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Federal Trade Commission
May 27, 2004
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: Fair and Accurate Credit Transactions Act of 2003, Medical
Information Rulemaking
OCC Docket Number 04–09
Board Docket Number R–1188
FDIC RIN 3064–AC81
OTS Docket Number 2004–16
NCUA: Federal Trade Commission Comments on Proposed Rule Part 717, Fair
Credit
Reporting–Medical Information
Ladies and Gentlemen:
Your respective agencies (the “Agencies”) have initiated the
above-referenced
rulemaking proceeding to implement the medical privacy provisions of the
Fair and Accurate
Credit Transactions Act of 2003 (“FACTA”). The Federal Trade Commission
(“FTC” or
“Commission”) offers the following comment to aid the Agencies in their
rulemaking.
FACTA adds to the Fair Credit Reporting Act (“FCRA”) new restrictions
on the use of
medical information in credit transactions, and gives the Agencies, but
not the FTC, express
authority to make exceptions to these restrictions. Because the proposed
rules would provide
exceptions to these restrictions only for entities regulated by the
Agencies, the Commission is
concerned that portraying certain permitted uses of the information as
exceptions by rule, rather
than as outside the statutory prohibition, may harm consumers and
businesses by unnecessarily
favoring certain lenders in markets for loans requiring the
consideration of medical information.
In this comment letter, the Commission recommends several clarifications
that would avoid
regulation creating unnecessary distortion of such markets.
Interest and Experience of the Federal Trade Commission
The FTC is charged by statute with preventing unfair methods of
competition and unfair
or deceptive acts or practices in or affecting commerce,1 and
is the only federal agency with
general jurisdiction to enforce the nation’s consumer protection and
antitrust laws. Under this
statutory mandate, the Commission seeks to identify business practices
that diminish consumer
choice or distort competition without offering countervailing benefits.
The FTC also is charged with administering and enforcing numerous
financial and
general privacy laws, including the FCRA, the Gramm-Leach-Bliley Act,
the Controlling the
Assault of Non-Solicited Pornography and Marketing (“CAN-SPAM”) Act, and
the Children’s
Online Privacy Protection Act. In addition, the FTC takes action under
the FTC Act to prevent
unfair or deceptive acts or practices involving consumer privacy,
including action against
companies for violating their privacy promises to consumers2
or for deceiving consumers about
the collection or use of their personal information.3 From
its numerous workshops on emerging
privacy issues, such as computer “spyware,”4 to the National
Do-Not-Call Registry,5 the
Commission has taken a leadership role on consumer privacy issues.
FACTA’s Medical Privacy Provisions
FACTA section 411 amends the FCRA to add a new section prohibiting
creditors from
obtaining or using “medical information” in connection with credit
eligibility determinations.6
The statute authorizes the Agencies – but not the FTC – to make rules
providing for necessary
and appropriate exceptions to this general prohibition, consistent with
the purposes of the
section.
Section 411 also adds a new section to the FCRA limiting the sharing
of medical
information among affiliated companies,7 but provides for
several exceptions to this limitation
and permits the Agencies – and the FTC – to make rules allowing medical
information to be
shared among affiliated companies as necessary and appropriate.
Finally, section 411 amends the FCRA to prohibit consumer reporting
agencies (“CRAs”)
from furnishing medical information in connection with a credit
transaction. But the law
specifically allows CRAs to furnish medical information where the
information “is reported
using codes that do not identify . . . the specific [medical services]
provider or the nature of such
[medical] services.” FCRA section 604(g)(1)(C). Furthermore, CRAs may
furnish medical
information where the information is relevant to process or effect the
credit transaction and the
consumer provides specific written consent for the furnishing of the
report. FCRA section
604(g)(1)(B).
The proposed rules also would prescribe certain exceptions from the
limitation on
sharing medical information among affiliated companies. The FTC has
authority to make a rule
with respect to the affiliate-sharing provisions, and offers no comment
on these portions of the
proposed rule.
The Proposed Rules
The Agencies’ proposed rules would implement section 411 by
prescribing certain
exceptions from the general prohibition on obtaining or using medical
information in connection
with credit eligibility determinations.8 Specifically, the
proposed rules would allow medical
information to be obtained and used in connection with a determination
of credit eligibility:
- when it is needed to identify debt or income, which may be
considered to the same extent
other debt or income would be considered;
- to determine whether a power of attorney is necessary and
appropriate;
- to comply with federal, state, or local law;
- when the information is obtained with consumer consent from
a CRA under FCRA
section 604(g)(1)(B) – that is, as part of a credit report that,
pursuant to the consumer’s
consent, includes medical information;
- for fraud prevention;
- to verify the purpose of a medical loan and the use of
proceeds; and
- with the consumer’s specific written consent.
The proposed rules also would define “credit eligibility” and
“obtain” to allow medical
information to be obtained and used in connection with credit
transactions in certain limited
circumstances. For example, “credit eligibility” is defined to exclude
processing a transaction,
maintaining an account, or determining whether a benefit is due under a
credit insurance policy
or debt cancellation contract. With respect to “obtain,” the Agencies
would adopt a “rule of
construction:” a creditor cannot “obtain” medical information unless he
specifically asks for
such information.
The Effect of the Proposed Rules on Consumers and Competition
As outlined above, the proposed rules would create specific
exceptions to the FCRA’s
general prohibition on the use or collection of medical information to
underwrite credit. The
Commission agrees with the Agencies that for many credit transactions it
is necessary and
appropriate to obtain or use medical information to make a credit
eligibility determination. There
is a well-established market in “medical loans” – for example, loans to
finance a medical
procedure (e.g., laser eye surgery) or secured by a medical device
(e.g., a kidney dialysis
machine). In addition, medical information may be relevant when
extending traditional credit –
for example, where a consumer is seeking to finance a handicap-equipped
automobile.
It appears, however, that only a creditor subject to the jurisdiction
of one of the Agencies
is entitled to the benefit of exceptions created by the proposed rule.9
The Commission, based on
its considerable consumer protection and antitrust experience, believes
that this regulatory
structure may unnecessarily distort markets for loans and limit
consumers’ choice of lender. Nonbank
entities committed to the Commission’s jurisdiction – such as mortgage
companies, auto
finance companies, loan brokers, car dealers, third party credit
“arrangers,” state-chartered credit
unions, and doctors who allow their patients to pay over time – may no
longer be able to assess
the risk of medical loans and other credit requiring the consideration
of medical information,
making them less able to compete in this market.10 Moreover,
because many creditors subject to
the Commission’s jurisdiction may originate loans for, or sell or assign
credit obligations to,
entities regulated by one of the Agencies, the rule may not achieve its
objective of permitting the
use and consideration of medical information when “necessary and
appropriate to protect
legitimate operational, transactional, risk, consumer, and other needs.”
FCRA section
604(g)(5)(A). Consumers who need or would benefit from a creditor’s
consideration of medical
information might be able to obtain credit only from a bank, thrift, or
Federal credit union, and
even then only when they apply directly to such a lender.
Purpose of this Comment
Although the absence of Commission rulemaking authority in section
411 of FACTA
may result in some differentiation between bank and non-bank lenders,
the Commission believes
that it would be a mistake to read this differentiation more broadly
than necessary. In enacting
FACTA, Congress did not indicate an intent to favor one category of
creditor over another, and
the adoption of an exception by rule applicable only to banks, thrifts,
and Federal credit unions
rather than by an appropriate interpretation of the statute would favor
those entities over other
types of lenders.
With respect to many legitimate uses of medical information, the
statute allows for an
interpretation that would permit all lenders to use the medical
information in the same manner
for a particular purpose. A posture by the Agencies that use of medical
information in such
instances requires an exception by rule to the statutory prohibition
would unnecessarily
disadvantage entities not subject to the rule and could effectively
limit consumers’ choice of
lenders. The Commission therefore urges the Agencies to adopt reasonable
interpretations of the
statute to avoid such harm.
Of course, the Agencies may wish, for clarity’s sake, to include
their interpretations of the
statute in a rule as well. A rule that describes all of the
circumstances in which banks, thrifts, and
Federal credit unions may obtain and use medical information can help
minimize the burdens on
these lenders and achieve compliance, by providing covered entities with
one comprehensive
discussion of permitted conduct.
We recommend that the rule or the accompanying statement of the
Agencies make clear
the uses that are permitted by statute, adopting the interpretations of
the statute set forth below.
We urge the Agencies to adopt those interpretations for the reasons
explained, in light of the
importance of avoiding differences among lenders in the uses of medical
information permitted
to them where such differences are not mandated by law, and in the
interest of consistent
interpretation of the statute by the several agencies charged with
administering it.
Specific interpretive issues
“Credit Eligibility”
The Agencies have defined “credit eligibility” to exclude employment
and insurance
decisions; transaction or payment processing; and account maintenance or
servicing. The
Commission agrees with the Agencies that transaction processing, account
maintenance, and
employment and insurance decisions do not involve any determination of
credit eligibility.
The Agencies, however, have defined “credit eligibility” only as “used
in this subpart.”
See proposed section ___.30(a)(2). The Commission recommends that the
Agencies make clear
in the Statement of Basis and Purpose for the final rule that they are
defining “credit eligibility”
as a statutory matter, and not solely for the purposes of the rule.
Payment of Insurance Benefits
The Agencies also have defined “credit eligibility” to exclude “[a]ny
determination of
whether the provisions of a debt cancellation contract, debt suspension
agreement, credit
insurance product, or similar forbearance practice or program are
triggered.” See proposed
section ___.30(a)(2)(i)(B). The Agencies, however, request comment on
“whether it is more
appropriate to grant an exception” with respect to these transactions,
rather than address them as
a general definitional matter.
Because this is a common sense and self-evident construction of the
term “credit
eligibility,” the Commission recommends that the Agencies continue to
address the payment of
credit insurance benefits through an interpretation. It therefore is
unnecessary to create an
exception by rule. Indeed, if the Agencies created an exception, it
might result in a negative
implication that only entities covered by the rules can consider
relevant medical information
needed to pay credit insurance or debt cancellation benefits, while
others cannot.
Obtaining Medical Information Inadvertently
The Agencies propose a “rule of construction” for receiving
unsolicited medical
information – that is, a creditor does not “obtain” medical information
for the purposes of the
proposed rule if it receives medical information without specifically
requesting such information.
See proposed section ___.30(b). The Agencies seek comment on the
appropriateness of this rule
of construction and on whether this provision should be drafted as an
exception to the general
prohibition, rather than as a rule of construction.
The Commission agrees with the Agencies’ proposal that unsolicited
medical information
should be addressed by interpretation, and recommends further that the
Agencies clarify that this
rule of construction does not simply apply to the Agencies’ rules, but
applies to construction of
the statute more generally. Under the rule of construction as currently
drafted, a creditor “does
not obtain medical information for purposes of [the rule],” if the
creditor does not specifically
request the information and does not use the information to determine
credit eligibility. See
proposed section ____.30(b) (emphasis added). The Commission recommends
that the Agencies
make clear that the rule of construction applies with equal force to the
statute, and that
inadvertently obtaining medical information does not violate either the
statute or the rule.11
Specifically, we suggest that the Agencies replace the phrase “for
purposes of [the rule]” with
“for purposes of [the statute].”
Powers of Attorney and Legal Compliance
The Agencies’ proposed rule includes two exceptions to the statutory
prohibition that
allow medical information to be obtained and used for legal compliance
and to determine the
necessity of powers of attorney. See proposed sections ____.30(d)(i) and
(ii). First, the proposed
rule allows medical information to be obtained or used “to comply with
applicable requirements
of local, state, or federal laws,” and cites as an example state laws
“requir[ing] creditors to
consider medical information in certain circumstances to protect
populations that may be
vulnerable to financial abuse by caregivers.” 69 FR 23380, 23386. These
laws typically permit,
but do not require, financial institutions to report evidence of
financial abuse to the relevant
authorities.12 The Commission believes that this type of
account monitoring to comply with legal
requirements and to protect the interests of disabled customers does not
involve a determination of credit eligibility and is not prohibited by
the statute.13 Therefore, an exception by rule is
unnecessary, and the Commission recommends that the Agencies make clear
that the conduct
described in proposed section ___.30(d)(1)(ii) is permitted under the
statute itself.
Second, the proposed rule allows medical information to be obtained
and used “to
determine whether the use of a power of attorney or legal representative
is necessary and
appropriate.” See proposed section ___.30(d)(1)(i). It is unclear why a
broad exception is
needed. A power of attorney typically does not contain medical
information. Therefore, a
creditor would not need to obtain or use medical information to
determine its validity. There
may be limited circumstances where a power of attorney may indicate a
consumer’s health or
condition – for example, where a court has appointed a guardian for a
consumer adjudicated
incompetent or where a power of attorney is triggered by a consumer’s
medical condition. In
these instances, merely being notified of the existence of this medical
condition is not tantamount
to obtaining or using that information to determine credit eligibility.
The Agencies should clarify
that “obtaining medical information” in these situations is not
prohibited by the statute.
Information Obtained from CRAs
As noted above, FACTA section 411 amends the FCRA specifically to
permit CRAs to
provide, “in connection with a credit transaction,” coded medical
information in consumer
reports. FCRA section 604(g)(1)(C) (hereinafter, “coding provision”).
CRAs also can provide
full uncoded medical information in a credit report with the consent of
the consumer. FCRA
section 604(g)(1)(B) (hereinafter, “consumer consent provision”). These
provisions appear to
conflict with the provision prohibiting creditors from obtaining or
using medical information in
connection with a credit transaction. FCRA section 604(g)(2). As
explained below, the
Commission urges the Agencies to read the statute to resolve this
conflict.
With respect to coded information received from CRAs under the coding
provision, the
Agencies have stated that they “do not believe that it is necessary to
propose a separate
exception” allowing creditors to use coded information, but have
nonetheless solicited comment
on whether they should provide a specific exception or should take an
interpretive approach. See
69 FR 23380, 23386. The Agencies also have asked what interpretation is
most appropriate:
should coded information be deemed an exclusion from the definition of
“medical information”
or should “the broad prohibition in [FCRA] section 604(g)(2) on
obtaining and using medical
information in credit eligibility determinations [] be construed as
being qualified by the specific
provisions in section 604(g)(1) that authorize consumer reporting
agencies to furnish consumer reports containing medical information
under certain limited circumstances.” 69 FR 23380,
23386. The Commission urges adoption of the latter approach. Rules of
statutory construction
dictate that provisions of a statute be construed to be consistent, if
possible, and that specific
provisions qualify a general prohibition.14 Thus, the
Agencies should recognize the statutory
permission for CRAs to provide coded information to lenders as
concomitantly implying
statutory permission for lenders to receive and use such information.15
With respect to uncoded information received from CRAs with consumer
consent under
the consumer consent provision, the Agencies provide a specific
exception that allows creditors
to use this information. See proposed section ____.30(d)(1)(iii). The
Agencies do not explain
the reason for treating the coding provision and the consumer consent
provision differently – that
is, why they determined to take an interpretive approach for the former
but propose a specific
exception for the latter. Congress, for its part, did not distinguish
between the two provisions or
evidence any intent that only banks should be able to obtain medical
information from CRAs
under the consumer consent provisions of section 604(g)(1)(B). The FTC
believes that the two
provisions should be treated the same: all of the specific permissions
of FCRA section 604(g)(1)
should be read as specific statutory exclusions from the general
prohibition of section 604(g)(2).
Absent this construction, the two provisions irreconcilably conflict,
which cannot have been
Congress’ intent. The Agencies observe, correctly, that
(1) it is unlikely that Congress would permit consumer reporting
agencies to
furnish consumer reports containing medical information in connection
with
credit transactions without permitting creditors to obtain and use
these reports,
and (2) in these circumstances, Congress may well have provided the
consumer
protections it deemed necessary by specifying the limitations under
which
consumer reporting agencies could furnish reports containing medical
information.
69 FR 23380, 23386. This analysis applies as fully to the consumer
consent provisions of FCRA
section 604(g)(1)(B) as it does to the coding provisions of FCRA section
604(g)(1)(C).16
In addition, the Commission reads FACTA to allow consumers and others
to disclose
medical information to creditors directly in the same manner and under
the same circumstances
that a CRA could disclose such information – that is, in coded form or
pursuant to consumer
consent. The Commission urges the Agencies to adopt a similar
interpretation. Strict application
of the exceptions in section 604(g)(1) will result in a creditor’s being
able to obtain medical
information, coded or uncoded, from a CRA, but not from anyone else.
That is, a creditor can
buy the information from a CRA, but cannot get it from the consumer
himself under the identical circumstances and for the same purposes. The
Commission believes that this anomalous result will unnecessarily
disadvantage consumers – it will result in higher costs for credit that
are not outweighed by enhanced privacy or other countervailing benefits.
The Commission believes that Congress did not intend this result and
reads the statute to permit creditors to obtain directly from
consumers and to use (1) coded medical information and (2) uncoded
medical information relevant to “process or effect” a credit
transaction. The statute also permits creditors to obtain from non-CRA
third parties and use (1) coded medical information and (2) uncoded
medical information relevant to “process or effect” a credit transaction
where the consumer has consented to the disclosure.
Incidental Credit
When a provider of goods or services bills a consumer, rather than
requiring payment at
the time of delivery, this is technically the extension of credit under
the FCRA.17 When the provider is offering medical goods or
services, it will of necessity obtain medical information as a result of
the transaction. Thus a doctor who bills his patients for services
rendered may be subject to the new prohibition on the use of medical
information in making credit decisions, and may not be entitled to the
benefit of the Agencies’ exceptions from that prohibition.18
The Commission believes that this type of transaction is permitted
under the statute
because the doctor is not obtaining or using medical information in
connection with a credit eligibility decision. The doctor obtains
medical information as a result of the underlying medical transaction,
and not for the purposes of determining whether or not to extend credit.
The extension of credit is merely incidental to the medical treatment.
The credit is not offered for its own sake, but for administrative ease
or consumer convenience. Typically, the amount of credit extended in
these transactions is minimal, no finance charge is imposed, and the
terms require quick repayment.19 In addition, the only
medical information considered by the doctor in extending credit is the
fact that the borrower is his patient.
As a result, the Commission reads the statute to permit providers of
medical goods and
services to extend credit to consumers where the credit is incidental to
the rendering of medical treatment. In these situations, the medical
providers do not obtain or use medical information in connection with
credit eligibility decisions, and the Commission urges the Agencies to
interpret the statute in this manner.
Arranging Credit
Consumers often wish to finance medical products or services, perhaps
because they are
uninsured, underinsured, or their health insurance will not pay for the
products or services (e.g., elective procedures, laser eye surgery,
cosmetic surgery, or orthodonture). In these cases, providers of medical
products or services may assist or advise their customers in obtaining
financing, and this advice may make the providers “creditors” under the
FCRA.20
For example, a plastic surgeon may provide his patient with a
brochure for a bank that
will finance cosmetic surgery. The Commission believes that a doctor who
assists a patient in this manner does not violate the statute, because
he does not obtain or use medical information in connection with a
credit eligibility decision. As is the case with incidental medical
credit, the doctor is obtaining information for the purposes of the
underlying medical transaction (e.g., the surgery), not for the purpose
of extending credit.21 The Commission encourages the Agencies
to read the statute to permit this conduct.
Consideration of Collateral
The Agencies’ proposed rules provide a specific exception allowing a
lender to obtain
and use information about certain property pledged as security for a
loan, e.g., a medical device used as collateral. The Commission
agrees that consumers should be able to finance medical devices or other
real or personal property that may bear a relationship to a person’s
physical, mental, or behavioral health or condition, e.g., a
handicap-equipped automobile or a house outfitted with special equipment
for a person with disabilities.
The Commission does not agree, however, that this needs to be done by
rule, because
information about collateral should not be considered “medical
information:” it does not pertain to an individual, but rather is
information about inanimate property. When a creditor considers whether
to accept as collateral real or personal property with some medical
significance, it is not evaluating the borrower’s health or ability to
repay but is evaluating the value of the collateral: e.g., the
property’s condition, age, and market value. Moreover, there is no
indication that a person borrowing money to purchase a medical device is
actually the person using the medical device. The consumer obligated on
the loan could be purchasing the device, for example, for a spouse,
child, parent, or other relative or close friend. With respect to real
property, the nexus between the borrower and the person with the medical
condition can become even more attenuated – for example, a consumer
financing a home in which a previous owner installed an elevator for a
person with disabilities. This extra equipment may enhance or diminish
the value of the home, but how is a creditor to appraise the house if he
is unable to consider these attributes? It is evident to the Commission
that the term “medical information” does not include information
pertaining to collateral, and the Commission urges the Agencies to adopt
a similar interpretation.22
Conclusion
FACTA section 411 prohibits creditors from obtaining or using medical
information in
connection with credit eligibility determinations, except as allowed by
rules of the Agencies.
The Agencies, however, have limited jurisdictions, and many creditors
may be unable to take advantage of the exceptions created by the
Agencies’ rule. To the extent that appropriate circumstances for
obtaining or using the information are permitted under the statute
itself,
defining these circumstances as exceptions to the statute would
unnecessarily disadvantage such creditors and limit consumers’ choice of
lender.
The Commission reads the statute to permit numerous beneficial uses
of medical
information. Specifically, in the Commission’s view, the statute permits
a creditor to consider medical information:
- to determine whether to pay credit insurance or debt cancellation
benefits;
- to process transactions and maintain accounts, including to
determine whether a power of attorney is necessary and to comply with
local, state, or federal laws; and
- in the same manner, to the same extent, and under the same
circumstances that the
creditor could consider information obtained from a CRA under FCRA
section 604(g)(1),
without regard to whether the information was obtained from a CRA,
from the consumer,
or from another third party.
Also, under the Commission’s interpretation of the statute, a
creditor does not violate the
law by obtaining medical information inadvertently, so long as the
creditor does not then use the information for credit eligibility
decisions.
In addition, the Commission does not read the statute to prohibit the
extension of credit
that is simply incidental to a medical transaction, such as when a
doctor invoices his patient for an insurance copayment. Moreover, the
Commission interprets the statute to allow providers of medical products
or services to arrange credit for their customers. Medical providers
that assist their customers in this manner do not obtain or use medical
information in connection with a credit eligibility decision.
Finally, the Commission interprets the term “medical information” to
include only personally identifiable information. Information about real
or personal property pledged as collateral is not medical information
about an individual.
In order to avoid the harms stemming from unnecessary regulatory
favoring of certain
categories of lenders over others, the Commission urges the Agencies to
adopt all of these statutory interpretations, and, in so doing, to make
clear that they are construing the statute and not simply their own
rules.
The Commission also believes that it would be useful for the Agencies
to retain in the
rule a description of all the permitted uses of medical information,
regardless of whether the conduct is permitted by the statute itself or
by rule-made exception. Regulated entities can benefit from the clarity
and assurance of a comprehensive statement of permitted conduct, easing
their compliance burden. The FTC supports the Agencies’ goals of
facilitating useful and legitimate loan transactions that benefit
consumers, while protecting consumers’ medical privacy as intended by
Congress. Although the recommended interpretations will not entirely
eliminate the problems resulting from differentiation among lenders with
respect to their treatment of consumer medical information, they will
minimize those differences and make available to all lenders many types
of transactions from which consumers derive substantial benefit, without
compromising consumers’ medical privacy. The Commission thanks the
Agencies for the opportunity to comment on this important rulemaking
proceeding.
By direction of the Commission.
Donald S. Clark
Secretary
1 Federal Trade Commission Act, 15 U.S.C. § 45.
2 See, e.g., TowerRecords.com, http://www.ftc.gov/opa/2004/04/towerrecords.htm
3 See, e.g., 30-Minute Mortgage, http://www.ftc.gov/opa/2003/12/30mm2.htm.
4 See 69 FR 8538 (Feb. 24, 2004) (announcing workshop).
5 See 68 FR 4580 (Jan. 29, 2003) (final rule).
6 “Medical information” is defined as information or data,
whether oral or recorded, in any
form or medium, created by or derived from a health care provider or the
consumer, that relates
to the past, present, or future physical, mental, or behavioral health
or condition of an individual,
the provision of health care to an individual, or the payment for the
provision of health care to an
individual. FCRA § 603(i).
7 Existing FCRA section 603(d)(2) provides for certain
exceptions from the definition of
consumer report, allowing companies to share consumer information with
their affiliates without
thereby becoming consumer reporting agencies, with all of the attendant
duties and limitations.
New FCRA Section 603(d)(3), added by FACTA section 411, removes these
exceptions with
respect to medical information.
9 For example, the National Credit Union Administration’s
would apply only to Federal
credit unions. See proposed 12 CFR 717.1(b)(2). Thus state-chartered
credit unions would not
be able to consider medical information in making credit decisions while
their federally chartered
competitors would.
10 The terms “credit” and “creditor” are defined in the FCRA
by reference to the Equal
Credit Opportunity Act. See FCRA section 603(r)(5), added by FACTA
section 111. Thus
credit arrangers, brokers, or doctors are “creditors” for the purposes
of the medical information
restrictions. See Regulation B, 12 CFR 202.2(l); compare Regulation Z,
12 CFR 226.2(a)(17).
11 The Commission agrees with the Agencies that a creditor
who inadvertently obtains
medical information and then uses that information to make a credit
decision violates both the
statute and the rules.
12 See, e.g., Mich. Comp. Laws § 400.11a(3). Only four states
appear to require bank
employees to report suspected abuse. Fla. Stat. § 415.1034; Ga. Code §
30-5-4; Kan. Stat. §
39-1431; Miss. Code § 43-47-7.
13 The relevant state laws address the reporting of instances
of suspected financial abuse,
and do not address the extension of credit in instances of suspected
abuse. Entirely apart from its
compliance duties, a bank might determine not to extend credit to a
legal representative of a
disabled consumer, on the belief that the legal representative is
abusing his position of trust to
defraud the consumer. This type of fraud prevention, addressed in the
Agencies’ proposed rules,
is beyond the scope of this comment letter. See proposed section
___.30(d)(1)(iv).
14 Statutory provisions should be construed so as to be
consistent with each other.
Citizens to Save Spencer County v. U.S. Environmental Protection Agency,
600 F.2d 844, 870 (D.C. Cir. 1979). In construing statutory provisions
that conflict, specific provisions govern general provisions, absent a
clear intent to the contrary. See, e.g., Radzanower v. Touche Ross &
Co., 426 U.S. 148, 153 (1976), quoting Morton v. Mancari, 417 U.S. 535,
550-551 (1974) (“Where there is no clear intention otherwise, a specific
statute will not be controlled or nullified by a general one, regardless
of the priority of enactment.”). That is, the specific provisions
qualify or provide exceptions to the general provisions. See, e.g.,
Townsend v. Little, 109 U.S. 504, 512 (U.S. 1883) (“[G]eneral and
specific provisions in apparent contradiction, whether in the same or
different statutes and without regard to priority of enactment, can
subsist together,
the specific qualifying and supplying exceptions to the general.”)
15 If non-bank creditors are unable even to obtain coded
information about medical debts
(e.g., to determine a debt-to-income ratio), they may become unable to
underwrite any credit risk competitively with a bank. The bank could
consider medical debts, by dint of the Agencies’ proposed exceptions,
enabling the bank to determine credit risk more precisely. The non-bank
creditor, however, would have access to less information, creating a
potential adverse selection problem – those borrowers with large medical
debts affecting their ability to repay may seek out the lenders who
cannot obtain information about or consider those debts.
16 In addition, there is no indication that Congress believed
it to be necessary that the
Agencies make special rules to permit creditors to obtain or use medical
information obtained
from consumer reports under these circumstances. The legislative history
notes certain
legitimate uses for medical information in connection with credit
transactions, where the
Agencies should consider making exceptions to the general prohibition.
See H. Rept. 108-263 at
53. Medical information legally obtained from a CRA in a consumer report
is not one of the
areas that Congress mentioned as needing a special exception. Without
such an exception read
into the law, however, it would be impossible for a creditor to even
obtain a consumer report, for
fear it will contain medical information, coded or not. Given that FACTA
was motivated
primarily by Congress’ interest in preserving and extending the “the
benefits that our national
credit reporting system has visited upon consumers of financial
products,” Conf Rept 108-396 at
65, Congress could not have intended to discourage the obtaining of
consumer reports in this
manner.
17 FACTA section 111 adds new definitions for “credit” and
“creditor” to the FCRA,
providing that those terms are as defined in the Equal Credit
Opportunity Act (“ECOA”). The ECOA defines “credit” as, among other
things, any right to “purchase products or services and defer payment
therefor.” 12 CFR 202.2(j).
18 See supra note 10 and accompanying text.
19 See, e.g., 12 CFR 202.3(c) (defining “incidental credit”
as credit not subject to a
finance charge and not payable by agreement in more than four
installments).
20 See 12 CFR 202.2(l) (defining “creditor” to include “a
person who, in the ordinary
course of business, regularly refers applicants or prospective
applicants to creditors”).
21 The Commission notes that the lender to whom the doctor
refers the consumer’s credit
application may need the benefit of the Agencies’ rules in order to
provide the financing for the medical procedure.
22 Were a creditor to draw an inference about a borrower’s
ability or willingness to repay
based on the medical collateral securing a loan, that would not be
permitted under either the law or the Agencies’ proposed rules.
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