[Federal Register Volume 69, Number 100 (Monday, May 24, 2004)]
[Notices]
[Pages 29539-29540]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-11607]



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FEDERAL RESERVE SYSTEM

Docket No. OP-1195


Request for Information for Study on Prescreened Solicitations or 
Firm Offers of Credit or Insurance

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Notice of Study and Request for Information.

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SUMMARY: The Board is conducting a study concerning prescreened 
solicitations, pursuant to section 213(e) of the Fair and Accurate 
Credit Transactions Act of 2003 (FACT Act), which generally amends the 
Fair Credit Reporting Act (FCRA). The Board is requesting public 
comment on a number of issues to assist in preparation of the study. 
Under the FCRA, creditors and insurers in specific circumstances may 
use certain consumer reports as the basis for sending unsolicited 
offers of credit or insurance to consumers who meet certain criteria 
for credit worthiness or insurability (so-called ``prescreened 
solicitations''). The FCRA provides a mechanism by which consumers can 
elect not to receive these prescreened solicitations, by directing 
consumer reporting agencies to exclude the consumer's name and address 
from lists provided by these agencies to creditors or insurers for use 
in sending prescreened solicitations. Section 213(e) of the FACT Act 
requires the Board to conduct a study of the ability of consumers to 
avoid receiving these prescreened solicitations (including using the 
mechanism described above), and the potential impact that any further 
restrictions on providing consumers with such prescreened solicitations 
would have on consumers.

DATES: Comments must be received by July 23, 2004.

ADDRESSES: You may submit comments, identified by Docket No. OP-1195, 
by any of the following methods:
 Agency Web Site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments on the http://www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm.
 Federal eRulemaking Portal: http://www.regulations.gov. Follow 
the instructions for submitting comments.
 E-mail: [email protected]. Include docket 
number in the subject line of the message.
 FAX: 202/452-3819 or 202/452-3102.
 Mail: Jennifer J. Johnson, Secretary, Board of Governors of 
the Federal Reserve System, 20th Street and Constitution Avenue, N.W., 
Washington, DC 20551.
    All public comments are available from the Board's web site at 
www.federalreserve.gov/generalinfo/foia/ProposedRegs.cfm as submitted, 
except as necessary for technical reasons. Accordingly, your comments 
will not be edited to remove any identifying or contact information. 
Public comments may also be viewed electronically or in paper in Room 
MP-500 of the Board's Martin Building (20th and C Streets, N.W.) 
between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: Krista P. DeLargy, Senior Attorney, 
and David A. Stein, Counsel, Division of Consumer and Community 
Affairs, Board of Governors of the Federal Reserve System, at (202) 
452-3667 or 452-2412; for users of Telecommunications Device for the 
Deaf (``TDD'') only, contact (202) 263-4869.

SUPPLEMENTARY INFORMATION:

I. Background

    The Fair and Accurate Credit Transactions Act of 2003 (FACT Act) 
was signed into law on December 4, 2003. Pub. L. 108-159, 117 Stat. 
1952. In general, the FACT Act amends the Fair Credit Reporting Act 
(FCRA) to enhance the ability of consumers to combat identity theft, to 
increase the accuracy of consumer reports, and to allow consumers to 
exercise greater control regarding the type and amount of marketing 
solicitations they receive. The FACT Act also restricts the use and 
disclosure of sensitive medical information. To bolster efforts to 
improve financial literacy among consumers, title V of the Act 
(entitled the ``Financial Literacy and Education Improvement Act'') 
creates a new Financial Literacy and Education Commission empowered to 
take appropriate actions to improve the financial literacy and 
education programs, grants, and materials of the Federal government. 
Lastly, to promote increasingly efficient national credit markets, the 
FACT Act establishes uniform national standards in key areas of 
regulation regarding consumer report information.
    The FCRA currently provides that creditors and insurers in specific 
circumstances may use certain consumer reports as the basis for sending 
unsolicited firm offers of credit or insurance to consumers (so-called 
``prescreened solicitations''). The FCRA provides a mechanism by which 
consumers can elect not to receive these prescreened solicitations, by 
directing consumer reporting agencies (CRAs) to exclude the consumer's 
name and address from lists provided by CRAs to creditors or insurers 
for use in sending these prescreened solicitations.
    Section 213(e) of the FACT Act requires the Board to conduct a 
study of the ability of consumers to avoid receiving prescreened 
solicitations, and the potential impact that any further restrictions 
on providing consumers with such prescreened solicitations would have 
on consumers. The Board must submit a report summarizing the results of 
the study no later than December 4, 2004, which is 12 months after the 
date of enactment of the Act. The report must contain recommendations 
for legislative or administrative actions as the Board may determine to 
be appropriate. In addition, the report must address:
     The current statutory or voluntary mechanisms that are 
available to a consumer to notify lenders and insurance providers that 
the consumer does not wish to receive prescreened solicitations.
     The extent to which consumers are currently utilizing 
existing statutory and voluntary mechanisms to avoid receiving 
prescreened solicitations.
     The benefits provided to consumers as a result of 
receiving prescreened solicitations.
     Whether consumers incur significant costs or are otherwise 
adversely affected by the receipt of prescreened solicitations.
     Whether further restricting the ability of lenders and 
insurers to provide prescreened solicitations would affect (1) the cost 
consumers pay to obtain credit or insurance; (2) the availability of 
credit or insurance; (3) consumers' knowledge about new or alternative 
products and services; (4) the ability of lenders or insurers to 
compete with one another; and (5) the ability to offer credit or 
insurance products to consumers who have been traditionally 
underserved.

II. FCRA Statutory Provisions on Prescreened Solicitations

    Current Provisions
    The FCRA establishes requirements for CRAs when furnishing consumer 
reports for use in connection with prescreened solicitations. A CRA may 
only furnish a person with consumer reports for such prescreening 
purposes if: (1) the consumer authorizes the CRA to provide such report 
to such person; or (2) the transaction consists of a ``firm offer of 
credit or insurance,'' as defined in section 603(l) of the FCRA; the 
CRA has established the required procedures to permit consumers to 
elect to be excluded from prescreened lists; and no such election is in 
effect as to the consumer. 15 U.S.C. 1681b(c)(1). A

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``firm offer of credit or insurance'' is any offer of credit or 
insurance to a consumer that will be honored if the consumer is 
determined, based on information in a consumer report on the consumer, 
to meet the specific criteria used to select the consumer for the 
offer, except that the offer may be further conditioned in certain 
circumstances outlined in section 603(l) of the FCRA. 15 U.S.C. 
1681a(l).
    A person receiving a prescreened list from a CRA may, as to each 
consumer on the list, receive only the following information: (1) the 
name and address of the consumer; (2) an identifier that is not unique 
to the consumer and that is used by the person solely for the purpose 
of verifying the identity of the consumer (such as a partial social 
security number); and (3) other information about the consumer that 
does not identify the relationship or experience of the consumer with a 
particular creditor or other entity. 15 U.S.C. 1681b(c)(2).
    As indicated above, a CRA must establish procedures that allow a 
consumer to notify the agency that the consumer elects to be excluded 
from prescreened lists furnished by the agency. A consumer may notify 
the agency through a notification system maintained by the agency 
(which must include a toll-free telephone number) or by submitting a 
signed ``notice of election form'' issued by the agency. 15 U.S.C. 
1681b(e)(2), (5). Currently under the FCRA, requests made through the 
notification system maintained by the agency expire two years following 
notification, unless the consumer revokes the election. 15 U.S.C. 
1681b(e)(4). Requests made through a signed notice of election form 
never expire, although they may be revoked by the consumer. 15 U.S.C. 
1681b(e)(4).\1\
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    \1\ When a consumer contacts an agency through the notification 
system, the agency must inform the consumer that the election is 
effective only for the 2 year period following the election if the 
consumer does not submit to the agency a signed notice of election 
form issued by the agency. The agency also must provide to the 
consumer a notice of election form, upon request of the consumer. 15 
U.S.C. 1681b(e)(3).
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    Currently under the FCRA, any person who uses a consumer report on 
any consumer in connection with a prescreened solicitation must provide 
with each written solicitation to the consumer, a clear and conspicuous 
statement that: (1) information contained in a consumer's consumer 
report was used in connection with the offer; (2) the consumer received 
the offer because he or she satisfied the criteria for creditworthiness 
or insurability used to screen for the offer; (3) if applicable, the 
credit or insurance may not be extended if, after the consumer 
responds, it is determined that the consumer does not meet the criteria 
used for screening or any applicable criteria bearing on 
creditworthiness or insurability, or the consumer does not furnish 
required collateral; and (4) the consumer has the right to prohibit use 
of information in the consumer's file in connection with future 
prescreened offers of credit or insurance by contacting the 
notification system established by the CRA that provided the report. 
The address and toll-free telephone number of the appropriate 
notification system also must be provided. 15 U.S.C. 1681m(d).
    FACT Act Amendments
    Section 213 of the FACT Act amends the FCRA with respect to 
prescreened solicitations in two ways. First, section 213(a) amends the 
FCRA to require that the notice provided by creditors or insurers with 
each written unsolicited prescreened offer, as discussed above, be 
presented in such format and in such type size and manner as to be 
simple and easy to understand, as established by regulations issued by 
the Federal Trade Commission, in consultation with the federal banking 
agencies and the National Credit Union Administration. These 
regulations must be issued in final form not later than 12 months after 
the date of enactment of the FACT Act, or December 4, 2004. Second, 
section 213(c) of the FACT Act extends from two years to five years the 
effective period of a consumer's election not to receive prescreened 
solicitations through a telephone notification system. This provision 
will become effective December 1, 2004. (69 FR 6526, Feb. 11, 2004).

III. Request for Specific Information

    As described above, section 213(e) of the FACT Act requires the 
Board to conduct a study, and report its finding to Congress, of the 
ability of consumers to avoid receiving prescreened solicitations, and 
the potential impact that any further restrictions on providing 
consumers with such prescreened solicitations would have on consumers. 
In conducting the study, the Board is requesting public comment on the 
following issues:
     To what extent are insurance providers providing 
prescreened solicitations to consumers?
     What statutory or voluntary mechanisms are available to a 
consumer to notify lenders and insurance providers that the consumer 
does not wish to receive prescreened solicitations?
     To what extent are consumers currently utilizing existing 
statutory and voluntary mechanisms to avoid receiving prescreened 
solicitations? For example, what percent of consumers (who have files 
at consumer reporting agencies) opt out of receiving prescreened 
solicitations for credit or for insurance?
     What are the benefits to consumers in receiving 
prescreened solicitations? Please be specific.
     What significant costs or other adverse effects, if any, 
do consumers incur as a result of receiving prescreened solicitations? 
Please be specific. For example, to what extent, if any, do prescreened 
solicitations contribute to identity theft or other fraud? What percent 
of fraud-related losses are due to identity theft emanating from 
prescreened solicitations?
     What additional restrictions, if any, should be imposed on 
consumer reporting agencies, lenders, or insurers to restrict the 
ability of lenders and insurers to provide prescreened solicitations to 
consumers? How would these additional restrictions benefit consumers? 
How would these additional restrictions affect the cost consumers pay 
to obtain credit or insurance, the availability of credit or insurance, 
consumers' knowledge about new or alternative products and services, 
the ability of lenders or insurers to compete with one another, and the 
ability of creditors or insurers to offer credit or insurance products 
to consumers who have been traditionally underserved? Please be 
specific.
* * * * *

    By order of the Board of Governors of the Federal Reserve 
System, May 18, 2004.
Jennifer J. Johnson,
Secretary of the Board
[FR Doc. 04-11607 Filed 5-21-04; 8:45 am]
BILLING CODE 6210-01-S