Not so private

As Gazette staffers quickly learned in the wake of an investigative report describing how the University of Iowa Hospitals and Clinics is routinely completing credit checks on patients, many people - in this specific circumstance, all but one of those who spoke out regarding the news report - believe the information contained in their credit report is both theirs and private. This assumption, however, glosses over the reality of who can access a credit report and why it and other similar databases are created and maintained.

WHAT'S IN IT?

A credit report contains information about you, but it was not created and is not necessarily maintained for you. While you have a right to know what is in your credit report and to request errors be corrected, there is no process that will allow you to completely prevent access to what it contains.

It includes such information as your borrowing history, your willingness (not necessarily ability) to pay debts, employment history, previous and current residences, Social Security number, date of birth, name or variations of name previously used, current and past telephone numbers, open and closed financial accounts and public record information such as court judgments and bankruptcies.

The report also notes when it was pulled by a financial institution, presumably for the purposes of issuing a line of credit. It lists the name of the institutions to which you have had financial agreements and your track record in honoring those agreements.

Credit reports may not contain medical information (without consent), bankruptcies 10 years or older and debts more than seven years old. Information can also be stripped from the report when specific industries make requests or when requests are linked to activities with their own prohibitions. For instance, age, marital status and race are not reported as a part of employment inquiries.

HOW DID IT START?

The practice of keeping consumer credit reports began in the late 1800s, although certainly not to the scale it is today. In the beginning, the process was largely local or regional, with individuals speaking with merchants and gaining information on consumers. For instance, 'Jim Bob doesn't always pay, but you can depend on his father to make good the son's promises.” When a new customer would approach a merchant, the merchant would seek advice from the local individual who kept the consumer information.

It wasn't until the 1960s and 1970s, when computers were fully introduced to the process, that the advent of consumer information could be taken nationally and internationally. It was also due to the more widespread use and acceptance of credit reports that the Fair Credit Reporting Act - passed in 1970 - provided guidelines. While the law has been amended many times over the years, it remains the core document that governs who can obtain a person's credit report, under what circumstances, and what information can be included on such reports as well as how long it can be reported.

In 2003, the federal government added the Fair and Accurate Credit Transactions Act, which provided every consumer one free copy of their credit report each year from some of the world's largest databases. In 2010, the Consumer Financial Protection Bureau was established as a part of the Dodd-Frank financial reform package and, in 2012, the Bureau announced it would begin supervising about 30 companies that maintain and provide 94 percent of what exists in credit reports.

'The fact that this industry has never before been subject to any federal supervision means there's a lot we don't know about it,” Director Richard Cordray said at the time.

To date, however, the Consumer Financial Protection Bureau, which also oversees banking, mortgage brokers, payday lenders and credit card companies, has kept most of its focus on the process by which credit report mistakes are investigated and corrected.

WHO CAN ACCESS IT?

Most consumers expect financial institutions to pull a credit history in advance of offering a car loan or mortgage. But federal law allows for many other groups and industries to access credit reports, and most are not obligated to ask permission before doing so. Credit card companies, which also make profits on consumer lending, may access credit reports when a consumer makes application and at regular intervals during the financial relationship.

Prospective employers can (and many do) consult the credit history of potential new hires. Some do so to determine if the individual poses a theft risk. Others simply view the information as an indicator of personal responsibility. Unlike some of the others, however, all employers must obtain written permission to pull a credit report.

Renters may have their credit report pulled by prospective landlords, since the report notes past evictions as a matter of public record.

Additional permissible uses include court orders, child support, insurance underwriting, license eligibility and 'other legitimate business need.”

Because the law has been vaguely written and liberally interpreted, the only clear prohibition in place is against a private individual pulling a credit report on another private individual. So, your neighbor cannot pull your credit report, but your baby sitter might have legal standing to do so.

It is through this 'business need” channel that UIHC as well as hospitals and doctors' offices throughout the nation have begun to pull credit information on their patients who must pony up a portion of their bill.

MY DOCTOR HAS IT?

In the 1980s and early 1990s, many employers were looking for ways to keep costs of their employee health care packages down. One way they used was to agree to higher employee out-of-pocket costs such as deductibles and copays.

Now many insurance plans require individuals to pay up to a certain amount for specific services before coverage begins. For instance, an insurance company may pay no portion of an X-ray and instead apply what the individual owes to a preset deductible for that type of service. Only after a deductible - usually around $1,000 - has been met in in-of-pocket costs will insurance begin to cover the services. Likewise, while many plans cover doctor visits, most plans require the patient to remit a portion of the cost, a co-pay.

As more hospitals and physician offices began to shift their collection focus from insurance and government assistance to a more mixed bag that included direct patient pay, they became more interested in their patients' past credit history. According to the health care industry and the rapidly expanding health care arm of the credit reporting agencies, a peek into a patient's credit situation can better help them steer low-income clients to charity care or government subsidies.

They are adamant that the public's two worst fears in relation to this reporting - that it's being used to determine course of care or that private medical information is being coupled with financial data - are not happening. And regardless of how uncomfortable the process makes patients, there is no evidence at this time of such misuses.

Nonetheless, the widespread availability of credit reports raises valid concerns about privacy and access to personal information as technology's reach expands exponentially. For now, the best approach for consumers is 'trust, but verify.”

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