[Federal Register Volume 69, Number 54 (Friday, March 19, 2004)]
[Proposed Rules]
[Pages 13192-13210]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-6268]



[[Page 13191]]

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Part V





Federal Trade Commission





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16 CFR Parts 610 and 698



Free Annual File Disclosures; Proposed Rule

  Federal Register / Vol. 69 , No. 54 / Friday, March 19, 2004 / 
Proposed Rules  

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FEDERAL TRADE COMMISSION

16 CFR Parts 610 and 698

[RIN 3084-AA94]


Free Annual File Disclosures

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Proposed rule, request for comment.

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SUMMARY: The recently enacted Fair and Accurate Credit Transactions Act 
of 2003 (FACT Act or the Act) requires the FTC to adopt rules to 
require the establishment of a centralized source through which 
consumers may request a free annual file disclosure from each 
nationwide consumer reporting agency; a standardized form for such 
requests; and a streamlined process for consumers to request free 
annual file disclosures from nationwide specialty consumer reporting 
agencies. In this action, the FTC is proposing, and seeking comment on, 
a proposed rule that would establish the centralized source, 
standardized form, and streamlined process required by the FACT Act.

DATES: Comments must be received by April 16, 2004.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``FACTA Free File Disclosures Proposed Rule, 
Matter No. R411005'' to facilitate the organization of comments. A 
comment filed in paper form should include this reference both in the 
text and on the envelope, and should be mailed to the following 
address: Federal Trade Commission, FACTA Free Reports, Post Office Box 
1031, Merrifield, VA 22116-1031. Please note that courier and overnight 
deliveries cannot be accepted at this address. Courier and overnight 
deliveries should be delivered to the following address: Federal Trade 
Commission/Office of the Secretary, Room 159-H, 600 Pennsylvania 
Avenue, NW., Washington, DC 20580. Comments containing confidential 
material must be filed in paper form.
    An electronic comment can be filed by (1) clicking on http://www.regulations.gov; (2) selecting ``Federal Trade Commission'' at 
``Search for Open Regulations;'' (3) locating the summary of this 
Notice; (4) clicking on ``Submit a Comment on this Regulation;'' and 
(5) completing the form. For a given electronic comment, any 
information placed in the following fields--``Title,'' ``First Name,'' 
``Last Name,'' ``Organization Name,'' ``State,'' ``Country,'' 
``Comment,'' and ``Attachment''--will be publicly available on the FTC 
Web site. The fields marked with an asterisk on the form are required 
in order for the FTC to fully consider a particular comment. Commenters 
may choose not to fill in one or more of those fields, but if they do 
so, their comments may not be considered.
    Comments on any proposed filing, recordkeeping, or disclosure 
requirements that are subject to paperwork burden review under the 
Paperwork Reduction Act should additionally be submitted to: Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 10102, Washington, DC 20503, 
Attention: Desk Officer for Federal Trade Commission. Such comments 
should also be mailed to the following address: Federal Trade 
Commission, FACTA Free Reports, Post Office Box 1031, Merrifield, VA 
22116-1031. Because courier and overnight deliveries cannot be accepted 
at this address, they should instead be delivered to the following 
address: Federal Trade Commission/Office of the Secretary, Room 159-H, 
600 Pennsylvania Avenue, NW., Washington, DC 20580.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments with all 
required fields completed, whether filed in paper or electronic form, 
will be considered by the Commission, and will be available to the 
public on the FTC Web site, to the extent practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes every effort to 
remove home contact information for individuals from the public 
comments it receives before placing those comments on the FTC Web site. 
More information, including routine uses permitted by the Privacy Act, 
may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

FOR FURTHER INFORMATION CONTACT: Helen Goff Foster or Sandra 
Farrington, Attorneys, Division of Financial Practices, Federal Trade 
Commission, 600 Pennsylvania Avenue, NW., Washington, DC 20580, (202) 
326-3224.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Overview of Proposed Rule
    A. Definitions and Rule of Construction
    B. Centralized Source for Requesting Annual File Disclosures 
From Nationwide Consumer Reporting Agencies
    C. Standardized Form for Annual File Disclosures
    D. Streamlined Process for Requesting Annual File Disclosures 
From Nationwide Specialty Consumer Reporting Agencies
    E. Effective Dates
    F. Substantially Nationwide Consumer Reporting Agencies
III. Invitation To Comment
IV. Communications by Outside Parties to Commissioners and Their 
Advisors
V. Paperwork Reduction Act
VI. Regulatory Flexibility Act
    A. Description of the Reasons That Action by the Agency Is Being 
Considered
    B. Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule
    C. Small Entities to Which the Proposed Rule Will Apply
    D. Projected Reporting, Recordkeeping and Other Compliance 
Requirements
    E. Duplicative, Overlapping, or Conflicting Federal Rules
    F. Significant Alternatives to the Proposed Rule
VII. Questions for Comment on the Proposed Rule

I. Introduction

    The Fair and Accurate Credit Transactions Act of 2003, Public Law 
108-159, 117 Stat. 1952 (FACT Act or the Act) was signed into law on 
December 4, 2003. In part, the Act amends the Fair Credit Reporting Act 
(FCRA), 15 U.S.C. 1681 et seq., by imposing new requirements on 
consumer reporting agencies that compile and maintain files on 
consumers on a nationwide basis (nationwide consumer reporting 
agencies), and nationwide specialty consumer reporting agencies, as 
defined by sections 603(p) and 603(w) of the FCRA, 15 U.S.C. 1681a(p) 
and (w), respectively. These additional requirements include the 
obligation to provide, upon request, one free file disclosure--commonly 
called a credit report--to the consumer annually.\1\
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    \1\ The FACT Act refers to the requirement to make ``all 
disclosures pursuant to [FCRA] section 609 once during any 12-month 
period'' without charge as free consumer reports. FACT Act 211(a). 
Section 609 of the FCRA requires disclosure of ``[a]ll information 
in the consumer's file at the time of the request.'' 15 U.S.C. 
1681g(a)(1). To avoid confusion, the proposed rule refers to 
disclosures made pursuant to FCRA section 609 as ``file 
disclosures'' and to the free annual disclosures required under the 
FACT Act as ``annual file disclosures.''
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    The proposed rule requires nationwide consumer reporting agencies 
to establish a centralized source to enable consumers, with a single 
request, to receive annual file disclosures from all nationwide 
consumer reporting agencies, in accordance with the FACT Act, section 
211(d)(1)(A). The proposed rule also includes a standardized form for 
such requests, as specified in the FACT Act, section 211(d)(1)(B). 
Further,

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the proposed rule requires nationwide specialty consumer reporting 
agencies to establish a streamlined process for consumer requests for 
annual file disclosures, as provided in the FACT Act, section 
211(a)(2).
    The centralized source required by the proposed rule will provide 
consumers with the ability to request their free annual file 
disclosures from each of the nationwide consumer reporting agencies 
through a centralized Internet Web site, toll-free telephone number, 
and postal address. The proposed rule also requires the nationwide 
consumer reporting agencies to establish a standardized form for 
Internet and mail requests for annual file disclosures, and provides a 
model standardized form that may be used to comply with that 
requirement.
    Under the proposed rule, the centralized source would not be 
available to all consumers on the rule's proposed effective date--
December 1, 2004. Proposed rule Sec.  610.2(i)(1). In order to ensure a 
smooth transition, and in response to concerns regarding the volume of 
consumers who may request annual file disclosures when the rule first 
becomes effective, under the proposed rule the centralized source will 
become available to consumers in cumulative stages that roll-out from 
west to east. See discussion infra, section B, Transition. The proposed 
rule also provides that, during periods of extraordinary request 
volume, the centralized source may redirect, or decline to accept, some 
requests, provided that the nationwide consumer reporting agencies 
implement reasonable procedures to anticipate and respond to consumer 
demand for annual file disclosures. See discussion infra, section B, 
Adequate Capacity.
    The proposed rule requires nationwide specialty consumer reporting 
agencies to establish a streamlined process for consumers to request 
annual file disclosures. Proposed rule Sec.  610.3(a). Under the 
proposed rule, this streamlined process includes a toll-free telephone 
number for consumers to make such requests. The proposed rule requires 
nationwide specialty consumer reporting agencies to make their 
streamlined process toll-free number available to consumers in specific 
ways. See discussion infra, Section D, Requirement to Redirect 
Requests.

II. Overview of Rule

A. Definitions and Rule of Construction

Definitions
    Section 610.1(b) of the proposed rule sets forth certain 
definitions for the purposes of the proposed rule.
    The term ``consumer reporting agency'' is defined under proposed 
rule Sec.  610.1(b)(5) as provided in section 603(f) of the FCRA, 15 
U.S.C. 1681a(f). The proposed rule would apply to two specific types of 
consumer reporting agencies: ``nationwide consumer reporting agencies'' 
and ``nationwide specialty consumer reporting agencies.'' Under 
proposed rule Sec.  610.1(b)(8), the term ``nationwide consumer 
reporting agency'' means a consumer reporting agency that compiles and 
maintains files on consumers on a nationwide basis, as defined in FCRA 
section 603(p), 15 U.S.C. 1681a(p). Similarly, the term ``nationwide 
specialty consumer reporting agency'' is defined under section 
610.1(b)(9) of the proposed rule, in accordance with FCRA section 
603(w), 15 U.S.C. 1681a(w), as a consumer reporting agency that 
compiles and maintains files on consumers relating to medical records 
or payments, residential or tenant history, check writing history, 
employment history, or insurance claims, on a nationwide basis.
    Section 610.1(b)(2) of the proposed rule defines an ``associated 
consumer reporting agency'' as a consumer reporting agency that 
maintains consumer files within systems operated by a nationwide 
consumer reporting agency. Some nationwide consumer reporting agencies 
have contractual relationships with a number of regional or local 
consumer reporting agencies. These regional or local consumer reporting 
agencies, traditionally called ``service bureaus'' or ``affiliates,'' 
generally are independently owned and operated entities--they are not 
corporate affiliates \2\ of a nationwide consumer reporting agency. 
Rather, typically, they have a right to house some or all of the 
consumer data that they own on the systems of one or more nationwide 
consumer reporting agencies. The nationwide consumer reporting agency 
with whom such an entity is associated, in turn, has the right to sell 
that consumer data to its customers.\3\ The proposed rule addresses 
these consumer reporting agencies as ``associated consumer reporting 
agencies.'' See discussion infra, section B, Disclosure of All Files.
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    \2\ That is to say, associated consumer reporting agencies 
generally are not under common ownership or control with a 
nationwide consumer reporting agency. See 16 CFR 313.3(a).
    \3\ The associated consumer reporting agency may also have the 
right to sell consumer information owned by the nationwide consumer 
reporting agency.
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    The proposed rule, section 610.1(b)(7), defines a ``file 
disclosure'' as any disclosure made pursuant to section 609 of the 
FCRA.\4\ Section 612(a) of the FCRA, 15 U.S.C. 1681j(a), as amended by 
the FACT Act, provides that nationwide consumer reporting agencies and 
nationwide specialty consumer reporting agencies must provide ``all 
disclosures pursuant to [FCRA] section 609 once during any 12-month 
period upon request of the consumer and without charge to the 
consumer.'' Accordingly, under proposed rule section 610.1(b)(1), the 
term ``annual file disclosure'' is a file disclosure that is made upon 
request, free of charge, in compliance with section 612(a) of the FCRA, 
15 U.S.C. 1681j(a), as amended. Although FCRA sections 612(b)-(e) 
provide for other types of free file disclosures, the term ``annual 
file disclosure,'' as defined in the proposed rule, refers only to free 
file disclosures made pursuant to FCRA section 612(a).\5\
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    \4\ Section 609 of the FCRA, 15 U.S.C. 1681g, requires every 
consumer reporting agency, upon request of the consumer, to disclose 
to the consumer, among other things, ``all information in the 
consumer's file at the time of the request.''
    \5\ It should be noted that the FCRA, as amended by the FACT 
Act, requires consumer reporting agencies to provide a free file 
disclosure to consumers under a number of different circumstances. 
In addition, under FCRA sec. 612(f), 15 U.S.C. 1681j(f), a consumer 
reporting agency must provide file disclosures to consumers for a 
fee, upon request. The requirement for nationwide consumer reporting 
agencies to provide annual file disclosures supplements, but does 
not replace, these other provisions. In other words, a consumer 
should be able to obtain a free annual file disclosure through the 
centralized source, once in any 12-month period, even if that 
consumer has obtained other free or paid file disclosures in that 
time period. See FCRA sec. 612, 15 U.S.C. 1681j.
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    Proposed rule section 610.1(b)(10) defines ``request method'' as 
the method by which a consumer chooses to communicate a request for an 
annual file disclosure. The FACT Act requires nationwide consumer 
reporting agencies, subject to regulations to be promulgated by the 
Commission, to establish a centralized source that will permit 
consumers to make such requests by three specific request methods: 
Internet Web site, toll-free telephone number, and mail.
    The proposed rule also addresses ``extraordinary request volume.'' 
The Commission recognizes that there may be times when the volume of 
consumer requests for file disclosures may be higher than anticipated, 
such as may overwhelm the systems of a nationwide consumer reporting 
agency or a

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nationwide specialty consumer reporting agency. The proposed rule 
limits the liability of a nationwide consumer reporting agency or a 
nationwide specialty consumer reporting agency during times of such 
``extraordinary request volume.'' See proposed rule secs. 610.2(e) and 
610.3(c). Section 610.1(b)(6) of the proposed rule defines 
``extraordinary request volume'' as occurring when the number of 
consumers requesting file disclosures in a 24-hour period is more than 
twice the daily rolling 90-day average of consumers requesting file 
disclosures. In other words, ``extraordinary request volume'' is 
reached only when the volume of requests in a 24-hour period is more 
than two times the daily average request volume of the last 90 days. 
Due to special considerations during the transition period defined by 
the proposed rule, however, extraordinary request volume is defined 
differently during those periods. See discussion infra section B, 
Transition.
    Under the proposed rule, extraordinary request volume is measured 
by requests for all types of file disclosures, rather than only 
requests for annual file disclosures. Although the FACT Act requires 
the nationwide consumer reporting agencies and nationwide specialty 
consumer reporting agencies to develop the centralized source and 
streamlined process described in the proposed rule for the purpose of 
receiving requests for annual file disclosures, Congress specifically 
directed the Commission to consider ``the significant demands that may 
be placed on consumer reporting agencies in providing [annual file 
disclosures],'' and ``appropriate means to ensure that consumer 
reporting agencies can satisfactorily meet those demands.'' FACT Act 
sec. 211(d)(2). The significant demands of providing annual file 
disclosures include demands associated with simultaneously responding 
to requests for other types of file disclosures, such as free file 
disclosures resulting from adverse action under FCRA section 612(b), 15 
U.S.C. 1681j(b), and free file disclosures provided in response to 
suspected fraud under FCRA section 612(c)(3), 15 U.S.C. 1681j(c)(3). 
Further, consumer reporting agencies may face additional significant 
demands in responding to inquiries, or requests for reinvestigation,\6\ 
generated through each of these types of file disclosures.\7\ Delays in 
this system caused by excess demand may adversely impact consumers with 
a specific, immediate need for access to their file disclosures and to 
reinvestigation procedures. Accordingly, it is appropriate to consider 
the volume of request for all types of file disclosures in determining 
``extraordinary request volume'' for the purpose of limiting liability 
under the proposed rule. Proposed rule sec. 610.1(b)(6).
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    \6\ See FCRA section 611(a), 15 U.S.C. 1681i(a).
    \7\ The Commission notes that the FACT Act has expanded 
consumers' rights to obtain a free file disclosure in a number of 
ways. See, e.g., FACT Act secs. 112 and 311.
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Rule of Construction

    Section 610.1(c) of the proposed rule sets out a rule of 
construction to clarify the effect of the examples used in the proposed 
rule. Given the complexity of the rule and its potential impact on a 
variety of entities, the Commission has elected, in some instances, to 
provide examples of conduct that would, and would not, comply with the 
proposed rule. This section provides that these examples are not 
intended to be exhaustive; rather they are intended to illustrate how 
the proposed rule would apply in specific circumstances. The Commission 
invites comment on whether including examples in the rule is useful, 
and suggestions on additional or different examples that may be 
helpful.

B. Centralized Source for Requesting Annual File Disclosures

    As noted above, the FACT Act directs the Commission to prescribe 
regulations, applicable to nationwide consumer reporting agencies, to 
require the establishment of ``a centralized source'' through which 
consumers may, with a single request, obtain annual file disclosures 
from each nationwide consumer reporting agency. FACT Act sec. 
211(d)(1)(A). In making such regulations, the FACT Act requires the 
Commission to consider: (1) The significant demands that may be placed 
on consumer reporting agencies in providing annual file disclosures; 
(2) appropriate means to ensure that consumer reporting agencies can 
satisfactorily meet those demands, including the efficacy of a system 
of staggering the availability to consumers of annual file disclosures; 
and (3) the ease by which consumers should be able to contact consumer 
reporting agencies with respect to access to annual file disclosures. 
FACT Act sec. 211(d)(2). The Commission has considered all of these 
factors in formulating the proposed rule.
Purpose of Centralized Source
    In accordance with section 211(d) of the FACT Act, proposed rule 
section 610.2(a) requires the nationwide consumer reporting agencies to 
establish a ``centralized source'' for the purpose of enabling 
consumers to make a single request to obtain annual file disclosures 
from all nationwide consumer reporting agencies. Under Sec.  610.2(b) 
of the proposed rule, the nationwide consumer reporting agencies must 
jointly design, fund, implement, maintain, and operate the centralized 
source for that purpose.
    In addition, the centralized source must be designed, funded, 
implemented, maintained, and operated to meet specific requirements. 
Under the FACT Act, nationwide consumer reporting agencies are required 
to provide annual file disclosures to consumers who request them only 
through the centralized source established pursuant to the proposed 
rule. FACT Act section 211(a)(2), codified at FCRA section 
612(a)(1)(B), 15 U.S.C. 1681j(a)(1)(B). Thus, consumers' ability to 
access the centralized source is the key to their ability to receive 
annual file disclosures. Accordingly, the standards contained in the 
proposed rule are designed, in accordance with FACT Act section 
211(d)(2)(C), to ensure ``the ease by which consumers should be able to 
contact consumer reporting agencies with respect to access to [annual 
file disclosures].''
Required Request Methods
    As specified under the FACT Act, section 211(d)(3), proposed rule 
section 610.2(b)(1) requires the centralized source to include a toll-
free telephone number, an Internet Web site, and a mail process for 
consumers to make requests for annual file disclosures. The centralized 
source, and each of these request methods, must have adequate capacity 
to accept requests from the reasonably anticipated volume of consumers 
contacting the centralized source. Proposed rule Sec.  610.2(b)(2). The 
reasonably anticipated volume must be determined in compliance with 
proposed rule Sec.  610.2(c), as discussed below.
    The FACT Act requires that consumers be able to request their 
annual file disclosures through specific request methods, but does not 
mandate the method by which the nationwide consumer reporting agencies 
may deliver those file disclosures. FCRA section 610(b), 15 U.S.C. 
1681h(b), specifies that disclosures may be made in such form as may be 
specified by the consumer and available from the

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agency. Thus, the proposed rule allows nationwide consumer reporting 
agencies flexibility in determining what methods of annual file 
disclosure delivery to make available to consumers.
Collection of Information and Identification of Consumers
    Under proposed rule section 610.2(b)(2)(ii), the centralized source 
may collect only as much information as is reasonably necessary to 
properly identify the consumer, in compliance with FCRA section 
610(a)(1), 15 U.S.C. 1681h(a)(1), and to process the transactions 
requested by the consumer.\8\ This provision of the proposed rule 
reflects the need to balance two competing goals: (1) Creating a 
centralized source that will be easy for consumers to use; and (2) 
allowing the nationwide consumer reporting agencies to identify 
properly consumers who request their file disclosures through the 
centralized source, in compliance with FCRA sec. 610(a)(1).
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    \8\ Proposed rule section 610.2(b)(2)(ii) refers to 
``transaction(s) requested by the consumer.'' The proposed rule 
would permit nationwide consumer reporting agencies to advertise and 
to offer products and services in addition to the required annual 
file disclosure through the centralized source, provided that these 
activities do not interfere, detract from, contradict or undermine 
the purpose of the centralized source . See discussion infra, 
section B, Communications Through the Centralized Source.
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    The Commission is concerned that a centralized source that collects 
too much information may discourage some consumers from requesting 
their annual file disclosures. Accordingly, the proposed rule limits 
the amount of information that each consumer reporting agency may 
collect through the centralized source to only what is reasonably 
necessary to properly identify the consumer and to complete the request 
for file disclosure or other transaction requested by the consumer.
    The proposed rule permits, however, each nationwide consumer 
reporting agency the flexibility to implement its own identification 
procedures for consumers who make file disclosure requests through the 
centralized source, in order to allow proper identification of 
consumers and to protect against fraud. File disclosures contain a 
great deal of very sensitive information. If misdirected to, or 
fraudulently obtained by, someone other than the consumer to whom it 
relates, a file disclosure would provide the ideal means for identity 
theft and other fraudulent activity. In addition, the nationwide 
consumer reporting agencies each maintain slightly different 
information in their consumer files, making it difficult to devise a 
common identification scheme. Moreover, a flexible approach allows the 
nationwide consumer reporting agencies to adjust to changing threats 
and patterns of fraudulent activity over time.
    In light of these competing concerns, the proposed rule permits 
each nationwide consumer reporting agency to design and implement its 
own methods of identifying consumers who make requests through the 
centralized source, provided that the nationwide consumer reporting 
agency requires no more information than is reasonably necessary. A 
consumer who utilizes the centralized source Internet Web site, for 
example, may be asked for his or her personally identifiable 
information (i.e., name, address, social security number, date of 
birth, etc.) once at the beginning of the request process. Each 
nationwide consumer reporting agency may then, however, require 
additional information to identify the consumer. Such additional 
information may include questions regarding the consumer's accounts, 
such as the amount of the consumer's monthly mortgage payment, or the 
name of a particular type of creditor. The nationwide consumer 
reporting agency may then compare the consumer's response to the 
information contained in the agency's files, to verify the identity of 
the consumer requesting a file disclosure. Although a centralized 
source that may require the consumer to respond to additional 
identification questions does increase the burden on the consumer using 
the centralized source, the goal of ensuring the security of file 
disclosures justifies some additional consumer burden.
    The Commission is concerned about whether the consumer personally 
identifiable information collected by nationwide consumer reporting 
agencies through the centralized source could be used and disclosed by 
the nationwide consumer reporting agencies, affiliated entities, and 
third parties, in ways that would adversely affect consumers. This 
information would include identifying information such as name, 
address, and social security number, and may also include credit card 
account number or other method of payment (i.e., if a credit score or a 
paid product is purchased, or if the account is used as a means of 
identification). The nationwide consumer reporting agencies presumably 
already collect these same types of information currently in providing 
file disclosures and other products to consumers,\9\ but it is unclear 
how they use or disclose it. Therefore, the Commission solicits comment 
on how the differing types of information currently collected in 
providing file disclosures are used and disclosed by the nationwide 
consumer reporting agencies and whether such information should be 
treated differently when it is collected through the centralized 
source. See infra, section VII, Questions 5b, c, and d.
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    \9\ In addition, much of this information is already in the 
consumer files of the nationwide consumer reporting agencies.
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Information and Instructions
    To ensure that consumers may access the centralized source request 
method of their choice, the proposed rule requires the centralized 
source toll-free telephone number and Internet Web site to provide 
information regarding how to make a request for file disclosure through 
all available request methods. Proposed rule Sec.  610.2(b)(2)(iii).
    In addition, proposed rule section 610.2(b)(2)(iv) requires the 
centralized source to provide clear and easily understandable 
information and instructions to consumers. This provision of the 
proposed rule requires the nationwide consumer reporting agencies to 
communicate to consumers, through the centralized source, information 
and instructions that may be needed by a consumer to request a free 
annual file disclosure. Such communications include informing consumers 
of the progress of their request for a file disclosure while they are 
engaged in the process of making the request. Proposed rule Sec.  
610.2(b)(2)(iv)(A). For a Web site request method, the proposed rule 
also requires the centralized source to provide access to a ``help'' or 
``frequently asked questions'' screen. Proposed rule Sec.  
610.2(b)(2)(iv)(B). Finally, in the event that a consumer cannot be 
properly identified through the centralized source, the proposed rule 
requires the nationwide consumer reporting agencies to notify the 
consumer of that fact, and to provide instructions on how to complete 
the request. Proposed rule Sec.  610.2(b)(2)(iv)(C).
    Although proposed rule Sec.  610.2(b)(2)(iv) lists types of 
information that must be provided to consumers in a clear and easily 
understandable manner, additional information may be required in order 
to ensure that all instructions are clear and easily understandable in 
compliance with the proposed rule. If consumers are unable to 
understand centralized source instructions on how to obtain their 
annual file disclosures, the FACT Act provisions requiring such 
disclosures would be effectively thwarted. Thus, the intent of proposed 
rule Sec.  610.2(b)(2)(iv) is to ensure that all centralized source

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materials are provided to consumers in plain language, and that the 
centralized source is easy for consumers to use. Evaluation of 
centralized source communications by consumer communication experts, 
and consumer testing, may be instructive in determining whether 
centralized source materials meet this standard.
Adequate Capacity
    Under the FACT Act, nationwide consumer reporting agencies must 
fulfill consumers' requests for free annual disclosures ``only if the 
request from the consumer is made using the centralized source 
established for such purpose.'' FACT Act section 211(a)(2), codified at 
FCRA section 612(a)(1)(B), 15 U.S.C. 1681j(a)(1)(B). In recognition of 
the importance of a centralized source with adequate capacity to ensure 
the ability of consumers to obtain annual file disclosures, the 
proposed rule contains two requirements relating to capacity. The first 
is the requirement, contained in proposed rule Sec.  610.2(b)(2)(i), 
that the centralized source have adequate capacity to accept requests 
from the reasonably anticipated volume of consumers contacting the 
centralized source.
    The second is the requirement, contained in proposed rule Sec.  
610.2(c), that nationwide consumer reporting agencies implement 
reasonable procedures to anticipate and respond to the volume of 
consumers who will contact \10\ the centralized source. This 
requirement includes developing and implementing contingency plans to 
address circumstances that may materially and adversely impact the 
operation of the nationwide consumer reporting agency, a centralized 
source request method, or the centralized source itself. Examples of 
the types of circumstances for which the nationwide consumer reporting 
agencies should develop contingency plans are natural disasters, 
telecommunications interruptions, equipment malfunctions, labor 
shortages, computer viruses, coordinated hacker attacks, and seasonal 
or other fluctuations in consumer request volume. Under the proposed 
rule, the required contingency plans must include measures to minimize 
the impact of such circumstances, including taking all reasonable steps 
to restore the centralized source to normal operating status as quickly 
as possible.
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    \10\ It is important to note that nationwide consumer reporting 
agencies are required to anticipate the number of consumers who will 
contact the centralized source. Because nationwide consumer 
reporting agencies must meet this requirement during the transition 
periods defined by the proposed rule under Sec.  610.2(i), this 
language is intended to include consumers who contact the 
centralized source at a time when it is not yet available in their 
state. Under this requirement, the nationwide consumer reporting 
agencies must adjust their estimations of anticipated request volume 
in light of such consumers, and must respond to such consumers. They 
would not be required, however, to accept requests from such 
consumers prior to the time that the centralized source is available 
to consumers residing in those states.
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    Even with careful planning and preparation, however, it may be 
difficult for the nationwide consumer reporting agencies to anticipate 
consumer request volume accurately under all circumstances. In light of 
these uncertainties, and in consideration of the possible impact of 
unexpected and extraordinary demand for file disclosures on the ability 
of the nationwide consumer reporting agencies to provide annual file 
disclosures, the proposed rule limits the liability of nationwide 
consumer reporting agencies in times of ``extraordinary request 
volume.'' When a centralized source request method, the centralized 
source as a whole, or an individual nationwide consumer reporting 
agency experiences extraordinary request volume, the agency will not be 
deemed in violation of the proposed rule's adequate capacity 
requirement (proposed rule Sec.  610.2(b)(2)(i)) provided that it has 
implemented reasonable procedures to anticipate and respond to the 
volume of consumers who will contact the centralized source, in 
compliance with proposed rule Sec.  610.2(c).
    In other words, the proposed rule would allow a nationwide consumer 
reporting agency that complies with Sec.  610.2(c) to decline to accept 
some requests for annual file disclosures during times when a 
centralized source request method, the centralized source as a whole, 
or the nationwide consumer reporting agency experiences extraordinary 
request volume.\11\ The FACT Act requires nationwide consumer reporting 
agencies to provide annual file disclosures within 15 days of when the 
request is received. By permitting nationwide consumer reporting 
agencies to decline to accept some requests for annual file disclosures 
during times of extraordinary request volume, the proposed rule allows 
the nationwide consumer reporting agencies to postpone receiving those 
requests--and thereby postpone the running of the 15-day delivery 
requirement--for a reasonable period of time. The proposed rule would 
allow the nationwide consumer reporting agencies to ask those consumers 
to make their requests again at a time when the centralized source is 
reasonably expected to be able to accept them, proposed rule Sec.  
610.2(c)(2)(i)(B), or to collect the request information in a queue to 
be accepted for processing at a reasonable later time, proposed rule 
Sec.  610.2(c)(2).
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    \11\ It is important to note that, in the event of extraordinary 
request volume affecting a particular request method, the proposed 
rule would require nationwide consumer reporting agencies to direct 
consumers to other available request methods. Proposed rule Sec.  
610.2(c)(2)(i)(A). Thus, extraordinary request volume affecting just 
one request method would not necessarily lead to a limitation on 
liability in relation to the operation of the other request methods.
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    As described under Definitions above, extraordinary request volume 
is any 24-hour volume greater than twice the daily rolling 90-day 
average request volume. A request volume that is two times greater than 
the 90-day daily rolling average is likely a fluctuation of sufficient 
magnitude to warrant relief from the adequate capacity requirement of 
the rule. The trigger for this relief is linked to the ``rolling 
average'' of requests received in order to accommodate request volume 
that may increase gradually over time. The proposed rule contemplates 
that the centralized source should adapt to such changes and be able to 
handle additional volume over time, if needed.
    During the initial months after the rule becomes effective, 
however, the previous 90-day average of file disclosures likely will 
not adequately reflect the volume that may be expected, because free 
annual file disclosures have not previously been available from a 
centralized source. For this reason, the proposed rule addresses 
consumer request volume differently during the transition period, when 
request volume will be hardest to predict because of the lack of 
comparable historical data, and when publicity may be greatest. See 
discussion supra, this section, Transition.
    The Commission has considered, as required under FACT Act section 
211(d)(2) ``appropriate means to ensure that consumer reporting 
agencies can satisfactorily meet [the demands of providing annual file 
disclosures], including the efficacy of a system of staggering the 
availability to consumers of such [annual file disclosures].'' In 
particular, the Commission considered whether a centralized source that 
made annual file disclosures available to specific segments of the 
population for a limited period of time (for example, during a birth 
month or birth quarter) each year would be effective and appropriate. 
Based upon the information currently available, there is no basis for 
concluding ongoing staggering of the availability of annual file 
disclosures is necessary.

[[Page 13197]]

    The FACT Act, and the proposed rule, provide nationwide consumer 
reporting agencies with considerable flexibility in meeting the 
significant demands placed upon them. The FACT Act allows nationwide 
consumer reporting agencies15 days from the time a request for an 
annual file disclosure is received to provide that disclosure. FACT Act 
section 211(a), codified at FCRA section 612(a)(2), 15 U.S.C. 
1681j(a)(2). The Act also allows nationwide consumer reporting agencies 
a significantly longer period of time to resolve requests for 
reinvestigation when they originate from an annual file disclosure. 
FACT Act section 211(a), codified at FCRA section 612(a)(3), 15 U.S.C. 
1681(a)(3). In addition, annual file disclosures must be provided only 
once in a 12-month period. The 12-month limitation may result in the 
mirroring of the demand-smoothing effects of the transition roll-out 
scheme. This provides an ongoing limitation on unexpected volume after 
the transition period--i.e., a consumer who received an annual file 
disclosure when his or her state first became eligible under the 
transition provisions is not eligible to request another such 
disclosure for 12 months.\12\ Moreover, the proposed rule limits the 
liability of nationwide consumer reporting agencies during times of 
extraordinary request volume, proposed rule Sec.  610.2(e), and 
provides additional flexibility during the transition when uncertainty 
is greatest, proposed rule Sec.  610.2(i)(2)-(3). After the transition 
period, the nationwide consumer reporting agencies may reasonably be 
expected to provide access to annual file disclosures through a 
centralized source to all consumers who request them. The Commission 
intends, however, to closely monitor the progress of the transition and 
the capability of the nationwide consumer reporting agencies to respond 
to actual request volume, and may adjust the rule, as necessary or 
appropriate, in the future.
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    \12\ It is important to note that the FACT Act requires annual 
file disclosures to be made once in any 12 month period. This 
language indicates that nationwide consumer reporting agencies are 
required to provide these disclosures to consumers, at most, once 
every 12 months, and not once in each calendar year.
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Joint Establishment and New Entrants
    As noted above, under Sec.  610.2(b) of the proposed rule, all 
nationwide consumer reporting agencies must jointly design, fund, 
implement, maintain, and operate the centralized source. The Commission 
is aware of three entities that meet the FCRA section 603(p) definition 
of nationwide consumer reporting agency.\13\ It is possible, however, 
that additional nationwide consumer reporting agencies may exist, or be 
created, in the future. Any entity that meets the definition of 
nationwide consumer reporting agency in FCRA section 603(p), 15 U.S.C. 
1681a(p), cannot be excluded by the currently identified nationwide 
consumer reporting agencies from participating jointly in the 
centralized source. Moreover, all participants in the centralized 
source, including any new entrants, must comply with, and may be 
jointly liable for any violations of, proposed rule section 610.2.
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    \13\ These entities are Equifax, Inc., Experian, and Trans Union 
LLP.
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    Further, although the proposed rule requires nationwide consumer 
reporting agencies, which are presumably competitors, to jointly 
design, fund, implement, maintain, and operate the centralized source 
required under the FACT Act, nothing in the proposed rule would permit 
any activity that is otherwise prohibited by applicable United States 
antitrust laws.
Disclosure of All Files
    Some nationwide consumer reporting agencies house data owned by an 
associated consumer reporting agency in systems operated by the 
nationwide consumer reporting agency. By virtue of such relationships 
with associated consumer reporting agencies, a nationwide consumer 
reporting agency, which does not itself own consumer files in a 
localized area or region of the country, is able to provide consumer 
reports on consumers residing in that area or region to its customers. 
These relationships raise the issue of whether the nationwide consumer 
reporting agencies will provide file disclosures through the 
centralized source for consumers whose information is owned by an 
associated consumer reporting agency. If the nationwide consumer 
reporting agencies do not provide annual file disclosures to those 
consumers, consumers in some areas would be able to obtain file 
disclosures from only one or two nationwide consumer reporting agencies 
through the centralized source. It appears, however, that Congress 
intended consumers in all areas of the country to be able to obtain 
annual file disclosures from all nationwide consumer reporting agencies 
through the centralized source. ``The centralized system shall allow 
consumers to obtain free reports from all three [nationwide consumer 
reporting] agencies using a single request.'' S. Rep. No.108-166, at 17 
(2003) (Emphasis added).\14\ Accordingly, the proposed rule requires 
the nationwide consumer reporting agencies to provide annual file 
disclosures to any consumer that requests one if the consumer reporting 
agency has the ability to provide a consumer report to a third party 
relating to that consumer.\15\ Proposed rule Sec.  610.2(d).
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    \14\ Senator Sarbanes reiterated this intent, stating, ``The 
bill allows consumers to receive a free credit report annually from 
each of the three national credit reporting agencies.'' 149 Cong. 
Rec., S. 13851 (daily ed. Nov. 4, 2003) (Emphasis added). Both the 
Report of the Committee on Banking, Housing and Urban Affairs, and 
Senator Sarbanes' statement addressed S. 1753, the Senate version of 
the FACT Act. S. 1753 contained a ``centralized source'' requirement 
that is virtually identical to that contained in the final FACT Act 
bill.
    \15\ The Commission is not aware of any circumstances under 
which the nationwide consumer reporting agencies, through their 
relationships with associated consumer reporting agencies, are 
unable to provide consumer reports relating to consumers residing in 
a specific area of the country. Thus, this requirement will 
accomplish Congress's intent for the centralized source: it will 
create a system whereby every consumer can get their annual file 
disclosures from all nationwide consumer reporting agencies with a 
single request.
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Security
    As noted above, the information collected and disclosed through the 
centralized source may be extremely sensitive. Unauthorized access to 
this sensitive information could lead to identity theft and other 
consumer harm. To address this risk, the proposed rule requires 
nationwide consumer reporting agencies to comply with the Standards for 
Safeguarding Customer Information, 16 CFR 314.3 and 314.4 (the 
Safeguards Rule), regarding all personally identifiable information 
collected through or disclosed by the centralized source. Proposed rule 
Sec.  610.2(f).\16\ The requirements imposed by the Safeguards Rule 
form the core of a reasonable information security program and are 
therefore appropriate in this context.
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    \16\ That Rule requires financial institutions over which the 
FTC has jurisdiction to develop, implement, and maintain a 
comprehensive information security program that contains 
administrative, technical and physical safeguards. As part of its 
program, each financial institution must (1) designate one or more 
employees to coordinate its program; (2) assess risks to the 
security of customer information; (3) design and implement 
safeguards to address risks, and test and monitor their 
effectiveness over time; (4) oversee service providers and enter 
into contracts that require them to maintain safeguards; and (5) 
adjust the program to address changes that may affect safeguards. 
The Safeguards Rule is available on the Commission's Web site at 
http://www.ftc.gov/os/2002/05/67fr36585.pdf. Guidance for businesses 
on complying with the Safeguards Rule and achieving better 
safeguards can also be found on the FTC's Web site at http://www.ftc.gov/privacy/privacyinitiatives/safeguards_educ.html.

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[[Page 13198]]

Communications Through the Centralized Source
    The centralized source established in compliance with this part 
will provide the nationwide consumer reporting agencies with the means 
to communicate with interested consumers about a variety of topics 
related to consumer reporting and file disclosures. This affords the 
nationwide consumer reporting agencies an unparalleled opportunity to 
contribute to consumer education and understanding regarding consumer 
reports and related products. It also presents the nationwide consumer 
reporting agencies with a unique opportunity to market credit-related 
products and services to a group of consumers who may be interested in 
such products.
    The proposed rule would not prohibit the nationwide consumer 
reporting agencies advertising their products and services through the 
centralized source, nor offering those products and services, as well 
as additional file disclosures, directly through the centralized 
source. If done appropriately, access to some additional information, 
disclosures, products, or services through the centralized source--for 
example disclosure of the consumer's credit score--may be beneficial 
and convenient for consumers, and efficient for the nationwide consumer 
reporting agencies.
    To ensure that the purpose of the centralized source, as expressed 
in proposed rule Sec.  610.2(a), remains paramount in the centralized 
source's design, funding, implementation, operation and maintenance, 
however, the proposed rule Sec.  610.2(g) specifies that any 
communications made through the centralized source may not interfere 
with, detract from, contradict, or otherwise undermine the purpose of 
the centralized source. The proposed rule provides examples of conduct 
that would interfere with, detract from, contradict or undermine the 
purpose of the centralized source, in violation of Sec.  610.2(g) of 
the proposed rule. In addition, the FTC Act's prohibition against 
unfair or deceptive acts or practices also would apply to the 
nationwide consumer reporting agencies in their joint operation of 
centralized source, just as it does in their individual operations. 15 
U.S.C. 45(a).
Transition
    Section 211(d)(4) of the FACT Act requires that the Commission's 
regulations provide for an ``orderly transition'' for nationwide 
consumer reporting agencies to fully implement the centralized source. 
The FACT Act directs that this transition should be conducted in a 
manner that does not temporarily overwhelm such consumer reporting 
agencies with requests for disclosures beyond their capacity to 
deliver; and does not deny creditors, other users, and consumers access 
to consumer reports on a time-sensitive basis for specific purposes, 
such as home purchases or suspicions of identity theft, during the 
transition period.
    The Commission staff considered many different proposals for 
achieving a smooth transition, including staggering availability of 
annual file disclosures according to the birth month or birth quarter 
of the consumer. These proposals would require a year to fully roll-
out, and there is concern that birth month or birth quarter scheme may 
be difficult to convey efficiently to consumers. Further, it is clear 
that once the centralized source is designed and implemented, its 
capacity cannot be expanded quickly, i.e., in a month or less. As a 
result, these proposals were ultimately rejected.
    Accordingly, the proposed rule requires a cumulative regional roll-
out for the centralized source. Under proposed rule Sec.  610.2(i), the 
centralized source will become available to consumers by region, 
starting in the West and moving eastward across the country, at preset 
intervals. Consumers residing in the western part of the United States 
(California and 12 other western states) will have access to the 
centralized source beginning on December 1, 2004.\17\ Each phase of the 
transition will last three months. After three months, on March 1, 
2005, consumers in 12 midwest states also will become eligible to 
request their annual file disclosures from the centralized source. On 
June 1, 2005, the centralized source will become available to consumers 
in 11 southern states. Finally, on September 1, 2005, the centralized 
source will become available to all remaining consumers, including 
those residing in eastern states, the District of Columbia, and all 
U.S. territories and possessions.\18\ This regional roll-out plan is 
designed to provide for an orderly transition to a national system of 
free annual file disclosures in a manner that complies with section 
211(d)(4) of the FACT Act. Further, the regional roll-out can be easily 
understood by consumers, and will be complemented by local and regional 
press coverage which will remind consumers when the centralized source 
becomes available to their state or media market.\19\
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    \17\ According to the 2000 U.S. Census, these states account for 
22.1% of total U.S. population.
    \18\ According to the 2000 U.S. Census, the first phase (western 
region) contains approximately 63.1 million people, phase two 
(midwest region) contains approximately 64.4 million people, phase 
three (southern region) contains approximately 76.7 million people, 
and phase four (eastern region and all others) contains 
approximately 81.4 million consumers.
    \19\ The regional divisions do not divide metropolitan 
statistical areas.
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    Predicting accurately the volume of consumer requests that will 
result when this new annual file disclosure first becomes available is 
extremely difficult. The absence of comparable historical data, the 
unpredictable effect of nationwide media coverage and other publicity 
events, and the uncertain reaction of consumers make any analysis of 
anticipated request volume in the months immediately following the 
effective date of the rule inherently uncertain. To address these 
uncertainties, the proposed rule contains a multi-faceted approach to 
consumer request volume.
    From the beginning of the transition and beyond, the nationwide 
consumer reporting agencies must be prepared to accept requests from 
the reasonably anticipated number of consumers who will contact them 
when the centralized source is first made available. Proposed rule 
Sec.  610.2(l)(2)(i). Although the precise demand for consumer free 
annual file disclosures on a nationwide basis is largely unknown, there 
is some available information that appears to be instructive in 
anticipating request volume when the rule becomes effective. For 
example, according to a Congressional Research Service Report to 
Congress, the consumer request rate for file disclosures in states 
where free annual disclosures are not currently available is 0.5% to 
2%. In those states where consumers are, by state law, already 
guaranteed the right to a free annual disclosure, the request rate 
ranges from 3.5% to 10%. This represents an average disclosure rate 
that is 231% higher than the request rate in other states.\20\ Based 
upon these statistics alone, and taking into account also the publicity 
likely to be generated by the promulgation of the final rule, it would 
be reasonable to anticipate that the number of requests for annual file 
disclosures will be 300% of the current disclosure rate, absent any 
unanticipated intervening factors.\21\During

[[Page 13199]]

the initial week of operations, extraordinary request volume is defined 
as twice the reasonably predicted consumer request volume.
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    \20\ Loretta Nott and Angie Welborn, ``A Consumer's Access to 
Free Credit Report: A Legal and Economic Analysis,'' Congressional 
Research Service, Library of Congress, July 21, 2003, pp. 11.
    \21\ This estimate does not relieve the nationwide consumer 
reporting agencies of their obligation to plan for anticipated 
volume. Rather, absent unforeseen mitigating factors, the current 
data indicates that the initial volume of requests is reasonably 
likely to be approximately three times the current nationwide 
request volume. The Commission solicits comment on this estimate.
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    After centralized source operations commence, however, the 
nationwide consumer reporting agencies will have actual request volume 
data for the centralized source. The proposed rule provides two 
separate request volume triggers during this second period--from 
December 8, 2004 through the end of the transition on August 31, 
2005,--that are based on the actual volume of consumer requests 
received in the immediately preceding period, i.e., after the 
centralized source is operational.
    First, the proposed rule generally provides relief for the 
nationwide consumer reporting agencies when request volume reaches 
twice the rolling daily average of requests in the immediately 
preceding seven-day period. During such times, the proposed rule 
provides that the nationwide consumer reporting agencies are not in 
violation of the proposed rule's adequate capacity requirement as long 
as they continue to implement reasonable procedures to anticipate and 
respond to demand. As a practical matter, this would allow the 
nationwide consumer reporting agencies to delay accepting requests for 
file disclosures until such time as the request volume falls below the 
extraordinary request volume level. Twice the daily rolling seven-day 
average volume is intended as a reasonable approximation of 
extraordinary volume during the transition.\22\ It provides a 
reasonable level of protection for the nationwide consumer reporting 
agencies, when balanced against the goal of providing consumers with 
annual file disclosures in as easy a manner as possible.
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    \22\ Because it is tied to a short time period--i.e., seven 
days--this standard for extraordinary request volume in fact 
requires rapid expansion of the system. If extraordinary levels of 
demand persist, the system's capacity would have to double every 
week to remain in compliance.
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    Second, the proposed rule provides nationwide consumer reporting 
agencies with an option, in the transition period, during times of high 
request volume that do not meet reach the extraordinary request volume 
benchmark. Under proposed rule Sec.  610.2(i)(3), when consumer request 
volume exceeds 115% of the rolling daily seven-day average, the 
nationwide consumer reporting agencies may place requests into a queue 
for processing at a reasonable later time. This alternative procedure 
will benefit both consumers and the nationwide consumer reporting 
agencies. It will eliminate the need for consumers to reinitiate 
contact with the centralized source in order to obtain an annual file 
disclosure, and provides a measure of relief to the nationwide consumer 
reporting agencies during periods of high demand.
    Further, the nationwide consumer reporting agencies' duty to plan 
for and minimize the impact of circumstances that may materially and 
adversely impact the operation of the centralized source, a particular 
request method, or an individual nationwide consumer reporting agency, 
under Sec.  610.2(c), continues to apply during the initial transition 
period.

C. Standardized Form for Annual File Disclosures

    Section 211(d) of the FACT Act directs the Commission to prescribe 
a regulation requiring that nationwide consumer reporting agencies 
employ a standardized form for consumers to request, either by mail or 
through an Internet Web site, free annual file disclosures from the 
centralized source. Section 610.2(b)(3) of the proposed rule requires 
that the nationwide consumer reporting agencies establish this form, 
and make it available through the centralized source. In addition, the 
Commission proposes a model form, to be published in 16 CFR part 690, 
Appendix D. Nationwide consumer reporting agencies may use this form to 
comply with section 610.2(b)(3) of the proposed rule. The proposed form 
contains instructions and requests personally identifiable information 
that appears to be reasonably necessary for the processing of consumer 
requests. Nationwide consumer reporting agencies may require additional 
categories of information, provided such information is reasonably 
necessary to process the request, consistent with the standard set 
forth in section 610.2(b)(2)(ii) of the proposed rule.
    Consistent with the FACT Act's amendment to section 609(a)(1) of 
the FCRA, 15 U.S.C. 1681g(a)(1), beginning December 1, 2004, nationwide 
consumer reporting agencies must offer consumers the option of 
receiving their file disclosures with truncated social security 
numbers. The model form proposed in proposed rule Sec.  690, Appendix 
D, provides consumers with the ability to elect to have their Social 
Security number truncated accordingly. In addition, pursuant to FCRA 
section 610(b), 15 U.S.C. 1681h(b), a consumer using the standardized 
form may elect to use any method of delivery made available by the 
nationwide consumer reporting agencies operating the centralized 
source.

D. Streamlined Process for Requesting Annual File Disclosures

    Section 211 of the FACT Act also requires nationwide specialty 
consumer reporting agencies to provide annual file disclosures to 
consumers, once during any 12-month period upon the request of the 
consumer and without charge to the consumer. Under section 603(w) of 
the FCRA, 15 U.S.C. 1681a(w), a ``nationwide specialty consumer 
reporting agency'' means ``a consumer reporting agency that compiles 
and maintains files on consumers on a nationwide basis relating to (1) 
medical records or payments; (2) residential or tenant history; (3) 
check writing history; (4) employment history; or (5) insurance 
claims.''
    The FACT Act directs the Commission to prescribe regulations to 
require the establishment of ``a streamlined process'' for consumers to 
request their free annual file disclosures from the nationwide 
specialty consumer reporting agencies. Moreover, the statute requires 
that, at a minimum, the streamlined process shall include the 
establishment by each nationwide specialty consumer reporting agency of 
a toll-free telephone number for such requests. FACT Act section 
211(a), codified at FCRA section 612(a), 15 U.S.C. 1681j(a). In 
promulgating the regulations applicable to nationwide specialty 
consumer reporting agencies as required by the FACT Act, the Commission 
must consider: the significant demands that may be placed on consumer 
reporting agencies in providing annual file disclosures; appropriate 
means to ensure that consumer reporting agencies can satisfactorily 
meet those demands, including the efficacy of a system of staggering 
the availability to consumers of such file disclosures; and the ease by 
which consumers should be able to contact consumer reporting agencies 
with respect to access to such file disclosures. FACT Act, seciton 
211(a)(2)(a)(C)(ii).
Streamlined Process Requirements
    In accordance with the statutory mandate, the rule requires each 
nationwide specialty consumer reporting agency to establish a 
streamlined process for accepting and processing consumer requests for 
annual file disclosures. Proposed rule Sec.  610.3(a). The proposed 
rule requires that the streamlined process include toll-free telephone 
numbers for consumers to request their annual file disclosures. Because 
some consumers

[[Page 13200]]

may prefer to request file disclosures by mail or other methods that 
may be offered by the nationwide specialty consumer reporting agency, 
the proposed rule requires that when consumers contact the nationwide 
specialty consumer reporting agency via its toll-free telephone number, 
they must be given access to clear and easily understood instructions 
for making the request by any available request method offered by the 
nationwide specialty consumer reporting agency.
    It is also important that the required toll-free telephone number 
required by the FACT Act and the proposed rule be readily available to 
consumers. Thus, the proposed rule requires the number to be published 
in any telephone directory in which any telephone number for the 
nationwide specialty consumer reporting agency is listed, proposed rule 
Sec.  610.3(a)(1)(ii), and that it be posted on any Web site that the 
nationwide specialty consumer reporting agency owns or maintains, 
proposed rule Sec.  610.3(a)(1)(iii).\23\ It is important to note that 
nothing in the rule requires a nationwide specialty consumer reporting 
agency to establish a Web site; however, if an agency chooses to have a 
Web site, it must post its toll-free number and streamlined process 
instructions on that site.
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    \23\ This provision is not intended to require nationwide 
specialty consumer reporting agencies to post their toll-free 
telephone number on every page of a Web site. Rather, it is intended 
to require them to provide a clear and prominent link to such 
information on any Web site that the nationwide consumer reporting 
agency owns or maintains.
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    The proposed rule does not require a nationwide specialty consumer 
reporting agency to provide specific request methods, other than the 
toll-free telephone number described above. In the past, nationwide 
specialty consumer reporting agencies may have had limited demand for 
file disclosures, as compared to the demand that nationwide consumer 
reporting agencies may typically encounter. As a result, many 
nationwide specialty consumer reporting agencies may be relatively 
inexperienced in providing file disclosures to consumers on a large 
scale. The proposed rule's requirements relating to establishment of a 
toll-free telephone number for file disclosure requests is likely 
sufficient to facilitate consumer access to annual file disclosures 
from nationwide specialty consumer reporting agencies, and also takes 
into account the significant demands that may be placed upon those 
agencies in providing annual file disclosures to all consumers upon 
request.
    Similar to the requirements relating to the centralized source 
discussed in section B, above, the proposed rule also requires the 
streamlined process to have adequate capacity to accept reasonably 
anticipated volume, proposed rule Sec.  610.3(a)(2)(i); to collect only 
as much personal information as is reasonably necessary to properly 
identify the consumer, proposed rule Sec.  610.3(a)(2)(ii); and to 
provide clear and easily understandable information and instructions, 
proposed rule Sec.  610.3(a)(2)(iii). Nationwide specialty consumer 
reporting agencies, like nationwide consumer reporting agencies, must 
implement reasonable procedures to anticipate and respond to the volume 
of consumers who will contact the nationwide specialty consumer 
reporting agency to request annual file disclosures. Proposed rule 
Sec.  610.3(b). Provided that they implement such reasonable 
procedures, they will not be deemed in violation of the adequate 
capacity requirement in times of ``extraordinary request volume.'' 
Proposed rule Sec.  610.3(c). Nationwide specialty consumer reporting 
agencies also must comply with the FTC Safeguards rule, 16 CFR part 
314, for information collected and disclosed through the streamlined 
process. Proposed rule Sec.  610.3(d). These requirements are nearly 
identical to those imposed upon nationwide consumer reporting agencies 
under section 610.2 of the proposed rule. See discussion supra, section 
B.
Requirement To Accept or Redirect Requests
    The FACT Act requires nationwide consumer reporting agencies to 
provide annual file disclosures upon request, but only through the 
centralized source. There is no similar statutory limitation applicable 
to the streamlined process for the specialty consumer reporting 
agencies. Many consumers may request their free annual file disclosures 
through a method other than the streamlined process established in 
compliance with this part. Therefore, the rule requires specialty 
consumer reporting agencies either to honor those requests, or to 
redirect the consumer to the streamlined process. Proposed rule Sec.  
610.3(e).
Transition for the Streamlined Process
    The proposed rule outlines a transition for the streamlined process 
that is more limited than that for the centralized source, due to the 
more limited requirements imposed on nationwide specialty consumer 
reporting agencies compared to those imposed on nationwide consumer 
reporting agencies. Although nationwide specialty consumer reporting 
agencies must establish and operate a streamlined process with adequate 
capacity to meet consumer demand for free annual file disclosures, they 
will be excused from this requirement during the first three months 
after the rule is effective when experiencing extraordinary request 
volume of more than twice the anticipated request volume. After 
February 28, 2005, extraordinary request volume will be calculated as 
twice the rolling daily 90-day average.

E. Effective Dates

    The provisions of the proposed rule relating to the centralized 
source, proposed rule Sec.  610.2, and those relating to the 
streamlined process rule, proposed rule Sec.  610.3, are proposed to 
become effective on December 1, 2004.
    The FACT Act requires that the Commission issue centralized source 
regulations in final form no later than six months after the enactment 
date of the FACT Act, and that these rules take effect no later than 
six months after the date on which the regulations are issued in final 
form. After considering the FACT Act requirements under section 
211(d),\24\ the Commission proposes to make the centralized source 
final rule effective on December 1, 2004, nearly a full six months 
after the final regulations will have been issued.
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    \24\ The FACT Act requires the Commission to consider: the 
significant demands that may be placed on consumer reporting 
agencies in providing annual file disclosures; appropriate means to 
ensure that consumer reporting agencies can satisfactorily meet 
those demands, including the efficacy of a system of staggering the 
availability to consumers of such disclosures; and the ease by which 
consumers should be able to contact consumer reporting agencies with 
respect to access to such consumer reports. FACT Act sec. 211(d)(2). 
In addition, section 211(d)(4) of the Act requires that the 
Commission regulations provide for an orderly transition for 
nationwide consumer reporting agencies to the centralized source, in 
a manner that: does not temporarily overwhelm such consumer 
reporting agencies with requests for disclosures beyond their 
capacity to deliver; and does not deny creditors, other users, and 
consumers access to consumer reports on a time-sensitive basis for 
specific purposes, such as home purchases or suspicions of identity 
theft, during the transition period.
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    For the portions of the rule relating to nationwide specialty 
consumer reporting agencies and the streamlined process, the statute 
allows the Commission to set an effective date of up to nine months 
from the date on which the final regulations will issue. In proposing 
its rule for the nationwide specialty consumer reporting agencies, the 
Commission has considered the factors required by section 211(a) of the 
FACT Act and determined that

[[Page 13201]]

December 1, 2004, is an appropriate effective date for these provisions 
as well. The Commission recognizes that while nationwide specialty 
consumer reporting agencies will need some time to develop and 
implement the streamlined process required under the proposed rule, it 
appears that six months is adequate, given the limited requirements of 
the rule. The Commission invites comment and specific information on 
whether a longer time period to establish the streamlined process 
required under the proposed rule is necessary and appropriate.

F. Substantially Nationwide Consumer Reporting Agencies

    Section 211(d)(6)(A) of the FACT Act directs the Commission to 
determine, by rulemaking, ``whether to require a consumer reporting 
agency that compiles and maintains files on consumers on substantially 
a nationwide basis, other than one described in section 603(p) of the 
Fair Credit Reporting Act, to make free consumer reports available upon 
consumer request, and if so, whether such consumer reporting agencies 
should make such free reports available through the centralized source 
described in paragraph (1)(A).''
    The term ``a consumer reporting agency that compiles and maintains 
files on consumers on substantially a nationwide basis, other than one 
described in section 603(p) of the Fair Credit Reporting Act'' 
(hereinafter ``substantially nationwide consumer reporting agencies'') 
is not defined under the FCRA or under the FACT Act. The 
characteristics and role of entities that meet this description require 
extensive evaluation. The FACT Act requires the Commission to consider 
the number of consumer reports sold by such entities, the overall scope 
of such entities' operations, the costs to such entities of providing 
annual file disclosures to consumers, and the competitive viability of 
such entities if they are required to provide free annual file 
disclosures. In light of the information currently available to it, the 
Commission proposes a determination that substantially nationwide 
consumer reporting agencies should not, at this time, be required to 
provide annual file disclosures, and it is therefore not proposing a 
rule that would require any such agency to provide such disclosures. 
The Commission invites comment relating to substantially nationwide 
consumer reporting agencies. The Commission may, at a later time, 
determine that such entities should provide annual file disclosures, 
and that such disclosures should be made through the centralized source 
required by this proposed rule.

III. Invitation To Comment

    All persons are hereby given notice of the opportunity to submit 
written data, views, facts, and arguments addressing the issues raised 
by this Notice. Written comments must be received on or before April 
16, 2004. Comments should refer to ``FACTA Free File Disclosures 
Proposed Rule, Matter No. R411005'' to facilitate the organization of 
comments. In addition, commenters should key their comments to the 
particular question or section of the proposed rule to which they 
relate. A comment filed in paper form should include this reference 
both in the text and on the envelope, and should be mailed to the 
following address: Federal Trade Commission, FACTA Free Reports, Post 
Office Box 1031, Merrifield, VA 22116-1031. Please note that courier 
and overnight deliveries cannot be accepted at this address. Courier 
and overnight deliveries should be delivered to the following address: 
Federal Trade Commission/Office of the Secretary, Room 159-H, 600 
Pennsylvania Avenue, NW., Washington, DC 20580. If the comment contains 
any material for which confidential treatment is requested, it must be 
filed in paper (rather than electronic) form, and the first page of the 
document must be clearly labeled ``Confidential.''\25\
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    \25\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be 
accompanied by an explicit request for confidential treatment, 
including the factual and legal basis for the request, and must 
identify the specific portions of the comment to be withheld from 
the public record. The request will be granted or denied by the 
Commission's General Counsel, consistent with applicable law and the 
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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    An electronic comment can be filed by (1) clicking on http://www.regulations.gov; (2) selecting ``Federal Trade Commission'' at 
``Search for Open Regulations;'' (3) locating the summary of this 
Notice; (4) clicking on ``Submit a Comment on this Regulation;'' and 
(5) completing the form. For a given electronic comment, any 
information placed in the following fields--``Title,'' ``First Name,'' 
``Last Name,'' ``Organization Name,'' ``State,'' ``Country,'' 
``Comment,'' and ``Attachment''--will be publicly available on the FTC 
Web site. The fields marked with an asterisk on the form are required 
in order for the FTC to fully consider a particular comment. Commenters 
may choose not to fill in one or more of those fields, but if they do 
so, their comments may not be considered.
    Comments on any proposed filing, recordkeeping, or disclosure 
requirements that are subject to paperwork burden review under the 
Paperwork Reduction Act should additionally be submitted to: Office of 
Information and Regulatory Affairs, Office of Management and Budget, 
New Executive Office Building, Room 10102, Washington, DC 20503, 
Attention: Desk Officer for Federal Trade Commission. Such comments 
should also be mailed to the following address: Federal Trade 
Commission, FACTA Free Reports, Post Office Box 1031, Merrifield, VA 
22116-1031. Because courier and overnight deliveries cannot be accepted 
at this address, they should instead be delivered to the following 
address: Federal Trade Commission/Office of the Secretary, Room 159-H, 
600 Pennsylvania Avenue, NW., Washington, DC 20580.
    The FTC Act and other laws the Commission administers permit the 
collection of public comments to consider and use in this proceeding as 
appropriate. All timely and responsive public comments with all 
required fields completed, whether filed in paper or electronic form, 
will be considered by the Commission, and will be available to the 
public on the FTC Web site, to the extent practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes every effort to 
remove home contact information for individuals from the public 
comments it receives before placing those comments on the FTC Web site. 
More information, including routine uses permitted by the Privacy Act, 
may be found in the FTC's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.

IV. Communications by Outside Parties to Commissioners and Their 
Advisors

    Written communications and summaries or transcripts of oral 
communications respecting the merits of this proceeding from any 
outside party to any Commissioner or Commissioner's advisor will be 
placed on the public record. 16 CFR 1.26(b)(4).

V. Paperwork Reduction Act

    The Commission has submitted this proposed Rule and a Supporting 
Statement for Information Collection Provisions to the Office of 
Management and Budget (``OMB'') for review under the Paperwork 
Reduction Act (``PRA''), 44 U.S.C. 3501-3517. The FACT Act and proposed 
Rule require nationwide consumer reporting agencies and nationwide 
specialty consumer reporting agencies to disclose information to third 
parties by requiring those consumer reporting agencies to

[[Page 13202]]

provide to consumers, upon request, one annual file disclosure. 
Overall, the Commission staff estimate that the average annual 
information collection burden during the three-year period for which 
OMB clearance is sought will be 198,960 hours. The estimated annual 
labor cost associated with these paperwork burdens is $8.41 million.
    The Commission staff estimate, based on their knowledge of the 
industry, that consumers currently receive approximately 15.2 million 
free file disclosures.\26\ The staff estimate that in 2005 and 2006, 
the nationwide consumer reporting agencies and the nationwide specialty 
consumer reporting agencies will receive 35.1 million requests per year 
from consumers for annual file disclosures.\27\ Thus, the staff predict 
that consumer reporting agencies will receive an average of 16.6 
million new annual file disclosure requests per year during the period 
for which clearance is requested.\28\
Annual File Disclosures Provided Through the Internet
    Both nationwide consumer reporting agencies and nationwide 
specialty consumer reporting agencies will likely handle the 
overwhelming majority of consumer requests through internet Web 
sites.\29\ The annual file disclosures requests processed through the 
internet will not impose any hours burden per request on the nationwide 
and nationwide specialty consumer reporting agencies, even though there 
will be some periodically recurring time and investment required to 
adjust the internet capacity needed to handle the new changing request 
volume. Consumer reporting agencies will likely make such adjustments 
by negotiating or renegotiating outsourcing service contacts annually 
or as conditions change. Negotiating and re-negotiating such contracts 
requires the time of trained personnel. The staff estimate that 
negotiating such contracts will require a total of 8,320 hours and will 
cost a total of $390,707.\30\ Such activity is treated as an annual 
burden of maintaining and adjusting the changing internet capacity 
requirements.
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    \26\ See Loretta Nott and Angie Welborn, ``A Consumer's Access 
to a Free Credit Report: A Legal and Economic Analysis,'' 
Congressional Research Service, Library of Congress, July 21, 2003. 
Consumers are able to receive these file disclosures for free 
because of adverse action notices and state laws in certain states 
that give consumers the right to receive free file disclosures.
    \27\ The nationwide consumer reporting agencies have not 
provided a precise prediction of the number of additional requests 
they will receive but have voiced their concern that it will be very 
large. The staff's estimate is based on a rough comparison provided 
by the Consumer Data Industry Association of the percentage of 
eligible consumers who requested free file disclosures in states 
that already mandate free file disclosures for consumers and those 
that do not. Based on information that the staff have obtained from 
the consumer reporting industry, the staff estimates that the 
increase in annual file disclosures requested due to the Act and 
proposed rule will be 231%.
    \28\ The Commission will request a clearance from OMB for the 
proposed collection of information for the three-year period from 
June 2004 through June 2007. During this period, the staff predict 
that nationwide consumer reporting agencies and nationwide specialty 
consumer reporting agencies will receive 19.9 million new annual 
file disclosure requests per year. However, the nationwide and 
nationwide specialty consumer reporting agencies are not required to 
issue annual file disclosures under this rule until December 2004. 
The staff predict 9.45 million new requests for annual file 
disclosures for the first year of the clearance [19.9 million / 2]. 
Thus, the staff predict that consumer reporting agencies will 
receive an average of 16.6 million new requests per year during the 
requested clearance period. [(9.45 million + 19.9 million + 19.9 
million) / 3 = 16.6 million].
    \29\ According to a HarrisInteractive poll, the percentage of 
households that have access to the internet is currently over 60% 
and increasing. See The Harris Poll 8, February 5, 2003, 
available at http://www.harrisinteractive.com/harris_poll/index.asp?PID=356. In addition, internet users are probably more 
likely to request an annual file disclosure. Accordingly, the staff 
estimate that annually 75% (or 22.8 million) of the 30.4 million new 
requests will be made by internet.
    \30\ Based on the time required for similar activity in the 
Federal government (including at the FTC), the staff estimate that 
such contracting and administration will require approximately 4 
full-time equivalent employees (``FTE'') for the web service 
contract. Thus, the staff estimates that the setting up the contract 
will require 4 FTE, which is 8,320 hours per year (4FTE x 2080 hrs/
yr). The cost is based on the reported Bureau of Labor Statistics 
rate for Computer System Manager ($46.96). Thus, the estimated setup 
and maintenance cost for an internet system is $390,707 per year. 
(8,320 hours x $46.96/hour).
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Annual File Disclosures Requested Over the Telephone
    Most of the telephone requests for annual file disclosures will 
also be handled in an automated fashion, without any additional 
personnel being required to process the requests. As in the case of the 
internet, there will be some time and investment required to increase 
and administer the automated telephone capacity needed to handle the 
new increased volume of requests. The nationwide and nationwide 
specialty consumer reporting agencies will likely make such adjustments 
by negotiating or renegotiating outsourcing service contacts annually 
or as conditions change. The staff estimates that it will require a 
total of 6,240 hours and will cost a total of $282,422.\31\ This also 
is treated as an annual recurring burden necessary to obtain, maintain 
and adjust automated call center capacity.
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    \31\ Similar to setup of the internet system, the staff 
estimates that recurrent contracting for automated telephone 
capacity will require approximately 3 FTE, and will therefore 
require 6,240 hours (3 x 2,080 hours). Applying a wage rate based on 
the BLS rate for Marketing Manager ($45.26/hr), the estimate for 
setup and maintenance cost is $282,422 (3 x 2080 x $45.26) per year.
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    A small percentage of those phoning the centralized source or the 
nationwide speciality consumer reporting agencies will not have phone 
equipment compatible with an automated system and may need to be 
processed by a live operator.\32\ The staff estimate based on their 
knowledge of the industry that each of these requests will take 5 
minutes to process, for a total of 3,319 additional hours of operator 
time. [(39,824 x 5 minutes) / 60 minutes = 3,319 hours].
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    \32\ Based on their knowledge of the industry, the staff 
estimates that consumers will submit 24% (4.0 million) of the 
average 16.6 million new requests for annual file disclosures by 
telephone. Of those, an estimated 1% (or 40,000) will not have 
telephone equipment compatible with an automated system and may need 
to be serviced by live personnel.
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Annual File Disclosures That Require Processing by Mail
    The staff estimates, based on their knowledge of the industry, that 
a small percentage of consumers (estimated at 1% of 16.6 million or 
166,000) will request an annual file disclosure through U.S. postal 
service mail. The staff estimates that 10 minutes per request is 
required to handle these requests, thereby requiring 27,667 hours of 
time by clerical personnel. [(166,000 x 10 minutes) / 60 minutes = 
27,667 hours].
    In addition, whenever the requesting consumer cannot be identified 
using an automated method (a Web site or automated telephone service), 
it will be necessary to redirect that consumer to send identifying 
material along with the request by mail. The staff estimates that such 
a problem will occur in about 5% (or 821,370) of the new requests. The 
staff estimates that inputting and processing such requests will 
require approximately 10 minutes per redirected request. Thus, these 
annual file disclosures will require 136,895 hours of clerical time. 
[(821,370 x 10 minutes) / 60 minutes = 136,895 hours].
Instructions to Consumers
    The proposed rule also provides that certain instructions be 
provided to consumers. See proposed rule sections 610.2(b)(2)(iv)(A,B), 
610.3(a)(2)(iii)(A,B). On the centralized source Web site, the 
instructions to consumers will be embedded in the Web site and will 
require no additional time or cost on the part of the nationwide 
consumer reporting agencies. Similarly, on the automated telephone 
systems, the

[[Page 13203]]

instructions required by the proposed rule will require no additional 
time or cost because the disclosures will be made automatically when 
consumers select certain options. For the postal service mail requests, 
the nationwide and nationwide specialty consumer reporting agencies may 
send printed forms to those consumers who choose to use this method. Of 
the predicted 987,370 requests for annual file disclosures that will be 
done by mail, the staff estimates based on their knowledge of the 
industry that 10% (or 98,737) will request instructions by mail. If 
printed instructions are sent to each of these consumers by mail, 
requiring 10 minutes of clerical time per consumer, this will require 
16,456 hours. [(98,737 instructions x 10 minutes) / 60 minutes per 
hour].
Labor Costs
    Labor costs are derived by applying hourly cost figures to the 
burden hours described above. Accordingly, the staff estimates that it 
will cost $39,600 to provide annual file disclosures for requests that 
require a telephone service representative. [$12.00 per hour x 3,300 
hours]. \33\ The remaining processing of requests for annual file 
disclosures and instructions will be performed by clerical personnel, 
which will require 181,100 hours as described above, and will cost 
$2,535,400. [(27,700 hours for handling initial mail request + 136,900 
hours for handling requests redirected to mail + 16,500 hours for 
handling instructions mailed to consumers) x $14.00 per hour].\34\ As 
explained earlier, it is estimated that a total of 14,560 labor hours 
will be needed to obtain, maintain, and adjust the new capacity 
requirements for the automated telephone call center and the internet 
web services. It is estimated that this will cost approximately 
$673,100 per year.\35\
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    \33\ The Bureau of Labor Statistics reports an average wage of 
$12.00 per hour for retail trade employees.
    \34\ The staff estimates the wage rate for these clerical 
personnel to be $14.00 per hour, which is between the Bureau of 
Labor Statistics rate for retail trade (at $12.00) and the rate for 
financial activities (at $17.37).
    \35\ As explained earlier, the estimated burden is 6,240 hours 
($282,422) for automated phone service and 8,320 hours ($390,707) 
for web services.
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    In addition, the staff believes it is likely that the consumer 
reporting agencies will use third-party contractors (instead of their 
own employees) to increase the capacity of their systems. Because of 
the way these contracts are typically established, these costs will 
likely be incurred on a continuing basis, and will be calculated based 
on the number of requests handled by the systems. The staff estimates 
that the total annual amount to be paid for services delivered under 
these contracts is $5.16 million.\36\ Thus, these costs are added to 
the labor costs, for a total of $8.41 million ($3.248 million + $5.16 
million).\37\
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    \36\ The staff estimates the total ongoing costs to be paid 
under these contracts is $5.16 million. The automated telephone cost 
is estimated as $4.73 million ($1.20 per request x 3.94 million 
requests) and the internet web service cost is estimated as $435,600 
($0.035 per request x 12.45 million requests).
    \37\ The consumer reporting industry is a multi-billion dollar 
market. As of 2002, it is estimated to have more than $4 billion 
dollars in sales of file disclosures. One study indicates that the 
nationwide consumer reporting agencies had approximately $1.2 
billion in earnings in 2002. See Michael Turner, Daniel Balis, 
Joseph Duncan, and Robin Varghese, ``Free Consumer Credit Reports: 
At What Cost? The Economic Impact of a Free Credit Report Law to the 
National Credit Reporting Infrastructure,'' Washington, DC: 
Information Policy Institute, September, 2003. Thus, the total labor 
cost burden estimate of $8.41 million represents a small 
percentage--approximately 0.7% ($8.41 million divided by $1.2 
billion) of the overall market. This comparison is conservative, as 
it does not include the earnings of the nationwide specialty 
consumer reporting agencies.
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    The Commission invites comments that will enable it to: (1) 
Evaluate whether the proposed collections of information are necessary 
for the proper performance of the functions of the Commission, 
including whether the information will have practical utility; (2) 
evaluate the accuracy of the Commission's estimate of the burden of the 
proposed collections of information, including the validity of the 
methodology and assumptions used; (3) enhance the quality, utility, and 
clarity of the information to be collected; and (4) minimize the burden 
of the collections of information on those who must comply, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological techniques or other forms of information 
technology.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612, 
requires that the Commission provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with a proposed rule and a Final Regulatory 
Flexibility Analysis (``FRFA''), if any, with the final rule, unless 
the Commission certifies that the rule will not have a significant 
economic impact on a substantial number of small entities. 5 U.S.C. 
603-605.
    The Commission does not anticipate that the proposed rule will have 
a significant economic impact on a substantial number of small 
entities. The proposed rule applies to two types of consumer reporting 
agencies: (1) Nationwide consumer reporting agencies, and (2) 
nationwide specialty consumer reporting agencies.\38\ The Commission 
has not identified any nationwide consumer reporting agencies that are 
small entities. Furthermore, the Commission estimates, based on 
industry sources, that there are fewer than 50 nationwide specialty 
consumer reporting agencies currently doing business in the U.S. The 
Commission has been unable to determine how many of these nationwide 
specialty consumer reporting agencies, if any, are small entities. 
Based on industry sources, however, the Commission believes that the 
number of such agencies that are small entities, if any, is 
insubstantial. While the economic impact of the proposed rule on a 
particular small entity could be significant, overall the proposed rule 
will not have a significant economic impact on a substantial number of 
small entities. This document serves as notice to the Small Business 
Administration of the agency's certification of no effect. Nonetheless, 
the Commission has determined that it is appropriate to publish an IRFA 
in order to inquire into the impact of the proposed rule on small 
entities. Therefore, the Commission has prepared the following 
analysis:
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    \38\ In addition, this notice solicits information about two 
other types of consumer reporting agencies. As discussed in section 
F, supra, the FACT Act directs the Commission to determine whether 
to promulgate a rule covering ``a consumer reporting agency that 
compiles and maintains files on consumers on substantially a 
nationwide basis.'' The Commission, at this time, is not proposing a 
rule provision relevant to such an agency. However, the Commission 
is requesting information about the number, and nature of any such 
agencies and whether they should be subject to a requirement to 
provide annual file disclosures to consumers in the future. 
Furthermore, the Commission seeks information about associated 
consumer reporting agencies, i.e., those consumer reporting agencies 
that maintain consumer files within the systems of nationwide 
consumer reporting agencies. The proposed rule, however, does not 
cover such agencies.
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A. Description of the Reasons That Action by the Agency Is Being 
Considered

    The Fair and Accurate Credit Transactions Act of 2003, Public Law 
108-159, 117 Stat. 1952 (FACT Act or the Act), directs the Commission 
to adopt rules to require the establishment of: (1) A centralized 
source through which consumers may request a free annual file 
disclosure from each nationwide consumer reporting agency; (2) a 
standardized form for consumer use in making such requests; and (3) a 
streamlined process for consumers to request free annual file 
disclosures from nationwide specialty consumer reporting agencies. In 
this action, the

[[Page 13204]]

Commission proposes, and seeks comment on, a rule that would fulfill 
the statutory mandate. The Act requires that the Commission promulgate 
this rule not later than six months after the date of enactment, or by 
June 4, 2004.

B. Statement of the Objectives of, and Legal Basis for, the Proposed 
Rule

    The objective of the proposed rule is to require the establishment 
of: (1) A centralized source through which consumers may request a free 
annual file disclosure from each nationwide consumer reporting agency; 
(2) a standardized form for consumer use in making such requests; and 
(3) a streamlined process for consumers to request free annual file 
disclosures from nationwide specialty consumer reporting agencies. The 
proposed rule is authorized by and based upon section 211(a) and (d) of 
the FACT Act, Public Law 108-159, 117 Stat. 1952.

C. Small Entities to Which the Proposed Rule Will Apply

    The proposed rule will apply to two types of consumer reporting 
agencies: (1) Nationwide consumer reporting agencies, and (2) 
nationwide specialty consumer reporting agencies. The Commission has 
not identified any nationwide consumer reporting agencies that are 
small entities. The Commission estimates that the number of nationwide 
specialty consumer reporting agencies that are small entities (with 
less than $6,000,000 in average annual receipts) is either very small 
or none. However, the Commission invites comment and information on 
this issue.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    Under the proposed rule, nationwide specialty consumer reporting 
agencies \39\ will be required to do the following: (1) Provide 
consumers with free annual file disclosures; (2) establish a 
streamlined process, including a toll-free telephone number, for 
accepting and processing such consumer requests; (3) provide consumers 
with clear instructions on how to obtain free annual file disclosures; 
and (4) make additional disclosures to consumers during situations when 
adverse circumstances or extraordinary request volume affect the 
ability of the agency to accept consumer requests.
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    \39\ Nationwide consumer reporting agencies will have similar, 
but more extensive, obligations under the proposed rule. As stated 
above, however, the Commission believes that there are no nationwide 
consumer reporting agencies that are small entities.
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E. Duplicative, Overlapping, or Conflicting Federal Rules

    The Commission has not identified any other federal statutes, 
rules, or policies that would duplicate, overlap, or conflict with the 
proposed rule. The Commission invites comment and information on this 
issue.

F. Significant Alternatives to the Proposed Rule

    The Commission is not, at this time, aware of what particular 
alternative methods of compliance may comport with the statute and also 
reduce the impact of the proposed rule on small entities that may be 
affected by the rule. Therefore, the Commission seeks comment and 
information with regard to (1) the existence of small business entities 
for which the proposed rule would have a significant economic impact; 
and (2) suggested alternative methods of compliance that, consistent 
with the statutory requirements, would reduce the economic impact of 
the rule on such small entities. (See section VII of this notice, 
supra, questions 4, and 18-22.) If the comments filed in response to 
this notice identify small entities that are significantly affected by 
the rule, as well as alternative methods of compliance that would 
reduce the economic impact of the rule on such entities, the Commission 
will consider the feasibility of such alternatives and determine 
whether they should be incorporated into the final rule.

VII. Questions for Comment on the Proposed Rule

    The Commission seeks comment on all aspects of the proposed rule. 
Without limiting the scope of issues on which it seeks comment, the 
Commission is particularly interested in receiving comments on the 
questions that follow. Responses to these questions should include 
detailed, factual supporting information whenever possible.

Definitions and Examples

    1. Are the definitions contained in section 610.1(b) of the 
proposed rule clear, meaningful, and appropriate?
    2. Do the examples provided in various sections of the proposed 
rule offer helpful guidance for complying with the rule? What 
additional examples might be helpful if included?

Centralized Source for Nationwide Consumer Reporting Agencies

    3. Are the proposed requirements for establishment and operation of 
the centralized source, set forth in section 610.2(b), appropriate and 
adequate to fulfill the purpose of enabling consumers to request easily 
their free annual file disclosures from all nationwide consumer 
reporting agencies? Are there other issues or problems with respect to 
establishment and operation of the centralized source that the rule 
should address? If so, please identify and discuss how the rule could 
address the issue or problem.
    4. Is the proposed rule's requirement that if nationwide consumer 
reporting agencies have the ability to sell a consumer report to a 
third party they must provide an annual file disclosure to that 
consumer through the centralized source appropriate?
    (a) Should the rule specifically address the relationship between 
nationwide consumer reporting agencies and associated consumer 
reporting agencies, i.e., those consumer reporting agencies that 
maintain consumer files within the systems of nationwide consumer 
reporting agencies? If so, how should the rule address this 
relationship?
    (b) Is the definition of associated consumer reporting agency 
contained in section 610.1(b)(2) clear and adequate? To what other 
entities, besides those described under section II, above, might this 
definition apply?
    (c) What will be the effect of the rule on the contractual 
relationships that exist between nationwide consumer reporting agencies 
and their associated consumer reporting agencies? How could the rule 
address these effects?
    (d) What is the number and nature of associated consumer reporting 
agencies currently doing business in the U.S.? What is the scope of 
their operations? How many consumer reports are sold annually through 
these entities? Are any of these entities small businesses (i.e., those 
with less than $6,000,000 in average annual receipts)? If so, how many? 
What will be the economic impact of the proposed rule on these small 
entities? Could the proposed rule be modified, consistent with the 
requirements of the FACT Act, in a way that would lessen the economic 
impact of the rule on such entities? If yes, please describe.
    5. Section 610.2 (b)(2)(ii) allows the nationwide consumer 
reporting agencies to collect, through the centralized source, only as 
much information as is reasonably necessary to properly identify the 
consumer as required under the Fair Credit Reporting Act, section 
610(a)(1), 15 U.S.C. 1681h(a)(1), and other applicable laws and 
regulations, and to process the transaction(s) requested by the 
consumer.
    (a) Does the amount of information that is reasonably necessary 
depend on the request method or the method of delivery of the file 
disclosure or product

[[Page 13205]]

or service? What information is reasonably necessary for each request 
method and delivery method?
    (b) What types of personally identifiable information do nationwide 
consumer reporting agencies currently collect in providing file 
disclosures to consumers? Do these practices differ from information 
collection practices related to the collection of personally 
identifiable information in providing other products (i.e., those not 
mandated by statute), and if so, how?
    (c) How is the personally identifiable information collected in 
providing file disclosures used and disclosed by the nationwide 
consumer reporting agencies, affiliated entities and third parties? For 
what other purposes might this information be used and disclosed? What 
are the potential benefits and consequences of such use and disclosure?
    (d) Should the rule address the use of information collected by the 
centralized source (i.e., by allowing, prohibiting, restricting, or 
limiting such use)? If so, how? If so, what information should such a 
rule address, i.e., personally identifiable information collected in 
connection with file disclosures and/or information collected in 
connection with products provided through the centralized source? 
Should any restrictions or limitations differ from those that are 
applicable to the same information collected currently in connection 
with the provision of such disclosures and products? On what basis 
should a distinction between information collected through the 
centralized source and information currently collected by nationwide 
consumer reporting agencies be made?
    (e) Are there compelling reasons why nationwide consumer reporting 
agencies should not be allowed to use separate identification 
procedures in the centralized source?
    6. Section 610.2(c) of the proposed rule requires that nationwide 
consumer reporting agencies reasonably anticipate the volume of 
consumer requests to the centralized source and develop contingency 
plans to minimize the impact of adverse circumstances that may affect 
the operation of the centralized source.
    (a) Is the list of possible adverse circumstances sufficiently 
inclusive? If there are additional circumstances that should be 
included in this provision, please identify them and describe their 
potential impact on the operation of the centralized source.
    (b) Is the list of measures to be included in the contingency plans 
sufficiently inclusive? If there are additional measures that should be 
included in this provision, please describe them.
    7. Should the proposed rule provide relief for nationwide consumer 
reporting agencies during times of extraordinary request volume? If 
yes, does section 610.2(e) of the proposed rule adequately address 
those potential situations? If not, what additional provisions are 
needed and why?
    8. Section 610.2(g) of the proposed rule governs the possible use 
of the centralized source for other communications, including marketing 
or advertising.
    (a) Are the provisions of this section, along with the prohibitions 
of the FTC Act, adequate to ensure that consumers are protected against 
communications that may interfere with the purpose of the centralized 
source?
    (b) Are there particular goods or services the marketing or 
advertising of which would be especially likely to interfere with or 
complement the purpose of the centralized source; for example, credit 
scores, credit monitoring, and credit counseling? If so, why? Should 
the marketing or advertising of such products or services be treated 
differently under the rule?
    9. How could the rule address the potential for fraudulent Web 
sites, telephone numbers and other ploys that may mimic the centralized 
source in order to gain access to consumer personally identifiable 
information or for other illegal means? Should the rule require the 
nationwide consumer reporting agencies to undertake specific measures 
to prevent such illegal schemes? If yes, specify what measures would be 
appropriate and effective. Should the rule require the nationwide 
consumer reporting agencies to employ measures to reassure consumers 
that they are contacting the legitimate centralized source? If yes, 
specify what measure would be appropriate and effective.
    10. What competitive concerns may be raised by the operation of the 
centralized source and/or other provisions of the proposed rule? How 
might the final rule address these concerns?
    11. Is the geographic roll-out scheme for the centralized source 
during the transition period, described in section 610.2(i)(1) of the 
proposed rule, appropriate to protect the interests of both industry 
and consumers and to ensure an orderly phase-in of the free annual file 
disclosures requirement?
    (a) Is the duration of the roll-out appropriate? Please provide any 
available information regarding the costs or benefits of different 
rollout durations.
    (b) Does section 610.2(i) adequately address the potential problem 
of extraordinary request volume during the initial transition period?
    (c) Discuss any additional issues that should be addressed with 
regard to the transition period.

Streamlined Process for Nationwide Specialty Consumer Reporting 
Agencies

    12. Are the proposed requirements for a streamlined process for 
consumers to request free annual file disclosures from nationwide 
specialty consumer reporting agencies, as set forth in section 
610.3(a), appropriate and adequate? Are there other issues or problems 
with respect to the streamlined process that this provision should 
address? If so, please identify and discuss how the rule could address 
the issue or problem.
    13. Section 610.3(b) of the proposed rule requires that nationwide 
specialty consumer reporting agencies reasonably anticipate the volume 
of consumer requests for annual file disclosures and develop 
contingency plans to minimize the impact of adverse circumstances that 
may affect the operation of the streamlined process. Is the list of 
measures to be included in the contingency plans sufficiently 
inclusive? If there are additional measures that should be included in 
this provision, please describe them.
    14. Does section 610.3(c) of the proposed rule adequately address 
the potential situation of extraordinary request volume for nationwide 
specialty consumer reporting agencies? If not, what additional 
provisions are needed and why?
    15. Does section 610.3(g) adequately address the potential problem 
of extraordinary request volume during the transition period for the 
streamlined process? Discuss any additional issues that should be 
addressed with regard to the transition period.

Standardized Form

    16. Section 690.1, Appendix D, sets out a model standardized form 
that can be used for mail or Internet requests to the centralized 
source. Is the form adequate and appropriate for this purpose? Does the 
form list the minimum information necessary to properly identify the 
consumer and process the request? If additional information is needed, 
identify such information and state why it is needed. Does the form 
include more personal information than is reasonably necessary to 
properly identify the consumer?

[[Page 13206]]

Substantially Nationwide Consumer Reporting Agencies

    17. Are there consumer reporting agencies in the U.S. that compile 
and maintain files on consumers on substantially a nationwide basis, 
other than those consumer reporting agencies which, pursuant to the 
proposed rule, will provide free annual file disclosures through the 
centralized source? If so:
    (a) Identify each such agency and state:
    (i) the approximate number or portion of the adult population 
served by the agency and the number of states included in the agency's 
geographic coverage;
    (ii) the number of requests for file disclosures to the agency and 
the number of consumer reports generated by the agency;
    (iii) the categories of information contained in any consumer 
reports generated by the agency; and
    (iv) the needs of consumers for access to file disclosures 
generated by the agency.
    (b) What would be the advantages and disadvantages of a requirement 
that consumers be able to obtain annual file disclosures generated by 
such agencies free of charge? What would be the costs of such a 
requirement?
    (c) What would be the advantages and disadvantages of requiring 
that such agencies provide annual file disclosures through the 
centralized source?
    (d) What would be the effect on the ongoing competitive viability 
of such agencies if they were required to provide annual file 
disclosures to consumers free of charge?

Regulatory Flexibility Act Analysis

    18. Are there any small business entities (i.e., those with less 
than $6,000,000 in average annual receipts) covered by the proposed 
rule?
    a. Identify the number and nature of any such business entities.
    b. Describe, with specificity, the likely economic impact of the 
proposed rule on any such small business entities.
    19. Please provide comment on any or all of the provisions in the 
proposed rule with regard to (a) the impact of the provision(s) 
(including any benefits and costs), if any, and (b) what alternatives, 
if any, the Commission should consider, as well as the costs and 
benefits of those alternatives, paying specific attention to the effect 
of the proposed rule on small entities in light of the analysis in 
section VI of this notice. Costs to ``implement and comply'' with the 
proposed rule should include expenditures of time and money for any 
employee training, attorney, computer programmer or other professional 
time.
    20. Please describe ways in which the proposed rule could be 
modified, consistent with the FACT Act's mandated requirements, to 
reduce any costs or burdens for small entities.
    21. Please provide any information quantifying the economic costs 
and benefits of the proposed rule for regulated entities, including 
small entities.
    22. Please identify any relevant federal, state, or local rules 
that may duplicate, overlap or conflict with the proposed rule.

List of Subjects

16 CFR Part 610

    Fair Credit Reporting Act, Consumer reports, Consumer reporting 
agencies, Credit, Trade practices.

16 CFR Part 698

    Fair Credit Reporting Act, Consumer reports, Consumer reporting 
agencies, Credit, Trade practices.
    Accordingly, for the reasons set forth in the preamble, the FTC 
proposes to amend chapter I, title 16, Code of Federal Regulations, as 
follows:
    1. Revise the heading of subchapter F of this chapter to read as 
follows:

SUBCHAPTER F--FAIR CREDIT REPORTING ACT

    2. Add new part 610 to subchapter F to read as follows:

PART 610--FREE ANNUAL FILE DISCLOSURES

Sec.
610.1 Definitions and rule of construction.
610.2 Centralized source for requesting annual file disclosures from 
nationwide consumer reporting agencies.
610.3 Streamlined process for requesting annual file disclosures 
from nationwide specialty consumer reporting agencies.

    Authority: 15 U.S.C. 1681a, g, and h; sec. 211 (a) and (d), Pub. 
L. 108-159, 117 Stat. 1968 and 1972 (15 U.S.C. 1681j).


Sec.  610.1  Definitions and rule of construction.

    (a) The definitions and rule of construction set forth in this 
section apply throughout this part.
    (b) Definitions.
    (1) Annual file disclosure means a file disclosure that is provided 
to a consumer, upon consumer request and without charge, once in any 
12-month period, in compliance with section 612(a) of the Fair Credit 
Reporting Act, 15 U.S.C. 1681j(a).
    (2) Associated consumer reporting agency means a consumer reporting 
agency that maintains consumer files within systems operated by one or 
more nationwide consumer reporting agencies.
    (3) Consumer means an individual.
    (4) Consumer report has the meaning provided in section 603(d) of 
the Fair Credit Reporting Act, 15 U.S.C. 1681a(d).
    (5) Consumer reporting agency has the meaning provided in section 
603(f) of the Fair Credit Reporting Act, 15 U.S.C. 1681a(f).
    (6) Extraordinary request volume, except as provided in Sec.  
610.2(i)(2) of this part, occurs when the number of consumers 
requesting file disclosures during any 24-hour period is more than 
twice the daily rolling 90-day average of consumers requesting file 
disclosures. For example, if over the previous 90 days an average of 
100 consumers per day requested file disclosures, then an extraordinary 
request volume would be any volume greater than two times 100, or 201 
requests in a single 24-hour period.
    (7) File disclosure means a disclosure by a consumer reporting 
agency pursuant to section 609 of the Fair Credit Reporting Act, 15 
U.S.C. 1681g.
    (8) Nationwide consumer reporting agency means a consumer reporting 
agency that compiles and maintains files on consumers on a nationwide 
basis as defined in section 603(p) of the Fair Credit Reporting Act, 15 
U.S.C. 1681a(p).
    (9) Nationwide specialty consumer reporting agency has the meaning 
provided in section 603(w) of the Fair Credit Reporting Act, 15 U.S.C. 
1681a(w).
    (10) Request method means the method by which a consumer chooses to 
communicate a request for an annual file disclosure.
    (c) Rule of construction. The examples in this part are 
illustrative and not exclusive. Compliance with an example, to the 
extent applicable, constitutes compliance with this part.


Sec.  610.2  Centralized source for requesting annual file disclosures 
from nationwide consumer reporting agencies.

    (a) Purpose. The purpose of the centralized source is to enable 
consumers to make a single request to obtain annual file disclosures 
from all nationwide consumer reporting agencies, as required under 
section 612(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681j(a).
    (b) Establishment and operation. All nationwide consumer reporting 
agencies shall jointly design, fund, implement, maintain, and operate a 
centralized source for the purpose described in paragraph (a) of this 
section. The centralized source required by this part shall:
    (1) Enable consumers to request annual file disclosures by any of 
the

[[Page 13207]]

following request methods, at the consumer's option:
    (i) A single, dedicated Internet Web site;
    (ii) A single, dedicated toll-free telephone number; and
    (iii) Mail directed to a single address;
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the centralized source 
through each request method, as determined in accordance with paragraph 
(c) of this section;
    (ii) Collects only as much information as is reasonably necessary 
to properly identify the consumer as required under the Fair Credit 
Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other 
applicable laws and regulations, and to process the transaction(s) 
requested by the consumer;
    (iii) Provides information through the centralized source Web site 
and telephone number regarding how to make a request by all request 
methods required under section 610.2(b)(1) of this part; and
    (iv) Provides clear and easily understandable information and 
instructions to consumers, including, but not necessarily limited to:
    (A) Providing information on the progress of the consumer's request 
while the consumer is engaged in the process of requesting a file 
disclosure;
    (B) For a Web site request method, providing access to a ``help'' 
or ``frequently asked questions'' screen, which includes specific 
information that consumers might reasonably need to order their file 
disclosure, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
centralized source and with the Federal Trade Commission; and
    (C) In the event that a consumer requesting a file disclosure 
through the centralized source cannot be properly identified in 
accordance with the Fair Credit Reporting Act, section 610(a)(1), 15 
U.S.C. 1681h(a)(1), and other applicable laws and regulations, 
providing:
    (1) A statement that the consumer's identity cannot be verified; 
and
    (2) Directions on how to complete the request, including what 
additional information or documentation will be required to complete 
the request, and how to submit such information; and
    (3) Make available to consumers a standardized form established 
jointly by the nationwide consumer reporting agencies, which consumers 
may use to make a request for an annual file disclosure, either by mail 
or on the Internet Web site required under Sec.  610.2(b)(1) of this 
part, from the centralized source required by this part. The form 
provided at 16 CFR 690, Appendix D, may be used to comply with this 
section.
    (c) Requirement to anticipate. The nationwide consumer reporting 
agencies shall implement reasonable procedures to anticipate, and to 
respond to, the volume of consumers who will contact the centralized 
source through each request method, to request, or attempt to request, 
a file disclosure, including developing and implementing contingency 
plans to address circumstances that may materially and adversely impact 
the operation of the nationwide consumer reporting agency, a 
centralized source request method, or the centralized source.
    (1) Circumstances that may materially and adversely impact 
operations shall include, but are not necessarily limited to, natural 
disasters, telecommunications interruptions, equipment malfunctions, 
labor shortages, computer viruses, coordinated hacker attacks, and 
seasonal and other fluctuations in the volume of consumer requests for 
annual disclosures.
    (2) The contingency plans required by this section shall include 
measures to minimize the impact of the circumstances referred to in 
paragraph (c)(1) of this section on the operation of the centralized 
source and on consumers contacting, or attempting to contact, the 
centralized source.
    (i) Such measures to minimize impact shall include, but are not 
necessarily limited to:
    (A) To the extent possible, providing information to consumers on 
how to use another available request method;
    (B) To the extent possible, communicating, to a consumer who 
attempts but is unable to make a request, the fact that a condition 
exists that has precluded the centralized source from accepting all 
requests, and the period of time after which the centralized source is 
reasonably anticipated to be able to accept the consumer's request for 
an annual file disclosure; and
    (C) Taking all reasonable steps to restore the centralized source 
to normal operating status as quickly as possible.
    (ii) Measures to minimize impact may also include, as appropriate, 
collecting request information but declining to accept the request for 
processing until a reasonable later time, provided that the consumer is 
clearly and prominently informed, to the extent possible, of when the 
request will be accepted for processing.
    (d) Disclosures required. If a nationwide consumer reporting agency 
has the ability to provide a consumer report to a third party relating 
to a consumer, that agency shall provide an annual file disclosure to 
such consumer if the consumer makes a request through the centralized 
source.
    (e) Extraordinary request volume. Provided that the nationwide 
consumer reporting agency has complied with paragraph (c) of this 
section, a nationwide consumer reporting agency shall not be deemed in 
violation of paragraph (b)(2)(i) of this section, for any period of 
time during which:
    (1) A particular centralized source request method experiences 
extraordinary request volume;
    (2) The centralized source, through all request methods, 
experiences extraordinary request volume; or
    (3) The nationwide consumer reporting agency experiences 
extraordinary request volume.
    (f) Security. A nationwide consumer reporting agency shall comply 
with Standards for Safeguarding Customer Information, 16 CFR 314.3 and 
314.4, for all personally identifiable information collected or 
disclosed by the nationwide consumer reporting agency or the 
centralized source, as a result of a transaction conducted, or request 
for annual file disclosure made, through the centralized source.
    (g) Communications provided by centralized source.
    (1) Any communications or instructions, including any advertising 
or marketing, provided through the centralized source shall not 
interfere with, detract from, contradict, or otherwise undermine the 
purpose of the centralized source stated in paragraph (a).
    (2) Examples of interfering, detracting, inconsistent, and/or 
undermining communications include:
    (i) A Web site that contains pop-up advertisements that hinder the 
consumer's ability to complete an online request for an annual file 
disclosure;
    (ii) Centralized source materials that represent, expressly or by 
implication, that a consumer must purchase a paid product in order to 
receive or to understand the annual file disclosure;
    (iii) Centralized source materials that represent, expressly or by 
implication, that annual file disclosures are not free, or that 
obtaining an annual file disclosure will have a negative impact on the 
consumer's credit standing; and
    (iv) Centralized source materials that falsely represent, expressly 
or by

[[Page 13208]]

implication, that a product or service offered ancillary to receipt of 
a file disclosure, such as a credit score or credit monitoring service, 
is free, or failing to clearly and prominently disclose that consumers 
must cancel a service advertised as free to avoid being charged, if 
such is the case.
    (h) Effective date. Section 610.2 shall become effective on 
December 1, 2004.
    (i) Transition.
    (1) Regional roll-out. The centralized source required by this part 
shall be made available to consumers in a cumulative manner, as 
follows:
    (i) For consumers residing in Alaska, Arizona, California, 
Colorado, Hawaii, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, 
Washington, and Wyoming, the centralized source shall become available 
on or before December 1, 2004;
    (ii) For consumers residing in Illinois, Indiana, Iowa, Kansas, 
Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South 
Dakota, and Wisconsin, the centralized source shall become available on 
or before March 1, 2005;
    (iii) For consumers residing in Alabama, Arkansas, Florida, 
Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, 
Tennessee, and Texas, the centralized source shall become available on 
or before June 1, 2005; and
    (iv) For all other consumers, including consumers residing in 
Connecticut, Delaware, District of Columbia, Maine, Maryland, 
Massachusetts, New Hampshire, New Jersey, New York, North Carolina, 
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, and all 
United States territories and possessions, the centralized source shall 
become available on or before September 1, 2005.
    (2) Extraordinary request volume during transition.
    (i) During the period of December 1, 2004 through December 7, 2004, 
extraordinary request volume shall mean the following:
    (A) For an individual request method: Extraordinary request volume 
occurs when the number of consumers contacting or attempting to contact 
the centralized source through the request method in a 24-hour period 
is more than twice the daily total number of consumers that were 
reasonably anticipated to contact the centralized source, in compliance 
with paragraph (c) of this section, through that request method.
    (B) For the centralized source as a whole: Extraordinary request 
volume occurs when the number of consumers contacting or attempting to 
contact the centralized source in a 24-hour period is more than twice 
the average daily total number of consumers that were reasonably 
anticipated to contact the centralized source, in compliance with 
paragraph (c) of this section, through any request method.
    (C) For a nationwide consumer reporting agency: Extraordinary 
request volume occurs when the number of consumers contacting or 
attempting to contact the nationwide consumer reporting agency to 
request file disclosures in a 24-hour period is more than twice the 
average daily total number of consumers that were reasonably 
anticipated to contact that nationwide consumer reporting agency to 
request their file disclosures, in compliance with paragraph (c) of 
this part.
    (ii) During the period of December 8, 2004 through August 31, 2005, 
extraordinary request volume shall mean the following:
    (A) For an individual request method: Extraordinary request volume 
occurs when the number of consumers contacting or attempting to contact 
the centralized source through the request method in a 24-hour period 
is more than twice the rolling 7-day daily average number of consumers 
who contacted or attempted to contact the centralized source to request 
file disclosures through that request method;
    (B) For the centralized source as a whole: Extraordinary request 
volume occurs when the number of consumers contacting or attempting to 
contact the centralized source in a 24-hour period is more than twice 
the rolling 7-day daily average number of consumers who contacted or 
attempted to contact the centralized source to request file disclosures 
through any request method; and
    (C) For a nationwide consumer reporting agency: Extraordinary 
request volume occurs when the number of consumers contacting or 
attempting to contact the nationwide consumer reporting agency to 
request file disclosures in a 24-hour period is more than twice the 
rolling 7-day daily average of consumers who requested any type of file 
disclosure from that nationwide consumer reporting agency.
    (3) Option to defer requests during transition in times of high 
volume.
    (i) For purposes of this paragraph, high request volume shall mean 
the following:
    (A) For an individual request method: High request volume occurs 
when the number of consumers contacting or attempting to contact the 
centralized source through the request method in a 24-hour period is 
more than 115% of the rolling 7-day daily average number of consumers 
who contacted or attempted to contact the centralized source to request 
their file disclosures through that request method;
    (B) For the centralized source as a whole: High request volume 
occurs when the number of consumers contacting or attempting to contact 
the centralized source in a 24-hour period is more than 115% of the 
rolling 7-day daily average number of consumers who contacted or 
attempted to contact the centralized source to request their file 
disclosures through any request method; and
    (C) For a nationwide consumer reporting agency: High request volume 
occurs when the number of consumers contacting or attempting to contact 
the nationwide consumer reporting agency to request file disclosures in 
a 24-hour period is more than 115% of the rolling 7-day daily average 
of consumers who requested any type of file disclosure from that 
nationwide consumer reporting agency.
    (ii) During the period from December 8, 2004 through August 31, 
2005, a nationwide consumer reporting agency shall not be deemed in 
violation of paragraph (b)(2)(i) of this section for a period of time 
in which a centralized source request method, the centralized source, 
or the nationwide consumer reporting agency experiences high request 
volume, provided that the nationwide consumer reporting agency.
    (A) complies with paragraph (c) of this section; and
    (B) collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (C) clearly and prominently informs the consumer of when the 
request will be accepted for processing.


Sec.  610.3  Streamlined process for requesting annual file disclosures 
from nationwide specialty consumer reporting agencies.

    (a) Streamlined process requirements. Any nationwide specialty 
consumer reporting agency shall have a streamlined process for 
accepting and processing consumer requests for annual file disclosures. 
The streamlined process required by this part shall:
    (1) Enable consumers to request annual file disclosures by a toll-
free telephone number that:
    (i) Provides clear and prominent instructions for requesting 
disclosures by mail and by any additional available request methods;
    (ii) Is published, in conjunction with all other published numbers 
for the

[[Page 13209]]

nationwide specialty consumer reporting agency, in any telephone 
directory in which any telephone number for the nationwide specialty 
consumer reporting agency is published; and
    (iii) Is clearly and prominently posted on any Web site owned or 
maintained by the nationwide specialty consumer reporting agency, along 
with instructions for requesting disclosures by mail and by any 
additional available request methods; and
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the nationwide specialty 
consumer reporting agency to request annual file disclosures, as 
determined in compliance with paragraph (b) of this section;
    (ii) Collects only as much personal information as is reasonably 
necessary to properly identify the consumer as required under the Fair 
Credit Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and 
other applicable laws and regulations; and
    (iii) Provides clear and easily understandable information and 
instructions to consumers, including but not necessarily limited to:
    (A) Providing information on the status of the consumer's request 
while the consumer is in the process of making a request;
    (B) For a Web site request method, providing access to a ``help'' 
or ``frequently asked questions'' screen, which includes more specific 
information that consumers might reasonably need to order their file 
disclosure, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
nationwide specialty consumer reporting agency and with the Federal 
Trade Commission; and
    (C) In the event that a consumer requesting a file disclosure 
cannot be properly identified in accordance with the Fair Credit 
Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other 
applicable laws and regulations, providing:
    (1) A statement that the consumer's identity cannot be verified; 
and
    (2) Directions on how to complete the request, including what 
additional information or documentation will be required to complete 
the request, and how to submit such information.
    (b) Requirement to anticipate. A nationwide specialty consumer 
reporting agency shall implement reasonable procedures to anticipate, 
and respond to, the volume of consumers who will request, or attempt to 
request, a file disclosure, including developing and implementing 
contingency plans to address circumstances that may materially and 
adversely impact the operation of the nationwide specialty consumer 
reporting agency, a request method, or the streamlined process.
    (1) Circumstances that may materially and adversely impact 
operations shall include, but are not limited to, natural disasters, 
telecommunications interruptions, equipment malfunctions, labor 
shortages, computer viruses, coordinated hacker attacks, and seasonal 
and other fluctuations in the volume of consumer requests for annual 
disclosures.
    (2) The contingency plans required under this section shall include 
measures to minimize the impact of the circumstance referred to in 
paragraph (b)(1) of this section on the operation of the streamlined 
process and on consumers contacting, or attempting to contact, the 
nationwide specialty consumer reporting agency to request an annual 
file disclosure.
    (i) Such measures to minimize impact shall include, but are not 
necessarily limited to:
    (A) To the extent possible, providing information to consumers on 
how to use another available request method;
    (B) To the extent possible, communicating, to a consumer who 
attempts but is unable to make a request, the fact that a condition 
exists that has precluded the nationwide specialty consumer reporting 
agency from accepting all requests, and the period of time after which 
the agency is reasonably anticipated to be able to accept the 
consumer's request for an annual file disclosure; and
    (C) Taking all reasonable steps to restore the streamlined process 
to normal operating status as quickly as possible.
    (ii) Measures to minimize impact may also include, as appropriate, 
collecting request information but declining to accept the request for 
processing until a reasonable later time, provided that the consumer is 
clearly and prominently informed, to the extent possible, of when the 
request will be accepted for processing.
    (c) Extraordinary request volume. Provided that the nationwide 
specialty consumer reporting agency has complied with paragraph (b) of 
this section, a nationwide specialty consumer reporting agency shall 
not be deemed in violation of paragraph (a)(2)(i) of this section for 
any period of time during which:
    (1) A particular request method experiences extraordinary request 
volume; or
    (2) The nationwide specialty consumer reporting agency experiences 
extraordinary request volume.
    (d) Security. A nationwide specialty consumer reporting agency 
shall comply with Standards for Safeguarding Customer Information, 16 
CFR 314.3 and 314.4, for all personally identifiable information 
collected or disclosed by the nationwide specialty consumer reporting 
agency as a result of a request for annual file disclosure.
    (e) Requirement to accept or redirect requests. If a consumer 
requests an annual file disclosure through a method other than the 
streamlined process established by the nationwide specialty consumer 
reporting agency in compliance with this part, a nationwide specialty 
consumer reporting agency shall:
    (1) Accept the consumer's request; or
    (2) Instruct the consumer how to make the request using the 
streamlined process required by this part.
    (f) Effective date. Section 610.3 shall become effective on 
December 1, 2004.
    (g) Extraordinary request volume during initial transition. During 
the period of December 1, 2004 through February 28, 2005, extraordinary 
request volume shall mean the following:
    (1) For an individual request method: Extraordinary request volume 
occurs when the number of consumers contacting or attempting to contact 
the nationwide specialty consumer reporting agency through a 
streamlined process request method in a 24-hour period is more than 
twice the daily total number of consumers who were reasonably predicted 
to contact that request method, in compliance with paragraph (b) of 
this section.
    (2) For a nationwide specialty consumer reporting agency: 
Extraordinary request volume occurs when the number of consumers 
contacting or attempting to contact the nationwide specialty consumer 
reporting agency to request file disclosures in a 24-hour period is 
more than twice the number of consumers who were reasonably anticipated 
to contact the nationwide specialty consumer reporting agency to 
request their file disclosures, in compliance with paragraph (b) of 
this section.
    3. Add new part 698 to subchapter F to read as follows:

PART 698--SUMMARIES, NOTICES, AND FORMS:

Sec.
698.1 Authority and purpose.

[[Page 13210]]

698.2 Legal effect.
Appendixes A-C to Part 698 [Reserved]
Appendix D to Part 698--Standardized Form for Requesting Free File 
Disclosure

    Authority: Secs. 151, 153, 211(c) and (d), 213, and 311, Pub. L. 
108-159, 117 Stat. 1961, 1966, 1970 and 1972 (15 U.S.C. 1681g and 
s).


Sec.  698.1  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 Fair and Accurate Credit 
Transactions Act of 2003, Pub. L. 108-159, 117 Stat. 1952 (Dec. 4, 
2003).
    (b) Purpose. The purpose of this part is to comply with sections 
607(d), 609(c), and 612(a) of the Fair Credit Reporting Act, as 
amended, and section 211 of the Fair and Accurate Credit Transactions 
Act of 2003.


Sec.  698.2  Legal effect

    These summaries, forms and notices prescribed by the FTC do not 
constitute a trade regulation rule. They carry out the directives in 
the statute that the FTC prescribe these documents, which will 
constitute compliance with the part of any section of the FCRA 
requiring that such summaries, notices, or forms be used by or supplied 
to any person.

Appendixes A-C to Part 698 [Reserved]

Appendix D to Part 698--Standardized form for requesting annual file 
disclosures.

REQUEST FOR FREE CREDIT REPORT

    Note to Consumers: You have the right to get a free copy of your 
credit report, once every 12 months, from each of the nationwide 
consumer reporting agencies. Your report may contain information on 
where you work and live, the credit accounts that have been opened 
in your name, if you've paid your bills on time, and whether you 
have been sued, arrested, or have filed for bankruptcy. Businesses 
use this information in making decisions about whether to offer you 
credit, insurance, or employment, and on what terms.

Use this form to request your credit report from any, or all, of the 
nationwide consumer reporting agencies.
The following information is required to process your request:
Your Full Name:--------------------------------------------------------
Your Street Address:---------------------------------------------------
Your City, State & Zip Code:-------------------------------------------
Your Telephone Numbers (with area code):
Day:-------------------------------------------------------------------
Evening:---------------------------------------------------------------
Your Social Security number:-------------------------------------------
Your Date of Birth-----------------------------------------------------
Place a check next to each credit report you want.
------ I want a credit report from each of the nationwide consumer 
reporting agencies

OR

------ I want a credit report from:
------ [name of nationwide consumer reporting agency]
------ [name of nationwide consumer reporting agency]
------ [name of nationwide consumer reporting agency]
Please check how you would like to receive your report. (Note: 
because of the need to accurately identify you before we send you 
your credit report, we may not be able to offer every delivery 
method to every consumer. We will try to honor your preference.)
------ [available delivery method]
------ [available delivery method]
------ [available delivery method]
------ Check here if, for security purposes, you want your copy of 
your credit report to include only the last four digits of your 
Social Security number (SSN), rather than your entire SSN.
If we need additional information to process your request, we may 
contact you by mail at the address you have provided. If you prefer 
that we contact you by phone or e-mail, please indicate:
[ballot] Telephone:
    ------ Day or ------ Evening
[ballot] E-mail at:----------------------------------------------------
For more information on obtaining your free credit report, visit 
[insert appropriate Web site address], call [insert appropriate 
telephone number], or write to [insert appropriate address].
Mail this form to:
[insert appropriate address]
You can expect to receive your report within 15 days after we 
receive your request.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-6268 Filed 3-18-04; 10:58 am]
BILLING CODE 6750-01-P