I think I am pretty clear on what we can and cannot do with medical information, however when I provided training our lending manager asked some questions. While I gave him my intrepretation of the reg, he still wanted me to check on these...hopefully you can help!

1. Does a mentally incompetent person have full rights to apply for a loan? For example, a person comes in and they appear to be incompetent can we make a decision based on that? I say we can't.

2. What if we know a medical issue will prevent a borrower from future income to make payments. For example, someone discloses to us that they have MS and that they will no longer be able to work once it progresses to a certain point. I say no, because we cannot determine what point that will be.
3. Must we remove a written document from a customer file if it discloses that the customer was delinquent prior due to mental illness? For example, John Smith had prior delinquencies due to a mental illness. We verify that information...should we keep that in the file? Other people besides the lender will have access to the file...is this on a need to know basis?

77 views but no responses???

My opinions:
1. I say you can as someone who is not legally competent can not enter into a binding contract - period. The key here is "legally" - be careful about assuming levels of competence.
2. I agree. The issue MAY harm future income, but it may not.
3. No, don't remove. That's what justifies ignoring the delinquency information. Control over who has access to the file is a different issue.

Well Jenny, here is my OPINION.
3. The documentation regarding the reason behind their delinquency should only be removed if you requested the medical reason they were behind. You can add the documentation that the information was given without your request. People should not have universal access to the file anyway so as long as you don't deny in the future due to that, I think you are fine.
2. You cannot deny due to the MS and question of future income. I could be hit by a car tomorrow and have no future income. That would be using the medical information in exactly the way you aren't allowed.
1. Unless they have a POA, many mentally challanged people can sign for themselves. You can't turn them down for this medical handicap.

regarding 1 - if the person seems/appears incompentent, the question you should ask is if that person can enter into a legally binding contract. If yes, make the loan. If no, don't make the loan - due to not being able to enter into a legally binding contract. Before you take that step, you should check with legal counsel.

I agree with Beagle Queen about responses 2 and 3.

Quote:

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you should ask is if that person can enter into a legally binding contract.

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Didn't they write a book about this subject? I think it was called "Catch 22".

thanks for the responses...finally! :-) These were my thoughts exactly, but I told the person that asked that I would double check. This helps a lot.

Jenny

Didn't the regulators say that the bank can't assume someone is mentally incompetent based upon appearance? I will see if I can locate that again.

Here is what I was thinking of. It is discussed in the final release from Nov. 2005, page 13.

Here is the link.

One commenter requested that the Agencies broaden the scope of this exception
to permit creditors to investigate the mental capacity of a consumer based on a suspicion
that the consumer lacks the capacity to contract. This commenter did not believe that an
exception to permit an inquiry into the consumer’s legal capacity “when a person seeks to
exercise a power of attorney or act as a legal representative for a consumer based on an
asserted medical event or condition” was broad enough to cover all circumstances where
the consumer’s legal capacity may be in doubt. This commenter urged the Agencies to
clarify that creditors may investigate the mental capacity of a consumer even when there
is no power of attorney issue, and that a reasonable suspicion is a sufficient basis to
conduct the investigation. Additionally, or in the alternative, this commenter requested
clarification that loan denials based on lack of legal mental capacity are not eligibility
issues; therefore, no exception is necessary, because use of medical information for this
purpose is not subject to the general statutory prohibition. Finally, this commenter did
not believe that the terms “medical event” or “condition” were clear for purposes of the
power of attorney exception. Specifically, this commenter believed it was unclear how
significant the medical event or condition must be, who must make the determination that
the medical event or condition has occurred, and whether a suspicion allows the creditor
to investigate further.
As noted in the supplementary information to the interim final rules, commenters
on the proposal were divided on the need for a broader exception covering powers of
attorney and legal capacity. In the interim final rules, the Agencies considered whether to
adopt a broader exception, but declined to do so. The Agencies believe that creditors, or
their counsel, are qualified to determine whether a power of attorney or legal
representative status has been properly invoked based on an asserted medical condition or
event. Creditors generally are not qualified to determine the mental capacity of a
consumer. Moreover, permitting creditors to inquire into the mental capacity of
consumers based only on a “reasonable suspicion” could result in discrimination against
certain consumers and circumvention of the general prohibition. Therefore, the Agencies
decline to expand the exception in the manner requested by the commenter.
The Agencies recognized in the supplementary information to the interim final
rules that a power of attorney or legal representative status may be used in a variety of
circumstances, many of which may have no connection with a determination of a
consumer’s eligibility, or continued eligibility, for credit. Nevertheless, the Agencies
concluded that an exception was necessary because a power of attorney or legal
representative status based on an asserted medical condition or event may relate to a
credit eligibility determination in certain circumstances. The Agencies do not agree with
the commenter that the use of medical information to deny loans based on a lack of
mental capacity is not connected with credit eligibility determinations. Accordingly, the
Agencies cannot state categorically that medical information used for this purpose is not
subject to the general prohibitio

We had a customer apply for a small consumer loan. As the lender was taking the application he kept commenting about how good the ocean smelled, as he sniffed the air. And about how good the ocean sounded and how he loved the ocean. This is pretty remarkable since we are at least 1,500 miles from the ocean..

If the customer otherwise qualified for the loan, I hope you didn't turn him down because the lender determined he had a medical problem.

We didn't turn him down for him remarkable olfactory capabilities. He did not have sufficient income to service the amount requested. He was denied on that basis.

Lucky!

One of the new user contributed FACTA Medical Info Tools can help in these general issues and training.