son
Secretary
Board of Governors of the Federal Reserve System
20
th
Street and Constitution Avenue, N.W.
Washington, DC 20551

Robert E. Feldman
Executive Secretary
Attention: Comments
Federal Deposit Insurance Corporation
550 17
th
Street, N.W.
Washington, DC 20429

Regulation Comments
Chief Counsels Office
Office of Thrift Supervision
1700 G Street, N.W.
Washington, DC 20552
Attention: No. 2004-xx

Becky Baker
Secretary of the Board
National Credit Union Administration
1775 Duke Street
Alexandria, VA 22314-3428

RE: Fair Credit Reporting Medical Information Regulation:
OCC Docket No. 04-09, Board Docket No. R-1188, FDIC
RIN 3064AC81 OTS RIN 1550-AB88 (69 Fed. Reg.
23380 [April 28, 2004])


Dear Sirs and Madams:

The Mortgage Bankers Association (MBA) appreciates the opportunity to comment on
the joint proposed rule (the Proposal) of the Office of the Comptroller of the Currency,
Fair Credit Reporting Medical Information Regulation
May 28, 2004
Page 2 of 6

Board of Governors of the Federal Reserve System, Federal Deposit Insurance
Corporation, Office of Thrift Supervision, and National Credit Union Administration (the
Agencies) concerning Fair Credit Reporting Medical Information Regulations (the
Regulations). 69 Fed. Reg. 23380 (April 28, 2004). The Proposal implements
provisions of the Fair and Accurate Transactions Act of 2003 (FACTA) designed to
limit the sharing and use of information about consumers medical history and current
health status.
MBA members recognize the particular sensitivity of medical information and are
committed to using such information only when it is necessary for prudent loan
underwriting and servicing. As was noted during the congressional debate on FACTA,
the provisions to be implemented by this rule are intended to protect the medical
information of individuals without disrupting access to low[-]cost credit and the security
of information. 149 Cong. Rec. H12218 (Nov. 21, 2003) (remarks of Rep. Kelly). MBA
commends the Agencies for creating exceptions in the Proposal that will give creditors
access to health-related information when they have a legitimate business need for that
information, and generally supports the Proposal. We believe, however, that there are
some improvements that could be made to fulfill the Agencies goal of protect[ing]
legitimate operational [and] transactional . . . needs as well as consumer privacy
expectations. See 69 Fed. Reg. 23382 (April 28, 2004).
Request to Use Medical Information: Procedural
A number of our comments concern the implications of the Agencies exception
permitting a financial institution to obtain and use medical information if the consumer
has requested such use in writing. See proposed § _.30(d)(1)(vi). Because this is likely
to be an important way for financial institutions to obtain the medical information that
they occasionally need, we think it important that the mechanism for handling this
request be made clear. We therefore suggest that the Regulations provide a simple
form that can be used to evidence the consumers request. Proper use of the form
should provide a safe harbor from liability under the FCRA. Particularly in a brand-new
regulation, such procedural certainty will go a long way towards securing industry
compliance.
Request to Use Medical Information: Substantive
The Proposal reflects the Agencies understanding that a consumer may make a very
specific request of the creditor to consider targeted medical information. For example, a
consumer whose credit history shows a bankruptcy may provide evidence that a
particular illness or injury caused the bankruptcy. Credit policy guidelines commonly
allow underwriters to treat a medically-related bankruptcy more favorably than other
bankruptcies. The consumer request exception, however, which is the mechanism in
the Proposal for conveying medical information of this sort to a creditor, is drafted so
narrowly that it could be read to limit the financial institution to obtaining and using only
the specific medical information which the consumer designates in writing that the
financial institution may consider, and no other medical information even if it is
potentially relevant.
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May 28, 2004
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Putting this power entirely in the hands of the consumer leaves lenders open to
potential fraud. To continue with the above example, suppose that the consumer claims
that a bankruptcy related to a disability and produces a doctors statement discussing
the disability. It is unclear from the Proposal whether a creditor would then have any
right to obtain or consider corroborative information about whether the consumer filed a
disability claim or about the disposition of that claim. Applicants should not be allowed
to cherry-pick by limiting the creditor to obtaining only favorable medical information
about them. Therefore, the Regulations should state that, once the consumer has
designated specific medical information, the creditor may obtain any other medical
information relevant to verifying the accuracy of the medical information provided.
This issue raises the question of what happens if the financial institution and the
consumer differ as to how much medical information the financial institution should have
to make its credit decision. The financial institution should be able to obtain all of the
information it deems necessary to make that decision. The Regulations should make
clear that, if a financial institution requests that a consumer provide medical information
so that the financial institution can render a credit decision, and if the consumer refuses
or provides only a portion of the requested information, then the financial institution can
deny credit to the consumer on the grounds that the consumers application was
incomplete, without violating the FCRA.
Mental Capacity
Moving beyond consent-based use of medical information, the Proposal allows creditors
to use medical information:
(i) To determine whether the use of a power of attorney or
legal representative is necessary and appropriate;
(ii) To comply with applicable requirements of local, state, or
federal laws; [or]
. . . .
(iv) For purposes of fraud prevention.
This addresses the situation, recognized by the Agencies, that some states have
enacted laws that require consideration of medical information relating to mental
capacity to prevent financial abuse by caregivers. 69 Fed. Reg. at 23386.
MBA believes that the § __.30(d)(1) exceptions should be clarified in several ways to
address the mental capacity issue. It is unclear whether the Proposal, as drafted,
allows creditors to consider whether the applicant has the mental capacity to enter into
a binding contract and create a valid security interest in the property. For example, if an
applicant relies on disability income to qualify for the loan, and verification of the income
reveals that part or all of the disability relates to a mental disability, many lenders
currently require evidence of mental capacity to ensure that the borrower can enter into
an enforceable agreement.
Furthermore, even when the applicant meets the minimal standard of legal capacity,
there may be situations in which the creditor believes that the consumer may not fully
Fair Credit Reporting Medical Information Regulation
May 28, 2004
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understand the nature of the loan or be able to determine whether accepting it would be
in his or her best interests. As the Agencies recognize, making a loan under these
circumstances could violate specific prohibitions against predatory lending, but the rule
should also make clear that creditors may also consider such medical information to
avoid committing an unfair or deceptive act or practice under federal or state law. As
drafted, the Proposal does not even clearly allow a lender to consider information
presented by a consumers relatives that the consumer suffers from a mental disorder
that prevents him or her from exercising sound judgment. In those circumstances, if the
lender could not consider medical information, it would be placed in a position where it
either violated FCRA or made a loan that could be characterized as predatory.
Therefore, MBA urges the Agencies to revise the Regulations to state that a creditor
may consider information indicating that the applicant may lack the mental capacity to
contract or otherwise may be unable to exercise sound judgment in evaluating whether
the loan is in his or her best interests. Further, the regulation should state that
applicable requirements of local, state, or federal laws include prohibitions in federal
and state laws against unfair and deceptive acts or practices.
Disability and Workers Compensation Income
The Agencies have recognized in proposed § __.30(c) that creditors must be able to
verify medical information when income on which the applicant relies to establish
creditworthiness is contingent on a medical condition, such as disability income.
Lenders must often collect additional information from physicians when an applicant is
receiving workers compensation, to verify that the applicant is likely to continue to
receive the income for the foreseeable future. For example, Department of Veter