[Federal Register Volume 69, Number 114 (Tuesday, June 15, 2004)]
[Proposed Rules]
[Pages 33324-33341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13481]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 69, No. 114 / Tuesday, June 15, 2004 / 
Proposed Rules  

[[Page 33324]]



FEDERAL TRADE COMMISSION

16 CFR Part 680

RIN 3084-AA94


Affiliate Marketing Rule

AGENCY: Federal Trade Commission (FTC).

ACTION: Proposed rule, request for comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is 
publishing for comment a proposed rule that is required by Section 
214(b) of the Fair and Accurate Credit Transactions Act of 2003 (FACT 
Act), with respect to entities subject to its jurisdiction under 
Section 621(a) of the Fair Credit Reporting Act (FCRA). Section 214(a) 
of the FACT Act amends the FCRA by adding a new section 624, which the 
proposed regulations implement by providing for consumer notice and an 
opportunity to prohibit affiliates from using certain information to 
make or send marketing solicitations to the consumer. The FACT Act 
requires certain other federal agencies to publish similar rules, and 
mandates that the FTC and other agencies consult and cooperate so that 
their regulations implementing this provision are consistent and 
comparable with one another.

DATES: Comments must be received by July 20, 2004.

ADDRESSES: Interested parties are invited to submit written comments. 
Comments should refer to ``FACT Act Affiliate Marketing Rule, Matter 
No. R411006'' 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 or delivered to: Federal Trade 
Commission, Office of the Secretary, Room H-159 (Annex Q), 600 
Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing 
confidential material must be filed in paper form clearly labeled 
``Confidential,'' and comply with the Commission Rule 4.9(c). 16 CFR 
4.9(c). Any comment filed in paper form should be sent by courier or 
overnight service, because U.S. postal mail in the Washington area and 
at the Commission is subject to delay due to heightened security 
precautions.
    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,'' ``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, 
Attention: Desk Officer for Federal Trade Commission. Comments should 
be submitted via facsimile to (202) 395-6974 because U.S. postal mail 
at the Office of Management and Budget is subject to lengthy delays due 
to heightened security precautions. Such comments should also be sent 
to the following address: Federal Trade Commission/Office of the 
Secretary, Room H-159 (Annex Q), 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, 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 at http://www.ftc.gov to the extent practicable. 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: Toby M. Levin and Loretta Garrison, 
Attorneys, (202) 326-3224, Division of Financial Practices, Federal 
Trade Commission, 601 New Jersey Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

The Fair Credit Reporting Act

    The Fair Credit Reporting Act (FCRA or Act), enacted in 1970, sets 
standards for the collection, communication, and use of information 
bearing on a consumer's credit worthiness, credit standing, credit 
capacity, character, general reputation, personal characteristics, or 
mode of living that is collected and communicated by consumer reporting 
agencies. 15 U.S.C. 1681-1681x. In 1996, the Consumer Credit Reporting 
Reform Act extensively amended the FCRA. Pub. L. 104-208, 110 Stat. 
3009.
    The FCRA, as amended, provides that a person may communicate to an 
affiliate or non-affiliated third party information solely as to 
transactions or experiences between the consumer and the person without 
becoming a consumer reporting agency.\1\ In addition, the communication 
of such transaction or experience information among affiliates will not 
result in any affiliate becoming a consumer reporting agency. See FCRA 
Sec. Sec.  603(d)(2)(A)(i) and (ii).
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    \1\ The FCRA creates substantial obligations for a person that 
meets the definition of a ``consumer reporting agency''(CRA) in 
section 603(f) of the statute. Most importantly, CRAs must make 
reports only to parties with permissible purposes listed in section 
604, limit reporting of negative information that is older than the 
times set out in section 605, maintain reasonable procedures to 
ensure accuracy of reports as required by section 607(b), make file 
disclosures to consumers required by section 609, and reinvestigate 
disputes using the procedures set forth in section 611.
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    Section 603(d)(2)(A)(iii) of the FCRA provides that a person may 
communicate ``other'' information--that is, non-transaction or 
experience information that would otherwise be a ``consumer report''--
among its affiliates without becoming a consumer reporting

[[Page 33325]]

agency if the person has given the consumer a clear and conspicuous 
notice that such information may be communicated among affiliates and 
an opportunity to ``opt-out'' or direct that the information not be 
communicated, and the consumer has not opted out. The notice and opt-
out provided in section 603(d)(2)(A)(iii) of the FCRA was the subject 
of a proposed rulemaking by the Federal banking agencies in October 
2000.\2\ 65 FR 63120 (Oct. 20, 2000). The Commission, which did not 
have FCRA rulemaking authority, shortly thereafter issued for public 
comment a proposed interpretation of the affiliate information sharing 
provisions that was parallel to the banking agencies' proposed rule. 65 
FR 80202 (Dec. 22, 2000). The banking agencies and the Commission had 
not completed action in those proceedings when Congress enacted the 
FACT Act.
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    \2\ The banking agencies are the Office of the Comptroller of 
the Currency, the Federal Reserve Board, the Federal Deposit 
Insurance Corporation, and the Office of Thrift Supervision. The 
National Credit Union Administration proposed a virtually identical 
rule to apply to institutions subject to its jurisdiction 
immediately thereafter. 65 FR 64168 (Oct. 26, 2000)
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    The current proposal addresses a new notice and opt-out provision 
that applies to the use of certain information by one member of a 
business family, when received from an affiliate, to make or send 
marketing solicitations for its products and services to consumers. 
Although there is a certain degree of overlap between the two opt-outs, 
the two opt-outs are distinct and serve different purposes. Therefore, 
nothing in this proposal regarding the opt-out for affiliate marketing 
supersedes or replaces the affiliate sharing opt-out contained in 
section 603(d)(2)(A)(iii) of the Act.\3\
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    \3\ The proposed regulations would implement the restrictions on 
the use of consumer information under Section 624 of the amended 
FCRA, but do not address the provisions of Section 603(d)(3) 
regarding the sharing of medical information among affiliates. 
Although Section 604(g)(3)(C) grants the Commission the authority to 
make a rule with respect to the sharing by affiliates of medical 
information, it is not doing so at this time.
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The Fair and Accurate Credit Transactions Act of 2003

    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. The FACT Act amends the FCRA to enhance the ability of consumers 
to combat identity theft, to increase the accuracy of consumer reports, 
to allow consumers to exercise greater control regarding the type and 
amount of solicitations they receive, and to restrict the use and 
disclosure of sensitive medical information. To promote increasingly 
efficient national credit markets, the FACT Act establishes uniform 
national standards in key areas of regulation regarding consumer report 
information. Finally, to bolster efforts to improve financial literacy 
among consumers, the FACT 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.
    Section 214 of the FACT Act adds a new section 624 of the FCRA. 
This new provision gives consumers the right to restrict a person from 
using certain information about a consumer obtained from an affiliate 
to make solicitations to that consumer. That section also requires the 
Commission and various federal agencies charged with regulating 
financial institutions,\4\ in consultation and coordination with each 
other, to issue regulations in final form implementing section 214 not 
later than 9 months after the date of enactment. These rules must 
become effective not later than 6 months after the date on which they 
are issued in final form.
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    \4\ The ``Agencies'' are the Federal banking agencies (see note 
2), the National Credit Union Administration, and the Securities and 
Exchange Commission.
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II. Explanation of the Proposed Regulations

    New section 624 of the FCRA generally provides that, if a person 
shares certain information about a consumer with an affiliate, the 
affiliate may not use that information to make or send solicitations to 
the consumer about its products or services, unless the consumer is 
given notice and a reasonable opportunity to opt out of such use of the 
information and the consumer does not opt out. Section 624 governs the 
use of information by an affiliate, not the sharing of information with 
or among affiliates. As such, the new opt-out right contained in 
section 624 is distinct from the existing FCRA opt-out right for 
affiliate sharing under section 603(d)(2)(A)(iii), although these opt-
out rights and the information subject to these opt-outs overlap to 
some extent. As noted above, the FCRA allows some information 
(transaction or experience information) to be shared among affiliates 
without giving the consumer notice and an opportunity to opt out, and 
provides that ``other'' information may not be shared among affiliates 
without giving the consumer notice and an opportunity to opt out. The 
new opt-out right for affiliate marketing generally applies to both 
transaction or experience information and ``other'' information.
    The Commission seeks comment on these proposed regulations 
implementing section 624 of the FCRA, including in particular the 
matters discussed below, especially from (1) Consumers and (2) 
companies who believe they face considerations not applicable to 
institutions regulated by federal financial agencies.

Responsibility for Providing Notice and an Opportunity To Opt Out

    Section 624 does not specify which affiliate must give the consumer 
notice and an opportunity to opt out of the use of the information by 
an affiliate for marketing purposes. Under one view, the person that 
receives certain consumer information from its affiliate and wants to 
use that information to make or send solicitations to the consumer 
could be responsible for giving the notice because the statute is 
drafted as a prohibition on the affiliate that receives the information 
from using such information to send solicitations, rather than as an 
affirmative duty imposed on the affiliate that sends or communicates 
that information. On the other hand, section 624(a)(1)(A) provides that 
the disclosure must state that the information ``may be communicated'' 
among affiliates for purposes of making solicitations, suggesting that 
the affiliate that sends or communicates information about a consumer 
should be responsible for providing the notice. In addition, section 
214(b)(2) of the FACT Act requires the Commission to consider existing 
affiliate sharing notification practices and provide for coordinated 
and consolidated notices. Similarly, section 214 allows for the 
combination of affiliate marketing opt-out notices with other notices 
required by law, which may include Gramm-Leach-Bliley Act (GLB Act) 
privacy notices. Thus, the provisions of section 214 suggest that the 
person communicating information about a consumer to its affiliate 
should give the notice because that is the person that would likely 
provide the affiliate sharing opt-out notice under section 
603(d)(2)(A)(iii) of the FCRA and other disclosures required by law.
    The Commission proposes that the person communicating information 
about a consumer to its affiliate should be responsible for satisfying 
the notice requirement, if applicable. A rule of construction provides 
flexibility to allow the notice to be given by the person that 
communicates information to its affiliate, by the person's agent, or

[[Page 33326]]

through a joint notice with one or more other affiliates. This approach 
provides flexibility and facilitates the use of a single notice. At the 
same time, it ensures that the notice is not provided solely by the 
affiliate that receives and uses the information to make or send 
solicitations, which may be a person from which the consumer would not 
expect to receive important notices regarding the consumer's opt-out 
rights. The Commission invites comment on whether the affiliate 
receiving the information should be permitted to give the notice solely 
on its own behalf. The Commission specifically solicits comment on 
whether a receiving affiliate could provide notice without making or 
sending any solicitations at the time of the notice and on whether such 
a notice would be effective.

Scope of Coverage

    The statute specifies certain circumstances, which are included in 
the proposed regulations, when the provisions of this part do not 
apply. New section 624(a)(4) provides that the requirements and 
prohibitions of that section do not apply, for example, when: (1) The 
affiliate receiving the information has a pre-existing business 
relationship with the consumer; (2) the information is used to perform 
services for another affiliate (subject to certain conditions); (3) the 
information is used in response to a communication initiated by the 
consumer; or (4) the information is used to make a solicitation that 
has been authorized or requested by the consumer. The Commission has 
incorporated each of these statutory exceptions into the proposed rule.
    The proposal uses the term ``eligibility information'' to describe 
the type of information that the statute allows consumers to bar 
affiliates from using to send marketing solicitations. The formula that 
defines the term in the proposal is designed to precisely reflect 
section 624(a)(1) of the Act--any information the communication of 
which would be a ``consumer report'' if the statutory exclusions from 
the definition of ``consumer report'' in section 603(d)(2)(A) of the 
FCRA (for transaction or experience information and for ``other'' 
information that is subject to the affiliate-sharing opt-out) did not 
apply. Under section 603(d)(1) of the FCRA, a ``consumer report'' means 
any written, oral, or other communication of any information by a 
consumer reporting agency bearing on the consumer's credit worthiness, 
credit standing, credit capacity, character, general reputation, 
personal characteristics, or mode of living which is used or expected 
to be used or collected in whole or in part for the purpose of serving 
as a factor in establishing the consumer's eligibility for credit or 
insurance to be used primarily for personal, family, or household 
purposes, employment purposes, or any other purpose authorized in 
section 604 of the FCRA. The term ``eligibility information'' is 
designed to facilitate discussion, and not to change the scope of 
information covered by section 624(a)(1) of the Act. The Commission 
invites comment on whether the term ``eligibility information,'' as 
defined, appropriately reflects the scope of coverage, or whether the 
regulation should track the more complicated language of the statute 
regarding the communication of information that would be a consumer 
report, but for clauses (i), (ii), and (iii) of section 603(d)(2)(A) of 
the FCRA.

Duration of Opt-Out

    Section 624 provides that a consumer's election to prohibit 
marketing based on shared information shall be effective for at least 5 
years. Accordingly, the proposal provides that a consumer's opt-out 
election is valid for a period of at least 5 years (the opt-out 
period), beginning as soon as reasonably practicable after the 
consumer's opt-out election is received, unless the consumer revokes 
the election in writing, or if the consumer agrees, electronically, 
before the opt-out period has expired. When a consumer opts out, an 
affiliate that receives eligibility information about that consumer 
from another affiliate may not make or send solicitations to the 
consumer during the opt-out period based on that information, unless an 
exception applies or the opt-out is revoked.
    To avoid the cost and burden of tracking consumer opt-outs over 5-
year periods with varying start and end dates and sending out extension 
notices in 5-year cycles, some companies may choose to treat the 
consumer's opt-out election as effective for a period longer than 5 
years, including in perpetuity, unless revoked by the consumer. A 
company that chooses to honor a consumer's opt-out election for more 
than 5 years would not violate the proposed regulations.

Key Definitions

    Section 624 allows eligibility information shared with an affiliate 
to be used by that affiliate in making solicitations in certain 
circumstances, including where the affiliate has a pre-existing 
business relationship with the consumer. The terms ``solicitation'' and 
``pre-existing business relationship'' are defined in the statute and 
the proposed regulation, and discussed in detail below in the Section-
by-Section Analysis. The Commission has the authority to prescribe by 
regulation circumstances other than those specified in the statute that 
would constitute a ``pre-existing business relationship'' or would not 
constitute a ``solicitation.'' The Commission seeks comment on whether 
there are additional circumstances that should be deemed a ``pre-
existing business relationship'' or other types of communications that 
should not be deemed a ``solicitation.''
    The Commission solicits comment on all aspects of the proposal, 
including but not limited to items discussed in the Section-by-Section 
Analysis below.

III. Section-by-Section Analysis

Section 680.1--Purpose, Scope, and Effective Dates

    Proposed Sec.  680.1 sets forth the purpose and scope of the 
proposed regulations.

Section 680.2--Examples

    Proposed Sec.  680.2 describes the use of examples in the proposed 
regulations. In particular, the examples in this part are not 
exclusive. However, compliance with an example, to the extent 
applicable, constitutes compliance with this part. Examples in a 
paragraph illustrate only the issue described in the paragraph and do 
not illustrate any other issue that may arise in this part.

Section 680.3--Definitions

    Proposed Sec.  680.3 contains definitions for the following terms: 
``affiliate'' (as well as the related terms ``company'' and 
``control''); ``clear and conspicuous''; ``communication''; 
``consumer''; ``eligibility information''; ``person''; ``pre-existing 
business relationship''; and ``solicitation.''
Affiliate
    Several FCRA provisions apply to information sharing with persons 
``related by common ownership or affiliated by corporate control,'' 
``related by common ownership or affiliated by common corporate 
control,'' or ``affiliated by common ownership or common corporate 
control.'' E.g., FCRA, sections 603(d)(2), 615(b)(2), and 624(b)(2). 
Section 2 of the FACT Act defines the term ``affiliate'' to mean 
``persons that are related by common ownership or affiliated by 
corporate control.''
    The FCRA, the FACT Act, and the GLB Act contain a variety of 
approaches to the term ``affiliate.'' Proposed

[[Page 33327]]

paragraph (b) simplifies the various FCRA and FACT Act formulations by 
defining ``affiliate'' to mean any person that is related by common 
ownership or common corporate control with another person.\5\ The 
Commission believes it is important to harmonize the various treatments 
of ``affiliate'' as much as possible and construe them to mean the same 
thing. Comment is solicited on whether there is any meaningful 
difference between the FCRA, FACT Act, and GLB Act definitions. In 
addition, the proposal uses a definition of ``control'' that applies 
exclusively to the control of a ``company,'' and defines ``company'' to 
include any corporation, limited liability company, business trust, 
general or limited partnership, association, or similar organization. 
See proposed paragraphs (d) (``company'') and (f) (``control'')
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    \5\ In this rule, ``affiliate'' refers to any entity over which 
the Commission has FCRA enforcement authority under section 
621(a)(1), which is universal except where ``specifically committed 
to some other government agency under subsection (b) hereof.'' 
Section 621(b) assigns federal bank and other agencies to enforce 
the statute as to certain banks, savings associations, credit 
unions, transportation and agricultural entities to other agencies. 
Because the Commission has enforcement authority over FCRA 
provisions as to all entities not assigned to other agencies, it is 
quite possible that in some corporate families one affiliate (e.g., 
a mortgage lender) may be subject to the jurisdiction of the 
Commission while another (e.g., a bank) would be subject to the 
jurisdiction of a different federal regulator.
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Clear and Conspicuous
    Proposed paragraph (c) defines the term ``clear and conspicuous'' 
to mean reasonably understandable and designed to call attention to the 
nature and significance of the information presented. Companies retain 
flexibility in determining how best to meet the clear and conspicuous 
standard.
    Companies may wish to consider a number of methods to make their 
notices clear and conspicuous. A notice or disclosure may be made 
reasonably understandable through methods that include but are not 
limited to: using clear and concise sentences, paragraphs, and 
sections; using short explanatory sentences; using bullet lists; using 
definite, concrete, everyday words; using active voice; avoiding 
multiple negatives; avoiding legal and highly technical business 
terminology; and avoiding explanations that are imprecise and are 
readily subject to different interpretations. Various methods may also 
be used to design a notice or disclosure to call attention to the 
nature and significance of the information in it, including but not 
limited to: using a plain-language heading; using a typeface and type 
size that are easy to read; using wide margins and ample line spacing; 
using boldface or italics for key words. Companies that provide the 
notice on a web page may use text or visual cues to encourage scrolling 
down the page if necessary to view the entire notice, and take steps to 
ensure that other elements on the web site (such as pop-up ads, text, 
graphics, hyperlinks, or sound) do not distract attention from the 
notice.
    When a notice or disclosure is combined with other information, 
methods for designing the notice or disclosure to call attention to the 
nature and significance of the information in it may include using 
distinctive type sizes, styles, fonts, paragraphs, headings, graphic 
devices, and groupings or other devices. It is unnecessary, however, to 
use distinctive features, such as distinctive type sizes, styles, or 
fonts, to differentiate an affiliate marketing opt-out notice from 
other components of a required disclosure, for example, where a privacy 
notice under the GLB Act includes several opt-out disclosures in a 
single notice. Nothing in the clear and conspicuous standard requires 
the segregation of an affiliate marketing opt-out notice when it is 
combined with a privacy notice under the GLB Act or other required 
disclosures.
    It may not be feasible to incorporate all of the methods described 
above all the time. For example, a company may have to use legal 
terminology, rather than everyday words, in certain circumstances to 
provide a precise explanation. Companies are encouraged, but not 
required, to consider the practices described above in designing their 
notices or disclosures, as well as using readability testing to devise 
notices that are understandable to consumers.
Consumer
    Proposed paragraph (e) defines the term ``consumer'' to mean an 
individual, which follows the statutory definition in section 603(c) of 
the FCRA. For purposes of this definition, an individual acting through 
a legal representative qualifies as a consumer.
Eligibility Information
    Under proposed paragraph (g), the term ``eligibility information'' 
means any information the communication of which would be a consumer 
report if the exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the FCRA did not apply. Eligibility information 
may include a person's own transaction or experience information, such 
as information about a consumer's account history with that person, and 
other information, such as information from credit bureau reports or 
applications.
Person
    Proposed paragraph (h) defines the term ``person'' to mean any 
individual, partnership, corporation, trust, estate, cooperative, 
association, government or governmental subdivision or agency, or other 
entity. A person may act through an agent, such as a licensed agent (in 
the case of an insurance company), a trustee (in the case of a trust), 
or any other agent. For purposes of this part, actions taken by an 
agent on behalf of a person that are within the scope of the agency 
relationship will be treated as actions of that person.
Pre-Existing Business Relationship
    Proposed paragraph (i) defines this term to mean a relationship 
between a person and a consumer based on the following: (1) A financial 
contract between the person and the consumer that is in force; (2) the 
purchase, rental, or lease by the consumer of that person's goods or 
services, or a financial transaction (including holding an active 
account or a policy in force or having another continuing relationship) 
between the consumer and that person, during the 18-month period 
immediately preceding the date on which a solicitation covered by 16 
CFR 680 is made or sent to the consumer; or (3) an inquiry or 
application by the consumer regarding a product or service offered by 
that person during the 3-month period immediately preceding the date on 
which a covered solicitation is made or sent to the consumer. The 
proposed definition generally tracks the statutory definition contained 
in section 624 of the Act, with certain revisions for clarity.
    In regard to sales and leases of goods or services, and consumer 
inquiries about such transactions, the definition is substantially 
similar to the definition of ``established business relationship'' 
under the amended Telemarketing Sales Rule (TSR) (16 CFR 310.2(n)). 
That definition was informed by Congress's intent that the 
``established business relationship'' exemption to the ``do not call'' 
provisions of the Telephone Consumer Protection Act (47 U.S.C. 227 et 
seq.) should be grounded on the reasonable expectations of the 
consumer.\6\ Congress's incorporation of similar language in the 
definition of ``pre-existing business relationship'' \7\ suggests that 
it would be appropriate to

[[Page 33328]]

consider the reasonable expectations of the consumer in determining the 
scope of this exception. Thus, for purposes of this regulation, an 
inquiry includes any affirmative request by a consumer for information, 
such that the consumer would reasonably expect to receive information 
from the affiliate about its products or services.\8\ A consumer would 
not reasonably expect to receive information from the affiliate if the 
consumer does not request information or does not provide contact 
information to the affiliate.
    The Commission has the statutory authority to define in the 
regulations other circumstances that qualify as a pre-existing business 
relationship. The Commission has not proposed to exercise this 
authority to expand the definition of ``pre-existing business 
relationship'' beyond the circumstances set forth in the statute. 
Comment is solicited, however, on whether there are other circumstances 
that the Commission should include within the definition of ``pre-
existing business relationship.''
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    \6\ H.R. Rep. No. 102-317, at 14-15 (1991). 68 FR 4580, 4591-94 
(Jan. 29, 2003).
    \7\ 149 Cong. Rec. S13,980 (daily ed. Nov. 5, 2003) (statement 
of Senator Feinstein).
    \8\ See 68 FR at 4594.
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Solicitation
    Proposed paragraph (j) defines this term to mean marketing 
initiated by a person to a particular consumer that is based on 
eligibility information communicated to that person by its affiliate 
and is intended to encourage the consumer to purchase a product or 
service. A communication, such as a telemarketing solicitation, direct 
mail, or e-mail, is a solicitation if it is directed to a specific 
consumer based on eligibility information. The proposed definition of 
solicitation does not, however, include communications that are 
directed at the general public without regard to eligibility 
information, even if those communications are intended to encourage 
consumers to purchase products and services from the person initiating 
the communications. The proposed definition tracks the statutory 
definition contained in section 624 of the Act, with certain revisions 
for clarity.
    The Commission has the statutory authority to determine by 
regulation that other communications do not constitute a solicitation. 
The Commission has not proposed to exercise this authority to specify 
other communications that would not be deemed ``solicitations'' beyond 
the circumstances set forth in the statute.
    Comment is solicited, however, on whether there are other 
communications that the Commission should determine do not meet the 
definition of ``solicitation.'' Comment is also requested on whether, 
and to what extent, various tools used in Internet marketing, such as 
pop-up ads, may constitute solicitations as opposed to communications 
directed at the general public, and whether further guidance is needed 
to address Internet marketing.

Section 680.20--Use of Eligibility Information by Affiliates for 
Marketing

    Proposed Sec.  680.20 establishes the basic rules governing the 
requirement to provide the consumer with notice and a reasonable 
opportunity to opt out of a person's use of eligibility information 
that it obtains from an affiliate for the purpose of making or sending 
solicitations to the consumer. The statute is ambiguous because it does 
not specify which affiliate must provide the opt-out notice to the 
consumer. The proposed regulation would resolve this ambiguity by 
imposing certain duties on the person that communicates the eligibility 
information and certain duties on the affiliate that receives the 
information with the intent to use that information to make or send 
solicitations to consumers. These bifurcated duties are set forth in 
paragraphs (a) and (b).
    Paragraph (a) sets forth the duty of a person that communicates 
eligibility information to an affiliate. Under the proposal, before an 
affiliate may use eligibility information to make or send solicitations 
to the consumer, the person that communicates eligibility information 
about a consumer to an affiliate must provide a notice to the consumer 
stating that such information may be communicated to and used by the 
affiliate to make or send solicitations to the consumer regarding the 
affiliate's products and services, and must give the consumer a 
reasonable opportunity and a simple method to opt out.
    Some organizations may choose to share eligibility information 
among affiliates but not allow the affiliates that receive that 
information to use it to make or send marketing solicitations. In that 
case, proposed paragraph (a) would not apply and an opt-out notice 
would not be required if none of the affiliates that receive 
eligibility information use it to make or send solicitations to 
consumers.
    Under the proposal, paragraph (a) would not apply if, for example, 
a finance company asks its affiliated retailer to include finance 
company marketing material in periodic statements sent to consumers by 
the retailer without regard to eligibility information. The Commission 
invites comment on whether, given the policy objectives of section 214 
of the FACT Act, proposed paragraph (a) should apply if affiliated 
companies seek to avoid providing notice and opt-out by engaging in the 
``constructive sharing'' of eligibility information to conduct 
marketing. For example, the Commission requests commenters to consider 
the applicability of paragraph (a) in the following circumstance. A 
consumer has a relationship with a retailer, and the retailer is 
affiliated with a finance company. The finance company provides the 
retailer with specific eligibility criteria, such as consumers having a 
credit limit in excess of $3,000, for the purpose of having the 
retailer make solicitations on behalf of the finance company to 
consumers that meet those criteria. Additionally, the consumer 
responses provide the finance company with discernible eligibility 
information, such as a response form that is coded to identify the 
consumer as an individual who meets the specific eligibility criteria.
    Proposed paragraph (a) also contains two rules of construction. The 
first rule of construction provides that the notice may be provided 
either in the name of a person with which the consumer currently does 
or previously has done business or in one or more common corporate 
names shared by members of an affiliate group of companies that 
includes the common corporate name used by that person. The rule of 
construction also provides alternatives regarding the manner in which 
the notice is given. A person that communicates eligibility information 
to an affiliate may provide the notice directly to the consumer, or may 
use an agent to provide the notice on the person's behalf. If the agent 
is the person's affiliate, the agent may not include any solicitations 
other than those of the person on or with the notice, unless one of the 
exceptions in paragraph (c) applies. Additionally, the agent must 
provide the opt-out notice in the name of the person or a common 
corporate name.\9\ If an agent is used, the person remains responsible 
for any failure of the agent to fulfill its notice obligations. 
Alternatively, a person may provide a joint notice with one or more of 
its affiliates as provided in Sec.  680.24(c) and discussed more fully 
below.
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    \9\ If the principal is a financial institution, and the agent 
sending the notice is not an affiliate, the agent would only be 
permitted to use the information for limited purposes under the GLB 
Act privacy regulations. 16 CFR 313.11(a)(1).
---------------------------------------------------------------------------

    This rule of construction strikes a balance between giving 
companies flexibility to allow different entities within the affiliated 
group to provide the notice while ensuring that the notice

[[Page 33329]]

provided to the consumer is meaningful and designed to be effective. 
Thus, an opt-out notice provided to the consumer solely in the name of 
an affiliate that receives eligibility information but that is not 
known or recognizable to the consumer as an entity with which the 
consumer does or has done business is not likely to be an effective 
notice. For example, if the consumer has a relationship with the ABC 
affiliate, but the opt-out notice is provided solely in the name of the 
XYZ affiliate--which does not share a common name with the ABC 
affiliate--the notice is not likely to be effective. Indeed, many 
consumers may disregard a notice from the XYZ affiliate on the 
assumption that the notice is unsolicited junk mail. If, however, the 
consumer has a relationship with the ABC affiliate, and the opt-out 
notice is provided jointly in the name of all affiliated companies that 
share the ABC name and the XYZ name, the notice is likely to be 
effective.
    The second rule of construction makes clear that it is not 
necessary for each affiliate that communicates the same eligibility 
information to provide an opt-out notice to the consumer, so long as 
the notice provided by the affiliate that initially communicated the 
information is broad enough to cover use of that information by each 
affiliate that receives and uses it to make solicitations. For example, 
if affiliate A communicates eligibility information to affiliate B, and 
affiliate B communicates that same information to affiliate C, 
affiliate B does not have to provide the consumer with an opt-out 
notice, so long as affiliate A's notice is broad enough to cover both 
B's and C's use of that information to make solicitations to the 
consumer. Examples are provided to illustrate how the rules of 
construction work.
    Paragraph (a) contemplates that the opt-out notice will be provided 
to the consumer in writing or, if the consumer agrees, electronically. 
The Commission notes that the methods discussed above for complying 
with the statutory ``clear and conspicuous'' provision do not apply to 
oral notices, and seeks comment on whether (1) there are circumstances 
in which it is necessary and appropriate to allow an oral notice, and 
(2) there exists any practical method for meeting the ``clear and 
conspicuous'' standard in oral notices.
    Paragraph (b) sets forth the general duties of an affiliate that 
receives eligibility information (``the receiving affiliate''). The 
receiving affiliate may not use eligibility information it receives 
from an affiliate to make solicitations to the consumer unless, prior 
to such use, the consumer has been provided an opt-out notice, as 
described in paragraph (a), that applies to that affiliate's use of 
eligibility information and a reasonable opportunity and simple method 
to opt out and the consumer did not opt out of that use.
    Paragraphs (a) and (b) focus on whether the information 
communicated to affiliates meets the definition of ``eligibility 
information.'' Section 624(a)(1) of the Act concerns ``a communication 
of information that would be a consumer report, but for clauses (i), 
(ii), and (iii) of section 603(d)(2)(A).'' The Commission has proposed 
to define ``eligibility information'' in a manner consistent with the 
statutory definition. The Commission recognizes, however, that there 
are other exceptions to the statutory definition of ``consumer 
report,'' such that it may be burdensome for companies to determine and 
track whether consumer report information is eligibility information 
(to which the marketing opt-out provisions of section 624 apply) or 
information that may be shared with affiliates under other exceptions 
in the FCRA (to which the marketing opt-out provisions of section 624 
do not apply). To minimize this burden, the Commission believes that 
companies may satisfy the requirements of section 624 by voluntarily 
offering consumers the ability to opt out of marketing based on 
consumer report information that is shared under any of the exceptions 
in section 603(d)(2) of the FCRA, not just those in section 
603(d)(2)(A), as required by section 624.
    Paragraph (c) contains exceptions to the requirements of this 
regulation. It incorporates each of the following statutory exceptions 
to the affiliate marketing notice and opt-out requirements set forth in 
section 624(a)(4) of the FCRA: (1) Using the information to make a 
solicitation to a consumer with whom the affiliate has a pre-existing 
business relationship; (2) using the information to facilitate 
communications to an individual for whose benefit the affiliate 
provides employee benefit or other services under a contract with an 
employer related to and arising out of a current employment 
relationship or an individual's status as a participant or beneficiary 
of an employee benefit plan; (3) using the information to perform 
services for another affiliate, unless the services involve sending 
solicitations on behalf of the other affiliate and such affiliate is 
not permitted to send such solicitations itself as a result of the 
consumer's decision to opt out; (4) using the information to make 
solicitations in response to a communication initiated by the consumer; 
(5) using the information to make solicitations in response to a 
consumer's request or authorization for a solicitation; or (6) if 
compliance with the requirements of section 624 by the affiliate would 
prevent that affiliate from complying with any provision of state 
insurance laws pertaining to unfair discrimination in a state where the 
affiliate is lawfully doing business. Several of these exceptions are 
discussed below.
    Proposed paragraph (c)(1) clarifies that the provisions of this 
subpart do not apply where the affiliate using the information to make 
a solicitation to a consumer has a ``pre-existing business 
relationship'' with that consumer, a key term discussed in detail 
above. Proposed paragraph (d)(1) provides examples of the pre-existing 
business relationship exception.
    Proposed paragraph (c)(3) clarifies that the provisions of this 
part do not apply where the information is used to perform services for 
another affiliate, except that the exception does not permit the 
service provider to make or send solicitations on behalf of itself or 
an affiliate if the service provider or the affiliate, as applicable, 
would not be permitted to make or send such solicitations as a result 
of the consumer's election to opt out. Thus, when the notice has been 
provided to a consumer and the consumer has opted-out, an affiliate 
subject to the consumer's opt-out election that has received 
eligibility information from a person that has a relationship with the 
consumer may not circumvent the opt-out by instructing the person with 
the consumer relationship or another affiliate to make or send 
solicitations to the consumer on its behalf. The Commission requests 
comment on whether there are other means of circumvention that the 
final rule should also address.
    Proposed paragraph (c)(4) incorporates the statutory exception for 
information used in response to a communication initiated by the 
consumer. The proposed rule clarifies that this exception may be 
triggered by an oral, electronic, or written communication initiated by 
the consumer. To be covered by the proposed exception, use of 
eligibility information must be responsive to the communication 
initiated by the consumer. For example, if a consumer calls an 
affiliate to ask about retail locations and hours, the affiliate may 
not then use eligibility information to make solicitations to the 
consumer about specific products because those solicitations would not 
be responsive to the consumer's communication.

[[Page 33330]]

Conversely, if the consumer calls an affiliate to ask about its 
products or services, then solicitations related to those products or 
services would be responsive to the communication and thus permitted 
under the exception. The time period during which solicitations remain 
responsive to the consumer's communication will depend on the facts and 
circumstances. The proposal also contemplates that a consumer has not 
initiated a communication if an affiliate makes the initial call and 
leaves a message for the consumer to call back, and the consumer 
responds. Proposed paragraph (d)(2) provides examples of the consumer-
initiated communications exception.
    Proposed paragraph (c)(5) provides that the provisions of this 
subpart do not apply where the information is used to make 
solicitations affirmatively authorized or requested by the consumer. 
This provision may be triggered by an oral, electronic, or written 
authorization or request by the consumer. Under the proposal, a pre-
selected check box or boilerplate language in a disclosure or contract 
would not constitute an affirmative authorization or request.
    The exception in paragraph (c)(5) could be triggered, for example, 
if a consumer obtains a mortgage from a mortgage lender and authorizes 
or requests to receive solicitations about homeowner's insurance from 
an insurance affiliate of the mortgage lender. Under this exception, 
the consumer may provide the authorization or make the request either 
through the person with whom the consumer has a business relationship 
or directly to the affiliate that will make the solicitation. In 
addition, the duration of the authorization or request will depend on 
the facts and circumstances. Finally, nothing in this exception 
supercedes the restrictions contained in the Telemarketing Sales Rule, 
including the ``Do-Not-Call List'' established by the FTC and the 
Federal Communications Commission. Proposed paragraph (d)(3) provides 
an example of the affirmative authorization or request exception.
    The exceptions in proposed paragraphs (c)(1), (4), and (5) 
described above overlap in certain situations. For example, if a 
lender's customer makes a telephone call to the lender's insurance 
affiliate and requests information about homeowner or auto policies, 
the insurance affiliate may use information about the consumer it 
obtains from the lender to make or send solicitations in response to 
the telephone call initiated by the consumer under the exception in 
paragraph (c)(4) for responding to a communication initiated by the 
consumer. In addition, the consumer's request for information from the 
insurance affiliate triggers the exceptions in paragraph (c)(1) for 
inquiries by the consumer regarding a product or service offered by the 
insurance affiliate under the statutory definition of a ``pre-existing 
business relationship'' as well as the exception in paragraph (c)(5) 
for a use in response to a solicitation requested by the consumer.
    Proposed paragraph (e) provides that the provisions of this part do 
not apply to eligibility information that was received by an affiliate 
prior to the date on which compliance with these regulations is 
required. This incorporates a limitation contained in the statute. The 
mandatory compliance date will be included in the final rule. Comment 
is requested on what the mandatory compliance date should be and 
whether it should be different from the effective date of the final 
regulations.
    Finally, proposed paragraph (f) clarifies the relationship between 
the affiliate sharing notice and opt-out under section 
603(d)(2)(A)(iii) of the FCRA and the affiliate marketing notice and 
opt-out in new section 624 of the Act. Specifically, it provides that 
nothing in 16 CFR Part 680 (these affiliate marketing regulations) 
limits the responsibility of a company to comply with the notice and 
opt-out provisions of section 603(d)(2)(A)(iii) of the Act before it 
shares information other than transaction or experience information 
with an affiliate, in order to avoid becoming a consumer reporting 
agency.
Section 680.21--Contents of Opt-Out Notice
    Proposed Sec.  680.21 addresses the contents of the opt-out notice. 
Proposed paragraph (a) requires that the opt-out notice be clear, 
conspicuous, and concise, and accurately disclose: (1) That the 
consumer may elect to limit a person's affiliate from using eligibility 
information about the consumer that it obtains from that person to make 
or send solicitations to the consumer; (2) if applicable, that the 
consumer's election will apply for a specified period of time and that 
the consumer will be allowed to extend the election once that period 
expires; and (3) a reasonable and simple method for the consumer to opt 
out. (The notice will specify the actual length of time the consumer's 
election will apply.) Use of the model form in Appendix A, in 
appropriate circumstances, would comply with paragraph (a), but is not 
required. Paragraph (a) reflects the intent of Congress, as expressed 
in section 624(a)(2)(B) of the FCRA, that the notice required by this 
part must be ``clear, conspicuous, and concise,'' and that the method 
for opting-out must be ``simple.''
    Proposed paragraph (b) defines the term ``concise'' to mean a 
reasonably brief expression or statement. Paragraph (b) also provides 
that a notice required by this part may be concise even if it is 
combined with other disclosures required or authorized by federal or 
state law. Such disclosures include, but are not limited to, a notice 
under the GLB Act, a notice under section 603(d)(2)(A)(iii) of the 
FCRA, and other similar consumer disclosures. Finally, paragraph (b) 
clarifies that the requirement for a concise notice would be satisfied 
by the appropriate use of one of the model forms contained in Appendix 
A to this part, although use of the model forms is not required.
    Proposed paragraph (c) provides that the notice may allow a 
consumer to choose from a menu of alternatives when opting out, such as 
by selecting certain types of affiliates, certain types of information, 
or certain modes of delivery from which to opt out, so long as one of 
the alternatives gives the consumer the opportunity to opt out with 
respect to all affiliates, all eligibility information, and all methods 
of delivering solicitations.
    Proposed paragraph (d) provides that, where a company elects to 
give consumers a broader right to opt out of marketing than is required 
by law, the company may modify the contents of the opt-out notice to 
reflect accurately the scope of the opt-out right it provides to 
consumers. Appendix A provides Model Form A-3 that may be helpful for 
companies that wish to allow consumers to prevent all marketing from 
the company and its affiliates, but use of the model form is not 
required.

Section 680.22--Reasonable Opportunity To Opt Out

    Proposed paragraph (a) provides that before the affiliate uses the 
eligibility information to make or send solicitations to the consumer, 
the person that communicates such eligibility information to the 
affiliate must provide the consumer with a reasonable opportunity to 
opt out following delivery of the opt-out notice. Given the variety of 
circumstances in which companies must provide a reasonable opportunity 
to opt out, the Commission believes that a reasonable opportunity to 
opt out should be construed as a general test that avoids setting a 
mandatory waiting period in all cases. A general

[[Page 33331]]

standard would provide flexibility to allow affiliates to use 
eligibility information received from another affiliate to make or send 
solicitations at an appropriate point in time which may vary depending 
upon the circumstances, while assuring that the consumer is given a 
realistic opportunity to prevent such use of this information. The 
Commission also believes that providing examples for what constitutes a 
reasonable opportunity to opt out may be useful by illustrating how the 
opt-out might work in different situations and by providing a safe 
harbor for opt-out periods of 30 days in certain situations. Although 
30 days is a safe harbor, a person subject to this requirement may 
decide, at its option, to give consumers more than 30 days in which to 
decide whether or not to opt-out. Whether a shorter waiting period 
would be adequate in certain situations depends on the circumstances.
    Proposed paragraphs (b)(1) and (2) contain examples of reasonable 
opportunities to opt out by mail or by electronic means that parallel 
examples used in the GLB Act privacy rules. The example of a reasonable 
opportunity to opt out for notices given by electronic means in 
paragraph (b)(2) is triggered by the consumer's acknowledgment of 
receipt of the electronic notice, consistent with an example in the GLB 
Act privacy regulations. 16 CFR 313.10(a)(3)(iii). Of course, these 
examples assume the consumer has agreed to electronic delivery under 
proposed Sec.  680.23(a)(3).
    Proposed paragraph (b)(3) would provide an example of a reasonable 
opportunity to opt out where, in a transaction that is conducted 
electronically, the consumer is required to decide, as a necessary part 
of proceeding with the transaction, whether or not to opt out before 
completing the transaction, so long as the company provides a simple 
process right at the Internet Web site that the consumer may use at 
that time to opt out. In this example, the opt-out notice would 
automatically be provided to the consumer, such as through a non-
bypassable link to an intermediate webpage, or ``speedbump.'' The 
consumer would be given a choice of either opting-out or not opting-out 
at that time through a simple process conducted at the web site. For 
example, the consumer could be required to check a box right at the 
Internet web site in order to opt out or decline to opt out before 
continuing with the transaction. However, this example would not cover 
a situation where the consumer is required to send a separate e-mail or 
visit a different Internet Web site in order to opt out. The Commission 
seeks comment on whether this is a good example of a reasonable 
opportunity to opt out, and whether additional protections or 
clarifications are needed. Proposed paragraph (b)(4) illustrates that 
including the affiliate marketing opt-out notice in a notice under the 
GLB Act will satisfy the reasonable opportunity standard. In such 
cases, the consumer should be allowed to exercise the opt-out in the 
same manner and be given the same amount of time to exercise the opt-
out as is provided for any other opt-out provided in the GLB Act 
privacy notice. This example is consistent with the statutory 
requirement that the Commission consider methods for coordinating and 
combining notices.
    Proposed paragraph (b)(5) illustrates how an ``opt-in'' can meet 
the requirement to provide a reasonable opportunity to opt out. 
Specifically, if a company has a policy of not allowing its affiliates 
to use eligibility information to market to consumers without the 
consumer's affirmative consent, providing the consumer with an 
opportunity to ``opt in'' or affirmatively consent to such use 
constitutes a reasonable opportunity to opt out. The Commission views 
the term ``affirmative'' to mean a knowing action by the consumer to 
receive marketing solicitations. The requirement that the company must 
``document'' the consumer's consent is not satisfied by a paragraph in 
a lengthy form provided to the consumer, but rather requires evidence 
that the opt-in was a conscious choice by the consumer. The paragraph 
specifies one example of an ostensible opt-in that would not be 
evidence of the consumer's affirmative consent--a pre-selected check 
box.
    The proposed regulations do not require companies subject to this 
rule to disclose in their opt-out notices how long a consumer has to 
respond to the opt-out notice before eligibility information 
communicated to other affiliates will be used to make or send 
solicitations to the consumer. Companies, however, have the flexibility 
to include such disclosures in their notices. In this respect, the 
proposed regulations are consistent with the GLB Act privacy 
regulations. The Commission solicits comment on whether companies 
subject to the proposed rule should be required to disclose in their 
opt-out notices how long a consumer has to respond to the opt-out 
notice. If so, why? If not, why not?

Section 680.23--Reasonable and Simple Methods of Opting Out

    Proposed paragraph (a) sets forth reasonable and simple methods of 
opting out. These examples generally track the examples of reasonable 
opt-out means from the GLB Act privacy regulations with certain 
revisions to give effect to Congress's mandate that methods of opting-
out be simple. See 16 CFR 313.7(a)(2)(ii). For simplicity, the example 
in paragraph (a)(2) contemplates including a self-addressed envelope 
with the reply form and opt-out notice. In regard to the example in 
paragraph (a)(4) of a toll-free telephone number that consumers can 
call to opt out, the Commission contemplates that it would be 
adequately designed and staffed, as necessary, to enable consumers to 
opt out in a single phone call.
    Proposed paragraph (b) sets forth methods of opting-out that are 
not reasonable and simple. Such methods include requiring the consumer 
to write a letter to the company or to call or write to obtain an opt-
out form rather than including it with the notice. In addition, a 
consumer who agrees to receive the opt-out notice in electronic form 
only, such as by electronic mail or a process at a web site, should be 
allowed to opt out by the same or a substantially similar electronic 
form and should not be required to opt out solely by telephone or paper 
mail.

Section 680.24--Delivery of Opt-Out Notices

    Proposed paragraph (a) provides that a company must deliver an opt-
out notice so that each consumer can reasonably be expected to receive 
actual notice. For opt-out notices delivered electronically, the 
notices may be delivered either in accordance with the electronic 
disclosure provisions in this subpart or in accordance with the 
Electronic Signatures in Global and National Commerce Act.\10\ Under 
the example in proposed paragraph (b)(1)(iii), the company may e-mail 
its notice to a consumer who has agreed to the electronic delivery of 
information or provide the notice on its Internet web site for the 
consumer who obtains a product or service electronically from that web 
site. That example is virtually identical to an example in the GLB Act 
Privacy Rule. 16 CFR 313.9(b)(1)(iii).
---------------------------------------------------------------------------

    \10\ Pub. L. No. 106-229, 114 Stat. 464 (2000). Because nothing 
in Section 624 of the Act requires that the notice be provided in 
writing, the ESIGN Act's provisions requiring consumer consent to 
electronic delivery of the FCRA opt-out notices would not apply.
---------------------------------------------------------------------------

    As indicated by the examples provided in proposed paragraph (b), 
the

[[Page 33332]]

standard described in paragraph (a) is a lesser standard than actual 
notice. For instance, if a person subject to the rule mails a printed 
copy of its notice to the last known mailing address of a consumer, the 
person has met its obligation even if the consumer has changed 
addresses and never receives the notice.
    Proposed paragraph (c) permits a person subject to this rule to 
provide a joint opt-out notice with one or more of its affiliates that 
are identified in the notice, so long as the notice is accurate with 
respect to each affiliate jointly issuing the notice. A joint notice 
does not have to list each affiliate participating in the joint notice 
by its name. If each affiliate shares a common name, such as ``ABC,'' 
then the joint notice may state that it applies to ``all companies with 
the ABC name'' or ``all affiliates in the ABC family of companies.'' 
If, however, an affiliate does not have ABC in its name, then the joint 
notice must separately identify that company or family of companies 
with a common name.
    Proposed paragraph (d)(1) sets out rules that apply when two or 
more consumers jointly obtain a product or service from a person 
subject to this rule (referred to in the proposed regulation as joint 
consumers), such as a loan to two consumers (joint debtors). For 
example, a lender subject to this rule may provide a single opt-out 
notice to two joint debtors. The notice must indicate whether the 
person will consider an opt-out by one joint debtor as an opt-out by 
both, or whether each consumer may opt out separately. The person may 
not require both consumers to opt out before honoring an opt-out 
direction by one of them. Paragraph (d)(2) gives examples of these 
rules.
    Proposed paragraph (d)(1)(vii) and the example in paragraph 
(d)(2)(iii) address the situation where only one of two joint consumers 
has opted out. Those paragraphs are derived from similar provisions in 
the GLB Act privacy regulations. Because section 624 of the FCRA deals 
with the use of information for marketing by affiliates, rather than 
the sharing of information among affiliates, comment is requested on 
whether information about a joint account should be allowed to be used 
for making solicitations to a joint consumer who has not opted out.

Section 680.25--Duration and Effect of Opt-Out

    Proposed Sec.  680.25 addresses the duration and effect of the 
consumer's opt-out election. Proposed paragraph (a) provides that the 
consumer's election to opt out shall be effective for the opt-out 
period, which is a period of at least 5 years, beginning as soon as 
reasonably practicable after the consumer's opt-out election is 
received. Nothing in this paragraph limits the ability of affiliated 
persons to set an opt-out period longer than 5 years, including an opt-
out period that does not expire unless revoked by the consumer. No opt-
out period, however, may be less than 5 years. In addition, if a 
consumer elects to opt out every year, a new opt-out period of at least 
5 years begins upon receipt of each successive opt-out election.
    Proposed paragraph (b) provides that a receiving affiliate may not 
make or send solicitations to a consumer during the opt-out period 
based on eligibility information it receives from an affiliate, except 
as provided in the exceptions in Sec.  680.20(c) or if the opt-out is 
revoked by the consumer. Under this paragraph, the opt-out is tied to 
the consumer, not to the information. Thus, if a consumer initially 
elects to opt out, but does not extend the opt-out upon expiration of 
the opt-out period, a receiving affiliate may use all eligibility 
information it has received about the consumer from its affiliate, 
including eligibility information that it received during the opt-out 
period. However, if the consumer subsequently opts out again some time 
after the initial opt-out period has lapsed, a receiving affiliate may 
not use any eligibility information about the consumer it has received 
from an affiliate on or after the mandatory compliance date for the 
regulations under this part, including information it received during 
the period in which no opt-out election was in effect.\11\
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    \11\ Section 624(a)(5) of the FCRA is a non-retroactivity 
provision, which states that nothing shall prohibit the use of 
information to send a solicitation to a consumer if such information 
was received prior to the date on which persons are required to 
comply with the regulations implementing section 624.
---------------------------------------------------------------------------

    Proposed paragraph (c) clarifies that a consumer may opt out at any 
time. Thus, even if the consumer did not opt out in response to the 
initial opt-out notice or if the consumer's election to opt out is not 
prompted by an opt-out notice, a consumer may still opt out. Regardless 
of when the consumer opts out, the opt-out must be effective for a 
period of at least 5 years.
    Proposed paragraph (d) describes how the termination of a consumer 
relationship affects the consumer's opt-out. Specifically, if a 
consumer's relationship with a company terminates for any reason when a 
consumer's opt-out election is in force, the opt-out will continue to 
apply indefinitely, unless revoked by the consumer.

Section 680.26--Extension of Opt-Out

    Proposed Sec.  680.26 describes the procedures for extension of an 
opt-out. Proposed paragraph (a) provides that a receiving affiliate may 
not make or send solicitations to the consumer after the expiration of 
the opt-out period based on eligibility information it receives or has 
received from an affiliate, unless the person responsible for providing 
the initial opt-out notice, or its successor, has given the consumer an 
extension notice and a reasonable opportunity to extend the opt-out, 
and the consumer does not extend the opt-out. If an extension notice is 
not provided to the consumer, the opt-out period continues 
indefinitely. The requirement to provide an extension notice also 
applies when a consumer fails to opt out initially, but at a subsequent 
point in time informs the company of his or her decision to opt out, 
which would be effective for a period of at least 5 years. The consumer 
may extend the opt-out at the expiration of each successive opt-out 
period. Paragraph (b) also provides that each opt-out extension must 
comply with Sec.  680.25(a), which means that it must be effective for 
a period of at least 5 years.
    Proposed paragraph (c) addresses the contents of an extension 
notice. A notice under paragraph (c) must be clear and conspicuous, and 
concise. Paragraph (c) provides some flexibility in the design and 
contents of the notice. Under one approach, the notice must accurately 
disclose the same items required to be disclosed in the initial opt-out 
notice under Sec.  680.21(a), along with a statement explaining that 
the consumer's prior opt-out has expired or is about to expire, as 
applicable, and that if the consumer wishes to keep the consumer's opt-
out election in force, the consumer must opt out again. Under another 
approach, the extension notice would provide that: (1) The consumer 
previously elected to limit an affiliate from using eligibility 
information about the consumer that it obtains from the communicating 
affiliate to make or send solicitations to the consumer; (2) the 
consumer's election has expired or is about to expire, as applicable; 
(3) the consumer may elect to extend the consumer's previous election; 
and (4) a reasonable and simple method for the consumer to opt out. The 
Agencies propose to give companies the flexibility to decide which of 
these notices best meets their needs.
    Companies do not need to provide extension notices if they treat 
the consumer's opt-out election as valid in perpetuity, unless revoked 
by the consumer. Comment is requested on whether companies plan to 
limit the

[[Page 33333]]

duration of the opt-out or not, and on the relative burdens and 
benefits of the two approaches.
    Proposed paragraph (d) addresses the timing of the extension notice 
and provides that an extension notice can be given to the consumer 
either a reasonable period of time before the expiration of the opt-out 
period, or any time after the expiration of the opt-out period but 
before solicitations that would have been prohibited by the expired 
opt-out are made to the consumer. Providing the extension notice a 
reasonable period of time before the expiration of the opt-out period 
is appropriate to facilitate the smooth transition of consumers that 
choose to change their election.
    An extension notice given too far in advance of the expiration of 
the opt-out period, however, may be confusing to consumers. The 
Commission does not propose to set a fixed time for what would 
constitute a reasonable period of time before the expiration of the 
opt-out period to send an extension notice, because a reasonable period 
of time may depend upon the amount of time afforded to the consumer for 
a reasonable opportunity to opt out, the amount of time necessary to 
process opt-outs, and other factors. Nevertheless, providing an 
extension notice on or with the last annual privacy notice required by 
the GLB Act privacy provisions sent to the consumer before the 
expiration of the opt-out period shall be deemed reasonable in all 
cases. Proposed paragraph (e) makes clear that sending an extension 
notice to the consumer before the expiration of the opt-out period does 
not shorten the 5-year opt-out period.
    Including an affiliate marketing opt-out notice or an extension 
notice on an initial or annual notice under the GLB Act raises special 
issues, because GLB Act notices typically state that the consumer does 
not need to opt out again if the consumer previously opted-out. This 
statement would be accurate if the company and its affiliates choose to 
make the affiliate marketing opt-out effective in perpetuity. However, 
if the opt-out period is limited to a defined period of 5 years or 
more, such a statement would not be accurate with respect to the 
extension notice, and the notice would have to make clear to the 
consumer the necessity of opting-out again in order to extend the opt-
out.

Section 680.27--Consolidated and Equivalent Notices

    Proposed Sec.  680.27 implements section 624(b) of the Act, and 
provides that a notice required by this subpart may be coordinated and 
consolidated with any other notice or disclosure required to be issued 
under any other provision of law, including but not limited to the 
notice described in section 603(d)(2)(A)(iii) of the Act and the notice 
required by title V of the GLB Act. A notice or other disclosure that 
is equivalent to the notice required by this subpart, and that is 
provided to a consumer together with disclosures required by any other 
provision of law, shall satisfy the requirements of this subpart.
    Comment is solicited on whether the affiliate marketing notice will 
be consolidated with the GLB Act privacy notice or the affiliate 
sharing opt-out notice under section 603(d)(2)(A)(iii) of the FCRA, 
whether the Agencies have provided sufficient guidance on consolidated 
notices, and whether consolidation would be helpful to consumers.

Effective Date

    Consistent with the requirements of section 624 of the FACT Act, 
the proposed regulations will become effective 6 months after the date 
on which they are issued in final form. The Commission requests comment 
on whether there is any need to delay the compliance date beyond the 
effective date, to permit financial institutions to incorporate the 
affiliate marketing notice into their next annual GLB Act notice.

Appendix A

    The Commission is proposing model forms to illustrate by way of 
example how companies may comply with the notice and opt-out 
requirements of section 624 and the proposed regulations. Ideally, the 
Commission would test the proposed model forms both alone and in 
conjunction with other opt-out notices under the FCRA and GLB Act. 
Because consumer testing is unlikely to be undertaken and completed 
before this rule is issued in final form, we solicit comment on these 
proposals at this time.
    Appendix A includes three proposed model forms. Model Form A-1 is a 
proposed form of an initial opt-out notice. Model Form A-2 is a 
proposed form of an extension notice. Model Form A-3 is a proposed form 
that companies may use if they offer consumers a broader right to opt 
out of marketing than is required by law.
    Use of the model forms is not mandatory. Companies have the 
flexibility to use or not use the model forms, or to modify the forms, 
so long as the requirements of the regulation are met. For example, 
although Model Forms A-1 and A-2 use 5 years as the duration of the 
opt-out period, companies are free to choose an opt-out period of 
longer than 5 years and substitute the longer time period in the opt-
out notices. Alternatively, companies may choose to treat the 
consumer's opt-out as effective in perpetuity and thereby omit any 
reference to the limited duration of the opt-out period or the right to 
extend the opt-out in the initial opt-out notice.
    Each of the proposed model forms is designed as a stand-alone form. 
The Commission anticipates that some companies that are financial 
institutions subject to the GLB Act may want to combine the opt-out 
form with the privacy notice required by that law. If so combined, the 
Commission expects that companies would integrate the affiliate 
marketing opt-out notice with other required disclosures and avoid 
repetition of certain information, such as the methods for opting-out. 
Developing a model form that combines various opt-out notices, however, 
is beyond the scope of this rulemaking.
    The proposed model forms have been designed to convey the necessary 
information to consumers as simply as possible. The Commission and 
other Agencies have tested the proposed model forms using two widely 
available readability tests, the Flesch reading ease test and the 
Flesch-Kincaid grade level test, each of which generates a score.\12\ 
Proposed Model Form A-1 has a Flesch reading ease score of 53.7 and a 
Flesch-Kincaid grade level score of 9.9. Proposed Model Form A-2 has a 
Flesch reading ease score of 57.5 and a Flesch-Kincaid grade level 
score of 9.6. Proposed Model Form A-3 has a Flesch reading ease score 
of 69.9 and a Flesch-Kincaid grade level score of 6.7.
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    \12\ The Flesch reading ease test generates a score between zero 
and 100, where the higher score correlates with improved 
readability. The Flesch-Kincaid grade level test generates a 
numerical assessment of the grade-level at which the text is 
written.
---------------------------------------------------------------------------

    The Commission recognizes the benefits of working with 
communications experts and conducting consumer testing to achieve 
better and more readable consumer opt-out notices. Comment is solicited 
on the form and content of the proposed model forms based on 
commenters' work with communications experts and experience with 
consumer testing. Comment is also requested on whether companies would 
combine the affiliate marketing notice with other opt-out notices or 
issue a separate affiliate marketing opt-out notice, and how those two 
approaches may affect consumer comprehension of the notices and their 
rights. In developing a final rule, the Commission will carefully 
consider any consumer

[[Page 33334]]

testing that may suggest ways to improve the proposed model forms, 
including efforts by consumer groups and industry, as well as the 
Commission's own initiative to consider alternative forms of privacy 
notices under the GLB Act. See 68 FR 75164 (Dec. 30, 2003).

IV. Communications by Outside Parties to Commissioners or 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. See 16 CFR. 1.26(b)(5).

V. Paperwork Reduction Act

    The Commission has submitted this proposed rule and a Supporting 
Statement to the Office of Management and Budget for review under the 
Paperwork Reduction Act (``PRA'') (44 U.S.C. 3501-3517). As required by 
the FACT Act, the proposed rule specifies disclosure requirements for 
certain affiliated companies subject to the Commission's jurisdiction. 
These requirements may constitute ``collections of information'' for 
purposes of the PRA. See 5 CFR 1320.3(c). The FACT Act and the proposed 
rule require covered entities to provide consumers with notice and an 
opportunity to opt out of the use of certain information for sending 
marketing solicitations. The proposed rule generally provides that, if 
a company communicates certain information about a consumer 
(``eligibility information'') to an affiliate, the affiliate may not 
use that information to make or send solicitations to the consumer 
unless the consumer is given notice and a reasonable opportunity to opt 
out of such use of the information and the consumer does not opt out. 
Where the company has chosen to set a limited time period for the opt-
out (no less than 5 years), the company must provide prior to the 
expiration of the opt-out, a notice that the consumer has a right to 
extend the opt-out for an additional period of time of at least 5 years 
(``extension notice''). There are a number of exceptions to these 
requirements. Moreover, although its disclosure requirements are 
expressly required by the FACT Act, the Commission's proposed rule 
provides flexibility in implementing these requirements.
    The Commission's staff does not know how many companies subject to 
the FTC's jurisdiction under the proposed rule actually share 
eligibility information among affiliates and use such information to 
make marketing solicitations to consumers. The estimates provided in 
this paperwork burden analysis, therefore, may well overstate the 
actual burden. The entities covered by the proposed rule include firms 
from a wide variety of industries engaged in business with consumers, 
including non-bank lenders, insurers, retailers, landlords, mortgage 
brokers, automobile dealers, telecommunication firms, and any other 
businesses that may communicate what the proposed rule defines as 
``eligibility information'' to their affiliates.
    The Commission's staff estimates that there are 7.7 million 
businesses that are subject to the FTC's jurisdiction, because they are 
not subject to the jurisdiction of one of the other Agencies 
responsible for enforcing the FACT Act.\13\ The staff estimates that 
some 7.6 million of these are non-GLBA entities \14\ and subject to the 
FTC's jurisdiction. Because the proposed rule addresses the practices 
only of affiliated companies, the staff estimates that 16.75 percent, 
or 1.2 million non-GLBA companies, are in affiliated relationships and 
thus potentially subject to the proposed rule.\15\ The staff further 
estimates that there are an average of 5 businesses per family or 
affiliated relationship, and that affiliated entities will choose to 
send a joint notice as permitted by the proposed rule. Thus, an 
estimated 238,000 non-GLBA entities may send the new affiliate 
marketing notice.
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    \13\ This estimate is derived from an analysis of a database of 
U.S. businesses based on SIC codes for businesses that market goods 
or services to consumers, which included the following industries: 
transportation services; communication; electric, gas, and sanitary 
services; retail trade; finance, insurance, and real estate; and 
services (excluding business services and engineering, management 
services).
    \14\ Staff estimates that about 100,000 entities are subject to 
the Commission's GLBA privacy notice regulation. The paperwork 
burden for GLBA entities has been analyzed separately.
    \15\ See, note 13.
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    Non-GLBA companies that will need to send a notice, however, should 
not incur significant start-up burdens and attendant costs, because the 
proposed rule provides a model disclosure, which should reduce costs 
significantly. Therefore, the staff estimates the hour burden for non-
GLBA companies to be 3,335,000 hours and the cost burden to be 
$81,072,000 for the first year of the clearance period, which includes 
the start-up burden and attendant costs, such as determining compliance 
obligations.\16\ The staff estimates that the paperwork burden in 
subsequent years will be significantly lower because creating the 
notice is generally a one-time cost that will have already been 
incurred.\17\ Thus, staff estimates the annual burden for the non-GLBA 
entities, averaged over the three year clearance period, to be 
2,699,000 hours and $62,656,000. Moreover, this estimate is likely to 
overstate the actual burden because a number of non-GLBA companies 
provide notices and opt-out choices voluntarily as a service to their 
customers, and many businesses may not even share eligibility 
information to market to consumers. The number of such companies, 
however, is not known at this time.
---------------------------------------------------------------------------

    \16\ The estimate of hours is based upon 7 hours of managerial 
skills at $31.55 per hour, 2 hours of technical skills at $26.44 per 
hour, and 5 hours of clerical skills at $13.33 per hour, which 
totals 14 hours per affiliated family of companies. (Bureau of Labor 
Statistics, Table 1, July 2002; http://www.bls.gov/ncs/ocs/sp/ncbl0539.pdf).
    \17\ Staff estimates that in subsequent years, non-GLBA 
companies will spend 4 hours of managerial time, 1 hour of technical 
time, and 5 hours of clerical time per affiliated family of 
companies. Thus the annual burden for the remaining two years of the 
clearance will be 2,382,000 hours and $53,448,000.
---------------------------------------------------------------------------

    Staff estimates that about 100,000 entities are subject to the 
Commission's GLBA privacy notice regulation and, therefore, already 
provide privacy notices to their customers. Because the proposed rule 
addresses the practices only of affiliated companies, the staff 
estimates that 16.75 percent of the GLBA companies, or 16,750 
companies, are affiliated entities subject to the new notice 
requirement.\18\ As noted above, the staff is estimating that there are 
an average of 5 businesses per family or affiliated relationship, and 
that affiliated entities will choose to send a joint notice as 
permitted by the proposed rule. Thus, an estimated 3,350 GLBA companies 
may send the new affiliate marketing notice.
---------------------------------------------------------------------------

    \18\ See, note 13.
---------------------------------------------------------------------------

    Because the FACT Act and proposed rule contemplate that the new 
affiliate marketing notice can be included in the GLBA notices, the 
burden on GLBA-regulated entities is greatly reduced. Costs are also 
reduced because the proposed rule provides model notices. Therefore, 
the staff estimates that incorporating the new disclosure into the GLBA 
notice will take approximately 5 hours of managerial time to understand 
the compliance obligations and only an hour to execute the notice, 
given that the proposed rule provides a model. No additional clerical 
costs should be incurred, if the new disclosure is combined with the 
GLBA notices. So, for the approximately 3,350 affiliated GLBA entities 
under the FTC's jurisdiction, the total burden hours for

[[Page 33335]]

the first year of the clearance period are estimated to be 20,000 hours 
and the total costs $617,000.\19\ The staff has estimated that the 
paperwork burden in subsequent years will be lower because creating the 
notice is generally a one-time cost that will have already been 
incurred.\20\ Thus, the staff estimates the annual burden for the GLBA 
entities, averaged over the three year clearance period, to be 15,600 
hours and $487,500.
---------------------------------------------------------------------------

    \19\ These estimates are based on 5 hours of managerial time at 
$31.55 per hour ($157.75) and one hour of technical time at $26.44 
per hour. (Bureau of Labor Statistics, Table 1, July 2002; http://www.bls.gov/ncs/ocs/sp/ncbl0539.pdf)
    \20\ Staff estimates that in subsequent years, GLBA companies 
will spend 3 hours of managerial time, 1 hour of technical time. No 
clerical time is estimated as the notice will likely be combined 
with existing GLBA notices. Thus the annual burden for the remaining 
two years of clearance will be 13,400 hours and $422,800.
---------------------------------------------------------------------------

    In sum, the staff has estimated that the average annual burden over 
the first three years for both GLBA and non-GLBA companies to be 
2,715,000 in burden hours and $63,144,000 in labor costs.
    The Commission invites comment 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. 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. Comments must be received on or before July 20, 2004. 
Comments should refer to ``FACT Act Affiliate Marketing Rule, Matter 
No. R411006'' 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 or delivered to the following 
address: Federal Trade Commission/Office of the Secretary, Room H-159 
(Annex Q), 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.'' \21\ The FTC is requesting that any comment filed in 
paper form be sent by courier or overnight service, if possible, 
because U.S. postal mail in the Washington area and at the Commission 
is subject to delay due to heightened security precautions.
---------------------------------------------------------------------------

    \21\ 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).
---------------------------------------------------------------------------

    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,'' ``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, 
Attention: Desk Officer for the Federal Trade Commission. Comments 
should be submitted via facsimile to (202) 395-6974 because U.S. postal 
mail at the Office of Management and Budget is subject to lengthy 
delays due to heightened security precautions. Such comments should 
also be sent to the following address: Federal Trade Commission/Office 
of the Secretary, Room H-159 (Annex Q), 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, 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.

VII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612, 
requires an agency to provide an Initial Regulatory Flexibility 
Analysis (``IRFA'') with a proposed rule and a Final Regulatory 
Flexibility Analysis (``FRFA'') 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 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 
and requests public comment in the following areas.

A. Reasons for the Proposed Rule

    Section 214 of the FACT Act (which adds a new section 624 to the 
FCRA) generally prohibits a person from using certain information 
received from an affiliate to make a solicitation for marketing 
purposes to a consumer, unless the consumer is given notice and an 
opportunity and simple method to opt out of the making of such 
solicitations. Section 214 also requires the Agencies, including the 
Commission, in consultation and coordination with each other, to issue 
regulations implementing the section that are as consistent and 
comparable as possible. The FTC is publishing its proposed rule 
separately from the other Agencies, but it is comparable in all 
substantive respects to the proposed rule published by the other 
Agencies.

B. Statement of Objectives and Legal Basis

    The objectives of the proposed Rule are discussed in the 
Supplementary Information section above. The legal basis for the 
proposed rule is section 214 of the FACT Act.

[[Page 33336]]

C. Description of Small Entities to Which the Proposed Rule Will Apply

    The FTC's proposed affiliate marketing rule, which closely tracks 
the language of section 214 of the FACT Act, would apply to ``[a]ny 
person that receives from another person related to it by common 
ownership or affiliated by corporate control a communication of 
information that would be a consumer report, but for clauses (i), (ii), 
and (iii) of section 603(d)(2)(A).'' In short, section 214 applies to 
any entity that (1) is under the FTC's jurisdiction pursuant to the 
FCRA and (2) receives consumer report information from an affiliate and 
uses that information to make a marketing solicitation to the consumer.
    As discussed above, the entities covered by the proposed rule would 
include non-bank lenders, insurers, retailers, landlords, mortgage 
brokers, automobile dealers, telecommunication firms, and any other 
business that shares eligibility information with its affiliates. It is 
not readily feasible to determine a precise number of small entities 
that will be subject to the proposed rule, but it is not likely that 
many of the entities covered by this new rule are small as defined by 
the Small Business Administration since most of the entities with 
affiliates are likely to be above the $6 M level. See http://www.sba.gov/size/indextableofsize.html. The Commission invites comment 
and information on the number and type of small entities affected by 
the proposed rule.

D. Projected Reporting, Recordkeeping and Other Compliance Requirements

    The proposed rule requires entities subject to section 624 of the 
FCRA to provide consumers notice and an opportunity to opt out of 
affiliates' use of the shared information for marketing solicitations. 
For those entities that provide the section 624 notice consolidated 
with the GLBA notices or other federally-mandated disclosures, the 
proposed rule imposes very limited additional reporting or 
recordkeeping requirements within the meaning of the PRA, as discussed 
above. However, for those entities that choose to send the notices 
separately, or that are not subject to the GLB Act, the reporting and 
recordkeeping requirements here may be substantial. The Commission, 
however, does not have a practicable or reliable basis for quantifying 
the costs of the proposed rule.
    Any analysis of the impact of this law and its implementing 
regulation must take into consideration that it is rather limited in 
its scope. First, the new law only applies to the use by affiliates of 
shared information for sending marketing solicitations. Thus, 
affiliates that do marketing based solely upon their own information 
are not affected by this law. Second, the new law provides for a number 
of exceptions, including permitting entities to market to consumers 
with whom they have a ``pre-existing business relationship'' or from 
whom they have received a specific request, orally, electronically, or 
in writing for information. And finally, the new law also permits 
entities to market to the general public without triggering the notice 
and opt-out obligations.
    A number of alternatives exist, however, to reduce the costs 
presented by compliance with the proposed rule. First, significant cost 
savings may be obtained by consolidating these notices with the GLBA 
privacy notice. Consolidated notices may also be less confusing to 
consumers. In addition, the Agencies have included model forms for opt-
out notices that the Agencies would deem to comply with the 
requirements of the proposed regulation and that entities could 
customize to suit their needs. Furthermore, the proposal would permit 
companies to offer consumers a permanent opt-out from the sharing of 
information for making or sending solicitations among affiliates, which 
would be consistent with the GLBA and FCRA opt-outs and would reduce 
recordkeeping requirements. Small entities, therefore, may wish to 
consider whether consolidation of their notices and opt-outs can reduce 
their compliance costs.
    Affiliates that communicate or receive eligibility information will 
likely need the advice of legal counsel to ensure that they comply with 
the rule, and may also require computer programming changes and 
additional staff training. Tracking the notice and opt-outs to prevent 
violations of the rule may not be a significant burden on any entity 
using database software to maintain their customer information. Such 
software should enable an entity to easily tag the customer database 
information with the opt-out requirement. The use of technology to 
track the opt-outs may reduce the costs of implementation.
    The Commission is concerned about the potential impact of the 
proposed rule on small entities, and invites comment on the costs of 
compliance for such parties. 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, the 
Commission should consider, as well as the costs and benefits of those 
alternatives, paying specific attention to the effect of the rule on 
small entities in light of the above analysis. Costs to implement and 
comply with the rule include expenditures of time and money for any 
employee training, attorney, or other professional time and preparing 
and processing the notices.

E. Identification of Other Duplicative, Overlapping, or Conflicting 
Federal Rules

    With the exception of the opt-out for information other than 
transaction or experience information in section 603(d)(2)(A)(iii), the 
Commission is unable to identify any federal statutes or regulations 
that would duplicate, overlap, or conflict with the proposed rule. The 
overlap of the proposed rule and section 603(d)(2)(A)(iii) is discussed 
in the Supplementary Information section. The Commission seeks comment 
regarding any other statutes or regulations, including state or local 
statutes or regulations, that would duplicate, overlap, or conflict 
with the proposed rule.

F. Discussion of Significant Alternatives

    The Commission has considered whether and how the obligations of 
section 624 can be modified to address the concerns of small entities. 
Section 214 of the FACT Act (which adds a new section 624 to the FCRA) 
generally provides that, if a person shares certain information about a 
consumer with an affiliate, the affiliate may not use that information 
to make or send solicitations to the consumer about its products or 
services, unless the consumer is given notice and a reasonable 
opportunity to opt out of such use of the information and the consumer 
does not opt out. As discussed above in section D of this subpart, the 
law's limited scope (including the threshold requirement that it be an 
affiliated entity) reduces the burden on small entities, as do a number 
of implementation procedures provided for in the proposed rule.
    The Commission welcomes comments on any significant alternatives, 
consistent with the mandate in section 214 to restrict the use of 
certain information for marketing solicitations, that would minimize 
the impact of the proposed rule on small entities.

List of Subjects in 16 CFR Part 680

    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 add a new 16 CFR Part 680, to read as follows:

[[Page 33337]]

PART 680--AFFILIATE USE OF INFORMATION FOR MARKETING PURPOSES

Sec.
680.1 Purpose and scope
680.2 Examples
680.3 Definitions
680.4-680.19 [Reserved]
680.20 Affiliate use of eligibility information for marketing 
solicitations
680.21 Contents of opt-out notice
680.22 Reasonable opportunity to opt out
680.23 Reasonable and simple methods of opting out
680.24 Delivery of opt-out notices
680.25 Duration and effect of opt-out
680.26 Extension of opt-out
680.27 Consolidated and equivalent notices

Appendix A to Part 680

    Authority: 15 U.S.C. 1681s; sec. 214, Pub. L. 108-159; 117 Stat. 
1952.

Sec.  680.1  Purpose and scope.

    (a) Purpose. This part implements section 214 of the Fair and 
Accurate Credit Transactions Act of 2003, which is designed to allow 
consumers to prohibit (``opt out'' of) the use of certain information 
about them to send marketing solicitations.
    (b) Scope. This part applies to any person over which the Federal 
Trade Commission has jurisdiction that shares information with 
affiliated persons to make or send marketing solicitations.


Sec.  680.2  Examples.

    The examples in this part are not exclusive. Compliance with an 
example, to the extent applicable, constitutes compliance with this 
part.


Sec.  680.3  Definitions.

    As used in this part, unless the context requires otherwise:
    (a) Act means the Fair Credit Reporting Act (15 U.S.C. 1681 et 
seq.).
    (b) Affiliate means any person that is related by common ownership 
or common corporate control with another person.
    (c) Clear and conspicuous means reasonably understandable and 
designed to call attention to the nature and significance of the 
information presented.
    (d) Company means any corporation, limited liability company, 
business trust, general or limited partnership, association, or similar 
organization.
    (e) Consumer means an individual.
    (f) Control of a company means:
    (1) Ownership, control, or power to vote 25 percent or more of the 
outstanding shares of any class of voting security of the company, 
directly or indirectly, or acting through one or more other persons;
    (2) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of the company; or
    (3) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of the company.
    (g) Eligibility information means any information the communication 
of which would be a consumer report if the exclusions from the 
definition of ``consumer report'' in section 603(d)(2)(A) of the Act 
did not apply.
    (h) Person means any individual, partnership, corporation, trust, 
estate, cooperative, association, government or governmental 
subdivision or agency, or other entity.
    (i) Pre-existing business relationship means a relationship between 
a person and a consumer, based on--
    (1) A financial contract between the person and the consumer which 
is in force on the date on which the consumer is sent a solicitation 
covered by this part;
    (2) The purchase, rental, or lease by the consumer of the person's 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which a solicitation covered 
by this part is made or sent to the consumer; or
    (3) An inquiry or application by the consumer regarding a product 
or service offered by that person during the 3-month period immediately 
preceding the date on which a solicitation covered by this part is made 
or sent to the consumer.
    (j) Solicitation--(1) In general. Solicitation means marketing 
initiated by a person to a particular consumer that is--
    (i) Based on eligibility information communicated to that person by 
its affiliate as described in this part; and
    (ii) Intended to encourage the consumer to purchase such product or 
service.
    (2) Exclusion of marketing directed at the general public. A 
solicitation does not include communications that are directed at the 
general public and distributed without the use of eligibility 
information communicated by an affiliate. For example, television, 
magazine, and billboard advertisements do not constitute solicitations, 
even if those communications are intended to encourage consumers to 
purchase products or services from the person initiating the 
communications.
    (3) Examples of solicitations. A solicitation includes a 
telemarketing call, direct mail, e-mail, or other form of marketing 
communication directed to a specific consumer that is based on 
eligibility information communicated by an affiliate.
    (k) You includes each person or company over which the Commission 
has enforcement jurisdiction pursuant to section 621(a)(1) of the Act.


Sec.  680.4-680.19  [Reserved]


Sec.  680.20  Affiliate use of eligibility information for marketing 
solicitations.

    (a) General duties of a person communicating eligibility 
information to an affiliate--(1) Notice and opt-out. If you communicate 
eligibility information about a consumer to your affiliate, your 
affiliate may not use the information to make or send solicitations to 
the consumer, unless prior to such use by the affiliate--
    (i) You provide a clear and conspicuous notice to the consumer 
stating that the information may be communicated to and used by your 
affiliate to make or send solicitations to the consumer about its 
products and services;
    (ii) You provide the consumer a reasonable opportunity and a simple 
method to ``opt out'' of such use of that information by your 
affiliate; and
    (iii) The consumer has not chosen to opt out.
    (2) Rules of construction--(i) In general. The notice required by 
this paragraph may be provided either in the name of a person with 
which the consumer currently does or previously has done business or in 
one or more common corporate names shared by members of an affiliated 
group of companies that includes the common corporate name used by that 
person, and may be provided in the following manner:
    (A) You may provide the notice directly to the consumer;
    (B) Your agent may provide the notice on your behalf, so long as--
    (1) Your agent, if your affiliate, does not include any 
solicitation other than yours on or with the notice, unless it falls 
within one of the exceptions in paragraph (c) of this section; and
    (2) Your agent gives the notice in your name or a common name or 
names used by the family of companies; or
    (C) You may provide a joint notice with one or more of your 
affiliates or under a common corporate name or names used by the family 
of companies as provided in Sec.  222.24(c).
    (ii) Avoiding duplicate notices. If Affiliate A communicates 
eligibility

[[Page 33338]]

information about a consumer to Affiliate B, and Affiliate B 
communicates that same information to Affiliate C, Affiliate B does not 
have to give an opt-out notice to the consumer when it provides 
eligibility information to Affiliate C, so long as Affiliate A's notice 
is broad enough to cover Affiliate C's use of the eligibility 
information to make solicitations to the consumer.
    (iii) Examples of rules of construction. A, B, and C are 
affiliates. The consumer currently has a business relationship with 
affiliate A, but has never done business with affiliates B or C. 
Affiliate A communicates eligibility information about the consumer to 
B for purposes of making solicitations. B communicates the information 
it received from A to C for purposes of making solicitations. In this 
circumstance, the rules of construction would--
    (A) Permit B to use the information to make solicitations if:
    (1) A has provided the opt-out notice directly to the consumer; or
    (2) B or C has provided the opt-out notice on behalf of A.
    (B) Permit B or C to use the information to make solicitations if:
    (1) A's notice is broad enough to cover both B's and C's use of the 
eligibility information; or
    (2) A, B, or C has provided a joint opt-out notice on behalf of the 
entire affiliated group of companies.
    (C) Not permit B or C to use the information to make solicitations 
if B has provided the opt-out notice only in B's own name, because no 
notice would have been provided by or on behalf of A.
    (b) General duties of an affiliate receiving eligibility 
information. If you receive eligibility information from an affiliate, 
you may not use the information to make or send solicitations to a 
consumer, unless the consumer has been provided an opt-out notice, as 
described in paragraph (a) of this section, that applies to your use of 
eligibility information and the consumer has not opted-out.
    (c) Exceptions. The provisions of this subpart do not apply if you 
use eligibility information you receive from an affiliate:
    (1) To make or send a marketing solicitation to a consumer with 
whom you have a pre-existing business relationship as defined in Sec.  
680.3(i);
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the current employment 
relationship or status of the individual as a participant or 
beneficiary of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
subparagraph shall not be construed as permitting you to make or send 
solicitations on your behalf or on behalf of an affiliate if you or the 
affiliate, as applicable, would not be permitted to make or send the 
solicitation as a result of the election of the consumer to opt out 
under this part;
    (4) In response to a communication initiated by the consumer 
orally, electronically, or in writing;
    (5) In response to an affirmative authorization or request by the 
consumer orally, electronically, or in writing to receive a 
solicitation; or
    (6) If your compliance with this subpart would prevent you from 
complying with any provision of State insurance laws pertaining to 
unfair discrimination in any State in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Examples of pre-existing business 
relationships.
    (i) If a consumer has an insurance policy with your insurance 
affiliate that is currently in force, your insurance affiliate has a 
pre-existing business relationship with the consumer and can therefore 
use eligibility information it has received from you to make 
solicitations.
    (ii) If a consumer has an insurance policy with your insurance 
affiliate that has lapsed, your insurance affiliate has a pre-existing 
business relationship with the consumer for 18 months after the date on 
which the policy ceases to be in force and can therefore use 
eligibility information it has received from you to make solicitations 
for 18 months after the date on which the policy ceases to be in force.
    (iii) If a consumer applies to your affiliate for a product or 
service, or inquires about your affiliate's products or services and 
provides contact information to your affiliate for receipt of that 
information, your affiliate has a pre-existing business relationship 
with the consumer for 3 months after the date of the inquiry or 
application and can therefore use eligibility information it has 
received from you to make solicitations for 3 months after the date of 
the inquiry or application.
    (iv) If a consumer makes a telephone call to a centralized call 
center for an affiliated group of companies to inquire about the 
consumer's account with a lender, the call does not constitute an 
inquiry with any affiliate other than that lender, and does not 
establish a pre-existing business relationship between the consumer and 
any affiliate of the lender.
    (2) Examples of consumer-initiated communications. (i) If a 
consumer who has an account with you initiates a telephone call to your 
securities affiliate to request information about brokerage services or 
mutual funds and provides contact information for receiving that 
information, your securities affiliate may use eligibility information 
about the consumer it obtains from you to make solicitations in 
response to the consumer-initiated call.
    (ii) If your affiliate makes the initial marketing call, leaves a 
message for the consumer to call back, and the consumer responds, the 
communication is not initiated by the consumer, but by your affiliate.
    (iii) If the consumer calls your affiliate to ask about retail 
locations and hours, but does not request information about your 
affiliate's products or services, solicitations by your affiliate using 
eligibility information about the consumer it obtains from you would 
not be responsive to the consumer-initiated communication.
    (3) Example of consumer affirmative authorization or request. If a 
consumer who obtains a mortgage from you requests or affirmatively 
authorizes information about homeowner's insurance from your insurance 
affiliate, such authorization or request, whether given to you or to 
your insurance affiliate, would permit your insurance affiliate to use 
eligibility information about the consumer it obtains from you to make 
solicitations about homeowner's insurance to the consumer. A pre-
selected check box would not satisfy the requirement for an affirmative 
authorization or request.
    (e) Prospective application. The provisions of this part shall not 
prohibit your affiliate from using eligibility information communicated 
by you to make or send solicitations to a consumer if such information 
was received by your affiliate prior to [MANDATORY COMPLIANCE DATE 
PURSUANT TO THE FINAL RULE].
    (f) Relation to affiliate-sharing notice and opt-out. Nothing in 
this part limits the responsibility of a company to comply with the 
notice and opt-out provisions of section 603(d)(2)(A)(iii) of the Act, 
before it shares information other than transaction or experience 
information among affiliates, in order to avoid becoming a consumer 
reporting agency.


Sec.  680.21  Contents of opt-out notice.

    (a) In general. A notice must be clear, conspicuous, and concise, 
and must accurately disclose:

[[Page 33339]]

    (1) That the consumer may elect to limit your affiliate from using 
eligibility information about the consumer that it obtains from you to 
make or send solicitations to the consumer;
    (2) If applicable, that the consumer's election will apply for a 
specified period of time and that the consumer will be allowed to 
extend the election once that period expires; and
    (3) A reasonable and simple method for the consumer to opt out.
    (b) Concise--(1) In general. For purposes of this part, the term 
``concise'' means reasonably brief.
    (2) Combination with other required disclosures. A notice required 
by this part may be concise even if it is combined with other 
disclosures required or authorized by federal or state law.
    (3) Use of model form. The requirement for a concise notice is 
satisfied by use of a model form contained in Appendix A of this part, 
although use of the model form is not required.
    (c) Providing a menu of opt-out choices. With respect to the opt-
out election, you may allow a consumer to choose from a menu of 
alternatives when opting out of affiliate use of eligibility 
information for marketing, such as by selecting certain types of 
affiliates, certain types of information, or certain methods of 
delivery from which to opt out, so long as you offer as one of the 
alternatives the opportunity to opt out with respect to all affiliates, 
all eligibility information, and all methods of delivery.
    (d) Alternative contents. If you provide the consumer with a 
broader right to opt out of marketing than is required by law, you 
satisfy the requirements of this section by providing the consumer with 
a clear, conspicuous, and concise notice that accurately discloses the 
consumer's opt-out rights. Proposed Model Notice A-3 provided in 
Appendix A provides guidance, although use of the model notice is not 
required.


Sec.  680.22  Reasonable opportunity to opt out.

    (a) In general. Before your affiliate uses eligibility information 
communicated by you to make or send solicitations to a consumer, you 
must provide the consumer with a reasonable opportunity, following the 
delivery of the opt-out notice, to opt out of such use by your 
affiliates.
    (b) Examples of a reasonable opportunity to opt out. You provide a 
consumer with a reasonable opportunity to opt out if:
    (1) By mail. You mail the opt-out notice to a consumer and give the 
consumer 30 days from the date you mailed the notice to elect to opt 
out by any reasonable means.
    (2) By electronic means. You notify the consumer electronically and 
give the consumer 30 days after the date that the consumer acknowledges 
receipt of the electronic notice to elect to opt out by any reasonable 
means.
    (3) At the time of an electronic transaction. You provide the opt-
out notice to the consumer at the time of an electronic transaction, 
such as a transaction conducted on an Internet web site, and request 
that the consumer decide, as a necessary part of proceeding with the 
transaction, whether to opt out before completing the transaction, so 
long as you provide a simple process at the Internet web site that the 
consumer may use at that time to opt out.
    (4) By including in a privacy notice. You include the opt-out 
notice in a Gramm-Leach-Bliley Act privacy notice and allow the 
consumer to exercise the opt-out within a reasonable period of time and 
in the same manner as the opt-out under the Gramm-Leach-Bliley Act.
    (5) By providing an ``opt-in''. If you have a policy of not 
allowing an affiliate to use eligibility information to make or send 
solicitations to the consumer unless the consumer affirmatively 
consents, you give the consumer the opportunity to ``opt in'' by 
affirmative consent to such use by your affiliate. You must document 
the consumer's affirmative consent. A pre-selected check box does not 
constitute evidence of the consumer's affirmative consent.


Sec.  680.23  Reasonable and simple methods of opting out.

    (a) Reasonable and simple methods of opting-out. You provide a 
reasonable and simple method for a consumer to exercise a right to opt 
out if you--
    (1) Designate check-off boxes in a prominent position on the 
relevant forms included with the opt-out notice required by this part;
    (2) Include a reply form and a self-addressed envelope together 
with the opt-out notice required by this part;
    (3) Provide an electronic means to opt out, such as a form that can 
be electronically mailed or processed at your web site, if the consumer 
agrees to the electronic delivery of information; or
    (4) Provide a toll-free telephone number that consumers may call to 
opt out.
    (b) Methods of opting-out that are not reasonable or simple. You do 
not provide a reasonable and simple method for exercising an opt-out 
right if you--
    (1) Require the consumer to write his or her own letter to you;
    (2) Require the consumer to call or write to you to obtain a form 
for opting-out, rather than including the form with the notice; or
    (3) Require the consumer who agrees to receive the opt-out notice 
in electronic form only, such as by electronic mail or at your web 
site, to opt out solely by telephone or by paper mail.


Sec.  680.24  Delivery of opt-out notices.

    (a) In general. You must provide an opt-out notice so that each 
consumer can reasonably be expected to receive actual notice. For opt-
out notices you provide electronically, you may either comply with the 
electronic disclosure provisions in this part or with the provisions in 
Sec.  101 of the Electronic Signatures in Global and National Commerce 
Act, 15 U.S.C. 7001 et seq.
    (b) Examples of expectation of actual notice. (1) You may 
reasonably expect that a consumer will receive actual notice if you:
    (i) Hand-deliver a printed copy of the notice to the consumer;
    (ii) Mail a printed copy of the notice to the last known mailing 
address of the consumer; or
    (iii) For the consumer who obtains a product or service from you 
electronically, such as on an Internet web site, post the notice on 
your electronic site and require the consumer to acknowledge receipt of 
the notice as a necessary step to obtaining a particular product or 
service;
    (2) You may not reasonably expect that a consumer will receive 
actual notice if you:
    (i) Only post a sign in your branch or office or generally publish 
advertisements presenting your notice; or
    (ii) Send the notice via electronic mail to a consumer who has not 
agreed to the electronic delivery of information.
    (c) Joint notice with affiliates--(1) In general. You may provide a 
joint notice from you and one or more of your affiliates, as identified 
in the notice, so long as the notice is accurate with respect to you 
and each affiliate.
    (2) Identification of affiliates. You do not have to list each 
affiliate providing the joint notice by its name. If each affiliate 
shares a common name, such as ``ABC,'' then the joint notice may state 
that it applies to ``all companies with the ABC name'' or ``all 
affiliates in the ABC family of companies.'' If, however, an affiliate 
does not have ABC in its name, then the joint notice must

[[Page 33340]]

separately identify each such affiliate or similarly-named family of 
companies.
    (d) Joint relationships-- (1) In general. If two or more consumers 
jointly obtain a product or service from you (joint consumers), the 
following rules apply:
    (i) You may provide a single opt-out notice.
    (ii) Any of the joint consumers may exercise the right to opt out.
    (iii) You may either--
    (A) Treat an opt-out direction by a joint consumer as applying to 
all of the associated joint consumers; or
    (B) Permit each joint consumer to opt out separately.
    (iv) If you permit each joint consumer to opt out separately, you 
must permit:
    (A) One of the joint consumers to opt out on behalf of all of the 
joint consumers; and
    (B) One or more joint consumers to notify you of their opt-out 
directions in a single response.
    (v) You must explain in your opt-out notice which of the policies 
in paragraph (d)(1)(iii) you will follow, as well as the information 
required by paragraph (d)(1)(iv).
    (vi) You may not require all joint consumers to opt out before you 
implement any opt-out direction.
    (vii) If you receive an opt-out by a particular joint consumer that 
does not apply to the others, you may use eligibility information about 
the others as long as no eligibility information is used about the 
consumer who opted out.
    (2) Example. If consumers A and B, who have different addresses, 
have a joint loan account with you and arrange for you to send 
statements to A's address, you may do any of the following, but you 
must explain in your opt-out notice which opt-out policy you will 
follow. You may send a single opt-out notice to A's address and:
    (i) Treat an opt-out direction by A as applying to the entire 
account. If you do so and A opts out, you may not require B to opt out 
as well before implementing A's opt-out direction.
    (ii) Treat A's opt-out direction as applying to A only. If you do 
so, you must also permit:
    (A) A and B to opt out for each other; and
    (B) A and B to notify you of their opt-out directions in a single 
response (such as on a single form) if they choose to give separate 
opt-out directions.
    (iii) If A opts out only for A, and B does not opt out, your 
affiliate may use information only about B to send solicitations to B, 
but may not use information about A and B jointly to send solicitations 
to B.


Sec.  680.25  Duration and effect of opt-out.

    (a) Duration of opt-out. The election of a consumer to opt out 
shall be effective for the opt-out period, which is a period of at 
least 5 years beginning as soon as reasonably practicable after the 
consumer's opt-out election is received. You may establish an opt-out 
period of more than 5 years, including an opt-out period that does not 
expire unless the consumer revokes it in writing, or if the consumer 
agrees, electronically.
    (b) Effect of opt-out. A receiving affiliate may not make or send 
solicitations to a consumer during the opt-out period based on 
eligibility information it receives from an affiliate, except as 
provided in the exceptions in Sec.  680.20(c) or if the opt-out is 
revoked by the consumer.
    (c) Time of opt-out. A consumer may opt out at any time.
    (d) Termination of relationship. If the consumer's relationship 
with you terminates when a consumer's opt-out election is in force, the 
opt-out will continue to apply indefinitely, unless revoked by the 
consumer.


Sec.  680.26  Extension of opt-out.

    (a) In general. For a consumer who has opted out, a receiving 
affiliate may not make or send solicitations to the consumer after the 
expiration of the opt-out period based on eligibility information it 
receives or has received from an affiliate, unless the person 
responsible for providing the initial opt-out notice, or its successor, 
has given the consumer an extension notice and a reasonable opportunity 
to extend the opt-out, and the consumer does not extend the opt-out.
    (b) Duration of extension. Each opt-out extension shall comply with 
Sec.  680.25(a).
    (c) Contents of extension notice. The notice provided at extension 
must be clear, conspicuous, and concise, and must accurately disclose 
either:
    (1) The same contents specified in Sec.  680.21(a) for the initial 
notice, along with a statement explaining that the consumer's previous 
opt-out has expired or is about to expire, as applicable, and that the 
consumer must opt out again if the consumer wishes to keep the opt-out 
election in force; or
    (2) Each of the items listed below:
    (i) That the consumer previously elected to limit your affiliate 
from using information about the consumer that it obtains from you to 
make or send solicitations to the consumer;
    (ii) That the consumer's election has expired or is about to 
expire, as applicable;
    (iii) That the consumer may elect to extend the consumer's previous 
election; and
    (iv) A reasonable and simple method for the consumer to opt out.
    (d) Timing of the extension notice--(1) In general. An extension 
notice may be provided to the consumer either--
    (i) A reasonable period of time before the expiration of the opt-
out period; or
    (ii) Any time after the expiration of the opt-out period but before 
any affiliate makes or sends solicitations to the consumer that would 
have been prohibited by the expired opt-out.
    (2) Reasonable period of time before expiration. Providing an 
extension notice on or with the last annual privacy notice required by 
the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., that is provided to 
the consumer before expiration of the opt-out period shall be deemed 
reasonable in all cases.
    (e) No effect on opt-out period. The opt-out period may not be 
shortened to a period of less than 5 years by sending an extension 
notice to the consumer before expiration of the opt-out period.


Sec.  680.27  Consolidated and equivalent notices.

    (a) Coordinated and consolidated notices. A notice required by this 
part may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law, 
including but not limited to the notice described in section 
603(d)(2)(A)(iii) of the Act and the Gramm-Leach-Bliley Act privacy 
notice.
    (b) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this part, and that you provide to 
a consumer together with disclosures required by any other provision of 
law, shall satisfy the requirements of this part.

APPENDIX A TO PART 680--MODEL FORMS FOR OPT-OUT NOTICES

A-1 Model Form for Initial Opt-out Notice
A-2 Model Form for Extension Notice
A-3 Model Form for Initial Opt-out Notice

A-1--Model Form for Initial Opt-Out Notice

Your Choice To Limit Marketing

    1. You may limit our affiliates from marketing their products or 
services to you based on information that we share with them, such as 
your income, your account history with us, and your credit score.
    2. [Include if applicable.] Your decision to limit marketing offers 
from

[[Page 33341]]

our affiliates will apply for 5 years. Once that period expires, you 
will be allowed to extend your decision.
    3. [Include if applicable.] This limitation does not apply in 
certain circumstances, such as if you currently do business with one of 
our affiliates or if you ask to receive information or offers from 
them.
    To limit marketing offers [include all that apply]:
     Call us toll-free at 877--
; or
     Visit our Web site at http://www.websiteaddress.com; or
     Check the box below and mail it to:
    [Company name]
    [Company address]
    --I do not want your affiliates to market their products or 
services to me based on information that you share with them.

A-2--Model Form for Extension Notice

Extending Your Choice To Limit Marketing

    1. You previously chose to limit our affiliates from marketing 
their products or services to you based on information that we share 
with them, such as your income, your account history with us, and your 
credit score.
    2. Your choice has expired or is about to expire.
    3. [Include if applicable.] This limitation does not apply in 
certain circumstances, such as if you currently do business with one of 
our affiliates or if you ask to receive information or offers from 
them.
    To extend your choice for another 5 years [include all that apply]:
     Call us toll-free at 877--
; or
     Visit our Web site at http://www.websiteaddress.com; or
     Check the box below and mail it to:
    [Company name]
    [Company address]
    --I want to extend my choice for another 5 years.

A-3--Model Form for Voluntary ``No Marketing'' Notice

Your Choice To Stop Marketing

    You may choose to stop all marketing offers from us and our 
affiliates.
    To stop all marketing offers [include all that apply]:
     Call us toll-free at 877--
; or
     Visit our Web site at http://www.websiteaddress.com; or
     Check the box on the form below and mail it to:
    [Company name]
    [Company address]
    --I do not want you or your affiliates to send me marketing offers.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-13481 Filed 6-14-04; 8:45 am]
BILLING CODE 6750-01-P