA states that: "Except as permitted pursuant to
paragraph (3)(C) or regulations prescribed under paragraph (5)(A), 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." This prohibition applies to any "creditor." The FCRA
defines the term "creditor" to have the same meaning as in section
702 of the Equal Credit Opportunity Act ("ECOA" ).2 Section
702 of the ECOA defines "creditor" as "any person who regularly
extends, renews, or continues credit; any person who regularly arranges for
the extension,
renewal, or continuation of credit; or any assignee of an original creditor
who participates in the decision to extend, renew, or continue credit.3 Thus,
the prohibition in section 604(0(2) would prohibit any lender or arranger of
credit or any assignee of a creditor from obtaining or using medical information
in connection with
a credit eligibility determination.
Section 604(g)(5)(A) of
the FCRA requires the Agencies to "prescribe
regulations that permit transactions under [section 604(g)(2)] that are determined
to be necessary and appropriate to protect legitimate operational, transactional,
risk, consumer, and other needs . . . consistent with the intent of [section
604(g)(2)] to restrict the use of medical information for inappropriate purposes." The
Proposed Rule would adopt the general rule of section 604(g)(2) prohibiting
creditors from obtaining or using medical information in connection with credit
eligibility determinations and also would adopt the FCRA definition of "creditor."4 In
addition, the Agencies each propose substantially identical exceptions
to the general prohibition against creditors obtaining or using medical information
in connection with credit eligibility determinations.5
ADVERSE EFFECT OF LIMITING
THE SCOPE OF THE EXCEPTIONS
The Agencies' proposed
regulations differ in one significant respect. Each of the Agencies' regulations
would only apply to the creditors that each Agency
views as being subject to its jurisdiction.6 Typically, the institutions subject
to the Proposed Rule would be institutions chartered as banks, savings associations
or credit unions, and the affiliates of these institutions. The prohibition
in section 604(g)(2), however, applies to lenders and arrangers of credit,
whether or not these entities are banking institutions-or affiliated with banking
institutions. In effect, no creditor, whether the creditor is a banking institution
or an unrelated entity, may obtain or use medical information in connection
with a determination of a consumer's eligibility for credit, except as provided
for in a regulation or order by the Agencies under section 604(g)(5)(A).7 As
a result of the broad statutory prohibition and the limitation of the scope
of the proposed exceptions to banking institutions and some affiliated or related
entities, many creditors would be prohibited from obtaining or using medical
information in connection with credit eligibility determinations, but only
a limited group of creditors would be able to rely on the exceptions. In many
cases, the persons that would be unable to rely on the exceptions would be
the nonaffiliated business partners of covered banking institutions.
Although GECF supports the Agencies' efforts to create regulations containing
exceptions for obtaining and using medical information, GECF is concerned that
the scope of the Proposed Rule does not effectively recognize the day-to-day
realities of the uses of medical information in the provision of financial
services, including credit. The unavailability of these exceptions to entities
that would not be covered by the Proposed Rule could have a significant adverse
effect on banks and on the availability of medical services and products to
consumers, particularly consumers that lack, or have limited, medical insurance.
Doctors, and other non-bank entities, play a crucial role in the process of
making financing options available in medical transactions because they are
best situated to inform consumers about options related to paying for health
care. In today's market, doctors frequently must consider a patient's ability
to pay when devising treatment plan options. As the first link in the chain
for determining health care options, it is critical that doctors be able to
present patients not only with options for a course of treatment, but with
payment options as well, so that consumers can make informed, intelligent decisions
regarding their medical treatment,
If a patient visits a doctor,
the doctor diagnoses the problem and develops treatment options
for the patient. Frequently, insurance is unavailable, and payment options
are given equal weight as treatment options. Because doctors know that
payment concerns are a primary determinant in individual decisions on whether
to pursue the suggested treatment options, doctors will present a patient with
several options on how to pay for the recommended treatment Among the options
doctors may present payment plans to the office and third-party payment
plans designed specifically for medical services. By limiting the exceptions
for obtaining and using medical information under the FCRA to banking institutions
and their affiliates, the Agencies will create a situation that reduces access
to quality medical care as consumers choose to forgo important procedures because
of the mistaken belief that they will not be able to finance the procedure.
The same scenario of insufficient information leading to uninformed medical
decisions will play out not only in doctors' offices, but also in medical supply
stores. If a store owner is unable to inform consumers of payment options for
equipment, such as wheelchairs, consumers may do without needed medical devices
due to the mistaken belief that they lack the ability to pay for their care.
GECF believes that the final rule must account for the day-to-day realities
of the uses of medical information in the provision of financial services.
The Agencies must be cognizant of the impact on the availability of medical
services and products to consumers that will result if the exceptions for obtaining
and using medical information are not available to entities that would not
be covered by the Proposed Rule,
AGENCIES MAY WRITE
REGULATIONS THAT ARE ENFORCED BY OTHER AGENCIES
GECF believes that the Agencies have the authority to write rules under section
604(g)(5)(A) of the FCRA that apply to creditors that are outside the scope
of the Proposed Rule. Section 604(g)(5)(A) does not limit the persons that
may rely on the exceptions created by any of the Agencies under that provision.
Accordingly, read literally, the exceptions created by the rules of each Agency
can apply to all creditors unless the Agencies intentionally limit the scope
of the exceptions.
GECF believes that there
is no reason to limit the scope of the exceptions more narrowly. Each of
the Agencies
can be expected to create responsible exceptions.
If a particular Agency identifies a necessary and appropriate exception that
had not been identified by the other Agencies, all creditors and consumers
should benefit from that exception. Having one Agency create exceptions that
apply to institutions that are subject to the enforcement authority of the
other Agencies does not usurp the authority.of the other Agencies. Further,
having multiple Agencies empowered to create exceptions will not result in
irreconcilable conflicts, For example, unlike the Truth in Lending Act ("TILA")
where the goal of uniformity effectively precludes multiple rules, the section
604(g)(5)(A) exception authority is limited to exceptions and, therefore, does
not raise the possibility of creating irreconcilable conflicts between the
exceptions.
The exceptions created
by the Agencies would be additive. One Agency would not be specifying that
a creditor must take a particular act while another
Agency would be prohibiting the creditor from taking that act. Thus, it is
not necessary to the operation of the prohibition and the exceptions that the
Agencies coordinate their exceptions, although such coordination would be desirable
for a variety of reasons. Although this structure of multiple agencies being
authorized to create potentially overlapping exceptions to a prohibition is
not common, the breadth of the prohibition in section 604(g)(2) itself and
its potential effects on retail credit markets is unique. This broad prohibition
calls for a liberal exception process to avoid disruption of credit transactions
that are important to consumers and their health.
Other Laws
Nothing
in other law or tradition suggests that section 604(g)(5)(A) should be read
in any other way but literally, In the area of regulation of financial
institutions, it is common for a statute to designate a particular agency to
prescribe rules that apply to a broad array of entities, even though that agency
may not have any other relationship to some entities subject to those rules.
In many cases, in a separate section, these statutes designate other agencies
to enforce the provisions of the statute, often according to-the jurisdiction
of the relevant federal agency under other law and relying on the enforcement
powers specified by that other law. For instance, this model is followed by
the Electronic Fund Transfer Act 8(consumer electronic banking transactions),
the Equal Credit Opportunity Act9 (discrimination in credit), the
Expedited Funds Availability Act10 (availability of funds deposited
in bank accounts
and the collection and return of checks) and TILA11 (credit disclosures),
Section 604(g)(5)(A) of the FCRA follows this same model. Rule writing is authorized
under section 604(g)(5)(A) and enforcement by the rule writing and other agencies
is specified in section 621.
The FCRA
The FCRA itself as amended
by the FACT Act, includes an array of rule writing models ranging from rule
writing
authorities that are limited to those entities
that are subject to the rule writing agency's enforcement authority under the
FCRA, to provisions that authorize a single agency to write rules that apply
to entities regardless of the enforcement scheme specified in the FCRA or any
other law. The rule writing authorizations in the FCRA can be divided into
two categories. The first category of rule writing authorizations permits or
requires multiple agencies to write rules that apply to the entities that fall
under those agencies' administrative enforcement jurisdiction
in section 621 of the FCRA. For example, section 615(e) of the FCRA directs
the Agencies
and
the Federal Trade Commission ("FTC") to establish "red flag" guidelines
and prescribe regulations, "with respect. to the entities that are subject
to their respective enforcement authority under section 621" of the FCRA.12
The second category of FACT Act rule writing authorizations permits or requires
an agency or agencies to write rules that cover.entities that are both within,
and beyond, the agency's or agencies' administrative enforcement jurisdiction
under the FCRA. For instance, section 615(h) of the FCRA directs the FRB and
the FTC to jointly prescribe rules to implement the risk based pricing notice
requirement, including providing exceptions to the requirement This notice
requirement applies to any person that uses a consumer report in connection
with an application for, or a grant, extension or other provision of, credit.
Accordingly, the rules written under this provision will apply to national
banks, federal savings associations and federal credit unions, even though
these institutions are not under the enforcement jurisdiction of the FRB or
the FTC under section 621 of the FCPA. Section 615(h) specifically provides
that enforcement is committed exclusively to the Agencies and officials identified
in section 621 of the FCRA.
Section 615(d)(2) of
the FCRA requires the FTC, in consultation with the Agencies, to write rules
requiring enhanced disclosure of prescreening opt outs. This
regulation applies to any user of a consumer report making a prescreened offer
of credit or insurance, including banks and others that are not subject to
the enforcement authority of the FTC under the FCRA or the Federal Trade Commission
Act. Unlike section 615(h), section 615(d)(2) does not include a provision
providing for the enforcement of its requirements.13
THE AGENCIES SHOULD
EXPAND THE SCOPE OF THE EXCEPTIONS TO COVER ALL CREDITORS
GECF strongly urges the Agencies to expand the scope of the exceptions to
the prohibition against obtaining and using medical information so that consumers,
particularly consumers that lack or have limited medical insurance, will not
be limited in their access to medical services and products and so that banks
will not be limited in their ability to provide financing to these consumers.
GECF believes that the
exceptions to the prohibition against obtaining and using medical information
should
be available to any creditor that is also
covered by the prohibition_ The structure of section 604(g) of the FCRA reinforces
the view that the section 604(g)(5)(A) exceptions should apply to all creditors.
As noted above, section 604(g)(2) of the FCRA refers to exceptions under both
section 604(g)(5)(A) and section 604(g)(3)(C). In stark contrast to section
604(g)(5)(A), which does not limit the applicability of the exceptions established
under that subparagraph, section 604(g)(3)(C) specifically delineates the coverage
of the exceptions under the Agencies' regulations. Section 604(g)(3)(C) provides
an exception to the FCRA's limitations on affiliate sharing of medical information
if the information is disclosed "as otherwise determined to be necessary
and appropriate, by regulation or order ... by the Commission, any Federal
banking agency or the National Credit Union Administration (with respect to
any financial institution subject to the jurisdiction of such agency or Administration
under paragraph (1), (2), or (3) of section 621(b))."
Consequently, section 604(g)
of the FCRA itself includes rule writings that fit in both rule writing categories
addressed above—rule writings that
apply to entities for which the rule writer has enforcement authority under
the FCRA and rule writings where the enforcement authority of the rule writer
under the FCRA is irrelevant. Clearly, where Congress intends to limit the
coverage of the Agencies' rule writing authority in the FCRA, Congress knows
how to do so. There is no evidence of Congressional intent to limit in any
way the entities to which the Agencies' rule writing authority under section
604(g)(5)(A) applies. As a result, GECF strongly urges the Agencies to establish
exceptions under section 604(g)(5)(A) that would apply to any creditor that
would be prohibited from obtaining or using medical information, although some
of these entities would be beyond the Agencies' limited administrative enforcement
jurisdiction.
If, for some reason, the
Agencies conclude that it is inappropriate to apply the exceptions to all
creditors, there are a number of alternative approaches
that the Agencies could adopt that would help mitigate the serious adverse effect on the availability of credit
for financing medical services and products. For example, the Agencies could
each adopt rules with the same scope as the Proposed Rule, but in addition,
the Agencies could adopt a separate, common set of exceptions that would apply
to other creditors not covered by the Agencies' rules.
A less comprehensive approach, but an approach that would not disrupt existing
medical financing arrangements to the extent of the approach taken under the
Proposed Rule, would be for
the Agencies to include within the scope of their final rules persons arranging
credit on behalf
of the
entities covered by the Proposed Rule. This
approach might be coupled with a joint interpretation of section 604(8)(2)
issued by all the agencies that enforce the FCRA, including the FTC, interpreting
the language "in connection with any determination of the consumer's eligibility,
or continued eligibility, for credit" to exclude persons who arrange credit
but do not make decisions concerning the consumer's creditworthiness.
Treating arrangers of credit the same way as the lenders themselves is consistent
with the use of the ECOA definition of creditor in the FCRA, as well as the
use of that definition in the ECOA itself. In the context of the prohibition
on obtaining or using medical information, it makes no sense to treat arrangers
of credit more harshly than the creditor itself. Put another way, an exception
for a creditor effectively can be nullified by failing to provide the same
exception to an arranger of credit that is important to the process of bringing
borrowers and the creditor together. This approach is also consistent with
the theory of the Bank Service Company Act which subjects activities that banks
could perform themselves, but which they choose to perform through service
companies, to regulation and examination by the bank supervisory agencies.14
In addition, while in many
medical financing arrangements a provider of medical services or products
serves as the conduit through which the lender and the
consumer are brought together, this provider has no role in evaluating the
consumer's creditworthiness. Thus, while it may be appropriate for the ECOA
to apply broadly to arrangers of credit in order to prevent arrangers from
engaging in discrimination on a prohibited basis that effectively limits the
availability of credit, it makes no sense to apply the prohibitions of section
604(g)(2) to providers of medical services and products simply because they
are helping to arrange financing for a consumer. These entities will be in
possession of medical information by virtue of the very nature of their activities.
The incidental use of this information to assist the consumer in obtaining
financing helps the consumer and would not result in the dissemination of medical
information for any inappropriate purposes because, to the extent that the
information was used to evaluate the creditworthiness of the individual, the
information could only be used in connection with an exception recognized by
the Agencies. To the extent that the provider of medical services and products
was not involved in the actual determination of the consumer's creditworthiness
because, for example, the provider merely forwarded information to the lender,
the provider should not be considered to be obtaining or using medical information
in connection with a determination of the consumer's eligibility for credit.
Given the day-to-day realities of the use of medical information in the provision
of financial services, failing to expand the scope of the exceptions could
significantly impact those
persons covered by section 604(g)(2) but not by the Proposed Rule. As discussed
above, to ensure that the exceptions allow the entities covered by the Proposed
Rule to obtain and use medical information to extend credit to consumers for
medical services and products, the Agencies should ensure that the exceptions
include all entities that work with banking institutions and with affiliates
of these institutions to provide financing for medical services and products.
THE FTC's ENFORCEMENT AUTHORITY
WOULD NOT BE AFFECTED BY BROAD EXCEPTIONS
The Agencies should not
limit the scope of the exceptions to the section 604(0(2) prohibition because
of concerns
about the enforcement process. If the Agencies
write regulations that provide exceptions for creditors that are beyond the
Agencies' administrative enforcement jurisdiction, these creditors will be
covered by the administrative enforcement jurisdiction of the FTC under the
FCRA. Section 621(a) of the FCRA provides that the FTC must enforce the provisions
of the FCRA "with respect to consumer reporting agencies and all other
persons subject thereto, except to the extent that enforcement of the requirements
. . . is specifically committed to some other government agency under subsection
(b)." As a result, if an entity has duties under the FCRA, the entity
will be under the FTC's enforcement authority, unless specifically covered
by another agency under section 621(b). Sections 604(0(2) and 604(g)(5)(A)
do not limit the FTC's general enforcement authority and do not provide an
enforcement structure that differs from sections 621(a) and (b). Accordingly,
the FTC is required by section 621(a) to enforce compliance with section 604(g)(2)
and with regulations providing exceptions to section 604(g)(2) with respect
to any creditor under its jurisdiction.
In conclusion, GECF appreciates the opportunity to comment on this very important
topic. If you have any questions concerning these comments, or if we may otherwise
be of assistance in connection with this matter, please do not hesitate to
contact me at (203) 585-6102.
Sincerely,
Mark Begor
President and Chief Executive
Officer
___________________________
1 Section
411 of the FACT Act also amends section 603 of the FCRA to limit the ability
of consumer reporting agencies to disclose
medical information and to limit the ability of affiliates
to share medical Information.
2 FCRA § 603(c)(5).
3 15 U.S.C. § 1691a(e).
4 Proposed § _30(a).
5 Proposed § §__.30(c)-(d)
5 Proposed §$
.30(c)-(d)
6 The
statutory basis for these jurisdictional determinations is not stated and
is unclear. The determinations do not appear to be related to any specific
jurisdictional statement in the FCRA and may even be based on inconsistent
theories. For example, the FDIC proposal refers to "other entities or
persons with respect to which the FDIC may exercise its enforcement authority
under
any provision of law," but this language does not appear in the other
Agencies' proposals.
7 Exceptions
created under section 604(g)(3)(C) only affect whether information is treated
as
a consumer report. In certain cases, a creditor would not be
able to obtain or use information that is considered to be a consumer report
and, therefore, would not be able to obtain or use information unless an exception
under that section applies. Specifically, section 604(g)(3)(C) provides an
exception to the FCRA's limitations on affiliate sharing of medical information
if the Information is disclosed "as otherwise determined to be necessary
and appropriate, by regulation or order ... by the Commission, any Federal
banking agency or the National Credit Union Administration (with respect to
any Iluaucial institution subject to the jurisdiction of such agency or Administration
under paragraph (1), (2), or (3) of section 621(b))."
8 15
U.S.C. §§ 1693-1693r.
9 15
U.S.C. § 1691-1691f.
10 12
U.S.C. §§ 4001-4010.
1115
U.S.C. §§ 1601-1615,
1631-1649, 1661-1665(b), 1666-1667f
12 Similarly,
sections 605(lh), 623(e) and 6211 and a note to section 624 of the FCRA direct
the
Agencies and the FTC
to write rules ''with respect to the entities that are subject to their respective
enforcement authority under Section
621" of the FCRA.
13
Similarly, section 623(a)(7) of the FCRA require the Board to prescribe a
model
notice to be used by any financial institution that extends credit and
regularly and in the ordinary course of business furnishes information
to the national consumer reporting agencies without specifically providing
for enforcement.
14 U.S.C. § 1867(c).
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