[Federal Register Volume 67, Number 83 (Tuesday, April 30, 2002)]
[Notices]
[Pages 21243-21247]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-10576]


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FEDERAL TRADE COMMISSION


Agency Information Collection Activities; Proposed Collection; 
Comment Request; Extension

AGENCY: Federal Trade Commission.

ACTION: Notice.

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SUMMARY: The FTC seeks public comments on its proposal to extend 
through August 31, 2005 the current Paperwork Reduction Act (``PRA'') 
clearances for information collection requirements contained in four 
Commission rules and one category of administrative activities. Their 
clearances expire on August 31, 2002.

DATES: Comments must be filed by July 1, 2002.

ADDRESSES: Send written comments to Secretary, Federal Trade 
Commission, Room H-159, 600 Pennsylvania Ave., NW., Washington, DC 
20580. Comments in electronic form should be sent to [email protected]. All 
comments should be identified as responding to this notice, as 
prescribed below.

FOR FURTHER INFORMATION CONTACT: Requests for additional information or 
copies of the proposed information requirements should be sent to Gary 
Greenfield, Attorney, Office of the General Counsel, Federal Trade 
Commission, 600 Pennsylvania Ave., NW., H-576, Washington, DC 20580, 
(202) 326-2753.

SUPPLEMENTARY INFORMATION: Under the Paperwork Reduction Act of 1995 
(PRA) (44 U.S.C. 3501-3520), Federal agencies must obtain approval from 
OMB for each collection of information they conduct or sponsor. 
``Collection of information'' means agency requests or requirements 
that members of the public submit reports, keep records, or provide 
information to a third party. 44 U.S.C. 3502(3), 5 CFR 1320.3(c). As 
required by section 3506(c)(2)(A) of the PRA, the FTC is providing this 
opportunity for public comment before requesting that OMB extend the 
existing paperwork clearance for the regulations noted herein.
    The FTC invites comments on: (1) Whether the proposed collections 
of information are necessary for the proper performance of the 
functions of the agency, including whether the information will have 
practical utility; (2) the accuracy of the agency's estimates of the 
burden of the proposed collections of information, including the 
validity of the methodology and assumptions used; (3) ways to enhance 
the quality, utility, and clarity of the information to be collected; 
and (4) ways to minimize the burden of the collection of information on 
those who are to respond, including through the use of appropriate 
automated, electronic, mechanical, or other technological collection 
techniques or other forms of information technology, e.g., permitting 
electronic submission of responses.
    If a comment contains nonpublic information, it must be filed in 
paper form, and the first page of the document must be clearly labeled 
``confidential.'' Comments that do not contain any nonpublic 
information may instead be filed in electronic form (in ASCII format, 
WordPerfect, or Microsoft Word) as part of or as an attachment to email 
messages directed to the following email box: [email protected]. Such 
comments will be considered by the Commission and will be available for 
inspection and copying at its principal office in accordance with 
Section 4.9(b)(6)(ii) of

[[Page 21244]]

the Commission's Rules of Practice, 16 CFR 4.9(b)(6)(ii)).
    The relevant information collection requirements are as follows:

1. The Negative Option Rule, 16 CFR Part 425 (Control Number: 3084-
0104)

    The Negative Option Rule governs the operation of prenotification 
subscription plans. Under these plans, sellers ship merchandise such as 
books, compact discs or tapes automatically to their subscribers, and 
bill them for the merchandise if consumers do not expressly reject the 
merchandise within a prescribed time. The Rule protects consumers by: 
(a) Requiring that promotional materials disclose the terms of 
membership clearly and conspicuously; and (b) establishing procedures 
for the administration of such ``negative option'' plans.
    Estimated annual hours burden: 14,000 total burden hours, rounded 
to the nearest thousand (all disclosure-related).
    Staff estimates that approximately 179 existing clubs require 
annually about 75 hours each to comply with the Rule's disclosure 
requirements, for a total of 13,425 hours (179 clubs  x  75 hours). 
These clubs should be familiar with the Rule, which has been in effect 
since 1974. Thus, the ``burden'' of compliance has declined over time. 
Moreover, comments provided to the FTC indicate that a substantial 
portion of the existing clubs likely would make these disclosures 
absent the Rule because they have helped foster long-term relationships 
with consumers.
    Approximately 5 new clubs come into being each year. These clubs 
require approximately 120 hours to comply with the Rule, including 
start up-time. Thus, cumulative PRA burden for new clubs is about 600 
hours. Combined with the estimated burden for established clubs, total 
burden is 14,025 hours or 14,000, rounded to the nearest thousand.
    Estimated annual cost burden: $385,000, rounded to the nearest 
thousand (solely related to labor costs).
    Based on recent Bureau of Labor Statistics, the average 
compensation for advertising managers is approximately $30 per hour. 
Compensation for clerical personnel is approximately $10 per hour. 
Assuming that managers perform the bulk of the work, while clerical 
personnel perform associated tasks (e.g., placing advertisements and 
responding to inquiries about offerings or prices), the total cost to 
the industry for the Rule's paperwork requirements would be 
approximately $384,700. [(65 hours managerial time  x  179 existing 
negative option plans  x  $30 per hour) + (10 hours clerical time  x  
179 existing negative option plans  x  $10 per hour) + (115 hours 
managerial time  x  5 new negative option plans  x  $30 per hour) + (10 
hours clerical time  x  5 new negative option plans  x  $10).]
    Because the Rule has been in effect since 1974, the vast majority 
of the negative option clubs have no current start-up costs. For the 
few new clubs that enter the market each year, the costs associated 
with the Rule's disclosure requirements, beyond the additional labor 
costs discussed above, are de minimis. Negative option clubs already 
have access to the ordinary office equipment necessary to achieve 
compliance with the Rule. Similarly, the Rule imposes few, if any, 
printing and distribution costs. The required disclosures generally 
constitute only a small addition to the materials that a prospective 
subscriber sends to the seller to solicit enrollment in a negative 
option plan. Because printing and distribution expenditures are 
incurred regardless of the Rule to market the product, adding the 
required disclosures to them would result in marginal incremental 
expense.

2. The Amplifier Rule, 16 CFR Part 432 (Control Number: 3084-0105)

    The Amplifier Rule assists consumers by standardizing the 
measurement and disclosure of power output and other performance 
characteristics of amplifiers in stereos and other home entertainment 
equipment. The Rule specifies the test conditions necessary to make the 
disclosures that the Rule requires.
    Estimated annual hours burden: 600 hours (30 disclosure-related 
hours; 300 testing-related hours).
    The annual burden is approximately 600 hours. The Rule's provisions 
require affected entities to test the power output of amplifiers in 
accordance with specified FTC protocol. Approximately 300 new 
amplifiers and receivers come on the market each year. Since high 
fidelity manufacturers routinely conduct performance tests as part of 
any new product development, the Rule imposes incremental costs only to 
the extent that the FTC protocol is more time-consuming than 
alternative testing procedures. Specifically, a warm up 
(``precondition'') period that the Rule requires before measurements 
are taken may add approximately one hour to the time testing entails. 
Thus, staff estimates that the Rule imposes approximately 300 hours (1 
hour  x  300 new products) of added testing burden annually.
    The Rule requires disclosures if an advertisement makes a power 
output claim. Assuming that ten advertisements per magazine are placed 
each month in ten existing magazines featuring audio equipment 
advertisements, staff estimates that approximately 1,200 magazine 
advertisements annually would be required to carry the FTC disclosures. 
The cost of these disclosures is limited to the time needed to draft 
and review the language pertaining to power output specifications. 
Because this rule became effective in 1974, and because members of the 
industry are familiar with its requirements, compliance is less 
burdensome today. Accordingly, staff estimates the time involved for 
this task to be a maximum of \1/4\ hour per advertisement, for a total 
burden of 300 hours.\1\ The total annual burden impose by the Rule is 
therefore approximately 600 burden hours for disclosures and testing.
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    \1\ Staff has reduced this amount from prior PRA estimates to 
reflect recent amendments to the Rule (Dec. 22, 2000, 65 FR 81232). 
The amendments eliminated 3 of 4 disclosures that were required in 
media advertising (eliminated were disclosures of total rated 
harmonic distortion and the associated power bandwidth and impedance 
ratings).
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    Estimated annual cost burden: $19,000, rounded to the nearest 
thousand (solely relating to labor costs).
    Based on recent Bureau of Labor Statistics, the average hourly 
compensation for electronics engineers is about $32, and the average 
hourly compensation for marketing, advertising and public relations 
managers is about $30. Generally, electronics engineers perform the 
testing of amplifiers and receivers (300 hours  x  $32 = $9,600), and 
marketing, advertising or public relations managers prepare 
advertisements (including required disclosures) (300 hours  x  $30 = 
$9,000). Based on this information, staff estimates the cost to the 
industry per year for the Rule's paperwork requirements to be 
approximately $19,000 per year.
    The Rule imposes no capital or other non labor costs because its 
requirements are incidental to testing and advertising done in the 
ordinary course of business.

3. The Franchise Rule, 16 CFR Part 436 (Control Number: 3084-0107)

    The Franchise Rule requires franchisors and franchise brokers to 
furnish to prospective investors a disclosure document that provides 
information relating to the franchisor, the franchisor's business, and 
the nature of the proposed franchise relationship, as well as 
additional information about any claims concerning actual or potential 
sales, income, or profits for a prospective franchisee (``earnings 
claims''). Franchisors must also preserve

[[Page 21245]]

the information that forms a reasonable basis for such claims. The Rule 
is designed to help potential investors from fraudulent claims.
    The Rule's required disclosure document provides franchisees with 
information on twenty broad-ranging subjects that affect franchisors 
and the nature of the proposed franchise relationship. This includes 
not only generally available information, such as the official name and 
address and principal place of business of the franchisor, but also 
less commonly available information such as, among other things, the 
previous 5 years business experience of each of a franchisor's current 
directors and executive officers and whether any of these individuals 
has been convicted of a felony or embezzlement, or has filed in 
bankruptcy or been adjudged bankrupt during the previous 7 years. All 
information in the disclosure statement must be updated and revised 
according to the express time requirements set forth in the Rule.
    Based on a review of the trade publications and information from 
state regulatory authorities, staff believes that, on average, from 
year to year, there are approximately 5,000 American franchise systems, 
consisting of 2,500 business format franchises and 2,500 business 
opportunity sellers, with perhaps about 10% of that total reflecting an 
equal amount of a new and departing business entrants.
    Staff has calculated burden based on the above estimates and 
corollary assumption. Some franchisors, however, for various reasons, 
are not covered by the Rule in certain situations (e.g., when a 
franchisee buys bona fide inventory but pays no franchisor fees). 
Moreover, fifteen states have franchise disclosure laws similar to the 
Rule. These states use a disclosure document format known as the 
Uniform Franchise Offering Circular (``UFOC''). In order to ease 
compliance burdens on the franchisor, the Commission has authorized use 
of the UFOC in lieu of its own disclosure format to satisfy the Rule's 
disclosure requirements. Staff estimates that about 95 percent of all 
franchisors use the UFOC format. When that format is used, the 
franchisor is not required to prepare an additional federal disclosure 
document. The burden hours stated below reflects staff's estimate of 
the incremental burden that the Franchise Rule may impose beyond 
information requirements imposed by states and/or followed by 
franchisors who use the UFOC.
    Estimated annual hours burden: 34,000 hours, rounded up to the next 
thousand (28,500 disclosure hours + 5,000 recordkeeping hours).
    Staff estimates that the 500 or so new franchisors require 
approximately 30 hours each to develop a Rule-compliant disclosure 
document. Staff additionally estimates that the remaining 4,500 
established franchisors require no more than approximately 3 hours each 
to update the disclosure document. The combined cumulative burden is 
28,500 hours.
    The franchisor may require additional recordkeeping of information 
pertaining to the sale of franchises in non-registration states. At 
most, franchisors would require an additional hour of recordkeeping per 
year. This yields a cumulative total of 5,000 hours per year for 
affected entities.
    Estimated annual cost burden: $19,952,000 ($7,175,000 in labor 
costs; $12,777,000 in capital or other non-labor costs).
    Labor costs are determined by applying applicable wage rates to 
associated burden hours. Staff assumes that an attorney likely would 
prepare or update the disclosure document. Accordingly, staff's 
estimate of the labor costs attributed to those tasks are as follow: 
(500 new franchisors  x  $250 per hour  x  30 hours per franchisor) + 
(4,500 established franchisors  x  $250 per hour  x  3 hours per 
franchisor) = &7,125,000.
    Staff anticipates that recordkeeping would be performed by clerical 
staff at approximately $10 per hour. At 5,000 hours per year for all 
affected entities, this would amount to a total cost of $50,000. Thus, 
combined labor costs for recordkeeping and disclosure is approximately 
$7,175,000.
    To comply specifically with the Rule, franchisors must incur costs 
to print and distribute the disclosure document. These costs vary based 
upon the length of the disclosures and the number of copies produced to 
meet the expected demand. Staff estimates that 2,500 business format 
and product franchisors print and mail 100 disclosure documents per 
year at a cost of $35 per document. Staff further estimates that 
another 2,500 business opportunity sellers print and mail 100 documents 
per year at a cost of $15 per document, for a total cost of 
$12,500,000.
    The franchisor also must provide and disseminate an FTC cover sheet 
that identifies the franchisor, the date the document is issued, a 
table of contents, and a notice that tracks the language specifically 
provided in the Rule. Although some of the language in the cover sheet 
is supplied by the government for the purpose of disclosure to the 
public, and is thus excluded from the definition of ``collection of 
information'' under the PRA, see 5 CFR 1320.3(c)(2), there are residual 
costs to print and mail these cover sheets, including within them the 
presentation of related information beyond the supplied text. Staff 
estimates that 5,000 francisors complete and disseminate 100 cover 
sheets per year at a cost of approximately $.55 per cover sheet, or a 
total cost of approximately $277,000.

4. R-value Rule, 16 CFR Part 460 (Control Number: 3084-0109)

    The R-value Rule establishes uniform standards for the 
substantiation and disclosure of accurate, material product information 
about the thermal performance characteristics of home insulation 
products. The R-value of an insulation signifies the insulation's 
degree of resistance to the flow of heat. This information tells 
consumers how well a product is likely to perform as an insulator and 
allows consumers to determine whether the cost of the insulation is 
justified.
    Estimated annual hours burden: 366,000 hours, rounded to the 
nearest thousand (366,095 disclosure hours and 305 hours for testing 
and recordkeeping).
    The Rule's requirements include product testing, recordkeeping, and 
third-party disclosures on labels, fact sheet, advertisements, and 
other promotional materials. Based on information provided by members 
of the insulation industry, staff estimates that the Rule affects: (1) 
150 insulation manufacturers and their testing laboratories; (2) 1,500 
installers who sell home insulation; (3) 130,000 new home builders/
sellers of site-built homes and approximately 7,000 dealers who sell 
manufactured housing; and (4) 25,000 retail sellers who sell home 
insulation for installation by consumers.
    Under the Rule's testing requirements, manufacturers must test each 
insulation product for its R-value. The test takes approximately 2 
hours. Approximately 15 of the 150 insulation manufacturers in 
existence introduce one new product each year. The total annual testing 
burden is therefore approximately 30 hours (15 manufacturers  x  2 
hours per test).
    Staff further estimates that most manufacturers require an average 
of approximately 20 hours per year with regard to third-party 
disclosure requirements in advertising and other promotional materials. 
Only the five or six largest manufacturers require additional time, 
approximately 80 hours each. Thus, the annual third-party disclosure 
burden for manufacturers is approximately 3,360 hours. [(144

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manufacturers  x  20 hours) + (6 manufacturers  x  80 hours)].
    While the Rule imposes recordkeeping requirements, most 
manufacturers and their testing laboratories keep their testing-related 
records in the ordinary course of business. Staff estimates that no 
more than one additional hour per year per manufacturer is necessary 
top comply with this requirement, for an annual recordkeeping burden of 
approximately 150 hours (150 manufacturers  x  1 hour).
    Installers are required to show the manufacturer's insulation fact 
sheet to retail consumers before purchase. They must also disclose 
information in contracts or receipts concerning the R-value and the 
amount of insulation to install. Staff estimates that two minutes per 
sales transaction is sufficient to comply with these requirements. 
Approximately 835,000 retrofit insulations are installed by 
approximately 1,500 installers per year and, thus, the related annual 
burden total is approximately 27,833 hours (835,000 sales transactions 
x  2 minutes). Staff anticipates that one hour per year per installer 
is sufficient to cover required disclosures in advertisements and other 
promotional materials. Thus, the burden for this requirement is 
approximately 1,500 hours per year (1,500 installers  x  1 hour). In 
addition, installers must keep records that indicate the substantiation 
relied upon for savings claims. The additional time to comply with this 
requirement is minimal--approximately 5 minutes per year per 
installer--for a total of approximately 125 hours (1,500 installers  x  
5 minutes).
    New home sellers must make contract disclosures concerning the 
type, thickness, and R-value of the insulation they install in each 
part of a new home. Staff estimates that no more than one minute per 
sales transaction is required to comply with this requirement, for a 
total annual burden of approximately 283,333 hours (1.7 million new 
home sales  x  1 minute). New Home sellers who make energy savings 
claims must also keep records regarding the substantiation relied upon 
for those claims. Because few new home sellers make these claims, and 
the ones that do would likely keep these records regardless of the R-
value Rule, staff believes that the one minute covering disclosures 
would also encompass this recordkeeping element.
    The Rule requires that the approximately 25,000 retailers who sell 
home insulation make fact sheets available to consumers before 
purchase. This can be accomplished by, for example, placing copies in a 
display rack or keeping copies in a binder on a service desk with an 
appropriate notice. Replenishing or replacing fact sheets should 
require no more than approximately one hour per year per retailer, for 
a total of 25,000 annual hours, industry-wide.
    The Rule also requires specific disclosures in advertisements or 
other promotional materials to ensure that the claims are fair and not 
deceptive. This burden is very minimal because retailers typically use 
advertising copy provided by the insulation manufacturer, and even when 
retailers prepare their own advertising copy, the Rule provides some of 
the language to be used. Accordingly, approximately one hour per year 
per retailer should suffice to meet this requirement, for a total 
annual burden of approximately 25,000 hours.
    Retailers who make energy savings claims in advertisements or other 
promotional materials must keep records that indicate the 
substantiation they are relying upon. Because few retailers make these 
types of promotional claims, and because the Rule permits retailers to 
rely on the insulation manufacturer's substantiation data for any 
claims that are made, the additional recordkeeping burden is de 
minimis. The time calculated for disclosures, above, would be more than 
adequate to cover any burden imposed by this recordkeeping requirement.
    To summarize, staff estimates that the Rule imposes a total of 
366,331 burden hours, as follows: 150 recordkeeping and 3,390 testing 
and disclosure hours for manufacturer; 125 recordkeeping and 29,333 
disclosure hours for installers; 283,333 disclosure hours for new home 
sellers; and 50,000 disclosure hours for retailers. Rounded to the 
nearest thousand, the total burden is 366,000 burden hours.
    Estimated annual cost burden: $7,290,030 (solely related to labor 
costs).
    The total annual labor costs for the Rule's information collection 
requirements is $7,290,030, derived as follows: $600 for testing, based 
on 30 hours for manufacturers (30 hours  x  $20 per hour for skilled 
technical personnel); $2,750 for complying with the recordkeeping 
requirements of the rule, based on 275 hours (275 hours  x  $10 per 
hour for clerical personnel); $33,360 for manufacturers' compliance 
with third-party disclosure requirements, based on 3,360 hours (3,360 
hours  x  $10 per hour for clerical personnel); and $7,253,320 for 
compliance by installers, new home (362,666 hours  x  $20 per hour for 
sales persons).
    There are no significant current capital or other non-labor costs 
associated with this Rule. Because the Rule has been in effect since 
1980, members of the industry are familiar with its requirements and 
already have in place the equipment for conducting tests and storing 
records. New products are introduced infrequently. because the required 
disclosures are placed on packaging or on the product itself, the 
Rule's additional disclosure requirements do not cause industry members 
to incur any significant additional non-labor associated costs.

5. FTC Administrative Activities (Control Number: 3084-0047)

    This category consists of: (a) applications to the Commission, 
including applications and notices contained in the Commission's Rules 
of Practice (primarily parts I, II, and IV); and (b) the FTC's Consumer 
Response Center.
    Estimated annual hours burden: 78,000 hours, rounded to the nearest 
thousand.
    Most applications to the Commission generally fall within the ``law 
enforcement exception'' to the PRA \2\; any burden associated with 
those that do not is de minimis. For example, over the last decade, the 
Commission has received only one application for an exemption under the 
Fair Debt Collection Practices Act provisions. Staff has estimated that 
such a submission can be completed well within 50 hours. Applications 
and notices to the Commission contained in other rules (generally in 
Parts I, II, and IV of the Commission's Rule of Practice) are also 
infrequent and difficult to quantify. Nonetheless, in order to cover 
any potential ``collections of information'' for which separate 
clearance has not been sought, staff is projecting 125 hours as its 
estimate of the time needed to submit any applicable responses.\3\
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    \2\ The ``law enforcement'' exception to the PRA excludes most 
items in this subcategory because they involve collecting 
information during the conduct of a Federal investigation, civil 
action, administrative action, investigation, or audit with respect 
to a specific party, or subsequent adjudicative or judicial 
proceedings designed to determine fines or other penalties. See 44 
U.S.C. 3518(c)(1); 5 CFR 1320.4(a)(1)-(3).
    \3\ This includes Rule 4.11(e), 16 CFR 4.11(e), which 
establishes procedures for agency review of outside requests for 
Commission employee testimony, through compulsory process or 
otherwise, in cases or matters to which the agency is not a party. 
The rule requires that a person who seeks testimony submit a 
statement in support of the request. Staff estimates that agency 
personnel receive roughly 2 such requests per month or 24 per year, 
and conservatively estimates that it would require up to 2 hours to 
prepare the statement, for a cumulative total of 24 hours.

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    The FTC's Bureau of Consumer Protection (``BCP'') uses various 
telephone complaint hotlines and, alternatively, three different 
consumer complaint forms to handle consumer grievances: (1) The general 
www.ftc.gov complaint form (for other than identify theft complaints); 
(2) the www.consumer.gov ``Know Fraud'' complaint form (essentially 
another way to access complaint form #1); and (3) the ``Identity Theft 
On-Line Complaint Form.'' \4\ The forms' completion is wholly 
voluntary.
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    \4\ The burden calculations for these online options also 
include related variations, which comprise the same basic 
``collection of information'': (1) Spanish language versions also 
available at www.ftc.gov, (2) the www.econsumer.gov complaints form, 
but only with regard to complaints from U.S. or foreign consumers 
regarding U.S. companies, and (3) the FTC's planned www.sentinel.mil 
link for consumer complaints from U.S. military personnel as part of 
a joint initiative with the Department of Defense.
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    Burden estimates for these BCP programs is as follows:
    Annual hours burden:

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                                                                    No. of      No. of minutes/
                           Activity                              respondents        activity       Total hours
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Miscell. and fraud-related consumer complaints (phone)*......         325,000              4.5           24,375
Miscell. and fraud-related consumer complaints (online)**....         105,000              5.0            8,750
IDT complaints (phone)*......................................         300,000                8           40,000
IDT complaints (online)**....................................          32,000              7.5            4,000
Customer Satisfaction Questionnaire..........................           9,000              4.0              600
                                                              --------------------------------------------------
    Totals...................................................         771,000                           77,725
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*Number of consumer calls calculated by projecting over the 3-year clearance period sought 5% annual growth and
  a telephone contractor response rate of 95% (contracted level of service) with regard to consumers who call
  the toll free lines and opt to talk to a counselor.
**Number of online collections projected from consumers who use the FTC's online complaint forms noted in the
  text above and in footnote 3. These figures also assume 5% annual growth over the 3-year clearance period
  requested.

    Annual cost burden: The cost per respondent should be negligible. 
Participation is voluntary, and will not require any labor expenditures 
by respondents. There are no capital, start-up operation, maintenance, 
or other similar costs to the respondents.

William E. Kovacic,
General Counsel.
[FR Doc. 02-10576 Filed 4-29-02; 8:45 am]
BILLING CODE 6750-01-M