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COALITION TO IMPLEMENT THE FACT ACT
May 27, 2004
Robert E. Feldman, Executive Secretary
Attn: Comments
Federal Deposit Insurance Corporation
550 17th Street,
NW
Washington, DC 20429
Re: RIN 3064-AC81
To Whom It May Concern:
This letter is
submitted by The Coalition to Implement the FACT Act ("Coalition") in response to the Proposed Rule ("Proposed
Rule") published by the Office of the Comptroller of the Currency,
the Office of Thrift Supervision, the Board of Governors of the Federal
Reserve, the Federal Deposit Insurance Corporation, and the National
Credit Union Administration ("Agencies") pursuant to Section
411 of the Fair and Accurate Credit Transactions Act ("Act").
The Coalition represents a full range of trade associations and companies
that furnish and use consumer information, as well as those who collect
and disclose such information. We appreciate this opportunity to
provide comments on the Proposed Rule.
Overview
Congress enacted
Section 411 of the Act "to restrict the use
of medical information for inappropriate purposes." In so doing,
Congress imposed a broad prohibition on a creditor's ability to obtain
and use medical information in connection with a determination of
a consumer's eligibility, or continued eligibility, for credit. Congress
also recognized that there were situations where it is "necessary
and appropriate" for a creditor to obtain and use medical information,
and therefore directed the Agencies to establish regulations that
permit a creditor to obtain and use medical information as "necessary
and appropriate to protect legitimate operational, transactional,
risk, consumer, and other needs." The Agencies have issued the
Proposed Rule to permit a limited number of creditors to obtain and
use medical information for these types of purposes. As a general
matter, the Coalition commends the Agencies for issuing a Proposed
Rule with exceptions that adhere to the congressional intent of Section
411 of the Act to preserve the ability of creditors to obtain and
use medical information in those relatively limited circumstances
when it is appropriate. Although we believe the Proposed Rule is
generally sound, we do have constructive suggestions which we hope
the Agencies will consider including in any final rule ("Final
Rule").
The Proposed Rule's Scope of Applicability
The Agencies
have each issued a Proposed Rule which is intended to apply only
to entities
specified by the Agencies. The Coalition
is concerned that the Agencies have inappropriately narrowed the
scope of applicability of the Proposed Rule, with the perverse result
that only certain creditors can obtain and use medical information
in situations where the Agencies believe it to be "necessary
and appropriate." For example, under the Proposed Rule, creditors such
as certain types of finance companies and state-chartered credit
unions would appear not to be covered by the Final Rule. Other entities
who do not make credit decisions, but who may fall within the definition
of "creditor," such as those who arrange for credit, also
would not be within the Agencies' stated scope. We believe that such
a result would harm consumers and is not supported by the plain language
of the Fair Credit Reporting Act ("FCRA").
Many types of
lenders have legitimate needs to obtain and use medical information
in connection with determining a consumer's eligibility,
or continued eligibility, for credit. The Proposed Rule outlines
several appropriate circumstances in which a creditor may obtain
and/or use medical information. However, the Proposed Rule would
apply only to those creditors specified by the Agencies. We are not
aware of any justification to not allow other types of creditors
to avail them-selves of the Final Rule, nor is any basis for this
distinction articulated in the Pro-posed Rule. A consumer benefits
greatly when a finance company offers credit for the consumer to
obtain laser eye surgery. A consumer benefits greatly when a state-chartered
credit union can offer the consumer a loan based on an application
that may include positive information about repayment of a debt to
a hospital. A consumer benefits greatly when an auto finance company
finances his or her vehicle that is modified to include medical equipment,
such as a wheelchair lift. A consumer benefits greatly when a doctor
can arrange for credit for a consumer's medical procedure. A consumer
benefits greatly when an auto deafer can arrange for financing for
a car. However, these benefits could be denied needlessly unless
the Agencies broaden the scope of the Final Rule to include any type
of creditor that is subject to the prohibition provided in Section
411 of the Act.
The Coalition
notes that the plain language of the FCRA, as amended by the Act,
suggests
that the scope of the Final Rule should be broader
than has been proposed. Section 604(g)(5)(A) of the FCRA requires
the Agencies to "prescribe regulations that permit transactions
[involving medical information] that are deter-mined to be necessary
and appropriate to protect legitimate operational, transactional,
risk, consumer, and other needs." The statute does not limit
the applicability of such regulations to entities within the Agencies'
respective jurisdictions. However, had Congress intended to limit
the applicability in this regard, Congress could have done so, as
it did explicitly, for example, in Sections 603(g)(3)(C) and 621(e)
of the FCRA, and in Section 214(b) of the FACT Act. Therefore, we
strongly urge the Agencies to issue a Final Rule that is applicable
to all creditors to be enforced by the appropriate Agency or other
regulatory agency with the proper jurisdiction.
Use of Examples
The Proposed
Rule contains several examples to illustrate activities that would
be consistent with the Proposed Rule, as well as those
that would be deemed to violate the Proposed Rule. Furthermore, the
Proposed Rule states that examples provided are not exclusive and
that compliance with an example, to the extent
applicable, constitutes compliance with the Proposed Rule. We urge
the Agencies to retain these provisions in the Final Rule.
The Coalition believes that examples can be useful to creditors in
demonstrating how to comply with the Final Rule. Furthermore, a creditor
should be permitted to rely on an example as a safe harbor for compliance
purposes.
Definitions
The Proposed
Rule contains definitions to several terms that will have general
applicability
to the Proposed Rule as well as future
rules issued to implement the FCRA. We believe the Agencies have
proposed useful and appropriate definitions, and urge that they be
retained with one modification. In particular, the Coalition does
not believe it would be appropriate to classify coded "medical" information
obtained from a consumer reporting agency as "medical information." Congress
has specifically addressed the necessary consumer protections with
respect to this type of information received from consumer reporting
agencies. To classify such information as "medical information," which
would further restrict its use, would appear to be contrary to the
congressional intent and would not provide any additional material
consumer protections. Therefore, we ask the Agencies to clarify that
such coded information is not "medical information."
General
Prohibition on Obtaining or Using Information
The Proposed Rule generally prohibits a creditor from obtaining
or using medical information pertaining to a consumer in connection
with any determination of the consumer's eligibility, or continued
eligibility, for credit except as provided in the Proposed Rule.
As discussed above, we applaud the Agencies for recognizing that
exceptions to this general prohibition should be created.
As part of the
general prohibition, the Agencies have provided a definition for "eligibility, or continued eligibility, for credit" as
such term is used in the Proposed Rule. Specifically, it means "the
consumer's 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." We appreciate
the fact that the Agencies have retained the traditional scope of
the FCRA by indicating that "eligibility, or continued eligibility,
for credit" must be related to credit for consumer purposes,
and not for business purposes. The Proposed Rule is therefore consistent
with the longstanding interpretations of the FCRA that the statute
generally does not apply to business transactions.
The definition
of "eligibility, or continued eligibility, for credit",
expressly does not include "[a]ny determination
of whether the provisions of a debt cancellation contract, debt suspension
agreement, credit insurance product, or similar forbearance practice
or program ['Debt Cancellation Product'] are triggered." The
Coalition is concerned that this exclusion is incomplete. In fact,
any issues related to the sale, or provision of, a Debt Cancellation
Product should be excluded from the definition
of "eligibility, or continued eligibility, for credit," not
just those related to whether the Debt Cancellation Product is triggered.
A more complete exclusion is appropriate because a Debt Cancellation
Product is a purchased product and is not necessarily related to
the consumer's underlying eligibility for credit.
The Agencies
have provided additional exclusions to the definition of "eligibility, or continued eligibility, for credit" which
we think are appropriate and should be retained. However, we respectfully
request the Agencies to clarify that the exclusions are illustrative
examples, and not an exclusive list of items excluded from the definition.
Rule of Construction
The Proposed
Rule also includes a "rule of construction" with
respect to unsolicited medical information. A creditor, under the
Proposed Rule, would not obtain medical information in violation
of the general prohibition if it receives such in-formation "without
specifically requesting medical information" and the creditor
does not use the medical information in determining whether to extend
or continue to extend credit to the consumer, and the terms on which
credit is offered or continued. We commend the Agencies for recognizing
that creditors may receive medical information on an unsolicited
basis, and that the Proposed Rule addresses this situation appropriately.
We urge that this rule of construction be retained in the Final Rule.
Financial Information Exception
Under the Proposed
Rule, a creditor could obtain and use medical information pertaining
to a consumer in connection with any determination
of the consumer's eligibility, or continued eligibility, for credit
in certain circumstances. In particular, the information must relate
to debts, expenses, income, benefits, collateral, or the purpose
of the loan, including the use of proceeds. Furthermore, the creditor
can use the medical information in a manner and to an extent that
is no less favorable than if it used, in a credit transaction, comparable
information that is not medical information. Finally, the creditor
may not take the consumer's physical, mental, or behavioral health,
condition or history, type of treatment, or prognosis into account
as part of any such determination.
We applaud the
Agencies for providing an exception whereby a creditor may obtain
and use
information necessary to underwrite a loan, even
if such information may be medical in nature. This approach should
be retained in the Final Rule. However, we believe the scope of the
exception should be expanded to include other types of information
that are routinely used in credit underwriting decisions, such as
assets, that could also be medical in nature or modified to address
a medical condition. This could be accomplished by deleting the limitation
provided in § __.30(c)(1)(i)
altogether, or amending it to state "The information
is of the type routinely used in credit eligibility determinations;".
Specific Exceptions
The Agencies
have provided several specific exceptions to the general prohibition
on obtaining
or using medical information in connection
with determining a consumer's eligibility, or continued eligibility,
for credit. The Coalition believes that the exceptions provided in § .30(d)
are appropriate and should be retained in the
Final Rule. These exceptions will allow creditors to obtain and use
medical information in those relatively few situations
when it is necessary and appropriate, such as for fraud prevention
or
to finance medical procedures.
We are concerned,
however, with a provision in the Supplementary information pertaining
to
obtaining the consumer's consent to obtain
and use medical information. The Supplementary Information suggests
that a consumer's consent should be obtained only in exceptional
circumstances, and that the consent cannot be "preprinted" for
the consumer to sign. We do not believe that restricting the ability
to obtain a consumer's consent should be limited to unusual circumstances
where the consumer handwrites his or her consent, especially if consent
must be obtained using a separate form. Indeed, many loan applications
may rely on pre-printed forms and automated processing, which could
limit the ability to rely on consents drafted by the consumer.
Limits on Redisclosure
According to the Proposed Rule, if a creditor receives medical information
about a consumer from a consumer reporting agency or from an affiliate
of the creditor, the creditor may not disclose that information to
any other person except as necessary to carry out the purpose for
which the information was initially disclosed. We generally agree
with this prohibition, but believe the limitation should be clarified.
In particular, the creditor should be able to redisclose the medical
in-formation to regulators, attorneys, accountants, and others for
limited purposes, such as fraud prevention. Therefore, the Agencies
should clarify that a disclosure that is made for any purpose described
in Section 502(e) of the GLBA is a disclosure that is necessary to
carry out the purpose for which the information was initially disclosed.
Sharing Medical
Information with Affiliates
The term "consumer
report" is defined in Section 603(d)
of the FCRA. Within that provision is a statutory exclusion from
the definition of a "consumer report." Specifically, Section
602(d)(2) excludes from the definition information that would otherwise
be a "consumer report" but that is experience and transaction
information, a communication of such information among affiliates,
or a communication of "other" information among affiliates
if the consumer receives a notice and declines to opt out of the
sharing among affiliates. The FACT Act added a new paragraph (3)
to Section 603(d) to specify that the exclusions provided in Section
603(d)(2) do not apply with respect to information disclosed by an
affiliate if the information is medical information or certain types
of related lists.
However, new
Section 603(d)(3) does
not apply to disclosures in connection with the business of annuities,
disclosures
for any purpose permitted
without authorization under certain regulations issued under the
Health Insurance Portability and Accountability Act, or disclosures
permitted by the Agencies. The Proposed Rule would permit affiliates
to share medical information for any purpose described in Section
502(e) of the GLBA or in connection with a consumer's credit eligibility
determination consistent with the Pro-posed Rule. The Coalition believes
these additional exclusions to Section 603(d) (3) are appropriate
and should be retained in the Final Rule.
Conclusion
Again, the coalition
appreciates the issuance of a Proposed Rule with exceptions that
adhere to the congressional intent of Section
411 of the Act to preserve the ability of creditors to obtain and
use medical information in those relatively limited circumstances
when it is appropriate, and we appreciate the opportunity to suggest
refinements to the Proposed Rule. We again wish to urge the Agencies
to give particular consideration to issuing a Final Rule that is
applicable to all creditors to be enforced by the appropriate Agency
or other regulatory agency with the proper jurisdiction. Thank you
for considering our views and please do not hesitate to contact us
if we can offer further assistance.
Sincerely,
Jeffrey A. Tassey
Executive Director
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