Considering Medical Information under the FCRA; Housing & Alternative Credit Scores Research
Good morning, Credit Union Compliance World!
In a short space of time, your NAFCU Regulatory Compliance Team got pinged with a couple different versions of the same question: when can credit unions consider medical information in making credit decisions? It's an area where most credit unions don't have a lot of traffic.
Credit union compliance officers clearly have an instinct is that this is an Equal Credit Opportunity Act (ECOA) issue. This makes sense because it speaks to our sense of fairness, but neither ECOA nor Regulation B address the question. However, it is dealt with fairly directly by the FACTA amendments to the FCRA.
Section 604(g)(2) of the FCRA (codified at 15 U.SC. § 1681b(g)(2)) generally prohibits credit unions from obtaining or using medical information in connection with any determination for credit. This applies to any creditor and "medical information" is defined to include any information relating to physical, mental or behavioral health of an individual.
The medical information does not need to come from a credit report for this prohibition to be implicated. It is important to understand that the prohibition against using medical information applies regardless of how the credit union obtained the medical information. The information could be received from the member directly, or from their friends or family.
Subpart D of Regulation V implements the medical information provisions of the FCRA. Section 1022.30 contains the general prohibition against obtaining or using medical information in credit decisions, unless an exception is met.
While the rule prohibits obtaining medical information, it also addresses that this information is often provided to credit unions completely unsolicited. Section 1022.30(c) states that if unsolicited medical information is shared with the credit union, the credit union has not violated the prohibition. However, to use that information, the credit union would need to meet an exception under the rule.
Section 1022.30 contains several exceptions to this general prohibition which may apply, including a financial exception, an exception for special credit-related assistance programs for those with medical conditions, an exception for forbearance programs triggered by medical conditions or events, an exception for following the member's documented request to accommodate a particular circumstance, and more. Below is more detail on the financial exception.
The financial exception allows a creditor to obtain and use medical information as long as the information is the "type of information routinely used in making credit edibility determination, such as information relating to debts, expenses, income, benefits, assets, collateral, or the purpose of the loan, including the use of proceeds." The information can only be used in a manner and to an extent that it is no less favorable than comparable non-medical information. To illustrate, the credit union could consider that an applicant owes medical bills related to oncology to the same extent that it would consider similar bills not related to a medical issue. The bills can be considered as a liability affecting their income and assets, but the applicant's implicit need for oncology treatment should not be considered. The credit union cannot consider the applicant's physical, mental or behavioral health, condition or history, type of treatment, or prognosis into account. 12 C.F.R. § 1022.30(d)(1).
So, if an applicant makes a disclosure of medical information during a loan application process or asks for loss mitigation assistance in connection with a medical crisis, the credit union might review section 1022.30 closely to ensure it is in compliance when requesting or considering any medical information in connection with a loan. Another thing to consider is whether state laws in your jurisdiction regarding fair lending or disability protections have prohibitions against considering medical information or the member's medical condition in a credit decision.
Housing & Alternative Credit Scores Research
The NAFCU is conducting research to help us in our advocacy efforts on your behalf. We want to hear about your credit union's health, mortgage lending and views on alternative credit scores. If you have a moment, please take the time to complete this survey. The survey will be open through this Friday.