[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Proposed Rules]
[Pages 9123-9137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4987]


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FEDERAL TRADE COMMISSION
16 CFR Part 601


Proposed Notices of Rights and Duties Under the Fair Credit 
Reporting Act

AGENCY: Federal Trade Commission.

ACTION: Publication of proposed guidance for forms, and request for 
public comment.

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SUMMARY: The Federal Trade Commission is publishing for public comment 
three notices that it is required to prescribe under recent amendments 
to the Fair Credit Reporting Act. Under those amendments, which become 
effective September 30, 1997, consumer reporting agencies will be 
required to provide: A summary of rights under the law to consumers; a 
notice of responsibilities under the law to parties who regularly 
furnish such agencies with consumer information, and a notice of 
responsibilities under the law to parties who obtain consumer reports 
from the agency. Under the statute, a consumer reporting agency will be 
in compliance with these requirements if it provides notice forms 
substantially similar to those prescribed by the Commission.

DATES: Comments must be received on or before March 31, 1997.

ADDRESSES: Comments should be addressed to: Office of the Secretary,

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Federal Trade Commission, Room H-159, Sixth Street and Pennsylvania 
Avenue NW, Washington, DC 20580. Submissions should be marked 
``Proposed Notices of Rights and Duties under the Fair Credit Reporting 
Act, 16 CFR Part 601--Comment.''

FOR FURTHER INFORMATION CONTACT: Clarke Brinckerhoff or William Haynes, 
Attorneys, Division of Credit Practices, Federal Trade Commission, 
Washington, DC 20580, 202-326-3224.

SUPPLEMENTARY INFORMATION:

I. Background

    A major revision of the Fair Credit Reporting Act (``FCRA'') was 
included in the Omnibus Consolidated Appropriations Act for Fiscal Year 
1997 (Pub. L. 104-208), signed by the President on September 30, 1996. 
The revisions of the FCRA are set forth in a portion of the omnibus 
bill (Title II, Subtitle D, Chapter 1), the ``Consumer Credit Reporting 
Reform Act of 1996'' (CCRRA). The provisions discussed in this 
publication become effective on September 30, 1997.
    The amended FCRA requires each consumer reporting agency (``CRA,'' 
usually a credit bureau) to provide certain notices, and mandates that 
the Federal Trade Commission (``Commission'' or ``FTC'') prescribe the 
content of all three notices and the form of one notice.
    The FCRA amendments require each CRA to provide as part of its file 
disclosure to consumers a written summary of consumer rights 
(``summary'' or ``consumer summary'') under the FCRA ((CCRRA Section 
2408(d), FCRA Section 609(c)).1 Section 2408(d)(1) of the CCRRA 
adds a new Section 609(c) to the FCRA that describes the required 
summary of consumer rights and the FTC's mandate with respect to it. 
The new section specifies certain items that must be in the summary, 
requires the Commission to prescribe the form and content of the 
disclosure, and states that the provision will not take effect until 
the Commission has prescribed the summary.
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    \1\  The CRA must also provide the consumer summary to any party 
to whom it provides a consumer report for employment purposes (CCRRA 
Section 2403(b), FCRA Section 604(o)(1)(B)), and the employer must 
in turn provide the report and the summary to the consumer before 
taking adverse action against him or her (FCRA Section 604(o)(3)).
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    Each CRA must also provide a notice of responsibilities under the 
FCRA to persons who buy consumer information from the CRA (``user 
notice''), and a notice of responsibilities under the FCRA to persons 
who regularly furnish consumer information to the CRA (``furnisher 
notice'') (CCRRA Section 2407(b), FCRA Section 607(d)(1)). The amended 
law states that the ``Commission shall prescribe the content of the 
notices'' to be provided (FCRA Section 607(d)(2)).
    For each of the three required disclosures, a CRA complies with the 
law if it provides the applicable person with a notice that is 
substantially similar to that prescribed by the Commission (FCRA 
Sections 607(d)(2) and 609(c)(3)).

II. Opportunity for Public Comment

    The Commission welcomes comments related in any way to the proposed 
consumer summary, user notice, or furnisher notice. The Commission is 
particularly interested in comments in the following areas.

A. Consumer Summary

1. Balancing brevity and completeness
    The statute gives conflicting guidance as to whether the summary 
should be brief or comprehensive. It is described as a ``summary of all 
the rights the consumer has under'' the FCRA (Section 609(c)(1)(A)) 
that includes ``a brief description of * * * all rights of consumers'' 
provided by that law (Section 609(c)(2)(A)). Arguably, no document that 
is actually a ``summary''--or that constitutes a ``brief description'' 
of FCRA consumer rights--could literally include ``all'' of them. The 
proposal seeks to meet these various statutory goals by prescribing a 
summary that is both reasonably comprehensive and user friendly for 
consumers. Is the proposed notice too long in any way to be effective 
as a summary, and if so, how should it be abbreviated? Conversely, are 
there important consumer rights that are not included in the proposed 
form or are discussed too briefly? Please identify any specific 
sections of the proposed summary that are viewed as too lengthy or 
incomplete.
2. Statutorily-required items
    Section 609(c)(2) mandates that the summary include an explanation 
of how the consumer may assert his or her rights, list all federal 
agencies with administrative authority under the FCRA in a form that 
will help consumers find the appropriate agency, and include specific 
statements concerning (1) state laws and authorities that may assist 
consumers, and (2) the fact that verifiable accurate information that 
is not outdated under Section 605 need not be removed. Are the 
statutorily-required items accurately and understandably presented? In 
what way, if any, could they be improved? Specifically, the Commission 
has drafted the table of federal agencies at the end of the summary to 
comply literally with Section 609(c)(2)(C) by including all agencies 
granted enforcement authority by Section 621(b)(1). Is what way, if 
any, could this table be shortened or made more understandable?
3. Terminology
    Because the summary is a document intended to inform consumers, the 
proposal is written in non-technical language, to the extent it is 
possible to do so and also include in sufficient detail the large 
number of important consumer rights conferred by the FCRA. Are there 
sections which can be improved by simplifying the presentation to make 
it easier for consumers to understand? Are there sections where the 
language does not accurately convey the substance of the provision? How 
could such sections be improved?
4. Form issues
    The Commission is required to ``prescribe the form and content of'' 
the consumer summary (Section 609(c)(3)) (emphasis added). The goal is 
to create a notice that sets forth all statutorily required items in a 
form that is readable, understandable, and attractive. The Commission 
proposes to prescribe that the text be provided on paper no smaller 
than 8\1/2\x11 inches in size, in type size no smaller than 12-point 
type (8-point for the chart of federal agencies), in a document 
separate from the consumer report. Generally, is there a format that 
would better convey the same information to consumers? If so, what is 
it and what costs would it entail? Is there a format that would convey 
the same information to consumers in a less expensive manner? If so, 
what is it and what cost saving would it achieve?
5. Numeric changes
    The Commission realizes that some of the numbers in the notice may 
change over time. For example, the permissible charges for file 
disclosures or telephone numbers of agencies may change. Such changes 
will be incorporated in any revisions to the summary the Commission may 
prescribe from time to time. In addition, the Commission proposes that 
all notices issued prior to such revisions that contain accurate and 
updated information concerning numeric changes will be considered 
``substantially similar'' to the prescribed notice as to those items. 
Is there a better way to accommodate such changes?

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B. Furnisher Notice

1. Content of notice
    The proposed notice summarizes the responsibilities imposed upon 
furnishers of information to CRAs by Section 623 of the FCRA. Are all 
statutory obligations of furnishers included? Is the presentation 
accurate and understandable? In what way can it be improved? Is it 
sufficient for the notice to refer furnishers to the complete text of 
the FCRA at the Internet web site maintained by the Commission, or 
would the notice be improved if it was expanded to add the complete 
text of Section 623?
2. Scope of notice
    The FCRA directs the Commission to prescribe a notice setting forth 
the responsibilities of any party ``who regularly and in the ordinary 
course of business furnishes (consumer) information to the agency'' and 
requires each CRA to provide the notice to all such parties (CCRRA 
Section 2407(b), FCRA Section 607(d)). Two of the listed duties apply 
only to parties who furnish information to CRAs regularly, and thus by 
inference, not to occasional information providers. Would some CRAs 
send these notices to occasional as well as regular furnishers? If so, 
would addition of a reference to the duties of occasional, as well as 
regular, providers be helpful?
3. Terminology
    The Commission's proposed notice summarizes the duties of 
furnishers. This summary is written in non-technical language, but with 
the expectation that regular providers of information to CRAs will be 
relatively sophisticated and will be able to understand both the 
language of the statute and the description of duties. Is the 
description of duties accurate and understandable for this audience? 
What improvements can be made?

C. User Notice

1. Number of Notices
    The ``users'' of consumer reports fall into a number of categories, 
and the duties imposed by the FCRA vary by user category. Accordingly, 
CRAs could send out one notice to all users setting forth all of the 
user requirements of the FCRA or they could send out notices that 
contain only those responsibilities that pertain to the particular 
user. The Commission is proposing a single notice, which first 
specifies the general responsibilities that apply to all users of 
consumer reports from a CRA (Part I). The proposed notice then lists 
the responsibilities that are specific to certain categories of users: 
users of consumer reports for employment purposes (Part II); users of 
investigative consumer reports (Part III); users of medical information 
(Part IV); users of ``prescreened'' lists (Part V); and users who are 
resellers (Part VI). Should there be a single notice or multiple 
notices? If multiple notices are appropriate, which types of users 
should receive particularized notices? Can CRAs easily determine 
through the certifications they receive from users which portions of 
the proposed notice are applicable to which users?
2. Content of notice
    The proposed notice discusses the principal portions of the FCRA 
that impose specific obligations upon all those who receive consumer 
reports and has included these in the six parts of the proposed notice. 
Are there other statutory requirements that should be included? Should 
additional information be included in the notice? Will the length of 
the notice impose substantial burdens upon CRAs? Are there ways to 
modify the notice to reduce this burden?
3. Terminology
    The Commission expects that user notices will be sent to a wide 
range of users and that these persons will have varying degrees of 
legal sophistication. Are the duties set forth in the proposed notice 
clear and understandable? Can they be improved upon?

D. Timing of Distribution of Notices

    With respect to the consumer summary, Section 609(c) makes clear 
that it must be provided every time a CRA makes a written file 
disclosure under the section. With respect to the furnisher and user 
notices, however, Section 607(d) provides no specific guidance. Is 
there a need for advice from the Commission about the timing of the 
distribution of furnisher and user notices to ensure that the documents 
are distributed in such a way that they are meaningful and effective? 
If so, when should the notices be distributed? Should the distribution 
of the user notice vary based on the recipient's status (e.g., regular 
and occasional users)?

E. Impact on Small Businesses

    The Commission is seeking comments on the impact that its 
prescription of these notices will have on small entities and for 
suggestions as to any ways in which the Commission can both meet its 
obligations under the FCRA and, if possible, lessen any burden imposed 
on small businesses.
    The FCRA itself requires three types of notices containing 
specified types of information, and also specifies how one type (the 
consumer notices) must be distributed. Accordingly, this discussion 
does not cover the necessity for any of the notices or the distribution 
requirements for the consumer notices.
    The Commission is prescribing these notices at the direction of 
Congress. The purpose of these notices is described in section I above. 
There is no requirement that the notices used be exactly as prescribed 
by the Commission. Rather, there is a presumption of compliance with 
the FCRA if notices are used that are substantially similar to those 
prescribed by the Commission. (FCRA Sections 607 and 609).
    A search of proprietary data bases has revealed approximately 500 
consumer reporting agencies that have sales of $5 million or less per 
year--the threshold for ``small'' credit reporting businesses as 
defined by the Small Business Administration. However, because the 
consumer reporting industry is dominated by a number of large companies 
who provide most of the information sold by smaller entities in the 
industry, the Commission believes that most of these 500 companies 
either are affiliated, or have contractual arrangements, with one of 
the large consumer reporting agencies in the industry. These large 
agencies, as well as industry trade associations, may make information 
about the notice requirements and the Commission's prescribed forms 
available to the smaller entities. The Commission's staff plans to make 
information about complying with the new FCRA requirements available 
through various means, including placing the prescribed forms on the 
Commission's Internet home page.
    The FCRA imposes no specific record keeping or reporting 
requirements directly tied to the use of the notices prescribed by the 
Commission. In addition, there are no federal rules or regulations that 
conflict with or duplicate the notices prescribed by the Commission.
    In these circumstances, the Commission does not believe that the 
prescription of the notices will have a significant economic impact 
upon small business. In fact, the Commission's ``prescription'' of 
these notices may lessen the burden on small businesses, since these 
entities can--but need not--adopt the Commission's forms and thereby 
avoid the risk and expense of developing their notices independently. 
To ensure that no significant economic impact is overlooked, however, 
the Commission seeks comments on this issue. The Commission also seeks

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comments on possible alternatives to the language of the proposed 
notices to accomplish the stated objectives within the statutory 
framework. Specifically, what benefits and costs to consumers and 
businesses would result from the proposed notices? Would the proposed 
notices have a significant economic impact on a substantial number of 
small business entities? If so, explain the nature of any such impact.

F. Firm Timetable for Comments

    The FTC intends to move promptly in order to allow time for (1) the 
staff to review and consider comments on the proposed summary and 
notices, (2) the agency to prescribe them in final form, and (3) the 
industry to prepare and use the final versions of the documents when 
the amendments take effect on September 30, 1997. The public should 
therefore anticipate no extension of the 30-day comment period.

III. Review under the Paperwork Reduction Act

    The FTC has reviewed the three notices that the FCRA amendments 
require it to prescribe--the Summary of FCRA Rights, the Notice of User 
Obligations, and the Notice of Furnisher Obligations--for the purpose 
of determining whether the agency will ``conduct or sponsor'' any 
``collection(s) of information'' as these terms are defined in the OMB 
regulation that implements the Paperwork Reduction Act (44 U.S.C. 
Chapter 35) (``PRA''), 5 C.F.R. Part 1320.

A. Conduct or Sponsor

    The purpose of the PRA is to minimize the Federal paperwork burden 
that agencies impose on individuals, businesses, State and local 
governments, and others by collecting unnecessary or duplicative 
information. 44 U.S.C. Section 3501; 5 C.F.R. Sec. 1320. Thus, an 
agency must seek and obtain clearance from OMB before it ``conducts or 
sponsors'' a ``collection of information'' from ten or more persons 
during a 12 month period. 44 U.S.C. Section 3507; 5 C.F.R. 1320.5.
    The FCRA amendments require the credit reporting agencies to 
provide relevant parties with a Notice of User Obligations and a Notice 
of Furnisher Obligations that describe certain investigation, 
disclosure, and recordkeeping requirements. The amendments further 
require the FTC to prescribe the ``content'' of the notices. So doing 
will not trigger the application of the PRA. The PRA is triggered when 
an agency ``conduct[s) or sponsor[s)'' a collection of information. The 
investigation, disclosure, and recordkeeping requirements described in 
the User and Furnisher Notices are imposed by the statute and the 
notices merely describe the requirements of the new FCRA. Further, the 
requirements contained in the notices become effective on October 31, 
1997, regardless of whether the FTC has provided the language for these 
forms by that time.
    The FCRA amendments also require the Commission to prescribe the 
content and form of a new Summary of Consumer Rights that must be 
provided to consumers. Because the amended FCRA further provides that: 
``[n)o disclosures shall be required under this subsection [discussing 
the Summary of Consumer Rights) until the date on which the Federal 
Trade Commission prescribes the form and content of such disclosures * 
* *,'' it could be argued that the Commission's actions in prescribing 
the manner and content of the Summary of Consumer Rights may be 
considered to ``require'' or ``cause'' the disclosures to occur. 
Nevertheless, as discussed below, we have determined that none of these 
notices constitute a ``collection of information.''

B. Collection of Information

    Because the three notices to be prescribed by the Commission 
contain information that must be distributed to third parties, these 
documents involve public disclosures that would otherwise constitute 
``collections of information'' under the PRA. However, OMB has 
recognized that some disclosures do not entail the ``collection of 
information'' and are thus outside the Act's paperwork control 
provisions. Specifically relevant here is OMB's determination that a 
disclosure requirement is not a ``collection of information'' when the 
information to be disclosed is supplied by the government. 5 C.F.R. 
1320.3(c)(2). In such a situation, a mandate to disclose does not 
impose any requirement to collect the information to be disclosed.
    The information in the proposed FCRA notices will be supplied by 
the government. The proposed notices supply all the information that 
subject firms will be required to disclose. The FCRA requires credit 
reporting agencies to provide these (or substantially similar) notices. 
FCRA Sections 607(d)(2) and 609(c)(3). The latitude provided by the 
statute to use language other than the precise language prescribed by 
the FTC does not undercut this concept because the consumer reporting 
agencies can simply adopt these notices for distribution without any 
change to the language. We have concluded therefore that these notices 
do not fall within the definition of ``collection of information'' 
because they are ``[t)he public disclosure of information originally 
supplied by the Federal government to the recipient for the purpose of 
disclosure to the public * * *'' 5 C.F.R. Sec. 1320.3(c)(2). Thus, the 
PRA does not apply.

List of Subjects in 16 CFR Part 601

    Credit, Trade practices.

    Pursuant to 15 U.S.C. 1681g and 1681s, the FTC hereby proposes to 
add to Subchapter F of Chapter I of 16 CFR a new Part 601 to read as 
follows:

PART 601--SUMMARY OF CONSUMER RIGHTS, NOTICE OF USER 
RESPONSIBILITIES, AND NOTICE OF FURNISHER RESPONSIBILITIES UNDER 
THE FAIR CREDIT REPORTING ACT

Sec.
601.1  Authority and purpose.
601.2  Legal effect.

Appendix A to Part 601--Prescribed Summary of Consumer Rights
Appendix B to Part 601--Prescribed Notice of Furnisher 
Responsibilities
Appendix C to Part 601--Prescribed Notice of User Responsibilities

    Authority: 15 U.S.C. 1681g and 1681s.


Sec. 601.1  Authority and purpose.

    (a) Authority. This part is issued by the Commission pursuant to 
the provisions of the Fair Credit Reporting Act (15 U.S.C. 1681 et 
seq.), as most recently amended by the Consumer Credit Reporting Reform 
Act of 1996 (Title II, Subtitle D, Chapter 1, of the Omnibus 
Consolidated Appropriations Act for Fiscal Year 1997), Public Law 104-
208, 110 Stat. 3009-426 (Sept. 30, 1996).
    (b) Purpose. The purpose of this part is to comply with sections 
607(c) and 609(c) of the Fair Credit Reporting Act, as amended. Section 
609(c)(3) directs the FTC to prescribe the form and content of a 
summary of consumers' legal rights under the FCRA that the amended law 
requires each consumer reporting agency to provide when disclosing the 
information in its file to consumers, and section 609(c)(4) provides 
that the summary need not be provided until the FTC has in fact 
prescribed its form and content. Section 607(d)(2) directs the FTC to 
prescribe the content of notices that consumer reporting agencies are 
required to provide to parties that supply information to, or purchase 
consumer reports from, the agency. These notices will set forth the 
responsibilities under the FCRA of all persons who furnish information 
to consumer reporting agencies or use information subject to the FCRA.

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Sec. 601.2  Legal effect.

    The forms prescribed by the FTC do not constitute a trade 
regulation rule. They carry out the directive in the statute that the 
FTC prescribe the summary and notices. A consumer reporting agency that 
provides notices substantially similar to those prescribed by the FTC 
will be in compliance with Section 607(d) or 609(c) of the FCRA, as 
applicable.

Appendix A to Part 601--Prescribed Summary of Consumer Rights

    The prescribed form for this summary is as a separate document, 
on paper no smaller than 8\1/2\x11 inches in size, with text no less 
than 12-point type (8-point for the chart of federal agencies), in 
bold or capital letters as indicated. The form in this appendix 
prescribes both the content and the sequence of items in the 
required summary. A consumer reporting agency that is not required 
by law to have a toll-free number may omit the sentence inviting 
consumers to call that number. A summary may accurately reflect 
changes in numerical items that change over time (e.g., dollar 
amounts, or phone numbers and addresses of federal agencies), and 
remain in compliance.

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    By direction of the Commission.
Donald S. Clark,
Secretary.

[FR Doc. 97-4987 Filed 2-27-97; 8:45 am]
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