WELLS FARGO
May 28, 2004
Wells Fargo & Company
Law Department
633 Folsom Street, 7th Floor
San Francisco, CA 94107
Via Electronic Mail
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
Re: Notice of Proposed Rulemaking on the Fair Credit Reporting
Medical Information Regulations
Ladies and Gentlemen:
Wells
Fargo & Company (“Wells Fargo”) appreciates
the opportunity to comment on the proposed regulations implementing
section 411 of the Fair and Accurate Credit Transactions Act of 2003
(“FACT Act”) issued by the Board of Governors of the Federal
Reserve System (the “Board”), the Office of the Comptroller
of the Currency (“OCC”), Office of Thrift Supervision (“OTS”),
the Federal Deposit Insurance Corporation (“FDIC”) and
the National Credit Union Administration (“NCUA”), (collectively,
the “Agencies”). Wells Fargo is one of the country’s
largest diversified financial services enterprises; our subsidiaries
include banks, a consumer finance company, investment advisors,
securities broker-dealers, and insurance agents and brokers.
Background
Section 411 of the FACT Act amends the Fair Credit Reporting
Act (“FCRA”)
to provide that a creditor may not obtain or use medical information
in connection with any determination of a consumer's eligibility, or
continued eligibility, for credit except as permitted by regulations.
The Agencies’ proposed regulations would grant limited
exceptions to allow creditors to obtain or use medical information
in those
circumstances that the Agencies believe are necessary and appropriate
in connection
with determinations of consumer eligibility for credit. The regulations
also establish when and how creditors would be permitted to share
medical information among affiliates.
Wells Fargo generally supports the Agencies’ proposed regulations.
However, we believe there are some areas in the proposal that
should be reconsidered prior to issuing a final rule. We would
like to offer
the following suggestions which we believe would enhance this
proposal. We recommend the following changes and additions:
• Additional clarification
is necessary for the definition of medical information, the exceptions
to the general prohibition on obtaining
and using medical information for credit purposes and the examples
illustrating the general rule and exceptions.
• The proposed exceptions have limited application and should be extended
to apply to all creditors who would otherwise be subject to
the prohibition on obtaining or using medical information.
• There should be a separate exception for debt cancellation contracts
and debt suspension agreements.
• The rule of construction which provides a safe harbor for unsolicited
medical information is preferable to creating a separate exception
to the prohibition.
• Consumer reports containing coded medical information should be excluded
from the definition of medical information.
• The requirements for consumer consent to the use of medical information
should be less onerous.
• There should be specific exceptions for the use of medical information
to authenticate the identity of a borrower and to determine
whether the borrower has the legal capacity to enter into a valid credit
agreement.
•
Redisclosure of medical information should be permitted for purposes
covered by the “general” exceptions under GLBA
and Regulation P.
• The Agencies should be allowed to draft regulations that are enforced
by other agencies.
• The FTC should retain enforcement authority despite the lack of rulemaking
power.
• The Agencies should provide sufficient time to implement the final
rule.
General comments about the definition of medical information and exceptions
Wells Fargo believes that the definition of medical
information needs further clarification. In particular, we believe
that the Agencies
should clarify that “medical information” must “relate
to” or “pertain to” a specific, identifiable consumer.
For example, a database of information relating to the repayment behavior
of thousands of consumers, none of whom is personally identifiable,
should not be deemed to be “medical information.” If such
information were “medical information,” creditors may
have difficulty in utilizing such data even for basic analytical
purposes
that have no bearing or impact on any individual. We do not believe
that this was the intent of Congress or the Agencies, and we urge
the Agencies to provide a clarification on this issue.
We generally support of the approach taken by the Agencies in the
proposed regulations to provide exceptions for financial information,
and to provide additional specific exceptions where the use of any
type of medical information is necessary or appropriate in connection
with an extension of credit. We support the three part test that must
be satisfied in order to qualify for the financial information exception.
However, we recommend adding a statement to the financial information
exception that indicates that the list of items that the medical information
is permitted to relate to (i.e., debts, expenses, income, benefits
collateral, or the purpose of the loan, including the use of proceeds)
is not exclusive. This would cover items that may have been unintentionally
omitted by the Agencies.
Wells Fargo favors the use of examples to illustrate the application
of the proposed regulations. We support the statement in the proposal
that the examples are not exclusive and that compliance with an example
provides a safe harbor for compliance with these rules. We recommend
that the Agencies provide additional examples based on comments received
in order to provide additional clarification of the proposed rules.
The exceptions, as proposed, have too limited application and should
be extended to apply to all creditors
The new section 604(g)(5)(A) of FCRA allows the Agencies
to grant exceptions that allow creditors to obtain or use medical
information
as “necessary and appropriate to protect legitimate operational,
transactional, risk, consumer, and other needs (including actions necessary
for administrative verification purposes), consistent with the intent
of the statute to restrict the use of medical information for inappropriate
purposes.” The Agencies have requested comments on whether
or not the proposed exceptions adhere to this standard.
Wells Fargo is concerned that the exceptions under
section 411 are limited only to those entities over which the Agencies
have supervisory
jurisdiction. Although each one of the Agencies have proposed virtually
identical exceptions to the general prohibition against creditors
obtaining or using medical information in connection with credit eligibility
determinations, the Agencies’ regulations would only apply
to those creditors that the Agency views as being subject to its
supervisory
jurisdiction. This would include those institutions chartered as
a bank, savings association or credit union and their affiliates.
As a result of the limitation of the proposed exceptions
to banking institutions and their affiliates, only a limited group
of creditors
would be able to rely on the exceptions. The remaining creditors
would be prohibited from obtaining or using medical information in
the credit
context. The groups most affected would be nonaffiliated business
customers and partners of banks, such as mortgage brokers, motor vehicle
dealers
and medical providers. These entities would be unable to apply the
exceptions to their business practices and therefore would be unfairly
disadvantaged. Moreover, even banks and other covered institutions
would be negatively impacted because they often originate loans through,
or purchase loans from, these entities. For example, covered institutions
often rely on motor vehicle dealers and mortgage brokers to consider
an applicant’s capacity to contract and the risks involved with
making a loan to an individual. Similarly, medical providers often
originate credit with their customers/patients, and then banks and
other covered institutions purchase or take security interests in those
receivables. Under section 411, these non-covered entities would not
be allowed to consider an individual’s past, present or future
physical, mental, or behavioral heath or condition when reviewing an
application and determining the applicant’s capacity to enter
into a contract. Furthermore, the non-covered entities would not be
allowed to take into account any medical debt delinquency that may
affect the applicant’s credit eligibility.
Wells Fargo believes that exceptions as proposed would
not apply to medical providers since they are not under the Agencies’ jurisdiction.
This could have a significant impact on how medical services are provided
to consumers, particularly consumers who have limited access to medical
insurance. Medical professionals often take into account a patient’s
ability to pay when offering treatment options. If the patient does
not have insurance, options may be limited absent the patient’s
ability to finance a procedure. If the medical professionals are
unable to inform consumers about certain financing options due to
the constraints
presented under section 411, patients may make an uninformed decision
and not choose to pursue the best available treatment for their ailment.
Wells Fargo does not believe that the statute should
limit the availability of the exceptions under section 411 to institutions
within the Agencies’ jurisdiction.
We believe the statute should be read as requiring the Agencies to
issue regulations that would apply to all creditors who would otherwise
be subject to the restriction against obtaining or using medical information
for credit determinations. If Congress had intended to limit the regulations
to those creditors in the Agencies’ jurisdiction, the statute
would be more explicit. Congress has indeed taken this approach on
other occasions. For example, there are sections in FCRA where Congress
has limited exceptions to the Agencies’ enforcement jurisdiction.
Section 604(g)(3)(C) specifically provides an exception to the 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)).” We urge
the Agencies to reconsider this proposal and extend the scope of
these regulations and exceptions to apply to all creditors.
There should there be a separate exception for debt cancellation contract
and debt suspension agreements
The agencies’ proposal requests comment on whether
or not there should there be a separate 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 to trigger coverage under these
products falls outside the determination of credit eligibility.
Debt cancellation contracts (“DCC”) and debt suspension
agreements (“DSA”) often require consideration of medical
information as a condition of eligibility. Without an express regulatory
exception, the use of medical information in connection with offering
a debt cancellation provision in an extension of credit would be
prohibited, which would have the effect of prohibiting the product
itself where consideration of medical information is a necessary
condition of offering the product. Wells Fargo recommends that such
contracts and agreements be subject to a specific exception to the
prohibition on the use of medical information rather than an interpretation
of what constitutes “eligibility for credit.”
We believe that the interpretation in the proposed regulation is
too narrow. The interpretation in the proposed regulation relates only
to the determination of whether a debt cancellation product has been
triggered by an event specified in the DCC or DSA. We believe that
medical information is an appropriate consideration in these circumstances
and also to determine whether an individual is eligible to purchase
a DCC or DSA or whether such a contract or agreement should be reactivated.
Creditors that sell DCCs and DSAs often ask health questions as part
of the application process. In addition, medical information is necessary
for making a reactivation determination after a temporary suspension
of a DCC and DSA due to nonpayment. If the borrower answers affirmatively
to various health questions, the creditor may decide not to offer the
borrower the DCC or DSA. These questions allow creditors to assess
the amount of risk they wish to assume under the DCC or DSA. They also
permit the creditor to lower the price of the DCC or DSA if appropriate.
Without the ability to ask medical questions in connection with a DCC
or DSA, the price of such protection would be higher for all borrowers.
Wells Fargo believes that the proposed interpretation fails to address
all circumstances in which medical information may appropriately be
considered in connection with a DCC or DSA and creates some legal uncertainty
about the application of the regulation to these products. The proposed
interpretation creates legal uncertainty because the preamble to the
proposed rule provides no rationale for the interpretation. This permits
others to question, and perhaps even challenge, the basis for the interpretation.
More importantly, the proposed interpretation calls into question the
prevailing legal classification of DCCs and DSAs.
To address the issues above, we recommend that proposed Section __.30(d)
be revised to include the following specific exception for DCCs and
DSAs:
(d)(1)(viii) To determine the eligibility for, the triggering of,
or the reactivation of a debt cancellation contract or debt suspension
agreement.
This language eliminates the operational and legal
uncertainties associated with the proposed regulation. This proposed
language is also consistent
with the terms of section 411 of the FACT Act and the legislative
history of the Act. New Section 604(g)(5)(A) of the Fair Credit Reporting
Act
expressly empowers the Agencies to except from the prohibition on
the use of medical information transactions that are “necessary and
appropriate to protect the legitimate operational, transactional, risk,
consumer, and other needs.” An exception for determining the
eligibility for, the triggering of, and the reactivation of DCCs and
DSAs is appropriate based on this authority. Additionally, the House
Report accompanying the FACT Act (House Report 108-263) specifically
states that the use of medical information in connection with “credit-related
debt cancellation agreements” is a “necessary and appropriate
use of medical information”.
We support the rule of construction which provides a safe harbor for
unsolicited medical information
Wells Fargo supports the rule of construction in section __.30(b),
which provides a safe harbor for a creditor who obtains medical information
without specifically requesting it and does not use the information
in connection with an extension of credit. The proposal lists situations
where a creditor might unintentionally receive medical information.
For instance, a customer may inform a loan officer that the loan
is for a medical treatment or a customer will list a hospital or
medical provider debt on a credit application.
We agree with the Agencies’ interpretation that
a creditor in these situations should not be deemed in violation
of the prohibition
on obtaining and using medical information. Furthermore, we believe
that the matter of unsolicited medical information is better addressed
as a rule of construction rather than creating an exception to the
general prohibition on the use medical information.
Consumer reports containing coded medical information should be excluded
from the definition of medical information
The Agencies have requested comment on how to treat the receipt of
consumer reports containing coded medical information in accordance
with FCRA section 604(g)(1)(C). We recommend excluding consumer reports
containing coded medical information from the definition of “medical
information.” We believe that it is reasonable to conclude
that Congress, by providing the coding option to consumer reporting
agencies,
did not intend that such information to be included in the medical
information which is subject to the prohibitions and restrictions
of section 411.
Requirements for consumer consent should be less onerous
The Agencies would permit a creditor to obtain and
use medical information in connection with any determination of the
consumer’s eligibility
for credit in certain specified circumstances. Wells Fargo commends
the Agencies for creating exceptions for legitimate purposes, such
as for fraud prevention or to comply with applicable legal requirements.
Wells Fargo is concerned, however, that the Agencies may have unnecessarily
limited the ability of a creditor to obtain the consumer’s, or
the consumer’s representative’s, request to use medical
information. The Proposed Rule would permit a creditor to use medical
information only 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 consumer’s eligibility for credit.
We agree with the exception to use medical information
pursuant to a consumer’s request. However, the Supplementary Information
to the Proposed Rule appears to limit the usefulness of this exception
by indicating that the consumer’s 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.” Wells Fargo 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 manner—and
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, the creditor may be better prepared to take consumers’ health-related
hardships into account.
There should be specific exceptions for the use of medical information
to authenticate the identify of a consumer or to determine legal competency
While it can be
argued that authenticating the identity of a consumer or determining
whether
the consumer is legally competent to enter into
a valid contract are not “determinations of credit eligibility,” we
believe there ought to be specific exceptions which permit the use
of medical information for such purposes. Determining whether someone
is mentally competent necessarily involves the use of medical information.
Nevertheless it is clearly in the best of interests of consumers that
they not be allowed to enter into credit obligations if their competence
is in doubt. Likewise, state courts or agencies may request or even
require a financial institution to take note of the fact that a customer
has been found to be incompetent. Such a notice is intended to protect
the customer from ill-advised and, in many cases, fraudulently induced
transactions. The final rule should make it clear that such uses of
medical information are permitted.
In addition, some
authentication techniques, especially those which may come into use
in the future
as biometric identification improves
and expands, may use information that might be construed as “medical
information.” The final rule should make specifically provide
that such use is permissible.
The final
rule should permit the redisclosure of medical information for
purposes
within the “general” exceptions
of GLBA and Regulation P
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 person’s auditors, accountants, or
attorneys, for example. Therefore, we suggest the appropriate clarification
be provided.
The Agencies should be allowed to draft regulations that are enforced
by other agencies
We believe that the Agencies have the authority to draft rules under
section 604(g)(5)(A) of the FCRA that apply to creditors that are outside
the scope of the exceptions described in the proposal. 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. Therefore, the exceptions
created by the rules of each Agency can apply to all creditors unless
the Agencies intentionally limit the scope of the exceptions.
We do not believe that the scope of the exceptions should be limited.
All creditors and consumers should benefit from the exceptions proposed
by each Agency. All of the Agencies should be empowered to create exceptions
that are broadly applied to all creditors. Allowing each Agency to
draft separate exceptions should not create conflicts. Although coordination
among the Agencies on drafting exceptions would be beneficial, we do
not believe that it is necessary or required.
The FTC would retain enforcement authority despite the lack of rulemaking
power
Section 621(a)
of the FCRA provides that the FTC shall 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 imposed under this title is specifically committed
to some other governmental 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(g)(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 creditors under its jurisdiction.
The Agencies should provide an adequate implementation time after
the final rule is published
Finally, we believe that an effective date of ninety days after the
final rules are issued is not realistic. We believe that because of
the personnel and systems changes needed to review existing business
practices and comply with these rules, this time period would be burdensome.
We urge the Agencies to consider providing creditors at least six months
from the publication of final rules to implement these regulations.
Conclusion
Wells Fargo appreciates
the Agencies’ efforts to draft the
proposed rules for section 411 in an expeditious manner. We generally
support the Agencies’ exceptions to the general rule that a creditor
may not obtain or use medical information in connection with any determination
of a consumer's eligibility, or continued eligibility, for credit.
However, our main concern is that the scope of the regulations is limited
and covers only the entities within the jurisdiction of the Agencies.
We believe that there is statutory authority to cover all creditors,
and failure to do so would adversely affect both non-covered creditors
(i.e., finance companies, mortgage brokers, motor vehicle dealers,
and medical providers) and the financial institutions that rely on
those sources for loan originations.
If you have any questions regarding the foregoing, please contact me at (415)
396-0940 or mccorkpl@wellsfargo.com.
Sincerely yours,
Peter L. McCorkell