[Federal Register Volume 69, Number 98 (Thursday, May 20, 2004)]
[Rules and Regulations]
[Pages 29061-29064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11329]


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FEDERAL TRADE COMMISSION

16 CFR Parts 602, 603, 604, and 611

RIN 3084-AA94


Amendment of Rules Under the FACT Act

AGENCY: Federal Trade Commission (FTC or Commission).

ACTION: Final rules.

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SUMMARY: The Fair and Accurate Credit Transactions Act of 2003 requires 
the FTC to adopt a number of rules to implement its provisions amending 
the Fair Credit Reporting Act. In this action, the FTC is revising the 
title or location of two previously-issued rules in the Code of Federal 
Regulations, and adding two technical provisions that apply generally 
to all rules issued by the Commission under the FCRA.

DATES: These rules are effective on June 21, 2004.

FOR FURTHER INFORMATION CONTACT: Clarke Brinckerhoff, Attorney, 
Division of Financial Practices, Federal Trade Commission, 600 
Pennsylvania Avenue, NW., Washington, DC 20580, (202) 326-3224.

SUPPLEMENTARY INFORMATION: The recently enacted Fair and Accurate 
Credit Transactions Act of 2003 (``FACT Act'') requires the FTC to 
adopt a number of rules to implement several of its provisions, which 
amend the Fair Credit Reporting Act (``FCRA''). The Commission has 
published one final rule, Effective Dates for the FACT Act (69 FR 6526; 
Feb. 11, 2004) (the ``effective dates rule'') and one interim final 
rule, Prohibition Against Circumventing Treatment as a Nationwide 
Consumer Reporting

[[Page 29062]]

Agency (69 FR 8532; Feb. 24, 2004) (the ``circumvention rule''). All 
FACT Act rules will be published in Title 16, Chapter I, Subchapter F, 
of the Code of Federal Regulations (``CFR''), which is labeled ``Fair 
Credit Reporting Act.'' In the CFR, the effective dates rule was 
designated as Part 602; the circumvention rule was designated as Part 
603. Subsequently, the Commission published more proposed rules, 
including Free Annual File Disclosures (69 FR 13192; Mar. 19, 2004) 
(the ``free reports rule'') and Identity Theft Definitions (69 FR 
23369; Apr. 28, 2004) (the ``definitions rule''). In the CFR, the 
proposed free reports rule was designated as Part 610; the proposed 
definitions rule was designated as Part 603.
    In this document, the Commission makes non-substantive revisions to 
the effective dates rule in Part 602, and establishes a new Part 611, 
containing the provisions of the circumvention rule previously issued 
as Part 603. In addition, the Commission revises Part 603 (i.e., the 
heading and Sec.  603.1) to state that terms defined in the FCRA have 
the same meaning in the FCRA rules unless otherwise stated in those 
rules. Finally, the Commission adds a new Part 604, which states that 
any court ruling staying or invalidating any provision of any FCRA rule 
has no impact on the continuing effectiveness of any other provision or 
rule (new Sec.  604.1). The above changes are described in greater 
detail below.

I. Reorganization of FCRA Rules

    To achieve a clearer and more logical structure for its FCRA rules, 
the Commission is making certain non-substantive, technical changes to 
several CFR parts in which those rules appear. Specifically, the 
Commission is making three technical revisions to 16 CFR Part 602, 
which contains the effective dates rule. First, the Commission is 
changing the heading of that part from ``Fair Credit Reporting Act,'' 
which unnecessarily duplicates the heading of Subchapter F, to ``Fair 
and Accurate Credit Transactions Act of 2003,'' which more specifically 
describes the nature of the rules that are subject to the effective 
dates set forth in Part 602. Second, the Commission is changing the 
heading of Sec.  602.1 from ``Purpose, scope, and effective dates'' to 
``Effective dates'' and deleting references to topics other than 
effective dates, because there are no provisions on other topics in 
this section. Third, it changes the description of Sec. 602.1(c)(3)(xi) 
from ``concerning enhanced disclosure of the means available to opt out 
of prescreened lists' to ``concerning duration of elections'' to more 
accurately describe the FACT Act provision involved. This revision is 
purely descriptive in nature and is intended neither to alter any 
effective date adopted jointly by the Commission and the Federal 
Reserve Board, nor to have any other effect whatsoever on any legal 
rights or obligations that may arise under any rule or other 
requirement arising under the FACT Act.
    Further, the Commission is changing the designation of the 
previously issued circumvention rule,\1\ by revising Part 603 to 
eliminate those provisions from that part and incorporating them 
instead into a new Part 611. This change will avoid any conflict with 
the proposed definitions rule, which, if finally adopted, will be 
issued in Part 603. This change allows for a rational arrangement of 
the Commission's FCRA rules in 16 CFR, whereby rules of general 
applicability would be contained in Parts 600-609, and rules applying 
to consumer reporting agencies would start with the proposed free 
reports rule in Part 610. Thus, the rule against circumventing the duty 
to provide free reports (Part 611) would immediately follow the free 
reports rule. The Commission anticipates proposing as Part 612 a rule 
concerning a reasonable fee for disclosure of scores by consumer 
reporting agencies, pursuant to Section 212(b) of the FACT Act, and has 
already proposed two rules relating to identity theft as Part 613 
(Duration of Active Duty Alerts) and Part 614 (Appropriate Proof of 
Identity) (69 FR 23369; Apr. 28, 2004).
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    \1\ This Commission action, changing the circumvention rule's 
location in the CFR, does not affect its classification as an 
interim final rule. Similarly, it has no impact on the Commission's 
invitation for comments to assit it in ascertaining facts necessary 
to reach a determination whether to adopt it as a final rule. 69 FR 
8532 (Feb. 24, 2004). The Commission will address those comments and 
any needed substantive changes in the circumvention rule at a later 
date.
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II. Provision for Statutorily Defined Terms and Severability

    Aside from the above organizational changes, the Commission is 
adding certain provisions that, without making substantive alterations, 
clarify the relationship between the statutory definitions and the 
Commission's rules, and the effect, if any, on those rules if a 
particular rule provision were to be invalidated.
    The Commission anticipates that some of its FACT Act rules may use 
terms that are already defined in the FCRA. Accordingly, the Commission 
is amending Part 603 (which no longer contains the circumvention rule) 
to revise the heading (to ``Definitions'') and specify in Sec.  603.1 
that any term used in any Commission FACT Act (or other FCRA) rule has 
the same meaning as in the FCRA unless otherwise specified in that 
rule. This provision will make it unnecessary for each rule to state 
that terms have the same meaning as in the FCRA.
    Finally, the Commission adds a new Part 604 and Sec.  604.1 
containing a severability provision similar to that in other recent 
Commission rules. (See, e.g., the Telemarketing Sales Rule, 16 CFR 
310.8.) This provision will ensure the effectiveness of all the 
Commission's FCRA rules, in the event that any rule (or any provision 
of any rule) is declared invalid by a court.

III. Good Cause for Final Rule

    The Administrative Procedure Act, 5 U.S.C. 551 et seq., generally 
requires an agency to publish a notice of a proposed rule and afford 
interested persons an opportunity to provide comments prior to 
promulgation of the rule. Notice of the proposed rule and an 
opportunity for public comment are not required ``when the agency for 
good cause finds (and incorporates the finding and a brief statement of 
reasons therefore in the rules issued) that notice and public procedure 
thereon are impracticable, unnecessary, or contrary to the public 
interest.'' 5 U.S.C. 553(b)(3)(B).
    The Commission finds good cause for adopting these rules without 
advance public notice or comment. The FACT Act requires the Commission 
to promulgate a large number of rules implementing various amendments 
to the FCRA, all of which will appear in 16 CFR, Chapter I, Subchapter 
F, ``Fair Credit Reporting Act.'' It has finalized some rules, proposed 
others, and will propose and finalize more in the coming months. It is 
important that FACT Act rules be appropriately organized and labeled in 
the CFR so they can be easily accessed by the public. Similarly, 
addition of the severability and FCRA definitions provisions will avoid 
possible uncertainties relating to the Commission's FACT Act rules. The 
revisions described above, however, are purely technical in nature, and 
are not intended to make any substantive change in the legal rights or 
obligations as defined or to be defined by the Commission's rules. 
Rather, the changes merely clarify the organizational structure and 
relationship of the rules, including the severability of its 
provisions, and to reiterate relevant terms already defined by statute. 
For these reasons, the FTC finds that issuing these rule changes with 
prior notice and comment is unnecessary, and would be contrary to the 
public interest to the

[[Page 29063]]

extent it would delay publication of the clarifications and interfere 
with the timely and orderly promulgation of the relevant substantive 
rules. 5 U.S.C. 553(b)(3)(B). Accordingly, the Commission finds that 
there is good cause for adopting these rules as effective without prior 
public comment.

IV. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 
3506; 5 CFR 1320 Appendix A.1, the FTC has reviewed these final rule 
changes. The Commission has determined that these changes neither 
affect nor contain any collection of information requirements subject 
to Office of Management and Budget review under the Paperwork Reduction 
Act. The rule changes do not require any entity to collect, maintain, 
disclose, or submit any records or other information.

V. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601-612, requires an 
agency to provide an Initial Regulatory Flexibility Analysis with a 
proposed rule and a Final Regulatory Flexibility Analysis with the 
final rule, if any, unless the agency certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities. See 5 U.S.C. 603-605. The FTC certifies that these rules are 
entirely technical in nature and thus 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.

List of Subjects in 16 CFR Parts 602, 603, 604, and 611

    Consumer reports, Consumer reporting agencies, Credit, Information 
furnishers, Identity theft, Trade practices.


0
Accordingly, for the reasons set forth in the preamble, the FTC revises 
16 CFR Parts 602 and 603, and adds new Parts 604 and 611, to read as 
follows:
0
1. Revise Part 602 to read as follows:

PART 602--FAIR AND ACCURATE CREDIT TRANSACTIONS ACT OF 2003

    Authority: 15 U.S.C. 1681s; sec. 3, Pub. L. 108-159; 117 Stat. 
1953.


Sec.  602.1  Effective dates.

    (a)-(b) [Reserved]
    (c) The applicable provisions of the Fair and Accurate Credit 
Transactions Act of 2003 (FACT Act), Pub. L. 108-159, 117 Stat. 1952, 
shall be effective in accordance with the following schedule:
    (1) Provisions effective December 31, 2003.
    (i) Sections 151(a)(2), 212(e), 214(c), 311(b), and 711, concerning 
the relation to state laws; and
    (ii) Each of the provisions of the FACT Act that authorizes an 
agency to issue a regulation or to take other action to implement the 
applicable provision of the FACT Act or the applicable provision of the 
Fair Credit Reporting Act, as amended by the FACT Act, but only with 
respect to that agency's authority to propose and adopt the 
implementing regulation or to take such other action.
    (2) Provisions effective March 31, 2004.
    (i) Section 111, concerning the definitions;
    (ii) Section 156, concerning the statute of limitations
    (iii) Sections 312(d), (e), and (f), concerning the furnisher 
liability exception, liability and enforcement, and rule of 
construction, respectively;
    (iv) Section 313(a), concerning action regarding complaints;
    (v) Section 611, concerning communications for certain employee 
investigations; and
    (vi) Section 811, concerning clerical amendments.
    (3) Provisions effective December 1, 2004.
    (i) Section 112, concerning fraud alerts and active duty alerts;
    (ii) Section 114, concerning procedures for the identification of 
possible instances of identity theft;
    (iii) Section 115, concerning truncation of the social security 
number in a consumer report;
    (iv) Section 151(a)(1), concerning the summary of rights of 
identity theft victims;
    (v) Section 152, concerning blocking of information resulting from 
identity theft;
    (vi) Section 153, concerning the coordination of identity theft 
complaint investigations;
    (vii) Section 154, concerning the prevention of repollution of 
consumer reports;
    (viii) Section 155, concerning notice by debt collectors with 
respect to fraudulent information;
    (ix) Section 211(c), concerning a summary of rights of consumers;
    (x) Section 212(a)-(d), concerning the disclosure of credit scores;
    (xi) Section 213(c), concerning duration of elections;
    (xii) Section 217(a), concerning the duty to provide notice to a 
consumer;
    (xiii) Section 311(a), concerning the risk-based pricing notice;
    (xiv) Section 312(a)-(c), concerning procedures to enhance the 
accuracy and integrity of information furnished to consumer reporting 
agencies;
    (xv) Section 314, concerning improved disclosure of the results of 
reinvestigation;
    (xvi) Section 315, concerning reconciling addresses;
    (xvii) Section 316, concerning notice of dispute through reseller; 
and
    (xviii) Section 317, concerning the duty to conduct a reasonable 
reinvestigation.

0
2. Revise Part 603 to read as follows:

PART 603--DEFINITIONS

    Authority: Pub. L. 108-159, sec. 111; 15 U.S.C. 1681a.


Sec.  603.1  Terms defined in the Fair Credit Reporting Act.

    Any term used in any part in this subchapter, if defined in the 
Fair Credit Reporting Act (FCRA) and not otherwise defined in that 
rule, has the same meaning provided by the FCRA.

0
3. Add new Part 604 to read as follows:

PART 604--FAIR CREDIT REPORTING ACT RULES

    Authority: Pub. L. 108-159, secs. 3, 111, 112, 114, 151, 153, 
211, 212, 213, 214, 216, 311, 315; 15 U.S.C. 1681s.


Sec.  604.1  Severability.

    All parts and subparts of this subchapter are separate and 
severable from one another. If any part or subpart is stayed or 
determined to be invalid, the Commission intends that the remaining 
parts and subparts shall continue in effect.

0
4. Add a new part 611 to read as follows:

PART 611--PROHIBITION AGAINST CIRCUMVENTING TREATMENT AS A 
NATIONWIDE CONSUMER REPORTING AGENCY

Sec.
611.1 Rule of construction.
611.2 General prohibition.
611.3 Limitation on applicability.

    Authority: Pub. L. 108-159, sec. 211(b); 15 U.S.C. 1681x.


Sec.  611.1  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.  611.2  General prohibition.

    (a) A consumer reporting agency shall not circumvent or evade 
treatment as a ``consumer reporting agency that compiles and maintains 
files on

[[Page 29064]]

consumers on a nationwide basis' as defined under section 603(p) of the 
Fair Credit Reporting Act, 15 U.S.C. 1681a(p), by any means, including, 
but not limited to:
    (1) Corporate organization, reorganization, structure, or 
restructuring, including merger, acquisition, dissolution, divestiture, 
or asset sale of a consumer reporting agency; or
    (2) Maintaining or merging public record and credit account 
information in a manner that is substantially equivalent to that 
described in paragraphs (1) and (2) of section 603(p) of the Fair 
Credit Reporting Act, 15 U.S.C. 1681a(p).
    (b) Examples:
    (1) Circumvention through reorganization by data type. XYZ Inc. is 
a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis. It restructures its operations so that 
public record information is assembled and maintained only by its 
corporate affiliate, ABC Inc. XYZ continues operating as a consumer 
reporting agency but ceases to comply with the FCRA obligations of a 
consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis, asserting that it no longer meets the 
definition found in FCRA section 603 (p), because it no longer 
maintains public record information. XYZ's conduct is a circumvention 
or evasion of treatment as a consumer reporting agency that compiles 
and maintains files on consumers on a nationwide basis, and thus 
violates this section.
    (2) Circumvention through reorganization by regional operations. 
PDQ Inc. is a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis. It restructures its 
operations so that corporate affiliates separately assemble and 
maintain all information on consumers residing in each state. PDQ 
continues to operate as a consumer reporting agency but ceases to 
comply with the FCRA obligations of a consumer reporting agency that 
compiles and maintains files on consumers on a nationwide basis, 
asserting that it no longer meets the definition found in FCRA section 
603(p), because it no longer operates on a nationwide basis. PDQ's 
conduct is a circumvention or evasion of treatment as a consumer 
reporting agency that compiles and maintains files on consumers on a 
nationwide basis, and thus violates this section.
    (3) Circumvention by a newly formed entity. Smith Co. is a new 
entrant in the marketplace for consumer reports that bear on a 
consumer's credit worthiness, standing and capacity. Smith Co. 
organizes itself into two affiliated companies: Smith Credit Co. and 
Smith Public Records Co. Smith Credit Co. assembles and maintains 
credit account information from persons who furnish that information 
regularly and in the ordinary course of business on consumers residing 
nationwide. Smith Public Records Co. assembles and maintains public 
record information on consumers nationwide. Neither Smith Co. nor its 
affiliated organizations comply with FCRA obligations of consumer 
reporting agencies that compile and maintain files on consumers on a 
nationwide basis. Smith Co.''s conduct is a circumvention or evasion of 
treatment as a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis, and thus violates this 
section.
    (4) Bona fide, arms-length transaction with unaffiliated party. 
Foster Ltd. is a consumer reporting agency that compiles and maintains 
files on consumers on a nationwide basis. Foster Ltd. sells its public 
record information business to an unaffiliated company in a bona fide, 
arms-length transaction. Foster Ltd. ceases to assemble, evaluate and 
maintain public record information on consumers residing nationwide, 
and ceases to offer reports containing public record information. 
Foster Ltd.''s conduct is not a circumvention or evasion of treatment 
as a consumer reporting agency that compiles and maintains files on 
consumers on a nationwide basis. Foster Ltd.''s conduct does not 
violate this part.


Sec.  611.3  Limitation on applicability.

    Any person who is otherwise in violation of Sec.  611.2 shall be 
deemed to be in compliance with this part if such person is in 
compliance with all obligations imposed upon consumer reporting 
agencies that compile and maintain files on consumers on a nationwide 
basis under the Fair Credit Reporting Act, 15 U.S.C. 1681 et seq.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-11329 Filed 5-19-04; 8:45 am]
BILLING CODE 6750-01-P