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FDIC Federal Register Citations

State Bank of Southern Utah

From: David Eberhard []
Sent: Wednesday, May 26, 2004 6:55 PM
To: Comments
Subject: FDIC RIN 3064-AC81

Robert E. Feldman, Executive Secretary
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, D.C. 20429

RE: Fair and Accurate Credit Transaction Act of 2003
Fair Credit Reporting Medical Information Regulations

Thank you for the opportunity to comment on the proposed rulemaking for the Fair Credit Reporting Medical Information Regulations. Although medical information is not routinely obtained in our institution, the rules provide guidance that is needed in obtaining and using medical information in certain circumstances. I believe for the most part, the proposed rules provide an adequate balance between permitting creditors to obtain and use medical information where necessary, and restricting the use of medical information for inappropriate purposes. My specific comments are as follows.

General prohibition on obtaining or using medical information

I generally agree with the proposed rule that a creditor may not obtain or use medical information pertaining to a consumer in connection with any determination of the consumer's eligibility for credit with certain exceptions. I believe that it would be more appropriate to grant an exception to permit creditors to obtain and use medical information in connection with debt cancellation, debt suspension, or credit insurance products rather than issuing an interpretation that obtaining information necessary for coverage of these product is excluded from the general definition. A specific exception would give clearer guidance on the appropriateness of obtaining and using medical information for these products.

Receiving Unsolicited Medical Information

Creditors may receive unsolicited medical information without specifically asking for such information. The proposal states that a creditor would not violate the prohibition on obtaining medical information when the creditor does not specifically ask for or request such information, yet the consumer or other person provides that information to the creditor. The proposal asks whether this rule should be drafted as a rule of construction or as an exception to the general prohibition. Again, I would encourage the agencies to include this as an exception to provide clearer guidance.

Exception for Obtaining and Using Medical Information

The proposed rule contains a financial information exception for instances where a creditor may obtain and use medical information. I generally agree with the first element of the exception in that a creditor may obtain and use medical information so long as the information relates to debts, expenses, income, benefits, collateral or the purpose of the loan, including the use of proceeds. I also agree with the second element that the creditor may use the medical information in a manner and to an extent that is no less favorable than it would use comparable information that is not medical information in a credit transaction. I generally agree with the third element that the creditor may not take the consumer's physical, mental, or behavioral health, condition or history, type of treatment, or prognosis into accout as part of any determination of the consumer's eligibility, or continued eligibility, for credit.

I think the examples provided in the proposal adequately describe the intent of the rule. The only example I have a specific comment on is the second example in proposed paragraph (c)(2)(iii) which illustrates the use of medical information that is inconsistent with the exception.  In the example, a consumer meets with a loan officer of a creditor to apply for a mortgage loan. While filling out the loan application, the consumer informs the loan officer orally that she has a potentially terminal disease. The loans officer recommends to the credit committee that the consumer be denied credit because the consumer has that disease. According to the rule, the creditor has used medical information in a manner inconsistent with the exception. In reading this, I can see a potential safety and soundness concern in that the consumer may not be able to repay the loan because of the potentially terminal disease. My question is whether the creditor can further inquire of the applicant and consider the repayment ability of the borrower. I am reminded of Regulation B (Equal Credit Opportunity Act) and the prohibition of considering an applicant's age in determining eligibility. In the Official Staff Commentary, it states, "A creditor may consider the applicant's occupation and length of time to retirement to ascertain whether the applicant's income (including retirement income) will support the extension of credit to its maturity."

Also in the model application form in Appendix B of Regulation B, one of the questions on the form is "Is any income listed in this Section likely to be reduced before the credit requested is paid off?" Next to the "Yes" box it states "Explain in detail on a separate sheet." If a consumer explains that he/she has a terminal condition, will a creditor be able to use that information and information about the consumer's ability to maintain adequate income to support the repayment of the loan and then deny the credit based on the repayment ability? I would like to request that the agencies provide more guidance in this area.

The proposed rule in paragraph (d) also provides specific exceptions for obtaining and using medical information. I agree with these exceptions provided. These exceptions are necessary for a creditor to be able to use information in the specific circumstances provided in the exceptions.

Finally, as rediculous as it may sound, I would like to see specific guidance that "death" would not be considered a medical condition under the definitions of the regulation. I can just imagine a future court case in which a creditor terminated "a consumer's continued eligibility for credit" based upon the death of the consumer and having the estate of the consumer sue the creditor stating that death is a medical condition under the regulation. Definite guidance is needed for creditors to be able to enforce their legal and contractual rights upon the death of a consumer.

Thank you,

David Eberhard
State Bank of Southern Utah

Last Updated 05/27/2004

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