QUESTION
Recently, we were faced with the need to get medical
information from an applicant in order for the underwriter to approve the applicant’s
eligibility. Since we had never had to do this before, it set off a lot of
alarm bells in our compliance department. We are hoping you could offer some
guidance. Basically, what we need to know is this: what are the conditions that
allow us to obtain and use an applicant’s medical information in order to
determine the applicant’s eligibility for credit?
ANSWER
The rule of thumb is that a lender may not obtain or use
medical information pertaining to a consumer in connection with any
determination of the consumer’s eligibility or continued eligibility for credit
unless the use is authorized under the Fair Credit Reporting Act (FCRA). [15 USC §§ 1681b(g)(1), (2)]
With few exceptions, if the lender does not specifically request
medical information a violation of this prohibition does not take place; that
is, if the creditor receives medical information pertaining to a consumer in
connection with any determination of the consumer’s eligibility or continued
eligibility for credit without specifically requesting medical information,
the information is not deemed to be a violation of the prohibition. [12 CFR §
334.30(c), 12 CFR § 222.30(c), inter alia]
With respect to use of medical information to determine
borrower eligibility, the lender may use the consumer’s medical information in
determining eligibility or continued eligibility for credit as long as:
(1) The
information is the type of information that is routinely used in making credit
eligibility determinations, such as information relating to debts, expenses,
income, benefits, assets, collateral or the purpose of the loan (including the
use of loan proceeds);
(2) The
creditor uses the medical information in a manner and to an extent that is no
less favorable than the creditor would use comparable information that is not
medical information in a credit transaction; and,
(3) The
creditor does not take the consumer’s physical, mental, or behavioral health, condition
or history, type of treatment, or prognosis into account as part of the credit
determination. [12 CFR § 334.30(d)(1), 12 CFR § 222.30(d)(1), inter alia]
This means that a lender may treat medical information of a
type that is routinely used in credit eligibility determinations in the same manner
that the creditor treats the same type of information that is not medical
information.
It is worth mentioning that there are special exceptions
that permit a creditor to obtain and use medical information. For instance, one
exception is where a creditor uses medical information at the request of the
consumer to determine if the consumer qualifies for a legally permissible
special credit program or credit-related assistance program that is designed to
meet the special needs of consumers with medical conditions, and other
conditions are also satisfied. [12 CFR § 334.30(e)(1), 12 CFR § 222.30(e)(1), inter alia]
Jonathan Foxx
President & Managing Director
Lenders Compliance Group
