QUIZ: Medical Information Rules under FACTA

"Medical information? We don't have medical information on our customers!"

Is that your first reaction to the subject of the FACT Act provisions that relate to creditors obtaining or using medical information?

If so, it's possible that you have not yet begun to comprehend how those provisions and the recently adopted final rules that implement them will affect you.

Section 411 of the Fair and Accurate Credit Transactions Act (FACTA) generally prohibits creditors from obtaining or using medical information pertaining to a consumer in connection with any determination of the consumer's eligibility, or continued eligibility, for credit. New final rules published by the financial institution regulators last month create exceptions to the general prohibition and permit creditors to obtain or use medical information in certain limited circumstances.

Following is a quiz to test your knowledge of what is/is not permissible. These ten questions deal with the issue of what is considered medical information and which types of activities are permissible.

Cogitate on the fact situations for a while. Forward this quiz to your colleagues who are lenders, auditors, or compliance officers. Don't forget senior managers who only occasionally make loans. They're even more likely to not be familiar with the new provisions.

Click HERE for our answers to the quiz.

1. Jack pays his insurance co-payment with a check drawn on your bank. The check is payable to Town Medical Services. The memo line indicates "Chest X-ray." Is the information on the memo line considered medical information?
   
   
2. A military veteran applies for a home purchase loan under a program that assists disabled veterans in purchasing homes by subsidizing the down payment for the loan. Can the lender contact the veteran?s doctor to verify that the veteran is, in fact, disabled?
   
   
3. Ken presents the bank with a power of attorney (POA) for his mother's accounts. The POA is effective when Ken?s mother is no longer capable of managing her own affairs. May the bank contact the mother's doctor to discuss her condition?
   
   
4. Michele is borrowing money from your bank. She is purchasing both credit life and accident and health. She completes a questionnaire that inquires about various illnesses ? have you had a heart attack, stroke, high blood pressure, diabetes, etc. Is the information collected using the questionnaire considered medical information?
   
   
5. As part of the processing of Michele's loan, your bank obtains a credit report on Michele. It shows a 60-day delinquency on a payment due to a medical clinic.
   • Is the credit report information considered medical information?
     
     
   • Can Michele's delinquency in payment to a medical clinic be used as a basis of denying the loan request?
     
     
6. Jack requests a loan to refinance a home purchase loan currently held by another lender. He wants the lowest possible rate and the longest possible term. He explains that his doctor has told him that he has less than six months to live as a result of advanced stage lung cancer. He wants to refinance in order to lower the payments so that hopefully his wife and children will be able to hang on to the house after he is gone.
   • Is the information the borrower volunteered considered medical information?
     
     
   • Can the lender use the information about Jack's condition to deny the loan?
     
     
   • Can the lender require Jack to assign a life insurance policy in order to obtain the loan?
     
     
7. Amy has applied for a loan to fund various elective medical procedures (an extreme makeover). Can the lender contact the various medical professionals in order to verify that the procedures are to be performed and the cost?
   
   
8. George's bank has been investigating the use of various biometric tools in connection with authentication of online users, including loan applicants and borrowers. Since the term "medical information" has such a broad definition, will the use of biometrics in connection with credit customers be precluded under FACTA?
   
   
9. Shirley applies for a loan. On the written application, she lists all of her outstanding debts, including many owed to local doctors and a hospital. Can you consider those debts in evaluating her request for credit, or are you prohibited from doing so because of their medical nature?
10. Leon has a long history of mental illness. While he has had periods of time when he has been able to work, on two occasions that you are aware of in the past, he was unable to continue his employment due to mental health issues. He seems to be fine now, has a good job, and is applying for a mortgage loan. Can you take into consideration his mental health in making a decision on his application?
    
    

First published on BankersOnline.com 12/14/05