|
LPAC
May 28, 2004
Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
RE: RIN 3064-AC81 Dear Mr. Feldman:
We appreciate the opportunity to comment on the proposed regulations
implementing section 411 of the Fair and Accurate Credit Transactions
Act of 2003 (FACT Act).
Lenders Protection Assurance Company, Risk Retention Group, provides
contractual liability coverage and administrative services to financial
institutions for their debt cancellation contract (DCCs) programs.
Our comments on the proposed regulation are twofold. First, we
recommend that there be specific exceptions to the prohibition on the
use of medical information rather than as subpart of the definition of "
Eligibility" (what is not "eligibility"). A specific exceptions
approach is more clear and concise.
Our second comment relates to the wording of exceptions (A) and (B)
in Subpart D- Medical Information .30 (a)(2)(i) and in particular the
inconsistent inclusion of debt cancellation contracts ("DCCs"), debt
suspension agreements ("DSAs"), insurance and credit- insurance in these
two exceptions In pertinent part exception (A) allows use of medical
information for the qualification to be offered "... insurance products,
or other non-credit products or services," Exception (B) allows use of
medical information for the determination of triggering benefits and
includes (among other products or programs) debt cancellation contracts,
debt suspension agreements and credit insurance products. DCC and DSA
programs should be included in (A) which allows use of medical
information for qualifications to offer certain products. The generic
"insurance products" should be included in (B) which allows use of
medical information for determining the triggering of benefits.
DCC and
DSA Programs
There is no apparent rationale and no stated reason as to why DCC and
DSA programs are not included in both exclusions. The collection and use
of medical information to determine eligibility of a consumer for a DCC
or DSA is a legitimate business use of medical information by the
financial institution for the evaluation of its risk associated with the
sale of such a contract.
Section 411 of the FACT Act gives the federal banking agencies and
the NCUA the express power 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". Consistent exceptions for use of medical information for
determining "qualification for" and "triggering of provisions" of DCCs
and DSAs is clearly within this authority.
Further authority is found in the Congressional record. The House
Report accompanying the Act (House Report 108-263) specifically states
that the use of medical information in connection with "credit-related
debt cancellation agreements" is "necessary and appropriate use of
medical information":
The Committee recognizes that there are limited circumstances in
which a creditor may require medical information in determining a
consumer's eligibility or continued eligibility for credit, for
example, to confirm the use of loan proceeds in connection with loans
to finance a specific medical procedure or device, or to verify a
consumer's death or disability in connection with credit-related debt
cancellation agreements, and considers the limited use of medical
information in these circumstances and any similar circumstances
the financial regulators may identify, to be a necessary and
appropriate use of medical information for purposes of this section.
(at page 53) emphasis added.
In the Congressional Record of December 8, 2003, the introduction of
the Act by the Chairman of the House Financial Services Committee and
the Chairman of the Financial Institutions and Consumer Credit
Subcommittee (who was an original sponsor of the House version of the
Act) indicates that Congress did not intend any part of a DCC or DSA
transaction to be subject to the prohibition on the use of medical
information:
The Federal banking agencies and the NCUA are directed to prescribe
regulations that are necessary and appropriate to protect legitimate
business needs with respect to the use of medical information in the
credit granting process, including allowing appropriate sharing for
verifying certain transactions as well as for debt cancellation
contracts, debt suspension agreements, and credit insurance that are
not generally intended to be restricted by this provision. (at page
E2518)
DCC and DSA programs should be included in (A) which allows use of
medical information for qualifications to offer certain products.
Insurance vs. Credit Insurance Programs
As with the treatment of DCC and DSA programs, there is no apparent
rationale and no stated reason for including the broad term "insurance"
in exclusion (A) and using the limiting term "credit insurance" in
exclusion (B). ). Beyond credit insurance, there may be many other types
of insurance for which the medical information of the consumer is
needed. "Credit Insurance" is a specifically defined type of insurance
under most state statutes and regulations and does not include many of
the insurance products offered by financial institutions nor would it
include the financial institution's own insurance coverage. For example:
the medical information which would be used by a financial institution
to determine whether the provisions of one of its debt cancellation
contracts is triggered would also need to be used for submission of a
claim by that financial institution's to its contractual liability
carrier. The collection and use of medical information for determining
the triggering of benefits other than credit insurance is a legitimate
business use of medical information by the financial institution for it
operational and transactional needs. The generic "insurance products"
should be included in (B) which allows use of medical information for
determining the triggering of benefits.
Therefore, we respectfully submit the following recommendations:
1. Move the exclusions contained within the definition of
Eligibility to the Specific Exceptions section.
2. Whether the exclusion are moved or remain within the definition of
Eligibility, change the wording of exclusions A and B and their
applicability to DCCs and DSAs to be consistent and reflective of
Section 411 of the FACT Act.
This would change the proposal language as follows:
Current .30 (d) (vii) "As otherwise permitted by order of the OCC"
moved to a new (viii) and replaced with:
(vii) To the extent such information is obtained for purposes of
(A) The consumer's qualification or fitness to be offered
employment, debt cancellation contracts, debt suspension agreements,
insurance products, or other non-credit products or services;
(B) Any determination of whether the provisions of a debt
cancellation contract, debt suspension agreement, credit
insurance product, or similar forbearance practice or program are
triggered;
(C) Authorizing, processing, or documenting a payment or transaction
on behalf of the consumer in a manner that does not involve a
determination of the consumer's eligibility, or continued
eligibility, for credit; or
(D) Maintaining or servicing the consumer's account in a manner that
does not involve a determination of the consumer's eligibility or
continued eligibility, for credit.
We appreciate your consideration of these recommendations.
Jeffrey J. Wanning
Vice President
Lenders Protection Assurance Company
Risk Retention Group
P.O. Box 641668
Omaha, NE 68164
|
