[Federal Register Volume 69, Number 121 (Thursday, June 24, 2004)]
[Rules and Regulations]
[Pages 35468-35502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-14388]
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Part IV
Federal Trade Commission
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16 CFR Parts 610 and 698
Free Annual File Disclosures; Final Rule
Federal Register / Vol. 69, No. 121 / Thursday, June 24, 2004 / Rules
and Regulations
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FEDERAL TRADE COMMISSION
16 CFR Parts 610 and 698
RIN 3084-AA94
Free Annual File Disclosures
AGENCY: Federal Trade Commission (FTC or Commission).
ACTION: Final Rule.
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SUMMARY: The Fair and Accurate Credit Transactions Act of 2003 (FACT
Act or the Act) requires the FTC to adopt regulations to require the
establishment of a centralized source through which consumers may
request a free annual file disclosure from each nationwide consumer
reporting agency; a standardized form for such requests; and a
streamlined process for consumers to request free annual file
disclosures from nationwide specialty consumer reporting agencies. This
final rule implements these requirements.
EFFECTIVE DATE: This rule is effective on December 1, 2004.
FOR FURTHER INFORMATION CONTACT: Helen Goff Foster or Sandra
Farrington, Attorneys, Division of Financial Practices, Federal Trade
Commission, 600 Pennsylvania Avenue, NW, Washington, DC 20580, (202)
326-3224.
SUPPLEMENTARY INFORMATION: The final rule retains all of the
requirements of the proposed rule, without major substantive changes,
and adds a requirement relating to the use and disclosure of personally
identifiable information collected through the centralized source.
Statement of Basis and Purpose
I. Background
The Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-
159, 117 Stat. 1952 (FACT Act or the Act) was signed into law on
December 4, 2003. In part, the Act amends the Fair Credit Reporting Act
(FCRA), 15 U.S.C. 1681 et seq., by imposing new requirements on
consumer reporting agencies that compile and maintain files on
consumers on a nationwide basis (nationwide consumer reporting
agencies), and nationwide specialty consumer reporting agencies, as
defined by Sec. Sec. 603(p) and 603(w) of the FCRA, 15 U.S.C. 1681a(p)
and (w), respectively. These additional requirements include the
obligation to provide, upon request, one free file disclosure--commonly
called a credit report--to the consumer once in a 12-month period.\1\
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\1\ Section 609 of the FCRA requires disclosure of ``[a]ll
information in the consumer's file at the time of the request.'' 15
U.S.C. 1681g(a)(1). The FACT Act refers to the requirement to make
``all disclosures pursuant to [FCRA] section 609 once during any 12-
month period'' without charge as providing free ``consumer
reports.'' FACT Act 211(d). To avoid confusion, the rule refers to
disclosures made pursuant to FCRA Sec. 609 as ``file disclosures''
and to the free annual disclosures required under the FACT Act as
``annual file disclosures.''
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The FACT Act directs the Commission to consider the concerns of
both consumers and industry in prescribing these rules. Specifically,
the Act directs the Commission to consider ``the significant demand
that may be placed on consumer reporting agencies in providing such
[annual file disclosures]; appropriate means to ensure that consumer
reporting agencies can satisfactorily meet those demands, including the
efficacy of a system of staggering the availability to consumers of
such [file disclosures]; and the ease by which consumers should be able
to contact consumer reporting agencies with respect to access to such
[annual file disclosures].'' FACT Act Sec. 211(d)(2). In addition to
these considerations, the FACT Act also requires the Commission to
provide for an orderly transition for the centralized source in a
manner that does not temporarily overwhelm the nationwide consumer
reporting agencies with requests for annual file disclosures and does
not deny creditors and other users access to consumer reports. FACT Act
Sec. 211(d)(2). Finally, the FACT Act directs the Commission to
consider, when setting the effective date for rule provisions
applicable to the nationwide specialty consumer reporting agencies, the
ability of each nationwide specialty consumer reporting agency to
comply with the annual file disclosure requirements. FACT Act Sec. 211
(a), codified at FCRA Sec. 612 (a), 15 U.S.C. Sec. 1681j (a).
The Commission has carefully weighed all of these considerations as
required by the FACT Act. On March 16, 2004, the Commission issued, and
sought comment on, a proposed rule implementing the requirements of the
FACT Act (the proposed rule).\2\ The Commission has reviewed the
detailed comments received, which represented all points of view. In
crafting both the proposed rule and the final rule, the Commission has
strived to strike the balance that the FACT Act seeks between the
availability of free annual file disclosures to consumers and the
legitimate concerns of the consumer reporting agencies that are
required to provide them. In issuing this final rule (the rule or the
final rule), the Commission adopts the proposed rule with some
modifications.
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\2\ The notice of proposed rulemaking (hereinafter, the NPR) and
proposed rule were published in the Federal Register on March 19,
2004. 69 FR 13192.
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Like the proposed rule, the final rule requires nationwide consumer
reporting agencies to establish a centralized source to enable
consumers, with a single request, to obtain annual file disclosures
from all nationwide consumer reporting agencies, in accordance with the
FACT Act, Sec. 211(d)(1)(A). The centralized source required by the
final rule will provide consumers with the ability to request their
free annual file disclosures from each of the nationwide consumer
reporting agencies through a centralized Internet website, toll-free
telephone number, and postal address. The rule also includes a
standardized form for such requests, as specified in the FACT Act,
Sec. 211(d)(1)(B). Further, the rule requires nationwide specialty
consumer reporting agencies to establish a streamlined process for
consumer requests for annual file disclosures, as provided in the FACT
Act, Sec. 211(a)(2).
The final rule limits the obligations of nationwide consumer
reporting agencies when the volume of consumer requests for annual file
disclosures is excessive. It permits nationwide consumer reporting
agencies to queue requests for annual file disclosures during times of
``high request volume''-i.e., volume that exceeds 125% of the rolling
daily average volume. It also allows nationwide consumer reporting
agencies to decline to accept requests during times of ``extraordinary
request volume''-i.e., volume that exceeds 175% of the rolling daily
average volume.
The final rule maintains the gradual roll-out of the centralized
source contained in the proposed rule. In order to ensure a smooth
transition, and in response to concerns regarding the volume of
consumers who may request annual file disclosures when the rule first
becomes effective, the centralized source will become available to
consumers in four cumulative stages that roll out from west to east.
See discussion under Sec. 610.2(i) of this notice, infra. This
transition will start on December 1, 2004, and will be completed within
nine months, by September 1, 2005. Final rule Sec. 610.2 (i)(1). The
final rule also provides for a lower threshold for ``high request
volume'' during this transition period.
In addition, the final rule retains, with some modifications, the
proposed rulex2019;s requirements relating to nationwide
specialty consumer reporting agencies. These agencies are required to
establish a streamlined process for consumers to request annual file
disclosures, final rule Sec. 610.3 (a),
[[Page 35469]]
including a toll-free telephone number for consumers to make such
requests. The rule also requires nationwide specialty consumer
reporting agencies to make their toll-free telephone numbers available
to consumers in specific ways. Final rule Sec. 610.3 (a)(1). See
discussion under Sec. 610.3 (a) of this notice, infra.
II. Overview of Comments Received.
The Commission received more than 2,300 comments on the proposed
rule.\3\ The vast majority of these comments were from consumers.
Consumer advocacy groups,\4\ members of Congress, industry trade
organizations, \5\ and various representatives of the consumer
reporting industry -- including the three nationwide consumer reporting
agencies,\6\ other consumer reporting agencies,\7\ and a variety of
other interested organizations \8\--also submitted comments on the
proposed rule.
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\3\ The public comments relating to this rulemaking may be
viewed at www.ftc.gov[sol]os[sol]comments[sol]factafcr. The
Commission considered all comments timely filed, i.e.-those received
on or before the close of the comment period on April 16, 2004. As a
matter of discretion, the Commission also considered comments that
were filed after the close of the comment period. The total number
of comments stated here includes more than 2,000 consumer comments
collected through U.S. Public Interest Research Group, which are
posted, in batch form, at U.S. Public Interest Research Group
EREG000604. Citations to comments filed in this proceeding
are made to the name of the organization (if any) or the last name
of the commenter, and the comment number of record. Comment number
may appear as all numeric characters-e.g., 000031
(indicating a comment received by paper or electronic mail), or as
numeric characters preceded by ``EREG''-e.g., ``EREG000031''
(indicating a comment received through www.regulations.gov).
\4\ These include AARP, Asociac[iacute]on Campesino Lazaro
Cardenas Inc., CEIBA, Consumer Federation of America, Consumers
Union, Del Norte Neighborhood Development Corporation, Electronic
Privacy Information Center, Housing and Economic Development
Asociac[iacute]on De Puertorriquenos, Latino Leadership, Inc.,
Midland Community Development Corporation, National Association of
Consumer Advocates, National Consumer Law Center, National Consumers
League, National Council of La Raza, NEWSED C.D.C., Privacy Rights
Clearinghouse, Privacy Times, Self-Help Enterprises, Spanish Action
League, Spanish Coalition for Housing, Tejano Center for Community
Concerns, U.S. Public Interest Research Group (US-PIRG), and
Watts[sol]Century Latino Organization.
\5\ In addition to Consumer Data Industry Association (CDIA)-the
trade association that represents the nationwide consumer reporting
agencies and a variety of other consumer reporting agencies-the
Commission received comment on the proposed rule on behalf of a
number of trade organizations representing a variety of industries
and concerns. These include ACA International (representing debt
collection agencies and other accounts receivable professionals),
America's Community Bankers, National Association of Realtors,
Credit Union National Association (CUNA), Consumer Credit Counselors
of Los Angeles, National Association of Mortgage Brokers, Mortgage
Bankers Association, and Coalition to Implement the FACT Act
(representing trade associations and companies that furnish, use,
collect, and disclose consumer information).
\6\ The Commission is aware of three entities that meet the FCRA
Sec. 603(p) definition of nationwide consumer reporting agency.
These entities are Equifax Information Services LLC, Experian
Information Solutions, Inc., and Trans Union LLC.
\7\ These include ChoicePoint, Inc., Computer Sciences
Corporation (CSC), Evergreen Credit Reporting Inc., and MIB Group,
Inc. (MIB).
\8\ These include Aegon Direct Marketing Services, Inc., Cendant
Corporation, Chartered Marketing Services, Deluxe Corporation, Fair
Isaac and Company, Inc., Intersections Inc., ReferencePro, and
Schwartz & Ballen LLP.
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The Commission received comments relating to nearly every provision
contained in the proposed rule. Most commenters -- consumer and
industry representatives alike -- express general support for the
concept of free annual file disclosures. Many consumers and consumer
advocates note that free annual file disclosures will enhance consumer
report accuracy, save consumers money, foster greater financial
literacy, and prevent or mitigate the effects of identity theft. Some
consumers urge the Commission to adopt provisions that extend beyond
what the FACT Act provides: for example, requiring free file
disclosures more often, requiring disclosure of free credit scores, or
requiring free file disclosures from all consumer reporting agencies,
regardless of nationwide or nationwide specialty consumer reporting
agency status under the FCRA.
The overwhelming majority of comments focus on one or more aspects
of the proposed requirement for nationwide consumer reporting agencies
to provide annual file disclosures through a ``centralized source.''
Proposed rule Sec. 610.2. Consumer commenters express concern about a
variety of issues related to the centralized source. Many consumers and
consumer advocates suggest that the final rule should include a
limitation on the use and disclosure of information collected by
nationwide consumer reporting agencies through the centralized source.
Consumers also suggest that the regional roll-out of the centralized
source, proposed rule Sec. 610.2 (i), was too long, and that it placed
unfair burden on consumers residing in eastern states. Consumer
advocates, on the other hand, express doubt as to the need for any type
of gradual transition, but generally support a regional approach if
such a transition were to be retained in the final rule. Many consumer
advocacy groups also express concern that the proposed rule contained
no requirement to provide file disclosures and centralized source
information and instructions in Spanish.
In addition, many consumers and consumer advocates urge the
Commission to consider further restricting, or banning, advertising and
marketing of other products through the centralized source. Many
competitors of the nationwide consumer reporting agencies--including
both other consumer reporting agencies\9\ as well as non-consumer
reporting agencies\10\-- similarly advocate a final rule that would ban
advertising and marketing through the centralized source.
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\9\ For example, Evergreen Credit Reporting Inc. See Comment,
Evergreen Credit Reporting Inc. 000031.
\10\ For example, Fair, Isaac and Company, Inc. See Comment,
Fair, Isaac and Company, Inc. 000011.
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The Commission also received comments relating to the centralized
source from both federal and state elected officials. One U.S.
Senator\11\ and a group of members of the U.S. House of Representatives
Committee on Financial Services\12\ express concern that the structured
roll-out of the centralized source required by the proposed rule was
too slow, and discriminated against consumers who reside in eastern
states. A group of United States Senators\13\ and a different group of
members of the U.S. House of Representatives Committee on Financial
Services\14\ comment that the proposed rule did not provide the
nationwide consumer reporting agencies with sufficient guidance, and
that the safe harbor contained in the proposed rule was inadequate to
protect these agencies from overwhelming consumer demand for annual
file disclosures. A New York State Senator also expresses concern that
the proposed rule did not specify how annual file disclosures should be
delivered, contained inadequate provisions to protect consumers from
unwanted solicitations and other uses of their personally identifiable
information, and did not contain requirements that file disclosures and
other information be provided to
[[Page 35470]]
consumers in languages other than English.
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\11\ Senator Charles E. Schumer (D-NY). See Comment, U.S. Senate
000022.
\12\ These Representatives included Julia Carson, Joseph
Crowley, Harold E. Ford, Jr., Barney Frank, Luis V. Gutierrez,
Barbara Lee, Stephen Lynch, Brad Sherman, and Maxine Waters. See
Comment, U.S. House of Representatives 000134.
\13\ These Senators included Robert F. Bennett, Elizabeth Dole,
Tim Johnson, and Thomas R. Carper. Comment, United States Senate
000137.
\14\ These Representatives included Spencer Bachus, Judy
Biggert, Rahm Emanuel, Jeb Hensarling, Ruben Hinojosa, Darlene
Hooley, Steve Israel, Sue W. Kelly, Steven LaTourette, Dennis Moore,
Robert W. Ney, Michael G. Oxley, Edward R. Royce, and David Scott.
See Comment, U.S. House of Representatives 000136.
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CDIA and the nationwide consumer reporting agencies also comment at
length on a variety of issues relating to the centralized source. They
uniformly express concern that both the proposed rule transition and
the provisions relating to the ``extraordinary request volume'' safe
harbor were inadequate and, if adopted, would have subjected the
industry to dangerous uncertainties, increased liability from private
actions, and wasted resources. They urge the Commission to lengthen the
transition period; convert the cumulative regional roll-out approach of
the proposed rule to a permanent staggering of availability of free
reports by birth month or quarter; and provide additional and lower
safe harbor thresholds. In addition, the nationwide consumer reporting
agencies and CDIA object to the proposed rule's requirement that
nationwide consumer reporting agencies provide free annual file
disclosures for consumers whose files are owned by, or maintained on
the nationwide consumer reporting agency's system by, an associated
consumer reporting agency.
The Commission also received a number of comments relating to the
proposed rule's requirement that nationwide specialty consumer
reporting agencies implement a ``streamlined process'' for accepting
and processing consumer requests for free annual file disclosures.
Proposed rule Sec. 610.3. Consumer and consumer advocate comments on
the ``streamlined process'' focus mainly on the visibility of
nationwide specialty consumer reporting agencies and the convenience
with which consumers should be able to contact them. A number of
consumers comment that nationwide specialty consumer reporting agencies
should be required to participate in the centralized source for
nationwide consumer reporting agencies required under proposed rule
Sec. 610.2, or that nationwide specialty consumer reporting agencies
should also develop a joint centralized source.
Representatives of nationwide specialty consumer reporting
agencies\15\ express concern over the definition of that term found in
the FACT Act. In addition, they object to the fact that the proposed
rule did not provide nationwide speciality consumer reporting agencies
with a structured roll-out for the required streamlined process.
Finally, these entities urge the Commission to provide additional, and
lower threshold safe harbors from both private and regulatory liability
arising from unforeseen circumstances and overwhelming request volume.
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\15\ The Commission notes that some commenters identify
themselves as ``nationwide specialty consumer reporting agencies.''
Others, however, decline to use this term, although their services
focus on one or more of the five categories of nationwide specialty
consumer reporting agencies. By referring to both types of
commenters as ``nationwide specialty consumer reporting agencies''
here, the Commission is not making a legal determination or factual
finding that such entities meet the statutory definition of that
term.
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III. Section-By-Section Analysis
Section 610.1--Definitions and rule of construction
Section 610.1 (a) of the final rule explains that the definitions
and the rule of construction provided in Sec. 610.1 (b) and (c) of the
rule apply throughout Part 610. Terms not otherwise defined in Sec.
610.1 of the rule have the meaning provided under the Fair Credit
Reporting Act, 15 U.S.C. 1681a. See also 69 FR 29061.
Definitions.
Section 610.1 (b) of the final rule sets forth definitions for a
number of terms used throughout the rule.
Annual file disclosure. The proposed rule defined ``annual file
disclosure'' as a file disclosure that is provided to a consumer upon
consumer request and without charge, once in any 12-month period, in
compliance with Sec. 612(a) of the Fair Credit Reporting Act, 15
U.S.C. 1681j(a). Proposed rule Sec. 610.1(b)(1). A consumer advocacy
group suggests that this definition be revised to provide for free file
disclosures ``once in a calendar year.''\16\ Such a definition,
however, conflicts with the language of the FACT Act, which states free
file disclosures should be provided ``once during any 12-month
period.'' FACT Act Sec. 211 (a)(2), codified at FCRA Sec. 612 (a)(1),
15 U.S.C. 1691j (a)(1) (emphasis supplied). The Commission therefore
has adopted the proposed rule definition of annual file disclosure in
the final rule.
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\16\ Comment, Electronic Privacy Information Center
EREG000594.
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Associated consumer reporting agency. Section 610.1(b)(2) of the
proposed rule defined an ``associated consumer reporting agency'' as a
consumer reporting agency that maintains consumer reports within
systems operated by a nationwide consumer reporting agency. In the NPR,
the Commission noted that nationwide consumer reporting agencies have
contractual relationships with a number of regional or local consumer
reporting agencies. 69 FR at 13197. These regional or local consumer
reporting agencies, traditionally called ``service bureaus'' or
``affiliates,'' generally are independently owned and operated
entities--they are not corporate affiliates of a nationwide consumer
reporting agency.\17\ Rather, typically, they have a right to house
some or all of the consumer data that they own on the systems of one or
more nationwide consumer reporting agencies. The nationwide consumer
reporting agency with whom such an entity is associated, in turn, has
the right to sell that consumer data to its customers.\18\ The final
rule, like the proposed rule, addresses these consumer reporting
agencies as ``associated consumer reporting agencies.''
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\17\ That is to say, associated consumer reporting agencies
generally are not under common ownership or control with a
nationwide consumer reporting agency. See FACT Act Sec. 2 (4).
\18\ The associated consumer reporting agency may also have the
right to sell consumer information owned by the nationwide consumer
reporting agency.
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One associated consumer reporting agency comments that this
description of associated consumer reporting agencies appropriately
describes the relationship between these agencies and nationwide
consumer reporting agencies. Both the associated consumer reporting
agency commenter and a nationwide consumer reporting agency, however,
suggest that the proposed rule definition of ``associated consumer
reporting agency'' should be altered slightly. These commenters both
note that many, if not all, associated consumer reporting agencies own
-- rather than merely maintain -- the files that they house in
nationwide consumer reporting agency systems. Accordingly, the final
rule definition of associated consumer reporting agency is ``a consumer
reporting agency that owns or maintains consumer files housed within
systems operated by one or more nationwide consumer reporting
agencies.'' Final rule Sec. 610.1(b)(2) (emphasis supplied).
Consumer. The proposed rule adopted the definition of ``consumer''
that is found in Sec. 603 (c) of the FCRA, 15 U.S.C. 1681a (c). The
Commission received no comments suggesting changes to this definition,
and it is adopted as proposed. Final rule Sec. 610.1(b)(3).
Consumer report. The proposed rule adopted the definition of
``consumer report'' that is found in Sec. 603(d) of the FCRA, 15
U.S.C. 1681a(d). The Commission received no comments suggesting changes
to this definition, and it is adopted as proposed. Final rule Sec.
610.1(b)(4).
Consumer reporting agency. The proposed rule adopted the definition
of ``consumer reporting agency'' that is found in Sec. 603 (f) of the
FCRA, 15 U.S.C.
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1681a (f). The Commission received no comments suggesting changes to
this definition, and it is adopted as proposed. Final rule Sec.
610.1(b)(5).
Extraordinary request volume. Under the proposed rule,
``extraordinary request volume'' occurred (except as provided in Sec.
610.2 (i)(2)) ``when the number of consumers requesting file
disclosures during any 24-hour period is more than twice the daily
rolling 90-day average of consumers requesting file disclosures.'' For
reasons discussed under Sec. 610.2 (e) of this notice, infra, the
Commission modifies the proposed rule definition of extraordinary
request volume to volume that ``is more than 175% of the rolling 90-day
daily average of consumers requesting or attempting to request file
disclosures.'' Final rule Sec. 610.1(b)(6).
File disclosure. The proposed rule, Sec. 610.1(b)(7), defined a
``file disclosure'' as any disclosure made pursuant to Sec. 609 of the
FCRA.\19\ Section 612(a) of the FCRA, 15 U.S.C. 1681j(a), as amended by
the FACT Act, provides that nationwide consumer reporting agencies and
nationwide specialty consumer reporting agencies must provide ``all
disclosures pursuant to [FCRA] section 609 once during any 12-month
period upon request of the consumer and without charge to the
consumer.'' Accordingly, under proposed rule Sec. 610.1(b)(1), the
term ``annual file disclosure'' was a file disclosure made upon
request, free of charge, in compliance with Sec. 612(a) of the FCRA,
15 U.S.C. 1681j(a), as amended. Although FCRA Sec. Sec. 612(b)-(e)
provide for other types of free file disclosures, the term ``annual
file disclosure,'' as defined in the proposed rule, referred only to
free file disclosures made pursuant to FCRA Sec. 612(a).\20\
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\19\ Section 609 of the FCRA, 15 U.S.C. 1681g, requires every
consumer reporting agency, upon request of the consumer, to disclose
to the consumer, among other things, ``all information in the
consumer's file at the time of the request.''
\20\ It should be noted that the FCRA, as amended by the FACT
Act, requires consumer reporting agencies to provide a free file
disclosure to consumers under a number of different circumstances.
In addition, under FCRA Sec. 612(f), 15 U.S.C. 1681j(f), a consumer
reporting agency must provide file disclosures to consumers for a
fee, upon request. The requirement for nationwide consumer reporting
agencies to provide annual file disclosures supplements, but does
not replace, these other provisions. In other words, a consumer is
entitled to obtain a free annual file disclosure through the
centralized source, once in any 12-month period, even if that
consumer has obtained other free or paid file disclosures in that
time period. See FCRA Sec. 612, 15 U.S.C. 1681j.
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One nationwide specialty consumer reporting agency requests that
the Commission consider limiting the definition of file disclosure, as
it applies to nationwide specialty consumer reporting agencies, to
require only the disclosure of specific types of information. This
commenter notes that the FACT Act specifically limits the types of
nationwide specialty consumer reporting agencies that must provide
annual file disclosures to only those that compile or maintain
information on medical records or payments; residential or tenant
history; check writing history; employment history; or insurance
claims. See FCRA Sec. 603(w), 15 U.S.C. 1681a(w). Thus, the commenter
posits, Congress must also have intended to circumscribe the content of
such file disclosures to only the types of information listed in the
definition of nationwide specialty consumer reporting agency.
While the FACT Act limits ``nationwide specialty consumer reporting
agencies'' to specific types of entities -- i.e., those that compile
and maintain medical records or payments, residential or tenant
history, check writing history, employment history, or insurance claims
-- the plain language of the Act is broader in describing what
information those entities must provide to consumers. The FACT Act
specifically requires nationwide consumer reporting agencies to make
all disclosures required by Sec. 609 of the FCRA, which, by the terms
of that section, must include ``all information in the consumer's file
at the time of the request.''\21\ The Commission therefore declines to
limit the scope of the required disclosures as the commenter suggests.
The final rule adopts the proposed rule definition of file disclosure
without modification. Final rule Sec. 610.1(b)(7).
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\21\ FCRA Sec. 609(a), 15 U.S.C. 1681g(a).
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High request volume. A definition of ``high request volume'' was
used in the transition section--Sec. 610.2(i)(3)-- of the proposed
rule. Under that section, during the transition period, ``high request
volume'' occurred when the number of consumers who contact or attempt
to contact the centralized source, a particular request method, or a
nationwide consumer reporting agency, in a 24-hour period, is more than
115% of the rolling 7-day average number of consumers who contacted or
attempted to contact the centralized source, a particular request
method, or a nationwide consumer reporting agency, to request file
disclosures. Proposed rule Sec. 610.2(i)(3). For reasons discussed
under Sec. Sec. 610.2(e) and 610.3(c) of this notice, infra, the final
rule broadens the concept of high request volume to apply both during
and after the defined transition periods. The final rule defines high
request volume as occurring when the number of consumers requesting or
attempting to request file disclosures during any 24-hour period is
more than 125% of the daily rolling 90-day average of consumers
requesting or attempting to request file disclosures. As with
extraordinary request volume, high request volume is defined
differently during the transition period. See discussion under
Sec. Sec. 610.2(i) and 610.3(g) of this notice, infra.
Nationwide consumer reporting agency. Under proposed rule Sec.
610.1(b)(8), the term ``nationwide consumer reporting agency'' meant a
consumer reporting agency that compiles and maintains files on
consumers on a nationwide basis, as defined in FCRA Sec. 603(p), 15
U.S.C. 1681a(p). The Commission received no comments suggesting changes
to this definition, and it is adopted as proposed. Final rule Sec.
610.1(b)(9).
Nationwide specialty consumer reporting agency. The term
``nationwide specialty consumer reporting agency'' was defined under
Sec. 610.1(b)(9) of the proposed rule, in accordance with FCRA Sec.
603(w), 15 U.S.C. 1681a(w), as a consumer reporting agency that
compiles and maintains files on consumers relating to medical records
or payments, residential or tenant history, check writing history,
employment history, or insurance claims, on a nationwide basis. One
nationwide specialty consumer reporting agency urges the Commission to
expand on the statutory definition of this term. The commenter argues
that because the FACT Act added this definition to the FCRA, and
because there is little or no legislative history to guide companies in
the interpretation of this new definition, the Commission should
further delineate the meaning of the term. Specifically, the commenter
urges the Commission to adopt specific, limited meanings for the
categories of information described in the definition of nationwide
specialty consumer reporting agency. This same commenter similarly
urges the Commission to define two other terms found within the
definition of nationwide specialty consumer reporting agency:
``compiles and maintains'' and ``nationwide.''\22\
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\22\ Comment, Choicepoint 000039.
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The Commission notes that the definition of the term nationwide
specialty consumer reporting agency is set out in the FACT Act with
some specificity. By the terms of the Act, its application is limited
to a consumer reporting agency. Further, such consumer reporting agency
must
[[Page 35472]]
compile and maintain files on consumers, on a nationwide basis,
relating to at least one of five specific categories of information.
The record as developed through this rulemaking provides insufficient
information to justify altering the definition used by Congress in the
FACT Act. Accordingly, the Commission declines to do so. Nor does the
Commission find it appropriate, in this rulemaking, to define terms --
such as ``nationwide'' and ``compiles and maintains''-- that appeared
in the FCRA prior to the FACT Act. The definition of nationwide
specialty consumer reporting agency is adopted in the final rule as
proposed. Final rule Sec. 610.1(b)(10).
Request method. Proposed rule Sec. 610.1(b)(10) defined ``request
method'' as the method by which a consumer chooses to communicate a
request for an annual file disclosure. The FACT Act requires nationwide
consumer reporting agencies, subject to regulations to be promulgated
by the Commission, to establish a centralized source that will permit
consumers to make such requests by three specific request methods:
Internet website, toll-free telephone number, and mail. The Commission
received no comments suggesting changes to this definition, and it is
adopted as proposed. Final rule Sec. 610.1(b)(11).
Rule of construction.
Section 610.1(c) of the proposed rule sets out a rule of
construction to clarify the effect of the examples used in the proposed
rule. Given the complexity of the rule and its potential impact on a
variety of entities, the Commission has elected, in some instances, to
provide examples of conduct that would, and would not, comply with the
proposed rule. This section of the proposed rule provided that these
examples are not intended to be exhaustive; they are intended to
illustrate how the proposed rule would apply in specific circumstances.
Representatives of the nationwide consumer reporting agencies comment
that the examples in the proposed rule, coupled with this rule of
construction, provide useful guidance for complying with the rule. The
Commission received no comments suggesting changes to this provision,
and it is adopted as proposed. Final rule Sec. 610.1(c).
Section 610.2(a)--Centralized source for requesting annual file
disclosures - purpose
Under Sec. 610.2(a) of the proposed rule, the purpose of the
centralized source, consistent with Sec. 211(d) of the FACT Act, was
to enable consumers to make a single request to obtain annual file
disclosures from all nationwide consumer reporting agencies, as
required under Sec. 612(a) of the Fair Credit Reporting Act, 15 U.S.C.
1681j(a). Some commenters suggest that the rule should be crafted to
fulfill other purposes as well. For example, several consumer comments
suggest that the rule require that credit scores be made available to
consumers without charge, free file disclosures be made available more
than once a year, and all consumer reporting agencies, not just
nationwide consumer reporting agencies, be required to participate in
the centralized source. These proposals are all inconsistent with the
plain language of the FACT Act. Under Sec. 212 of the FACT Act,
codified at FCRA Sec. 609(a)(6) and (f), 15 U.S.C. 1681g(a)(6) and
(f), information about credit scores must be provided to consumers
requesting file disclosures, and the scores themselves, together with
additional information about them, must be provided, upon request, for
a ``fair and reasonable fee.'' The statute also specifically limits the
free annual file disclosure requirement to nationwide consumer
reporting agencies and nationwide specialty consumer reporting
agencies. Furthermore, it limits the operation of the centralized
source to the nationwide consumer reporting agencies. FACT Act Sec.
211(a)(2), codified at FCRA Sec. 612(a)(1), 15 U.S.C. 1681j(a)(1).
Accordingly, Sec. 610.2(a) has been adopted as proposed.
Section 610.2(b)--Establishment and operation
Under Sec. 610.2(b) of the proposed rule, the nationwide consumer
reporting agencies were required to jointly design, fund, implement,
maintain, and operate the centralized source for the purpose stated in
Sec. 610.2(a). In addition, the centralized source was required to be
designed, funded, implemented, maintained, and operated to meet
specific requirements.
Joint establishment and operations.
Representatives of nationwide consumer reporting agencies object to
the proposed rule requirement that the centralized source be
``jointly'' designed, funded, implemented, maintained, and operated.
They argue that the FACT Act does not require such joint establishment
and operation. The FACT Act, however, does require the Commission to
``prescribe regulations applicable to consumer reporting agencies
described in section 603(p) [of FCRA], to require the establishment of
a centralized source through which consumers may obtain [annual file
disclosures].'' FACT Act Sec. 211(d)(1). Such a ``centralized source''
-- if it is to function as the Act contemplates -- must be a joint
effort of the nationwide consumer reporting agencies. Thus, the
Commission believes it is appropriate to require that the centralized
source be jointly designed, funded, implemented, maintained, and
operated by nationwide consumer reporting agencies, and the final rule
adopts this provision without modification. Final rule Sec. 610.2(b).
Potential competitive concerns among existing nationwide consumer
reporting agencies. CDIA comments that it is unaware of any
anticompetitive concerns that are raised by the proposed rule's
implementation of the statutory requirement that the nationwide
consumer reporting agencies jointly design, fund, implement, maintain,
and operate the centralized source through which consumers may request
their free file disclosures. The commenter points out that the
nationwide consumer reporting agencies have operated the automated
dispute resolution system required by FCRA Sec. 611(a)(5)(D) without
any competitive problems.
Further, although the final rule, like the proposed rule, requires
nationwide consumer reporting agencies, which presumably are
competitors, to jointly design, fund, implement, maintain, and operate
the centralized source required under the FACT Act, nothing in the rule
would permit any activity that is otherwise prohibited by applicable
United States antitrust laws. One nationwide consumer reporting agency
comments that this analysis interjects uncertainty into the ability of
nationwide consumer reporting agencies to comply with existing
antitrust law and the FACT Act simultaneously. As a result, the
nationwide consumer reporting agencies urge the Commission to make
clear that the coordination required by the statute and the rule is not
subject to antitrust enforcement as it relates to the operation of the
centralized source. As stated above, participation in the centralized
source as required by the FACT Act and the final rule is not a
violation of U.S. antitrust laws, which allow collaboration as long as
it is not anticompetitive. The converse, however, is also true: Neither
the FACT Act nor the final rule would permit nationwide consumer
reporting agencies to engage in anticompetitive activities that would
otherwise violate applicable antitrust laws.
New entrants and barriers to entry. The Commission is aware of
three entities that meet the FCRA Sec. 603(p) definition of nationwide
consumer
[[Page 35473]]
reporting agency.\23\ It is possible, however, that additional
nationwide consumer reporting agencies may exist, or be created, in the
future. Any entity that meets the definition of nationwide consumer
reporting agency in FCRA Sec. 603(p), 15 U.S.C. 1681a(p), cannot be
excluded by the currently identified nationwide consumer reporting
agencies from participating jointly in the centralized source.
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\23\ These entities are Equifax Information Services LLC,
Experian Information Solutions, Inc., and Trans Union LLC.
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One nationwide consumer reporting agency expresses concern that the
``joint'' establishment requirements might be interpreted to mean that
the centralized source should be redesigned and reimplemented each time
a new entrant is presented. The Commission agrees that to cause the
entire centralized source to be reinvented for a new entrant would be
inappropriate. Rather, Sec. 610.2(b) of the rule contemplates that the
centralized source would be modified only as necessary to allow
consumers to request file disclosures from new entrants with the same
ease as they can request file disclosures from existing participants.
Further, representatives of the nationwide consumer reporting
agencies comment that the existing nationwide consumer reporting
agencies, who will bear the costs of initial development and
implementation of the centralized source, should be permitted to
require any new entrants to reimburse them for the initial development
and implementation costs associated with the centralized source. In
contrast, some marketers of credit-related products and services
express concern that the existing nationwide consumer reporting
agencies will seek to impose unreasonable costs on potential new
entrants to the centralized source in order to create an unreasonable
barrier to entry. While the rule requires that the centralized source
be jointly funded, it does not state how costs are to be shared among
the nationwide consumer reporting agencies. In the Commission's view,
final rule Sec. 610.2(b), which specifically requires joint funding,
would permit both the sharing of ongoing operating costs as well as the
reimbursement of design and development costs in an equitable manner.
Section 610.2 of the final rule should not be used unreasonably to
prevent new entrants from participating in the centralized source.
One nationwide consumer reporting agency urges the Commission to
``assume responsibility'' for identifying new entrants -- i.e., those
consumer reporting agencies that meet the definition of nationwide
consumer reporting agency, and thus, must participate in the
centralized source. This commenter argues that the determination of
whether a particular consumer reporting agency is a nationwide consumer
reporting agency should not be made by competitors of that agency. The
Commission agrees that such a determination should not be made by an
entity's competitors. It does not follow, however, that the
determination must then be made by the Commission. The determination of
whether an entity meets the statutory definition of a nationwide
consumer reporting agency-like the determination of whether an entity
meets the definition of a consumer reporting agency-is fact specific.
Thus, as is true with the determination of whether an entity is a
consumer reporting agency, the entity itself must analyze its practices
in light of the statute and existing law, and make its own
determination.\24\
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\24\ Some commenters offer a similar argument in relation to the
determination of what entities are nationwide specialty consumer
reporting agencies. These commenters suggest that the Commission
publish a list of such entities. For the reasons explained here, the
Commission does not believe such a list would be appropriate.
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Joint and several liability. The final rule requirement for joint
design, funding, implementation, maintenance, and operation of the
centralized source suggests that all nationwide consumer reporting
agency participants in the centralized source could be jointly liable
for violations of final rule Sec. 610.2. The nationwide consumer
reporting agencies and CDIA object to the idea that a nationwide
consumer reporting agency could be held jointly and severally liable
for violations committed by one or more of the others, over which that
entity had no control. The Commission recognizes that any question of
individual or joint and several liability would be fact specific. The
Commission does not intend to alter existing applicable standards of
liability.
Required Request Methods.
As specified under the FACT Act, Sec. 211(d)(3), final rule Sec.
610.2(b)(1), like the proposed rule, requires the centralized source to
include a toll-free telephone number, an Internet website, and a mail
process for consumers to make requests for annual file disclosures.
Comments received relating to this provision of the proposed rule
generally note that it is consistent with the mandate of the FACT Act.
The Act requires the nationwide consumer reporting agencies to
establish a centralized source through which, by means of a single
request, consumers may obtain annual file disclosures. As noted in the
NPR, the FACT Act requires that consumers be able to request their
annual file disclosures through specific request methods, but does not
mandate the method by which the nationwide consumer reporting agencies
may deliver those file disclosures. 69 FR at 13194.
Some commenters express concern regarding particular aspects of how
the request methods might be presented. One nationwide consumer
reporting agency commenter urges the Commission to clarify that the
FACT Act and the final rule do not require any ``live'' telephone
assistance to consumers requesting file disclosures. The final rule,
like the proposed rule, requires nationwide consumer reporting agencies
to provide the request methods mandated by the Act, but does not
provide detailed specifications on how each request method should be
presented. The Commission notes that there is nothing in the FACT Act
that would either require or prohibit a completely automated telephone
system for accepting file disclosure requests.
Several commenters urge the Commission to specify in the final rule
how annual file disclosures may be provided to consumers who request
them. One consumer advocacy group supports requiring that all three
reports be generated simultaneously, in order to facilitate comparison.
Some consumers, on the other hand, urge the Commission to specify that
the reports do not have to be provided at the same time, arguing that a
consumer may wish to monitor their file disclosures over the course of
a year. Because the consumer is entitled to a free file disclosure from
each nationwide consumer reporting agency, that consumer may, for
example, choose to order only one file disclosure every four months.
The Commission believes that the divergence of opinion on this point
illustrates the need for flexibility. Because neither the FACT Act, nor
the final rule, specifies that all annual file disclosures must be
delivered simultaneously, consumers benefit from having a choice of
when they would prefer to request any, or all, of the available annual
file disclosures.
One state official argues that the final rule must specify by what
means annual file disclosures may be provided. The commenter argues
that, without specificity in the final rule, nationwide consumer
reporting agencies might limit the available methods of delivery in
such a way as to effectively thwart certain consumers from obtaining
annual file disclosures. Representatives
[[Page 35474]]
of the nationwide consumer reporting agencies, on the other hand, argue
that the proposed rule improperly allows consumers alone to select the
delivery channel for annual file disclosures.
FCRA Sec. 610(b), 15 U.S.C. 1681h(b), specifies that disclosures
may be made in such form as may be specified by the consumer and
available from the agency. Thus, the proposed rule allowed nationwide
consumer reporting agencies flexibility in determining what methods of
annual file disclosure delivery to make available generally to
consumers. Similarly the final rule neither prohibits nor requires any
particular method of delivery for annual file disclosures. The
Commission notes that the FCRA, notwithstanding the FACT Act
amendments, already specifies, in some detail, how file disclosures may
be delivered to consumers.\25\ See FCRA Sec. 610(a)-(b), 15 U.S.C.
1681h(a)-(b). Because the delivery of file disclosures to consumers is
already delineated in the FCRA, the final rule neither adds to nor
subtracts from those pre-existing provisions of law.\26\
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\25\ FCRA Sec. 610(a)(2), 15 U.S.C. 1681h(a)(2), requires that
file disclosures be made in writing, except as provided in
subsection (b). Section 610(b), 15 U.S.C. 1681h(b), in turn,
provides that disclosures may be made in forms other than in writing
if such disclosures are (1) available from the consumer reporting
agency and (2) specified by the consumer. Under Sec. 610(b)(2), 15
U.S.C. 1681h(b)(2), consumers may specify that file disclosures may
be made in person (under specified conditions), by telephone (upon
written request), by electronic means (if available from the
consumer reporting agency) or any other reasonable means that is
available from the agency. Thus, under FCRA Sec. 610(b), it is
clear that consumers may specify any means of delivery for their
file disclosures that are available from the consumer reporting
agency.
\26\ Similarly, some consumers suggest that the final rule
should require that annual file disclosures be delivered within a
specified period of time. The Commission notes that the FACT Act
itself sets forth the appropriate timing for delivery of annual file
disclosures. Under FACT Act Sec. 211(a)(2), codified at FCRA Sec.
612(a)(2), 15 U.S.C. 1681j(a)(2), ``a consumer reporting agency
shall provide [an annual file disclosure] not later than 15 days
after the date on which the request is received . . ..'' In light of
this clear statutory mandate, the final rule does not further
specify the timing for delivery of annual file disclosures.
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Adequate capacity.
Under Sec. 610.2(b)(2)(i) of the proposed rule, the centralized
source was required to have adequate capacity to accept requests from
the reasonably anticipated volume of consumers contacting the
centralized source through each request method. The reasonably
anticipated volume was required to be determined in compliance with
Sec. 610.2(c), discussed infra. Under the FACT Act, nationwide
consumer reporting agencies must fulfill consumers' requests for free
annual disclosures ``only if the request from the consumer is made
using the centralized source established for such purpose.'' FACT Act
Sec. 211(a)(2), codified at FCRA Sec. 612(a)(1)(B), 15 U.S.C.
1681j(a)(1)(B). In recognition of the importance of a centralized
source with adequate capacity to ensure the ability of consumers to
obtain annual file disclosures, the final rule adopts Sec.
610.2(b)(2)(i) as proposed, and thus requires that the centralized
source be designed, funded, implemented, maintained, and operated in a
manner that has adequate capacity to accept requests from the
reasonably anticipated volume of consumers contacting the centralized
source. Final rule Sec. 610.2(b)(2)(i).
It is important to note that, under the final rule, nationwide
consumer reporting agencies are required to anticipate the number of
consumers who will contact the centralized source. Because nationwide
consumer reporting agencies must meet this requirement during the
transition periods defined by the final rule under Sec. 610.2(i), this
language is intended to include consumers who contact the centralized
source at a time when it is not yet available in their state. In the
Commission's view, the nationwide consumer reporting agencies may
employ technological or other means (such as blocking non-eligible area
codes during the transition) to prevent consumers from mistakenly
contacting the centralized source during the transition at a time when
they are not eligible to receive an annual file disclosure.
The Commission received few comments on this provision itself.\27\
CDIA comments that ``it is entirely appropriate to require that the
nationwide consumer reporting agencies build and maintain each
individual request method of the centralized source to anticipate
consumer's request volume when there is data upon which to estimate
demand.''\28\ The Commission agrees, and Sec. 610.2(b)(2)(i) is
adopted as proposed.
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\27\ The Commission did, however, receive numerous comments on
its companion provision, Sec. 610.2(c), which requires reasonable
procedures to anticipate and respond to the volume of consumer
requests. See discussion under Sec. 610.2(c) of this notice, infra.
\28\ Comment, CDIA 000018
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Collection of information and identification of consumers.
The proposed rule, in Sec. 610.2(b)(2)(ii), required that the
nationwide consumer reporting agencies collect only as much information
from a consumer through the centralized source as is reasonably
necessary in order to properly identify the consumer and to process the
transaction(s) requested by the consumer. The final rule retains this
requirement, with some modification. See final rule Sec.
610.2(b)(2)(ii).
Personally identifiable information. One nationwide consumer
reporting agency comments that the proposed rule limitation on the
collection of ``information'' may prohibit the nationwide consumer
reporting agencies from collecting useful anonymous data through the
centralized source. This commenter explains that such anonymous data
would be useful for system maintenance and in detecting activities that
would harm the centralized source, such as fraud.
The purpose of this provision of the rule is to ensure that the
centralized source will be easy for consumers to use, while allowing
the nationwide consumer reporting agencies to properly identify
consumers who request their file disclosures through the centralized
source, in compliance with FCRA Sec. 610(a)(1), 15 U.S.C. 1681h(a)(1).
The Commission is concerned that a centralized source that collects too
much personal information may discourage some consumers from requesting
their annual file disclosures. The Commission also recognizes, however,
the need for collection of anonymous data for purposes such as system
maintenance, service improvement, or fraud prevention.\29\ Accordingly,
the Commission has modified the Sec. 610.2(b)(2)(ii) requirement to
limit the collection of personally identifiable information -- rather
than all information -- to that which is reasonably necessary to
properly identify the consumer and process the transaction(s) requested
by that consumer. Accordingly, final rule Sec. 610.2(b)(2)(ii) would
not prevent nationwide consumer reporting agencies from collecting
anonymous information.
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\29\ For example, the nationwide consumer reporting agencies may
want to collect information and statistics on the number of
consumers that use the centralized source website and toll-free
telephone number, so they can efficiently allocate resources.
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Social Security number. Some consumers suggest that the final rule
should specify that consumers are not required to provide their Social
Security numbers when requesting their free file disclosures through
the centralized source. These commenters contend that, in order to
prevent identity theft, consumers have been repeatedly instructed by
consumer advocates and government not to provide their Social Security
numbers to anyone, and that some consumers do not have Social Security
numbers. Therefore, they assert, the availability of annual file
[[Page 35475]]
disclosures should not be conditioned on providing a Social Security
number.
The final rule does not specifically require or prohibit the
collection of Social Security numbers through the centralized source.
Section 610.2(b)(2)(ii) is intended to provide a standard for
information collection that is sufficiently flexible to accommodate the
proper identification of consumers requesting free annual file
disclosures by all nationwide consumer reporting agencies. The
collection of this information is limited to that which is ``reasonably
necessary'' to achieve proper identification of the consumer. The
Commission believes that a consumer's Social Security number may be
``reasonably necessary'' to properly identify the consumer, given the
requirements of the nationwide consumer reporting agencies' current
systems. Therefore, the rule does not prohibit the collection of that
information. If, however, at some future time, due to changes in
technology or in the consumer data industry, a Social Security number
is not ``reasonably necessary'' for proper identification, then the
collection of that information would be prohibited by final rule Sec.
610.2(b)(2)(ii).
Separate authentication. Representatives of the nationwide consumer
reporting agencies comment on the need for each agency to conduct
separate authentication processes for each consumer requesting a free
annual file disclosure through the centralized source. As noted in the
NPR, proposed rule Sec. 610.2(b)(2)(ii) was intended to afford each
nationwide consumer reporting agency the flexibility to implement its
own identification procedures for consumers who request file
disclosures through the centralized source, in order to allow proper
identification of consumers and to protect against fraud. File
disclosures contain a great deal of very sensitive information. If
misdirected to, or fraudulently obtained by, someone other than the
consumer to whom it relates, a file disclosure would provide the ideal
means for identity theft and other fraudulent activity. In addition,
the nationwide consumer reporting agencies each maintain slightly
different information in their consumer files, making it difficult to
devise a common identification scheme. Moreover, a flexible approach
allows the nationwide consumer reporting agencies to adjust to changing
threats and patterns of fraudulent activity over time. Accordingly,
like the proposed rule, the final rule does not prohibit the use of
separate authentication processes by each nationwide consumer reporting
agency for consumers requesting free annual file disclosures through
the centralized source.
Reasonably necessary. One nationwide consumer reporting agency
suggests that the final rule alter the limitation on information
collection. This commenter expresses concern that the ``reasonably
necessary'' standard creates uncertainty and would, therefore, increase
the risk of litigation.\30\ The commenter also states that this risk of
liability would create incentive for a nationwide consumer reporting
agency to collect only the minimum necessary amount of information in
order to identify consumers, thus creating increased risk of identity
theft or fraud.
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\30\ Throughout their comments, CDIA and the nationwide consumer
reporting agencies repeatedly object to the use of ``reasonable''
standards in the proposed rule-such as may be found in proposed rule
Sec. Sec. 610.2(b)(2)(i) (``reasonably anticipated volume'');
610.2(b)(2(ii) (collect only as much information as is ``reasonably
necessary''); 610.2(b)(2)(iv)(B) (provide information that consumers
might ``reasonably need''); 610.2(c) (implement ``reasonable
procedures''); 610.2(c)(2)(i)(B) (time when centralized source may
be ``reasonably anticipated'' to be able to accept requests); and
610.2(c)(2)(i)(C) (take all ``reasonable steps'' and defer requests
until a ``reasonable later time''). In general, the stated objection
to such provisions is that the use of a ``reasonable'' standard is
inappropriately vague, creates uncertainty and increases the risk of
private litigation. The Commission notes, however, that, since its
inception more than 30 years ago, the provisions of the FCRA itself
have been based upon the concept of ``reasonableness.'' Indeed,
Congress declared that the very purpose of the FCRA is ``to require
that consumer reporting agencies adopt reasonable procedures.'' FCRA
Sec. 602(b), 15 U.S.C. 1681(b). Further, FCRA Sec. 607(b) requires
all consumer reporting agencies to ``follow reasonable procedures to
assure maximum possible accuracy'' in consumer reports. 15 U.S.C.
1681e(b). Far from abandoning this approach, the FCRA, as amended by
the FACT Act, uses the words ``reasonable'' or ``reasonably'' more
than 70 times. Further, the ``reasonable'' standard is particularly
appropriate when technology and the industry are continually
changing. A more prescriptive standard might provide certainty
today, but it would likely be overtaken and rendered anachronistic
by advances in technology within a very short time. Accordingly, the
Commission believes use of a ``reasonable'' standard in the final
rule is appropriate and consistent with the regulatory scheme long
established by the FCRA.
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As noted above, the Commission intends for the final rule to strike
a balance between ease of use of the centralized source and maintaining
adequate identification and authentication procedures to protect
against fraud and identity theft. In part, the purpose of the
``reasonably necessary'' standard is to allow for advances in
technology or other developments that improve proper identification and
authentication. The Commission believes that creating a flexible
standard that can adapt over time is the most effective way of ensuring
that proper procedures are implemented. Accordingly, nationwide
consumer reporting agencies are required to limit the collection of
personally identifiable information through the centralized source to
that which is ``reasonably necessary.''
Potential for fraud. In promulgating the proposed rule, the
Commission posed a question as to whether and how the rule should
address the potential for fraudulent websites, telephone numbers, or
other ploys that might mimic the centralized source in order to gain
access to personally identifiable consumer information for illegal
purposes. In addition, the Commission asked whether the rule should
require the nationwide consumer reporting agencies to employ measures
to reassure consumers that they are contacting the legitimate
centralized source.
Two of the nationwide consumer reporting agencies and CDIA
responded to these questions by stating that the primary mechanism for
preventing such fraudulent ploys is FTC enforcement action. These
comments further assert that no specific preventive measures should be
required of the nationwide consumer reporting agencies. One nationwide
consumer reporting agency suggests that the nationwide consumer
reporting agencies and the Commission engage in future discussions
regarding effective measures to reassure consumers that they are
contacting the centralized source.
At this time, the Commission has not identified any specific
appropriate measures that, if incorporated into the centralized source,
would sufficiently address fraudulent spoofing or mimicking of the
centralized source. It welcomes further dialogue with the nationwide
consumer reporting agencies regarding this important topic of fraud
prevention. The Commission may also address these issues through
consumer education, and, if appropriate, enforcement actions pursuant
to the FTC Act, 15 U.S.C. 45(a). As a further aid to wary consumers,
the Commission urges the nationwide consumer reporting agencies to make
it easy for consumers to navigate from the nationwide consumer
reporting agencies' individual homepages to the centralized source
website. In addition, to assist consumers in identifying the
centralized source, the final rule requires the nationwide consumer
reporting agencies to include a statement indicating that the consumer
has reached the website or telephone number ``operated by the national
credit reporting agencies for ordering free annual credit reports, as
required by
[[Page 35476]]
federal law.'' Final rule Sec. 610.2 (b)(2)(iv)(D).
Information on alternate request methods.
To ensure that consumers can access the centralized source request
method of their choice, proposed rule Sec. 610.2(b)(2)(iii) required
the centralized source toll-free number and Internet website to provide
information regarding how to make a request for annual file disclosures
through all available request methods. The Commission received no
comments relating to this provision and adopts the provision as set
forth in the proposed rule. Final rule Sec. 610.2(b)(2)(iii).
Clear and easily understandable instructions.
Under proposed rule Sec. 610.2(b)(2)(iv), the centralized source
was required to provide clear and easily understandable information and
instructions to consumers. This provision required the nationwide
consumer reporting agencies to communicate to consumers, through the
centralized source, information and instructions that may be needed by
a consumer to request a free annual file disclosure. Under the proposed
rule, such communications include informing consumers of the progress
of their request for a file disclosure while they are in the process of
making the request. Proposed rule Sec. 610.2(b)(2)(iv)(A). For a
website request method, the proposed rule also required the centralized
source to provide access to a ``help'' or ``frequently asked
questions'' screen. Proposed rule Sec. 610.2(b)(2)(iv)(B). Finally, in
the event that a consumer cannot be properly identified through the
centralized source, the proposed rule required the nationwide consumer
reporting agencies to notify the consumer of that fact, and to provide
instructions on how to complete the request. Proposed rule Sec.
610.2(b)(2)(iv)(C).
As stated in the NPR, the intent of these rule provisions was to
ensure that centralized source materials are provided to consumers in
plain language and that the centralized source is easy for consumers to
use. A nationwide consumer reporting agency argues that the phrase
``clear and easily understandable'' is overly broad and subject to
troubling interpretation. This commenter suggests that the Commission
provide model language that could be used to give consumers the
instructions and information required by the rule. Similarly, some
consumer commenters suggest that the final rule should require that
centralized source instructions be written at a 12-year old reading
level. Since the instructions and information to be provided will be
determined in substantial part by the format and structure of the yet-
to-be-created centralized source, the Commission has decided not to
include such model ``information and instructions'' in the final rule.
The Commission also declines to require that centralized source
materials be written to a specific reading level, but notes that
evaluation of centralized source communications by consumer
communication experts, and consumer testing, may be instructive in
determining whether centralized source materials are ``clear and easily
understandable.''
Many consumer advocacy groups and a state official suggest that the
centralized source be required to provide instructions in languages,
other than English, that are spoken by a substantial number of
consumers in the United States. These commenters point to the fact that
a significant portion of the United States population communicates
primarily in languages other than English. Having carefully considered
these comments, the Commission has determined not to require
instructions in other languages. The Commission believes that requiring
multi-language translations of centralized source materials, including
the centralized source website itself, would impose significant
additional burden on the nationwide consumer reporting agencies at a
time when they will already be responding to the multiple and varied
new obligations that the FACT Act imposes upon them. Accordingly, the
Commission declines, at this time, to require multi-language
centralized source information and instructions. The Commission,
however, intends to provide education and outreach to consumers
concerning the final rule in Spanish\31\ -- the language most commonly
mentioned by commenters on this issue -- and encourages other
stakeholders in the centralized source, including the nationwide
consumer reporting agencies, to do the same.
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\31\ The Commission has been active in both consumer outreach
and enforcement initiatives relevant to Spanish-speaking consumers.
See, e.g.,
www.ftc.gov[sol]opa[sol]2004[sol]04[sol]hispanicsweep2.htm. To date,
the Commission has translated nearly 70 consumer publications into
Spanish and posted them to the FTC's En Espanol Web site at
www.ftc.gov[sol]spanish.
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Consumer advocacy groups recommend that the centralized source be
required to provide additional information, including a statement of
the consumer's right to obtain a credit score, a disclosure of the
other circumstances under which a consumer is entitled to a free report
(e.g., when a consumer is a victim of identity theft, unemployed, or a
welfare recipient), and information about nationwide speciality
consumer reporting agencies. The Commission does not adopt these
recommendations, primarily because requirements to provide such
additional information appear elsewhere in the FCRA.\32\ Similarly,
requirements relating to nationwide speciality consumer reporting
agencies are contained in final rule Sec. 610.3. The Commission
believes the dissemination of information required under these
statutory and rule provisions is sufficient to inform consumers.
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\32\ Section 609(d) of the FCRA as amended by the FACT Act, 15
U.S.C. 1681g(d), requires the Commission in consultation with other
agencies to prepare and make available a summary of the rights of
identity theft victims. Section 609(c) of the FCRA as amended by the
FACT Act, 15 U.S.C. 1681g(c), requires the Commission to prepare and
make available a Summary of Rights to Obtain and Dispute Information
in Consumer Reports and to Obtain Credit Scores, which summary is
required to be included with each written disclosure provided to the
consumer by a consumer reporting agency, including free annual file
disclosures. Pursuant to Sec. 609(a)(6) of the FCRA, 15 U.S.C.
1681g(a)(6), as amended by Sec. 212 of the FACT Act, consumers who
request a file disclosure but not the credit score must be informed
of the right to request and obtain a credit score.
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A nationwide consumer reporting agency recommends that the
requirement of proposed rule Sec. 610.2(b)(2)(iv)(A) that the
centralized source provide ``information on the progress of the
consumer's request while the consumer is engaged in the process of
requesting a file disclosure'' be limited to requests made using the
Internet website. This commenter argues that this requirement will
cause confusion in the telephone request context. The Commission has
decided not to adopt this recommendation because it finds such
information to be useful in the context of a telephone request. The
purpose of having the centralized source provide such information is to
ensure that consumers do not mistakenly discontinue the order process
without finishing their request. The centralized source could comply
with this requirement in the telephone context, for example, by
instructing consumers to ``please hold while we find your record.''
A nationwide consumer reporting agency recommends that the
requirement of proposed rule Sec. 610.2(b)(2)(iv)(A) be modified to
state that it is not intended to allow a consumer to return to the
centralized source to check the ``status'' of a request for an annual
file disclosure already made, but rather is intended to keep the
consumer informed as the request is
[[Page 35477]]
being made. The language of the rule provision itself is clear on this
point: it requires information on the progress of the request ``while
the consumer is engaged in the process of requesting a file
disclosure.'' This provision is intended only to require the
centralized source to communicate with the consumer while the consumer
is in the process of providing information to make the request. Once
all the requisite information is provided, there is no further
obligation for the centralized source to ``update'' consumers on the
status of the processing of their request. The Commission has
determined that the rule provision is clear as stated, and accordingly,
adopts it as proposed. Final rule Sec. 610.2(b)(2)(iv)(A).
The Commission received no comments regarding the language of
proposed rule Sec. Sec. 610.2(b)(2)(iv)(B) and (C). The Commission
adopts Sec. 610.2(b)(2)(iv)(A)-(C) as set forth in the proposed rule.
Make standardized form available.
Proposed rule Sec. 610.2(b)(3) required that the centralized
source make available to consumers a standardized form established
jointly by the nationwide consumer reporting agencies. The Commission
has adopted a model form which may be used to comply with this section.
See final rule Sec. 698, App. D. and the discussion of that section in
this notice, infra. The Commission did not receive comment on Sec.
610.2(b)(3), and it is adopted as proposed.\33\
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\33\The Commission did, however, receive comments on the content
of the model standardized form contained in the proposed rule. These
comments, and the final rule modifications to the model form, are
discussed under the section of this notice entitled ``Part 698
Appendix D,'' infra.
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Section 610.2(c)--Requirement to anticipate
Proposed rule Sec. 610.2(c) required nationwide consumer reporting
agencies to implement reasonable procedures to anticipate and respond
to the volume of consumers who will contact the centralized source
through each request method. This requirement included developing and
implementing contingency plans to address circumstances that may
materially and adversely impact the centralized source. These
contingency plans were to include measures to minimize the impact of
such circumstances.
Implement reasonable procedures to anticipate and respond to volume.
General requirement. CDIA and the nationwide consumer reporting
agencies object to the proposed rule requirement that nationwide
consumer reporting agencies ``implement reasonable procedures to
anticipate, and respond to, the volume of consumers who will contact
the centralized source through each request method, to request, or
attempt to request, a file disclosure.'' Proposed rule Sec. 610.2(c).
These commenters argue that this requirement will put them in the
untenable position of defending their ``guesses'' regarding the
required capacity, against the perfect hindsight of consumer litigants
and the Commission.
This is not the case. Proposed rule Sec. 610.2(c) required only
that the nationwide consumer reporting agencies develop and implement
reasonable procedures to anticipate volume. It did not require the
nationwide consumer reporting agencies to anticipate volume perfectly.
The nationwide consumer reporting agencies have considerable experience
in anticipating the likely volume of consumer contacts. For example, in
the last five years, they have developed and implemented procedures to
anticipate the volume of consumer calls to their toll-free dispute
telephone numbers to facilitate their compliance with FCRA
requirements.\34\ Also, the nationwide consumer reporting agencies have
had to anticipate consumer request volume for free disclosures in those
states where, under state law, consumers have previously been granted
the right to obtain them. The Commission believes it is critical to
meeting the objectives of the centralized source that the nationwide
consumer reporting agencies implement reasonable procedures to
anticipate and respond to consumer contact volume. The Commission
believes this standard is both feasible and appropriate.
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\34\ See, U.S. v. Equifax Credit Information Services, Inc.,
1:00-CV-0087 (N.D. GA 2000), http://www.ftc.gov/os/2000/01/equifaxconsent.htm, U.S. v. Experian Information Solutions, Inc., 3-
00CV0056-L (N.D. TX 2000), http://www.ftc.gov/os/2000/01/experianconsent.htm, U.S. v. Trans Union LLC, Civil Action No.
00C0235 (N.D. IL 2000), http://www.ftc.gov/os/2000/01/transunionconsent.htm.
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Set point for initial capacity. Proposed rule Sec. 610.2(c)
required the nationwide consumer reporting agencies to implement
reasonable procedures to anticipate and respond to the volume of
consumer contacts, both during and after the transition period for the
centralized source. CDIA and the nationwide consumer reporting agencies
argue that the absence of any actual volume data for centralized source
operations makes this requirement impossible to meet during the first
two years of implementation of the centralized source. These commenters
claim that the Commission itself has declared initial request volume
impossible to estimate,\35\ and, in the absence of any reliable
historical data, the nationwide consumer reporting agencies should not
be required to anticipate and respond to the ``unknowable'' volume of
consumer contacts.\36\
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\35\ Comment, CDIA 000018. While the Commission
acknowledged in the NPR that accurately anticipating the initial
volume for the centralized source would be difficult, it did not
state, and does not believe, that it is ``impossible.'' See 69 FR at
13198. This is especially true because the proposed and final rules
require only reasonable procedures to anticipate volume.
\36\ See, e.g., Comment, Experian Information Solutions, Inc.
000040.
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CDIA and the nationwide consumer reporting agencies suggest that
the Commission should designate the starting capacity for the
centralized source in the rule itself. Further, they argue that the
starting capacity set point should constitute a safe harbor from all
liability under the rule for the first two years of operations of the
centralized source. In other words, they contend that the Commission
should designate the starting capacity, and the nationwide consumer
reporting agencies should not be required to exceed that capacity until
December 2006.
For a number of reasons, the Commission does not believe such a
rule provision would be appropriate, and thus has declined to adopt
this suggestion. As noted above, the Commission believes that the Sec.
610.2(c) requirement to implement reasonable procedures to anticipate
and respond to capacity is both feasible and appropriate. In the NPR,
the Commission explained how such reasonable procedures might be
implemented, for example, by conducting a sample analysis of the only
probative data available at that time. Thus, the Commission noted that,
``Although the precise demand for consumer free annual file
disclosures on a nationwide basis is largely unknown, there is some
available information that appears to be instructive in anticipating
request volume when the rule becomes effective. For example, according
to a Congressional Research Service Report to Congress, the consumer
request rate for file disclosures in states where free annual
disclosures are not currently available is 0.5% to 2%. In those states
where consumers are, by state law, already guaranteed the right to a
free annual disclosure, the request rate ranges from 3.5% to 10%. This
represents an average disclosure rate that is 231% [of] the request
rate in
[[Page 35478]]
other states.\37\ Based upon these statistics alone, and taking into
account also the publicity likely to be generated by the promulgation
of the final rule, it would be reasonable to anticipate that the number
of requests for annual file disclosures will be 300% of the current
disclosure rate, absent any unanticipated intervening factors.''
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\37\ Loretta Nott and Angie Welborn, ``A Consumer's Access to
Free Credit Report: A Legal and Economic Analysis,'' Congressional
Research Service, Library of Congress, July 21, 2003, p. 11.
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69 FR at 13198. Based upon the comments and the information available
to date, the Commission continues to believe that 300% of the current
rate of file disclosures is a reasonable estimation of needed initial
capacity for the centralized source.
Further, the Commission believes that the comments of CDIA and the
nationwide consumer reporting agencies themselves demonstrate that it
is possible to implement reasonable procedures to anticipate and
respond to the volume of consumers who will contact, or attempt to
contact, the centralized source.\38\ The nationwide consumer reporting
agencies, not the Commission, are in the best position to anticipate
likely demand for annual file disclosures, particularly as the initial
implementation of the centralized source begins to provide additional
data on the likely level of demand. The rule is designed and intended
to require only that the nationwide consumer reporting agencies develop
a reasonable initial estimate of adequate capacity, and then reasonably
expand capacity if those estimates prove too low. Further, the
nationwide consumer reporting agencies have decades of experience in
dealing with consumer requests and disputes relating to consumer
reports. In the Commission's view, it would not be appropriate to
substitute its estimation of consumer demand for free annual file
disclosures for that of the seasoned business judgment of organizations
that have superior access to existing relevant information and
experience in the industry.
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\38\ Trans Union declares that ``we believe that there is
sufficient data regarding experience with state free file disclosure
requirements that would enable the Commission to develop a clear and
reasonable standard for central source capacity at its inception.''
Comment, Trans Union 000035. CDIA states that it ``believes
the initial capacity should be based on experiential data.''
Comment, CDIA 000018. CDIA goes on to explain:``CDIA
believes that the consumer request volume will be the highest in the
first year that the centralized source is in operation. . . . As
discussed above, . . . data indicates that consumer requests for all
their file disclosures will be based on 231% of the current total
number of requests for file disclosures received by the nationwide
consumer reporting agencies in states that do not currently require
free file disclosures. Thus, the approximate percentage attributable
to the new federal free file disclosure right should be 131% of the
current file disclosure request rate in those states. The total
volume based upon those percentages should be adjusted to reflect
the fact that 43 of the 51 jurisdictions do not currently require
free file disclosures. The initial capacity of the centralized
source and of each nationwide consumer reporting agency should be
determined by applying the appropriate formula (i.e., based upon
231% or 131%) to the daily average of all consumer requests for file
disclosures received by the nationwide consumer reporting agencies .
. . .'' These comments demonstrate that it is possible to examine
existing data, draw conclusions based upon that examination, and
develop reasonable procedures based upon those conclusions.
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Similarly, as discussed further under Sec. 610.2(i) of this
notice, infra, the Commission does not believe that reasonable
estimations can be made only after a full two years of centralized
source operations. The final rule does, however, provide the nationwide
consumer reporting agencies with a reliable safe harbor structure,
based upon request volume, that applies both during and after the
centralized source transition period. See discussion under Sec. Sec.
610.2(e) and 610.2(i)(2)-(3), infra.
Developing and implementing contingency plans.
As part of its requirement for reasonable procedures to anticipate
and respond to consumer request volume, proposed rule Sec. 610.2(c)
required the nationwide consumer reporting agencies to develop and
implement contingency plans to address circumstances that may
materially and adversely impact the operation of the nationwide
consumer reporting agency, a centralized source request method, or the
centralized source. Examples of the types of circumstances for which
the nationwide consumer reporting agencies were required to develop
contingency plans included natural disasters, telecommunications
interruptions, equipment malfunctions, labor shortages, computer
viruses, coordinated hacker attacks, and seasonal or other fluctuations
in consumer request volume.
CDIA, the nationwide consumer reporting agencies, and some members
of Congress comment that these provisions of the proposed rule
``essentially require[d] the nationwide consumer reporting agencies to
anticipate the unpredictable''\39\ and ``perform despite those
disasters.''\40\ These commenters suggest that the proposed rule
imposed liability upon the nationwide consumer reporting agencies even
if they were unable to accept or respond to consumer requests due to
some unpredictable and materially adverse event. These commenters go on
to posit that it would be more appropriate for the final rule to
relieve the nationwide consumer reporting agencies of liability in the
event of such circumstances than to impose a requirement to reasonably
anticipate and respond to events that may be completely outside their
control.
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\39\ Comment, CDIA 000018.
\40\ Comment, Equifax Information Services, LLC 000028.
See also, Comment, Experian Information Solutions, Inc.
000040; Comment, U.S. House of Representatives Committee on
Financial Services 000136; and Comment, U.S. Senate
000137.
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The proposed rule was not intended to suggest that nationwide
consumer reporting agencies should be required to process requests for
annual file disclosures despite any and all unpredictable and
uncontrollable events that may hamper their performance. Rather,
proposed rule Sec. 610.2(c) was intended to require only that the
nationwide consumer reporting agencies consider the types of material
and adverse events that are reasonably likely to occur, and develop
reasonable plans to address such events in ways that will minimize
impact on the centralized source. Further, the Commission did not
intend that this provision should be interpreted to require nationwide
consumer reporting agencies to develop precise and unique plans for
every particular event listed in the proposed rule or otherwise
anticipated. Rather, the intent of this provision was to require that
generally appropriate plans be developed and implemented, based upon
the types of interruption such events may bring. Accordingly, final
rule Sec. 610.2(c) has been modified to clarify this intent, and
references to specific types of events have been removed.
As clarified, the Commission believes the requirement for
nationwide consumer reporting agencies to develop and implement
contingency plans for material and adverse circumstances that are
reasonably likely to occur is appropriate. The Commission notes that it
is common practice in many industries to develop contingency and
recovery plans for events that are not completely predictable but
likely enough that contingency plans are appropriate. For example, it
is not possible to predict exactly where and when a hurricane may
strike. The final rule would not require nationwide consumer reporting
agencies to have hurricane contingency plans regardless of where
centralized source operations are located. If, however, centralized
source operation centers are located in Miami, Florida, it would be
reasonably likely--based upon historical weather patterns for that
region-- that a hurricane may occur that would materially and adversely
impact those operations. In such a case, the final rule
[[Page 35479]]
would require the nationwide consumer reporting agencies to develop and
implement contingency plans to minimize the impact of such events, to
the extent reasonably practicable under the circumstances.
The Commission also recognizes that some events may be predictable,
but are so devastating that there are no reasonable measures that can
be implemented to minimize impact. Thus, the Commission intends that
the required contingency plans be tempered by two factors: the
likelihood of a material and adverse event occurring, and the extent to
which particular measures to minimize impact are reasonable under the
circumstances. For example, even though a hurricane that will
materially and adversely impact the centralized source operations in
Miami, Florida may be reasonably likely to occur, the contingency plan
for such an event need not include measures to minimize the impact of
the complete destruction of the centralized source operations by a
hurricane. Even if hurricanes of such destructive magnitude may have
occurred in the region previously, there are no reasonable measures
that could be undertaken to minimize the impact of such a devastating
event.
As revised, Sec. 610.2(c) is intended to reflect what would be
sound business planning in nearly any industry. Indeed, in the
Commission's view, the nationwide consumer reporting agencies may
comply with the requirement to develop and implement contingency plans
under final rule Sec. 610.2(c) by implementing the same contingency
procedures for centralized source operations that they maintain and
implement for their for-profit enterprises.
Specific measures to minimize impact.
Under the proposed rule the contingency plans required by paragraph
(c) were to include specific reasonable measures to minimize the impact
of material and adverse circumstances on the operation of the
centralized source. These measures included, but were not necessarily
limited to: (1) providing information to consumers on how to use
another available request method; (2) communicating, to a consumer who
attempts but is unable to make a request, the fact that a condition
exists that has precluded the centralized source from accepting all
requests, and the period of time after which the centralized source is
reasonably anticipated to be able to accept the consumer's request for
an annual file disclosure; and (3) taking all reasonable steps to
restore the centralized source to normal operating status as quickly as
possible. Measures to minimize impact also included, as appropriate,
collecting request information but declining to accept the request for
processing until a reasonable later time, provided that the nationwide
consumer reporting agency clearly and prominently informs the consumer
when it will accept the request for processing. Proposed rule Sec.
610.2(c)(2).
Industry commenters on this provision generally believe the list of
measures to minimize impact to be sufficiently inclusive and the
measures appropriate. CDIA and one nationwide consumer reporting agency
comment, however, that, as proposed, this section required some
measures to be performed ``to the extent possible.'' These commenters
argue that a standard of what is ``possible'' is too broad and
subjective to be truly meaningful. To address these concerns, the final
rule provides that these measures should be undertaken ``to the extent
reasonably practicable under the circumstances.'' Final rule Sec.
610.2(c)(1).
Centralized source maintenance.
One nationwide consumer reporting agency comments that temporary
outages may result from the need to perform maintenance on the
centralized source Internet website or telephone lines. The commenter
requests that the final rule clarify that such outages are not
violations of the rule. The Commission acknowledges that particular
request methods may be unavailable for reasonable periods of time due
to the need for maintenance. Accordingly, final rule Sec. 610.2(c)(2)
provides that nationwide consumer reporting agencies shall not be in
violation of the final rule's adequate capacity requirement if a
centralized source request method is unavailable for a reasonable
period of time for purposes of maintenance. This provision requires,
however, that only one request method be unavailable for such
maintenance at any given time.
In light of the foregoing discussion, the Commission adopts
proposed rule Sec. 610.2(c) with some modifications. As explained
above, the final rule requires nationwide consumer reporting agencies
to develop and implement contingency plans for material and adverse
events that are reasonably likely to occur. These contingency plans
must contain measures to minimize impact ``to the extent reasonably
practicable under the circumstances.'' Further, the final rule includes
a new subparagraph (3) to clarify that the nationwide consumer
reporting agencies are not in violation of the rule if a centralized
source request method is temporarily unavailable for maintenance. Final
rule Sec. Sec. 610.2(c)(1) and (2). The Commission believes that final
rule Sec. 610.2 (c) appropriately balances the considerations of
minimizing potential disruptions of the centralized source, and
providing nationwide consumer reporting agencies with both flexibility
and sufficient guidance in their compliance obligations.
Section 610.2(d)--Disclosure of all files
The proposed rule, in Sec. 610.2(d), required a nationwide
consumer reporting agency to provide an annual file disclosure to any
consumer who requests one if the consumer reporting agency has the
ability to provide a consumer report to a third party relating to that
consumer. As noted in the NPR, this provision was intended to ensure
that every consumer can obtain annual file disclosures through the
centralized source from each of the nationwide consumer reporting
agency systems, regardless of whether the information in that
consumer's file is owned by the nationwide consumer reporting agency or
an associated consumer reporting agency. See 69 FR at 13197.
Files Owned by Associated Consumer Reporting Agencies.
As noted in the discussion of the definition of associated consumer
reporting agency, supra, some nationwide consumer reporting agencies
house within their systems data owned by one or more associated
consumer reporting agencies. By virtue of such relationships with
associated consumer reporting agencies, a nationwide consumer reporting
agency, which does not itself own consumer files in a localized area or
region of the country, is able to provide consumer reports on consumers
residing in that area or region to its customers. On that basis, the
proposed rule required nationwide consumer reporting agencies to
provide free annual file disclosures to any consumer for whom they
could sell a consumer report, even if they did not ``own'' that
particular consumer's file.
Representatives of the nationwide consumer reporting agencies raise
many objections to this requirement. They comment that requiring them
to disclose files owned by another consumer reporting agency is
contrary to the intent of Congress, and outside the scope of the FACT
Act. These commenters assert that although, absent such a requirement,
not all consumers would be able to obtain annual file disclosures from
each of the three identified nationwide consumer reporting agencies
through the centralized source, this is a ``problem,''
[[Page 35480]]
in their view, based in the FACT Act itself, and the Commission should
not attempt to fix it.
As stated in the NPR, the Commission believes that the legislative
history indicates Congressional intent that all consumers be able to
obtain free annual file disclosures from each of the three known
nationwide consumer reporting agencies.\41\ The Commission does not
believe that it was the intent of Congress to create pockets of the
country in which consumers could obtain only one or two annual file
disclosures through the centralized source. Further, the language of
the FACT Act places the responsibility for providing annual file
disclosures solely on the nationwide consumer reporting agencies. The
Commission believes, therefore, that the intent of Congress and the
mandate of the FACT Act are best realized by requiring the nationwide
consumer reporting agencies to disclose to consumers all files in their
possession that they can provide to third parties, including those
residing on their systems but owned or maintained by an associated
consumer reporting agency. Moreover, the Commission believes it is
appropriate that if a nationwide consumer reporting agency has the
ability to provide a consumer report on a consumer to a third party,
and thereby profit from the sale of that report, that nationwide
consumer reporting agency should disclose the file to the consumer.
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\41\ ``The centralized system shall allow consumers to obtain
free reports from all three [nationwide consumer reporting] agencies
using a single request.'' S. Rep. No.108-166, at 17 (2003) (emphasis
supplied).
---------------------------------------------------------------------------
As an alternative means of providing free annual file disclosures
to all consumers, the nationwide consumer reporting agencies suggest
that an associated consumer reporting agency should be considered a
``consumer reporting agency that compiles and maintains files on
consumers on substantially a nationwide basis,'' as referred to in
Sec. 211(d)(6)(A) of the FACT Act, and that such agencies should be
obligated to provide consumers with annual file disclosures through the
centralized source. These commenters assert that all associated
consumer reporting agencies are substantially nationwide, based upon
their relationships with nationwide consumer reporting agencies. The
Commission notes that associated consumer reporting agencies are a
diverse group of entities, including many that own consumer credit
files for only a small geographic area. The Commission believes it is
not appropriate to classify all associated consumer reporting agencies,
regardless of their size, the scope of their operations, or the number
of files they own, as compiling and maintaining files on consumers ``on
substantially a nationwide basis'' based solely on their contractual
relationships with nationwide consumer reporting agencies.\42\
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\42\ See discussion under section IV of this notice, infra.
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The nationwide consumer reporting agencies also assert that this
provision is unfair. They argue that the requirement to provide annual
file disclosures for files owned by associated consumer reporting
agencies gives the associated consumer reporting agencies an
overwhelming advantage in any negotiations between the two entities for
supplying and paying for the file disclosures. These commenters suggest
that the Commission should include in the final rule provisions that
would govern the bargaining between these entities-for example, by
prohibiting the charging of certain fees by the associated consumer
reporting agencies. The nationwide consumer reporting agencies assert
that otherwise they will have unequal bargaining power when negotiating
contracts with the associated consumer reporting agencies.
The Commission does not believe it is appropriate or necessary to
intervene in the contractual relationships between the nationwide
consumer reporting agencies and the associated consumer reporting
agencies. These relationships have existed for many years, during which
the parties have managed to successfully negotiate various kinds of
terms and adjust to a wide variety of economic and regulatory changes
affecting the industry. The nationwide consumer reporting agencies'
assertion that they will have little leverage in these negotiations
seems improbable given the reciprocal and symbiotic nature of the
relationships between these entities. The parties involved rely on each
other to provide products or services of value to their customers. The
associated consumer reporting agencies rely on the nationwide consumer
reporting agencies to obtain updates for, and to some extent, to sell
their consumer reports on a national basis. In return, the nationwide
consumer reporting agencies rely on the associated consumer reporting
agencies for access to files in parts of the country where the
nationwide agency does not own files. It is clearly in the interests of
both parties to maintain these relationships, and the Commission does
not believe that the final rule will disrupt those interests or be
substantially unfair to any of the parties.
In addition, one nationwide consumer reporting agency comments that
the proposed rule does not specify that this provision applies only to
its own files and those of associated consumer reporting agencies.
Therefore, this commenter asserts, the rule provision could also be
read to require a nationwide consumer reporting agency to disclose
files owned by any other consumer reporting agency, regardless of
whether the files were housed in the system of the nationwide consumer
reporting agency. In order to clarify that this obligation applies only
to files that are either owned by the nationwide consumer reporting
agency itself, or housed on that agency's system but owned by an
associated consumer reporting agency, the final rule includes modified
Sec. 610.2(d) that clarifies the intended limited application of this
provision.
Proper Identification of Consumers.
One nationwide consumer reporting agency comments that the
obligation to provide an annual file disclosure should apply only when
the nationwide consumer reporting agency can confirm the requester's
identity. The Commission notes that FCRA Sec. 610(a)(1), 15 U.S.C.
1681h(a)(1), requires consumer reporting agencies to obtain proper
identification from consumers before providing file disclosures. This
statutory provision applies to those disclosures requested through the
centralized source. Accordingly, Sec. 610.2(d) of the rule has been
modified to clarify that the nationwide consumer reporting agencies are
obligated to provide annual file disclosures only upon proper
identification in compliance with Sec. 610(a)(1) of the FCRA, and
Sec. 610.2(b)(2)(ii) of the final rule.
Section 610.2(e)--High request volume and extraordinary request volume
The Commission recognizes that there may be times when the volume
of consumer requests for file disclosures may be higher than
anticipated, such as may overwhelm the systems of a nationwide consumer
reporting agency or a nationwide specialty consumer reporting agency.
As noted in the NPR, the Commission recognizes that, even with careful
planning and preparation, it may be difficult for the nationwide
consumer reporting agencies to anticipate and respond to consumer
request volume under all circumstances. In light of these
uncertainties, and in consideration of the possible impact of
unexpected and extraordinary demand for annual file disclosures on the
ability of the nationwide consumer reporting agencies to produce other
file
[[Page 35481]]
disclosures and consumer reports, the proposed rule provided some
limits on the liability of nationwide consumer reporting agencies
during times when request volume significantly exceeds what could
reasonably have been anticipated. Proposed rule Sec. 610.2(e).
Members of Congress, industry commenters-including CDIA, nationwide
and associated consumer reporting agencies, and several trade
organizations-strongly support the concept of liability relief
(sometimes called ``surge protection'') during times of heavy consumer
request volume. These comments provide a number of compelling arguments
that reasonable surge protection must be a feature of the final rule.
They posit that, without such protections, the nationwide consumer
reporting agencies could be overwhelmed with unexpected volume and be
unable to respond to consumer requests-a situation that would frustrate
consumers and thwart the purposes of the FACT Act and the rule. They
also contend that maintaining vast amounts of excess capacity for the
sole purpose of responding to sporadic surges is wasteful and
prohibitively expensive.
In addition, a number of commenters who represent organizations
that furnish consumer report information to nationwide consumer
reporting agencies comment that large surges in annual file disclosure
request volume may have a ripple effect for the whole financial
services industry. Even if nationwide consumer reporting agencies could
accept and process all of the requests for annual file disclosures
during a surge, the corresponding surge in consumers contacting the
nationwide and associated consumer reporting agencies and furnishers to
dispute information contained in those reports would constitute a
significant strain on the financial services industry. These commenters
assert that surge protection must be provided to manage the number of
requests for annual file disclosures that are accepted by nationwide
consumer reporting agencies in the first instance, in part to allow the
nationwide and associated consumer reporting agencies and furnishers to
manage these ``back end'' effects.
In response to these comments, the final rule provides two tiers of
relief for times when the consumer request volume is higher than the
normal fluctuations in demand. In times of ``high request volume''--
i.e., when volume exceeds 125% of average -- nationwide consumer
reporting agencies may delay accepting requests for processing until a
reasonable later time.\43\ Final rule Sec. 610.2(e)(1). In addition,
the rule provides a more complete limitation on liability in times of
``extraordinary request volume''--i.e. exceeding 175% of the daily
average volume- by allowing nationwide consumer reporting agencies to
decline requests at such times. The Commission believes the combined
structure of high request volume relief and extraordinary request
volume relief provides the industry with adequate protection from
unexpected, overwhelming request volume.
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\43\ Except as provided in Sec. Sec. 610.2(i) and 610.3(g),
high request volume occurs when the number of consumers requesting
or attempting to request file disclosures during any 24-hour period
is more than 125% of the daily rolling 90-day average. Final rule
Sec. 610.1(b)(8).
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High and extraordinary request volume thresholds.
Under the proposed rule, extraordinary request volume occurred when
the volume of requests exceeded twice the daily average volume. The
Commission received comment from consumer advocacy groups expressing
concern that the proposed rule definition of ``extraordinary request
volume'' set the bar too low for the nationwide consumer reporting
agencies and nationwide specialty consumer reporting agencies to obtain
relief from the rule's requirements. In particular, these commenters
are concerned that because extraordinary request volume was defined as
only twice the daily average of consumer requests, a single security
breach or national media event could produce request volume at the
``extraordinary'' level, thus allowing nationwide consumer reporting
agencies and nationwide specialty consumer reporting agencies to stop
fulfilling file disclosure requests too frequently. In contrast,
representatives of the nationwide consumer reporting agencies and
nationwide specialty consumer reporting agencies, as well as some
members of Congress, express concern that relief that is triggered at
twice the daily rolling average is, in fact, no relief at all. These
commenters argue that such a standard would require the nationwide
consumer reporting agencies to maintain an unrealistic amount of
costly, daily excess capacity.\44\
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\44\ The Commission notes that while the nationwide consumer
reporting agency and nationwide specialty consumer reporting agency
commenters agree that the extraordinary request volume threshold
contained in the proposed rule is too high, they are not similarly
uniform in their opinion as to what the appropriate threshold should
be. The nationwide consumer reporting agencies, as well as an
associated consumer reporting agency, suggest the proper threshold
is 125% of average volume. One nationwide specialty consumer
reporting agency commenter suggests 110% of average volume.
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In addition, industry commenters noted that under the proposed
rule, nationwide consumer reporting agencies, during the transition
period, were permitted to queue requests for file disclosures and delay
accepting such requests until a reasonable later time, when ``high
request volume'' occurs. No such relief was provided under the proposed
rule for nationwide specialty consumer reporting agencies or for
nationwide consumer reporting agencies after the transition period.
Compare proposed rule Sec. Sec. 610.2(i)(3) and 610.3(g). Accordingly,
industry commenters urge the Commission to revise the final rule to (1)
lower the extraordinary request volume threshold from 200% to 125%, and
(2) allow nationwide consumer reporting agencies to delay accepting
requests for file disclosures by queuing them at an intermediate
threshold of 115%, and to continue to have this option beyond the
transition period. Some commenters also ask the Commission to adopt
``high request volume'' provisions that would apply to nationwide
specialty consumer reporting agencies, both during and after the
transition period. As noted above, the Commission agrees that the
addition of high request volume relief during and after the transition
for both nationwide and nationwide specialty consumer reporting
agencies is appropriate.
In support of their argument that ``high request volume'' should be
defined as any volume that exceeds 115% of the rolling daily average
volume, the nationwide consumer reporting agencies posit that demand
for file disclosures is so volatile and difficult to predict that even
modest fluctuations beyond the average volume are likely to cause
significant difficulty for their operations. The Commission notes that,
according to CDIA, ``volatility in contact rates usually ranges no
higher (or lower) than 20% of the average baseline of contact.''\45\
The Commission believes that the nationwide consumer reporting agencies
and nationwide specialty consumer reporting agencies should be prepared
to respond to such day-to-day volatility. High request volume and
extraordinary request volume provisions, on the other hand, should be
available to address volatility that significantly exceeds the norm.
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\45\ Comment, CDIA 000018.
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In light of these comments, the final rule provides for ``high
request volume'' relief when the number of consumers requesting or
attempting to request file disclosures exceeds 125% of the rolling
daily 90-day average volume. The Commission believes requiring the
[[Page 35482]]
nationwide consumer reporting agencies to be prepared to accept 125% of
the daily rolling 90-day average of consumer requests is reasonable. As
one nationwide consumer reporting agency asserted: ``We believe that
maintaining a 25% buffer in excess capacity should be reasonably
achievable and should be sufficient based on our historical experience
with surges in demand for file disclosures.''\46\
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\46\ Comment, Trans Union 000035.
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Further, the Commission notes that the threshold for extraordinary
request volume is meant to be truly extraordinary because, at that
level, the rule provides complete relief from liability. For as long as
that level is maintained, the nationwide consumer reporting agencies
and nationwide specialty consumer reporting agencies are protected from
liability under the rule even if they decline to accept additional
consumer requests for file disclosures. See final rule Sec. Sec.
610.2(e)(2) and 610.3(c)(2). As noted above, the Commission believes
the nationwide consumer reporting agencies should be prepared to
respond to normal, day-to-day volatility of 25% over average volume.
The Commission also believes, however, that a volume that is more than
three times that normal variation in demand--i.e. 175% of rolling 90-
day daily average--would be ``extraordinary,'' and consequently the
level at which extraordinary relief should be provided. Accordingly,
the final rule provides that ``extraordinary request volume'' is volume
that exceeds 175% of rolling 90-day daily average volume.
As noted above, some consumer advocacy groups assert that the high
and extraordinary request volume threshold should not be set at a level
that is likely to be triggered by a single event. The Commission notes,
however, that the capacity of the centralized source likely cannot be
expanded and contracted immediately in response to sudden,
unpredictable events.\47\ Accordingly, the final rule provides for high
and extraordinary request volume relief at request levels that
significantly exceed normal fluctuations in demand, regardless of the
particular causes of such fluctuations.
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\47\ The commenters who argue that extraordinary request volume
relief should not be available at a level likely to be triggered by
a single event cite to the possibility of a large-scale security
breach or incidence of identity theft. The Commission notes that
while the consumers impacted by such events may choose at that point
in time to seek their annual file disclosures through the
centralized source, that is not the only means by which they might
obtain a file disclosure under those circumstances. Under the FCRA,
an individual who ``has reason to believe that the file on the
consumer at the agency contains inaccurate information due to
fraud'' is entitled to a free file disclosure during any 12-month
period. FCRA Sec. 612(c)(3), 15 U.S.C. 1681j(c)(3). In addition, a
consumer who asserts a good faith suspicion that he or she is or is
about to become a victim of fraud or identity theft is entitled to a
free file disclosure. FACT Act Sec. 112, codified at FCRA Sec.
605A, 15 U.S.C. 1681c-1. The Commission notes that these free file
disclosures are available to consumers in such circumstances, in
addition to -- not in place of -- the annual free file disclosure to
be provided through the centralized source. FACT Act Sec. 211(a),
codified at FCRA Sec. 612(a), 15 U.S.C. 1681j(a).
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To ensure that the high and extraordinary request volume threshold
functions as intended, however, the final rule alters the definition of
extraordinary request volume slightly. The Commission notes that, once
extraordinary request volume is reached, attempts to make requests for
file disclosures may be declined or queued for later processing. See
final rule Sec. Sec. 610.2(e) and 610.3(c). These attempted requests,
to the extent that they can be tracked, should be considered part of
the consumer request volume. Accordingly, the final rule modifies the
proposed rule's definition of ``extraordinary request volume'' to make
clear that the threshold is calculated based upon ``the number of
consumers requesting, or attempting to request, file disclosures during
any 24-hour period.'' Final rule Sec. 610.1(b)(6).
Under the final rule high and extraordinary request volume are
measured on the basis of requests for all types of file disclosures,
rather than only requests for annual file disclosures. Although the
FACT Act requires the nationwide consumer reporting agencies and
nationwide specialty consumer reporting agencies to develop the
centralized source and streamlined process described in the final rule
for the purpose of receiving requests for annual file disclosures,
Congress specifically directed the Commission to consider ``the
significant demands that may be placed on consumer reporting agencies
in providing [annual file disclosures],'' and ``appropriate means to
ensure that consumer reporting agencies can satisfactorily meet those
demands.'' FACT Act Sec. 211(d)(2). The significant demands of
providing annual file disclosures include demands associated with
simultaneously responding to requests for other types of file
disclosures, such as free file disclosures resulting from adverse
action under FCRA Sec. 612(b), 15 U.S.C. 1681j(b), and free file
disclosures provided in response to suspected fraud under FCRA Sec.
612(c)(3), 15 U.S.C. 1681j(c)(3). Further, consumer reporting agencies
may face additional significant demands in responding to inquiries, or
requests for reinvestigation,\48\ generated through each of these types
of file disclosures.\49\ Delays in this system caused by excess demand
may adversely impact consumers with a specific, immediate need for
access to their file disclosures and to reinvestigation procedures.
Accordingly, it is appropriate to consider the volume of request for
all types of file disclosures in determining ``extraordinary request
volume'' for the purpose of limiting liability under the final rule.
Final rule Sec. 610.1(b)(6).\50\
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\48\ See FCRA Sec. 611(a), 15 U.S.C. 1681i(a).
\49\ The Commission notes that the FACT Act has expanded
consumers' rights to obtain a free file disclosure in a number of
ways. See, e.g., FACT Act Sec. 112.
\50\ For the same reasons, high request volume also is
calculated based upon volume of all types of file disclosures.
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In addition, the Commission recognizes that the volume of requests
for annual file disclosures will be particularly difficult to predict
and volatile during the transition period. Due to such special
considerations during the transition period, high and extraordinary
request volume is defined differently during that period.\51\ See
discussion of Sec. Sec. 610.2(i) and 610.3(g) infra.
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\51\ The final rule definition of extraordinary request volume
found in Sec. 610.1 (b)(6) also makes clear that this definition
will prevail, except during the transition periods defined in
Sec. Sec. 610.2 (i) and 610.3 (g). As noted, the term is defined
differently in those sections, for the duration of the transition
periods described.
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High and extraordinary request volume protections.
When high request volume occurs, nationwide consumer reporting
agencies may collect consumer request information and delay accepting
the request for processing until a reasonable later time. The
nationwide consumer reporting agency must, however, clearly and
prominently inform the consumer of when the request will be accepted
for processing. This provision will provide nationwide consumer
reporting agencies with some protection from unexpected surges, and, as
one consumer advocacy group points out, it has the benefit of
eliminating the need for consumers within the surge to reinitiate
contact with the centralized source at a later time in order to obtain
an annual file disclosure. In order to take advantage of this high
request volume protection, however, the nationwide consumer reporting
agency must implement reasonable procedures to anticipate consumer
request volume developed in compliance with final rule Sec. 610.2(c).
The FACT Act requires nationwide consumer reporting agencies to
provide annual file disclosures within 15 days of
[[Page 35483]]
when the request is received. By permitting nationwide consumer
reporting agencies to queue some requests for annual file disclosures
during times of high request volume, the final rule allows the
nationwide consumer reporting agencies to postpone receiving those
requests -- and thereby postpone the running of the 15-day delivery
requirement -- for a reasonable period of time.\52\
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\52\ What constitutes a ``reasonable period of time'' to
postpone accepting requests will likely depend on a number of
factors, including the length and magnitude of the surge. For
example, if high request volume lasts only one day, it may not be
reasonable to postpone accepting the request for annual file
disclosures for three weeks. In addition, the rule does not specify
how the nationwide consumer reporting agencies should process
requests placed in a queue versus new requests after high request
volume ceases. The nationwide consumer reporting agencies are in the
best position to manage their resources to process these requests.
However, because the nationwide consumer reporting agencies may only
postpone accepting requests for a ``reasonable period of time,''
they must efficiently process requests placed in a queue, and it
would be logical to process requests in a chronological order from
the time they were received.
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Under final rule Sec. 610.2(e)(2), when extraordinary request
volume occurs, nationwide consumer reporting agencies will not be
deemed in violation of the rule's requirement for adequate capacity,
provided that they implement reasonable procedures to anticipate
consumer request volume in compliance with Sec. 610.2(c). This
provision is adopted as proposed, with only minor modifications.
In the event of high or extraordinary request volume affecting a
particular request method, the final rule requires nationwide consumer
reporting agencies to direct consumers to other available request
methods to the extent reasonably practicable. Final rule Sec.
610.2(c)(1)(i)(A). Thus, high or extraordinary request volume affecting
just one request method would not necessarily lead to a limitation on
liability in relation to the operation of the other request methods.
The Commission believes that--taken in combination with the
provisions of the FACT Act itself-- the high and extraordinary request
volume protections will provide appropriate and sufficient relief to
the nationwide consumer reporting agencies and other affected
businesses during times of unexpected, heavy volume. The 15-day time
line for providing reports prescribed under the FACT Act allows
considerable flexibility for nationwide consumer reporting agencies to
smooth normal fluctuations in demand for ``back end'' services by
managing when the requested annual file disclosures are provided. In
times of excess volume, final rule provisions for high and
extraordinary request volume allow the nationwide consumer reporting
agencies additional flexibility to manage both the acceptance of the
requests and timing of the processing of the requests.
Liability limitations contingent upon reasonable procedures.
CDIA and the nationwide consumer reporting agencies also comment
that, under the proposed rule, surge protection was contingent upon the
nationwide consumer reporting agency having complied with the Sec.
610.2(c) requirement to develop and implement reasonable procedures to
anticipate and respond to request volume. These comments assert that
the development of contingency plans for material adverse events and
relief from the effects of excess consumer request volume must remain
distinct. To support this argument, CDIA uses this example:
``[i]t would be possible for the nationwide consumer reporting
agencies to adopt reasonable procedures to anticipate consumer request
volume, but to have the actual demand exceed their reasonable
expectations. Under the proposed rule, these agencies could avail
themselves of the extraordinary request volume provisions or high
request volume provisions only if the agencies had also developed and
implemented contingency plans to address circumstances that would
materially and adversely impact the operations, even if none of those
circumstances affected the actual volume of requests.''\53\
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\53\ Comment, CDIA 000045.
---------------------------------------------------------------------------
The Commission believes this argument misinterprets the intended
application of the rule. The purpose of requiring the nationwide
consumer reporting agencies to implement reasonable procedures at all
times, including during times of high or extraordinary request volume,
is to ensure that the agencies respond, to the extent reasonably
practicable under the circumstances, to material and adverse
circumstances that impact the centralized source. It would seem of
little use to require nationwide consumer reporting agencies to develop
and implement reasonable procedures to anticipate and respond to
consumer demand if there was no corresponding requirement to implement
those procedures when they are most needed. Final rule Sec. 610.2(e)
ensures that excessive volume does not excuse the nationwide consumer
reporting agencies from their responsibility to implement reasonable
procedures to minimize impact on the centralized source, as required
under Sec. 610.2(c). Conversely, final rule Sec. 610.2(e) should not
be interpreted to deny high and extraordinary request volume
protections to a nationwide consumer reporting agency because the
agency failed to develop and implement contingency plans for events
that are unrelated to the ability of the agency to respond to request
volume during the time period at issue.
Ongoing staggering of availability of file disclosures.
The FACT Act Sec. 211(d)(2) directs the Commission to consider
``appropriate means to ensure that consumer reporting agencies can
satisfactorily meet [the demands of providing annual file disclosures],
including the efficacy of a system of staggering the availability to
consumers of such [annual file disclosures].'' The proposed rule
provided for a staggering of availability over a nine-month transition
in which regions of the country would successively become eligible
every three months. The NPR stated that ``there is no basis for
concluding ongoing staggering of the availability of annual file
disclosures is necessary'' and, accordingly, the proposed rule did not
provide for such staggering beyond the transition period. 69 FR at
13196.
The nationwide consumer reporting agencies urge the Commission to
change this process in two ways: (1) to permit consumers to request
file disclosures only during discrete periods of time (e.g., birth
month or birth quarter); and (2) to continue this segmentation in
perpetuity. One nationwide consumer reporting agency expresses doubt
that the Commission has properly considered ongoing, permanent
staggering of annual file disclosure availability. This commenter
maintains the Commission is ``ignor[ing] the plain language of the
statute [by] maximizing consumer ease of access at the expense of the
staggered availability contemplated by the statute.''\54\The commenter
suggests that the FACT Act requires the Commission to adopt such
staggering if it is found to be effective in ensuring that nationwide
consumer reporting agencies can meet their responsibilities.
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\54\ Comment, Equifax Information Services LLC 000028.
---------------------------------------------------------------------------
The Commission has considered the significant demands placed upon
the nationwide and nationwide specialty consumer reporting agencies in
the process of formulating both the proposed and the final rule. As
noted in the NPR, these demands include not only the provision of
annual file disclosures to consumers, but also
[[Page 35484]]
demands associated with simultaneously responding to requests for other
types of file disclosures, such as free file disclosures resulting from
adverse action under FCRA Sec. 612(b), 15 U.S.C. 1681j(b), and free
file disclosures provided in response to suspected fraud under FCRA
Sec. 612(c)(3), 15 U.S.C. 1681j(c)(3). Further, consumer reporting
agencies may face additional significant demands in responding to
inquiries, or requests for reinvestigation,\55\ generated through each
of these types of file disclosures. The Commission has also considered,
and adopted, a number of appropriate means to ensure that nationwide
consumer reporting agencies can meet those demands, including a
staggered transition period and two levels of surge protection. The
Commission does not agree that the FACT Act's direction to ``consider .
. . appropriate means to ensure that consumer reporting agencies can
satisfactorily meet [the significant demands]'' (emphasis supplied)
equates to a mandate to adopt a particular scheme of staggering,
especially when viewed in light of the FACT Act's direction also to
consider the ease by which consumers should be able to request annual
file disclosures. FACT Act Sec. 211(d).
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\55\ See FCRA Sec. 611(a), 15 U.S.C. 1681i(a).
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The nationwide consumer reporting agencies themselves state that
consumer demand for annual file disclosures, after the transition
period, can be reasonably anticipated based upon experiential data. The
final rule provides for a gradual, staggered roll-out, final rule Sec.
610.2(i), and for protection from unexpected surges in file disclosure
demand, both during the rollout period and thereafter, Sec. 610.2(e).
Further, the FACT Act provides nationwide consumer reporting agencies
with considerable flexibility in meeting the significant demands placed
upon them. As noted above, the FACT Act allows nationwide consumer
reporting agencies 15 days from the time a request for an annual file
disclosure is received to provide that disclosure. FACT Act Sec.
211(a), codified at FCRA Sec. 612(a)(2), 15 U.S.C. 1681j(a)(2). The
Act also allows nationwide consumer reporting agencies a significantly
longer period of time to resolve requests for reinvestigation when they
originate from an annual file disclosure. FACT Act Sec. 211(a),
codified at FCRA Sec. 612(a)(3), 15 U.S.C. 1681(a)(3) (45 days, rather
than 30 days). In addition, annual file disclosures must be provided
only once in a 12-month period. The 12-month limitation should result
in the continuation of the demand-smoothing effects of the transition
roll-out scheme, for the requests that are first made during that
period. This provides some ongoing limitation on unexpected volume
after the transition period-i.e., a consumer who received an annual
file disclosure when his or her state first became eligible under the
transition provisions is not eligible to request another such
disclosure for 12 months.
Accordingly, the Commission determines that ongoing staggering of
the availability of the annual file disclosures is not an appropriate
means to ensure that the nationwide consumer reporting agencies can
meet the significant demands placed upon them by the FACT Act,
particularly when balanced against the interests of consumers in having
ready access to file disclosures. The high and extraordinary request
volume protections incorporated into the final rule achieve the same
objective, and strike a better balance between the competing interests.
The Commission intends, however, to closely monitor the progress of the
transition and the capability of the nationwide consumer reporting
agencies to respond to actual request volume, and may adjust the rule,
as necessary or appropriate, in the future.
Section 610.2(f)--Information use and disclosure
Under the proposed rule, Sec. 610.2(f) addressed only information
security. The proposed rule did not contain any limitations on use and
disclosure of information collected by the centralized source.\56\ In
the NPR, the Commission posed several questions regarding what, if any,
use and disclosure restrictions would be appropriate for the personally
identifiable information collected through the centralized source.
Based upon those comments, as described below, the Commission adopts a
new Sec. 610.2(f) in the final rule, addressing information use and
disclosure. The provision of the proposed rule relating to information
security has been deleted, as discussed below.
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\56\ Proposed rule Sec. 610.2(b)(2)(ii) did address collection
of information by the centralized source, but not use or disclosure
of the information collected. This provision has been altered
slightly in the final rule. See discussion under Sec. 610.2(b) of
this notice, supra.
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Information use and disclosure.
The majority of consumer and consumer advocate commenters assert
that the final rule should contain restrictions on ``secondary'' use
and disclosure of information collected through the centralized source.
These commenters argue that consumers must be reassured that providing
their information to the centralized source will not subject them to
unintended consequences, such as unwanted marketing. Further, these
commenters note that because concern for information privacy is ``a key
motivating factor for consumers to request their [file disclosures],''
a final rule that does not restrict use and disclosure of information
``will seriously impair [consumers'] trust in the system.''\57\ For
these reasons, the commenters advocate that use and disclosure of
information collected through the centralized source be limited to
verifying the identity of the consumer making the request.
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\57\ Comment, Consumer Federation of America et al.
000019.
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Similarly, some marketers of credit-related products and services
also recommend that secondary uses of the personally identifiable
information collected through the centralized source be prohibited. One
commenter asserts, for example, that without such restrictions,
``consumers will be forced to choose between exercising their rights
[to obtain an annual file disclosure] . . .and maintaining their
privacy.''\58\ Further, these commenters argue that the ability to use
and disclose this consumer information would provide the nationwide
consumer reporting agencies with an unfair competitive advantage.\59\
In contrast, CDIA comments that the final rule should not attempt to
interfere with the use and disclosure requirements already applicable
to such personal information.
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\58\ Comment, Intersections Inc. 000034.
\59\ These commenters assert the same arguments that some
advanced to support banning the marketing and advertising of non-
statutorily mandated products on the centralized source. The
Commission's response to this argument is discussed under Sec.
610.2(g) of this notice.
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The Commission notes that the information collected by the
centralized source may include information that consumers view as
particularly sensitive and vulnerable to misuse-such as Social Security
numbers. Under FCRA Sec. 612(a)(1)(B), 15 U.S.C. 1681j(a)(1)(B),
consumers can obtain annual file disclosures from the nationwide
consumer reporting agencies only through the centralized source. In
obtaining free annual file disclosures, then, consumers are compelled
to use the centralized source. As a result, if consumers are reluctant
to use the centralized source due to concerns relating to the use and
disclosure of their personal information, the purpose of the FACT Act's
requirement for free annual file disclosures would be thwarted.
Further, as some commenters point out, the Commission believes it
is not
[[Page 35485]]
appropriate to make the availability of annual file disclosures -- a
right conferred by federal law -- contingent on a consumer's
willingness to subject personal identifying information to unrelated,
secondary uses. In this sense, the final rule is analogous to the
Commission's restriction on secondary uses of the Do Not Call Registry
required by the Telemarketing Sales Rule, 16 CFR Part 310 (TSR). Under
the TSR, use of the Commission's Do Not Call Registry for purposes
other than to prevent telephone calls to the persons listed is
prohibited. 16 CFR 310.2(b)(2). Similar reasoning applies here;
consumers should not be subjected to unrelated uses of their
information as a condition of availing themselves of protections and
benefits afforded to them by law.
For these reasons, in the final rule Sec. 610.2(f), the Commission
limits the use and disclosure of ``any personally identifiable
information collected from consumers as a result of a request for
annual file disclosure, or other disclosure required by the [FCRA],
made through the centralized source.'' This provision applies only to
personally identifiable information that is collected as the result of
providing a statutorily-mandated product-such as a file disclosure or
credit score. As noted under Sec. 610.2(g) of this notice, infra, the
final rule does not prevent nationwide consumer reporting agencies from
offering other products and services through the centralized source.
The Commission notes that use and disclosure of information collected
as a result of a consumer purchase of one of these non-statutorily-
mandated products is not subject to the limitation of Sec. 610.2(f).
Final rule Sec. 610.2(f) permits use and disclosure of personally
identifiable information in four ways: ``[1] to provide the annual file
disclosure or other disclosure requested by the consumer; [2] to
process a transaction requested by the consumer at the same time as a
request for annual file disclosure or other disclosure; [3] to comply
with applicable legal requirements, including those imposed by the Fair
Credit Reporting Act and this [rule]; and [4] to update personally
identifiable information already maintained by the nationwide consumer
reporting agencies for the purpose of providing consumer reports,
provided that the nationwide consumer reporting agency uses and
discloses the updated personally identifiable information subject to
the same restrictions that would apply to the information updated.''
The final rule makes it clear that personally identifiable
information collected through the centralized source may be used and
disclosed as necessary to process a transaction that the consumer
requests at the same time as a statutorily-mandated disclosure. The
purpose of this provision is to avoid requiring consumers to reenter
the information in order to purchase a non-statutorily mandated
product.
Some consumer advocacy organizations express concern regarding the
use of information collected through the centralized source to enhance
the nationwide consumer reporting agencies' consumer reporting files.
The final rule permits nationwide consumer reporting agencies to use
the information collected through the centralized source to update the
information they already maintain for consumer reporting purposes, but
would not permit them to add additional information that they do not
already collect from other sources -- such as an email address. This
provision would also prevent nationwide consumer reporting agencies
from using the protected information to develop new consumer files for
non-consumer reporting agency purposes.
The Commission notes that the information maintained by nationwide
consumer reporting agencies for consumer reporting purposes is subject
to a variety of restrictions under existing law. The Commission does
not believe it would be appropriate to permit the updating of such
information to interfere with any use and disclosure limitations that
may apply to the existing data prior to the update. For this reason,
this provision makes clear that if a nationwide consumer reporting
agency uses personally identifiable information obtained from consumers
requesting disclosures through the centralized source to update
information it maintains for consumer reporting purposes, the updated
information is subject to the same restrictions that apply to the
original, pre-updated data. One commenter from outside the consumer
reporting industry suggests that use and disclosure of information
collected through the centralized source is already limited to
``permissible purposes'' under the FCRA.\60\ This commenter argues that
any provision of the final rule that restricts the use and disclosure
of such information would be an attempt to change the operation of the
FCRA itself.\61\ This is not the case. The FCRA limits the use and
disclosure of ``consumer reports.'' As noted above, most information
collected through the centralized source is not a ``consumer report''
as that term is defined under the FCRA, and thus, the FCRA's
restrictions on use and disclosure of consumer reports do not apply. To
the extent that information collected through the centralized source is
consumer report information, final rule Sec. 610.2(f) would permit the
nationwide consumer reporting agencies to use that information to
update their consumer report files. Thus, contrary to the commenter's
assertions, the final rule's restriction on use and disclosure of
information collected through the centralized source does not impact
the availability of consumer reports for permissible purposes under the
FCRA.
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\60\ See FCRA Sec. 604, 15 U.S.C. 1681b.
\61\ Comment, ACA International 000043.
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Information security.
The proposed rule, in Sec. 610.2(f), required nationwide consumer
reporting agencies to comply with the requirements set forth in
Standards for Safeguarding Customer Information, 16 CFR 314 (the
Safeguards Rule),\62\ regarding all personally identifiable information
collected through or disclosed by the centralized source.
Representatives of the nationwide consumer reporting agencies comment
that this provision of the proposed rule is unnecessary because
consumer reporting agencies are financial institutions subject to the
Commission's jurisdiction under GLBA, and thus, already subject to the
Safeguards Rule. See 67 FR 36484, 36485 (May 23, 2002). Representatives
of the nationwide consumer reporting agencies also comment that by
requiring compliance with the Safeguards Rule in this rule, the
Commission has sought to alter the scheme of GLBA by applying the
FCRA's private right of action to GLBA violations where no private
right of action previously existed.
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\62\ 16 C.F.R. Part 314 was promulgated by the Commission
pursuant to the Gramm-Leach-Bliley Act (GLBA), 15 U.S.C. 6801 et
seq.
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The Commission notes that the nationwide consumer reporting
agencies are subject to a variety of existing laws relating to
unauthorized access and[sol]or security of information they collect and
disclose, including, but not limited to the FCRA, the Safeguards Rule
and the FTC Act. The record in this rulemaking provides no basis for
concluding that these existing requirements are inadequate to address
the information collected and disclosed through the centralized source,
or that the centralized source creates any new or unique risks that are
not addressed by such existing requirements. Thus, the Commission does
not believe it is necessary to duplicate or augment those requirements
in the final rule.
[[Page 35486]]
Accordingly, Sec. 610.2(f) of the proposed rule is not adopted in the
final rule.
Section 610.2(g)--Communications provided by the centralized source
The Commission noted in the NPR that the centralized source would
afford the nationwide consumer reporting agencies the opportunity to
communicate information to consumers about other credit-related
products and services they may sell. In addition, the Commission stated
that the proposed rule would not prohibit these agencies from offering
other file disclosures or products and services, in addition to the
required annual file disclosures, through the centralized source. In
order to ensure that such advertising or marketing does not undermine
the purpose of the centralized source, or mislead consumers, Sec.
610.2(g) of the proposed rule states that any communications provided
through the centralized source ``shall not interfere with, detract
from, contradict, or otherwise undermine the purpose of the centralized
source.'' In addition, the proposed rule listed examples of
representations that would be unacceptable: (1) pop-up advertisements
that hinder the consumer's ability to complete an online request for
annual file disclosures; (2) representations that a consumer must
purchase a product in order to receive or understand the file
disclosures; (3) representations that the annual file disclosures are
not free or that requesting them will have a negative impact on the
consumer's credit rating; and (4) representations that other products
are free, if that is not the case, or failing to disclose clearly and
prominently that a service advertised as initially free must be
cancelled to avoid a charge.
The final rule retains this provision with only minor
modifications. The example described in Sec. 610.2(g)(2)(i) with
respect to pop-up advertisements has been modified to make clear that
any offers or promotions that hinder the consumer's ability to complete
an online request for file disclosures would constitute undue
interference with the purpose of the centralized source.
A number of commenters, including consumer organizations,
individual consumers, and businesses that market credit-related
products or services, address this issue, urging the Commission to
prohibit advertising and marketing on the centralized source.
Competitors of the nationwide consumer reporting agencies argue that
advertising and marketing would give the nationwide consumer reporting
agencies an unfair competitive advantage. Consumer advocacy
organizations argue that the promotion of products or services - other
than credit scores - would necessarily confuse consumers and undermine
the purpose of the centralized source. Moreover, they did not believe
that any regulation could address adequately the potential for
confusion or deceptive advertising practices. In addition, some argue
that any advertising or marketing of products on the centralized source
would carry an implication of government endorsement or approval of the
products offered.
Most of these commenters further argue that there is no
congressional authority to allow the centralized source to be used for
other purposes. In addition, some suggest that if there is to be
advertising and marketing on the centralized source, the source should
be made available to other sellers of credit products or services or to
consumer groups that wish to provide their own information about credit
issues.
Comments from the nationwide consumer reporting agencies and CDIA
generally favor the Commission's approach on this matter, although some
express concern that the language of this rule provision is not
sufficiently specific to provide clear guidance.
Section 212(a) of the FACT Act requires that consumer reporting
agencies inform consumers about the availability of credit scores when
providing file disclosures to them. Further, a credit score that is
based upon consumer reporting information can only be generated from
that information. A consumer must be properly identified and the
appropriate consumer file must be located in order for either a credit
score or a file disclosure to be generated. It would be an anomalous
result, for both consumers and the nationwide consumer reporting
agencies, for the law to require the centralized source to inform
consumers about the availability of credit scores, but not permit them
to obtain credit scores at that juncture. Accordingly, it is consistent
with the FACT Act to make both file disclosures and credit scores
available through the centralized source. Allowing consumers who wish
to purchase credit scores to do so at the same time that they obtain
their annual file disclosures will result in efficiency for both
consumers and nationwide consumer reporting agencies.
The statute, however, is silent with respect to other products or
services that may be advertised or marketed on the centralized source.
The Commission does not interpret this silence as an indication that
the nationwide consumer reporting agencies are barred from the
advertising or marketing of other products or services. An absolute
prohibition of such communications would have to withstand scrutiny
under U.S. Supreme Court decisions regarding the First Amendment and
commercial speech. See Central Hudson Gas & Elec. Corp. v. Public Serv.
Comm'n., 447 U.S. 557, 564 (1980). The Commission believes that its
substantial interest in preventing communications that are misleading,
confusing to consumers, or undermine the purpose of the centralized
source can be served by less restrictive means than an absolute ban,
and it has crafted Sec. 610.2(g) accordingly.
The purpose of the centralized source is to enable consumers to
make a single request to obtain annual file disclosures from the
nationwide consumer reporting agencies. Advertising or marketing must
be secondary to, and constrained by, that purpose. If a consumer is
hindered in the effort to make an online request for file disclosures
by the need to view and respond to, or close windows for, multiple
offers of products and services, such communications would interfere
with or undermine the purpose of the centralized source. Any
representation that a consumer must purchase a product in order to
receive or understand the annual file disclosure would contradict and
detract from the right to obtain the free annual disclosure. Similarly,
any representation that the file disclosure request itself will have a
negative effect on the consumer's credit rating would undermine and
detract from the right to the free annual disclosure. The same would be
true of misrepresentations about the cost of other products or
services, or the terms of any subscription service such as credit
monitoring.
The Commission further notes that the specific provisions of the
rule are not the only mechanisms available to it to address deceptive
or unfair marketing practices in connection with the operation of the
centralized source. The FTC Act's prohibition against such practices
also would apply to the nationwide consumer reporting agencies in their
joint operation of the centralized source, just as it does in their
individual business operations. 15 U.S.C. 45(a). For example, any
express or implied claim that any product or service offered via the
centralized source bears government approval or endorsement would be
deceptive, and therefore a violation of the FTC Act. The Commission
believes that the enforcement tools available to the agency, under both
the rule and the FTC Act, will enable it to ensure that the centralized
source is operated in an appropriate manner - i.e., one that enables
consumers to request their
[[Page 35487]]
annual file disclosures easily and without being subjected to deceptive
or unfair practices.
The Commission believes that, in general, competition with regard
to credit-related products and services may be enhanced as a result of
the final rule, because easier consumer access to file disclosures may
create greater consumer awareness of the entire industry. Further, any
competitive advantage for the nationwide consumer reporting agencies is
created by the FACT Act's requirement to establish the centralized
source, an undertaking that imposes significant costs on the industry.
Section 610.2(h)--Effective date
The FACT Act, in Sec. 211(d)(5), requires that the Commission
issue centralized source regulations in final form no later than six
months after the enactment date of the FACT Act, and that these rules
take effect no later than six months after the date on which the
regulations are issued in final form. The statute, therefore, requires
that the effective date be no later than December 4, 2004.
The Commission proposed an effective date of December 1, 2004, at
which time the phase-in of consumer eligibility for free annual file
disclosures would begin. Some consumers suggest that this transition
would begin too late, and that free annual file disclosures should
begin to be available as soon as the final rule is issued. Some members
of Congress assert that the transition should be completed, and all
consumers should be eligible to request their free annual file
disclosures, by December 4, 2004.
Representatives of the nationwide consumer reporting agencies
comment that a six-month period is the minimum necessary time prior to
the initial deployment of the centralized source to any portion of the
country. These commenters explain that at least six months will be
required to evaluate the final rule and design and build the necessary
infrastructure for the centralized source.
The Commission has considerable recent experience in designing and
implementing structures to respond to large volumes of consumer
requests, e.g. the implementation of the Do-Not-Call Registry. After
considering the FACT Act requirements under Sec. 211(d), and the
significant technological challenges presented by designing, building
and implementing the centralized source required by this part, the
Commission believes it is reasonable to require the nationwide consumer
reporting agencies to begin to implement the centralized source about
six months after the final rule is issued. Accordingly, the final rule
becomes effective on December 1, 2004. Final rule Sec. 610.2(h).
Section 610.2(i)--Transition
The final rule -- like the proposed rule-- requires a cumulative
regional roll-out for the centralized source. Under Sec. 610.2(i), the
centralized source will become available to consumers by region,
starting in the west and moving eastward across the country, at three-
month intervals. Consumers residing in the western part of the United
States (California and 12 other western states) will have access to the
centralized source beginning on December 1, 2004.\63\ On March 1, 2005,
consumers in 12 midwestern states also will become eligible to request
their annual file disclosures from the centralized source. On June 1,
2005, the centralized source will become available to consumers in 11
southern states. Finally, on September 1, 2005, the centralized source
will become available to all remaining consumers, including those
residing in eastern states, the District of Columbia, and all U.S.
territories and possessions.
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\63\ According to the 2000 U.S. Census, these states account for
22.1% of total U.S. population.
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Some consumers and consumer groups comment that there is
insufficient evidence to justify any gradual transition scheme.
Accordingly, those commenters suggest that annual file disclosures
should be available without a segmented approach to consumer
eligibility. These commenters also suggest that if the final rule
provides for any transition, it should allow for only a very short
``test'' period when the centralized source would be available to a
portion of the country. If the consumer demand proved overwhelming
during the ``test,'' they argued, the Commission could then amend the
rule to provide a more structured roll-out for the rest of the country.
In contrast to these comments, all representatives of the consumer
reporting industry emphasize the need for a substantial structured
transition in order to manage initial consumer demand for annual file
disclosures.
Section 211(d)(4) of the FACT Act requires that the Commission's
regulations provide for an ``orderly transition'' for nationwide
consumer reporting agencies to fully implement the centralized source.
The FACT Act directs that this transition be conducted in a manner that
does not temporarily overwhelm such consumer reporting agencies with
requests for disclosures beyond their capacity to deliver; and does not
deny creditors, other users, and consumers access to consumer reports
on a time-sensitive basis for specific purposes, such as home purchases
or suspicions of identity theft, during the transition period. This
provision of the statute clearly indicates that Congress contemplated
allowing the nationwide consumer reporting agencies some period of time
in which to build and implement the centralized source.\64\
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\64\ Some commenters suggested that even if the rule allows a
transition period to phase in the availability of the centralized
source, consumers who approach an individual nationwide consumer
reporting agency directly should be entitled to receive their free
annual file disclosures without waiting. The FACT Act amended FCRA
Sec. 612(a) to require the nationwide consumer reporting agencies
to make free annual file disclosures upon request of the consumer.
This right was limited, however, to requests that are made using the
centralized source. FCRA Sec. 612(a)(1)(B), 15 U.S.C.
1681j(a)(1)(B).
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Given the significant development necessary to fully implement the
centralized source, the Commission believes a gradual, segmented
transition is appropriate. Further, the Commission notes that
conditioning a structured transition on the results of a test period,
as suggested by some commenters, would subject the availability of the
centralized source to unreasonable uncertainty and delay. The
Commission likely would not be able to examine test data and promulgate
a revised rule without delaying the complete implementation of the
centralized source. In the meantime, the nationwide consumer reporting
agencies would be uncertain as to what this revised rule might require.
Accordingly, the Commission believes that establishing, at the outset,
a structured transition over a reasonable period of time will provide
the best results for both industry and consumers.
Transition Length.
Consumers, consumer groups and members of Congress comment that the
nine-month transition period set out in the proposed rule is
unreasonably long, and that this delay in implementation is contrary to
the intent of the FACT Act. These commenters point out that because the
FACT Act was signed in December of 2003, and the transition does not
begin until December of 2004, the nationwide consumer reporting
agencies will already have had a year to work on meeting the
requirements of the rule before the transition period begins. They
assert that, without specific substantiation for such a delay, an
additional nine months is an unreasonable amount of time for consumers
-- especially those at the end of the transition scheme -- to wait to
receive their annual file disclosures.
On the other hand, representatives of the nationwide consumer
reporting
[[Page 35488]]
agencies assert that a transition period of nine months is too short to
ensure a smooth implementation. They contend that even with this time
frame, they are compelled to begin the process of building the
centralized source prior to issuance of the final rule. They argue that
a transition of two years is needed to fully implement the centralized
source. During the first year of this suggested transition, consumers
would become eligible for discrete periods of time (rather than on a
cumulative basis). These commenters maintain that the centralized
source's first year of operation will not provide reliable data to
determine the appropriate baseline for operations of the centralized
source, because demand will be uncharacteristically high due to
consumer education efforts and media campaigns. The first six to nine
months of the second year of operation, they argue, would provide
better data to use in anticipating normal demand. After collecting that
data, the nationwide consumer reporting agencies assert, they would
adjust capacity accordingly.
The Commission concludes that the proposed nine-month transition
period proposed is appropriate. It is important for consumers to become
eligible to obtain their annual file disclosures as quickly as
practicable. The large number of consumers who commented on the
proposed rule and requested a shorter transition is evidence that many
consumers place much value on receiving these file disclosures.
The Commission is mindful, however, that the transition provided by
the final rule must enable the nationwide consumer reporting agencies
to meet the significant demands of building and adjusting a system with
adequate capacity to respond to requests from all eligible consumers at
the end of the transition. The nationwide consumer reporting agencies
comment that significant adjustments in the capacity of the centralized
source will require 60 to 90 days. Accordingly, a nine-month transition
provides the nationwide consumer reporting agencies with adequate
opportunity to adjust capacity based upon the experience provided by
the first two segments, prior to the implementation of the centralized
source nationwide. Further, this transition length and roll-out assist
in smoothing out demand after the transition. That is, each group to
become eligible in a period will not be able to request another annual
file disclosure for 12 months, which will cause some natural staggering
by groups after the transition.
For these reasons, the Commission believes that nine months
provides adequate time, in light of the number of consumer files
maintained by the nationwide consumer reporting agencies and the
significant development demands that the centralized source will
require, to gradually build capacity to meet full demand. Accordingly,
Sec. 610.2(i)(1) is adopted as proposed.
Regional Rollout.
Consumers and consumer advocacy groups comment that, in the event
the final rule provides for a rollout, a regional rollout is preferable
to one based on birth date or other identifier. These commenters assert
that a regional approach permits better consumer education through
regional and local media, and it aids in household financial management
in that it allows members of the same household to obtain their free
annual file disclosures at the same time.
Representatives of the nationwide consumer reporting agencies
suggest, however, that a preferable method of staggering eligibility
would be by consumers' birth month, or first initial of last name,
rather than by region of the country. Some commenters, including a
member of Congress, advocate staggering eligibility based upon Social
Security number. The nationwide consumer reporting agencies argue that
a regional approach would exacerbate demand on the centralized source
due to local media and advocacy group efforts.
The Commission believes that a regional approach is the most
effective and appropriate method to roll out the centralized source. A
regional rollout can be easily understood by consumers and will be
complemented by local and regional press coverage, which will remind
consumers when the centralized source becomes available to their state
or media market.\65\ Further, an approach that allows members of the
same household to obtain their annual file disclosures at the same time
is efficient and convenient for consumers.
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\65\ The regional divisions do not divide metropolitan
statistical areas.
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Some commenters assert that the rollout of eligibility from the
western part of the country eastward unreasonably discriminates against
consumers residing in the east. The Commission acknowledges that
consumers in the east will wait longer before becoming eligible to
receive annual file disclosures than consumers elsewhere in the
country. The Commission notes, however, that in any transition scheme,
regardless of the method of segmentation, some segment will wait longer
than others. Further, of the seven states where free file disclosures
are currently available under state law,\66\ five are in the eastern
segment of the transition. As noted in the NPR, the transition allows
implementation of the centralized source to begin with the smallest
segment by population -- the west -- and gradually build to the
capacity to handle the addition of the final, largest segment. The
Commission believes this structure to be an appropriate means of
facilitating a smooth transition.
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\66\ Colorado, Maine, Maryland, Massachusetts, New Jersey,
Georgia, and Vermont. The frequency of the availability of free file
disclosures in these states is not preempted by the FACT Act. FACT
Act Sec. 212(e)(4).
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Representatives of the nationwide consumer reporting agencies
comment that one nationwide consumer reporting agency currently
receives a disproportionate number of requests for file disclosures in
the western region as compared to other regions. Accordingly, these
commenters suggest beginning the transition with a region other than
the west. The Commission notes that, although one nationwide consumer
reporting agency may currently receive a disproportionate number of
file disclosure requests from consumers in the west, there is a smaller
total population in that region than in any other segment of the
transition. The Commission believes that the higher request rate in
that region may not repeat itself in the requests for annual file
disclosures. Indeed, since the requests in that region are already
higher, it may be that the incremental increase in demand for annual
file disclosures will be smaller in the west than in the other regions.
Accordingly, the Commission adopts a regional rollout, which will occur
in four segments, moving from west to east.\67\
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\67\ Some commenters raised questions regarding the timing of
eligibility of consumers serving in military active duty. Consumers
serving in military active duty will become eligible during the
transition based on their addresses of record with creditors. The
FACT Act provides additional rights to consumers on military active
duty and their families. See, FACT Act Sec. 112.
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Surge Protection During the Transition
High request volume during transition. The proposed rule provided
nationwide consumer reporting agencies with some relief, during the
transition period, in times of high request volume that does not reach
the extraordinary request volume benchmark. Under proposed rule
610.2(i)(3), when consumer request volume exceeded 115% of the rolling
daily seven-day average, the nationwide consumer reporting agencies
were permitted to place requests into a queue for processing at a
reasonable later time.
[[Page 35489]]
See discussion under Sec. 610.2(e) of this notice, supra.
Representatives of the nationwide consumer reporting agencies
comment in support of this intermediate threshold at which they could
begin to queue consumer requests. These commenters suggest, however,
that the level for high request volume, during the transition, should
be set at any volume above the initial capacity\68\ of the centralized
source, request method or nationwide consumer reporting agency.
Consumers and consumer groups also comment on this provision of the
rule, asserting that the 115% threshold was set too low because
fluctuations in request volume at that level were not excessive. They
suggest instead using a trigger of 200% of the daily rolling seven-day
average.
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\68\ See discussion of initial capacity, under Sec. 610.2(c)
supra.
---------------------------------------------------------------------------
The Commission believes that setting the threshold for high request
volume during the transition at 115% is appropriate. Request volume is
likely to be particularly volatile during the transition period. Thus,
a transition high request volume threshold that is slightly lower than
the post-transition threshold is appropriate. The 115% level is
sufficiently sensitive to provide some relief to the nationwide
consumer reporting agencies during times of unexpected high demand.
Accordingly, the final rule, Sec. 610.2(i)(2), generally provides for
high request volume relief during the transition when volume exceeds
115% of the daily rolling seven-day average.
Extraordinary request volume during the transition. Under the
proposed rule, during the transition, extraordinary request volume was
generally defined as twice the daily rolling seven-day average volume
of requests. In general, comments on the threshold for extraordinary
request volume during the transition track the comments made regarding
extraordinary request volume outside the transition, and are discussed
fully under Sec. 610.2(e) of this notice, supra. Because the final
rule provides complete relief from liability when extraordinary request
volume is reached, the Commission believes the same extraordinary
request volume threshold--175% --is appropriate both during the
transition period and after. Thus, the Commission determines that 175%
of the daily rolling 7-day average volume is appropriate to provide
relief to the nationwide consumer reporting agencies during periods of
truly extraordinary request volume during the transition. Final rule
Sec. 610.2(i)(3).
First week of transition. As explained under Sec. 610.2(e) of this
notice, supra, the final rule generally provides high request volume
and extraordinary request volume relief for the nationwide consumer
reporting agencies when request volume reaches specific thresholds
based upon rolling daily average of requests over the previous 90 days.
During the transition period, when request volume may be most volatile,
both high and extraordinary request volume levels are generally
calculated based upon seven-day rolling averages, in order to
accommodate the unique structure of the transition and the volatile
demand for annual file disclosures that may prevail during that time.
During the first week of the transition, high and extraordinary
request volume levels are determined in reference to the reasonably
anticipated volume of consumer contacts to the centralized source. In
other words, the nationwide consumer reporting agencies must use the
reasonable procedures required under Sec. 610.2(c) to develop an
estimate of expected volume for each centralized source request method,
the centralized source as a whole, and each nationwide consumer
reporting agency. During the first week of operations, high request
volume will be calculated at 115% of this reasonably anticipated
baseline volume. Final rule Sec. 610.2(i)(2)(i). Similarly,
extraordinary request volume will be calculated based on 175% of that
baseline. Final rule Sec. 601.2(i)(3)(i). From the second week, until
the end of the transition, high and extraordinary request volume will
be calculated based upon the rolling average volume of the previous
seven days. Final rule Sec. Sec. 610.2(i)(2)(ii) and 610.2(i)(3)(ii).
The nationwide consumer reporting agencies object to this structure
as requiring them to build a system that will have vast amounts of
excess capacity, and to adjust that capacity within an unreasonably
short period of time-i.e., a week. As noted in the NPR, because it is
tied to a seven-day time frame, the standard for extraordinary request
volume in fact may produce rapid expansion of the system. If
extraordinary levels of demand persist, the system's capacity would
have to increase significantly every week in order to take advantage of
the extraordinary request volume protections. CDIA asserts that these
provisions would require the nationwide consumer reporting agencies to
double the capacity of the system within two weeks of the
implementation, and that such rapid expansion is simply not possible.
The Commission believes that, viewed in light of the overall
structure of the transition, these provisions are reasonable and
appropriate. The development of the centralized source is a complex
project, and the Commission assumes that, by necessity, the vast
majority of the development will be completed before the transition
period begins. It is reasonable to expect that although it will be
required to service only about one quarter of the country during the
initial weeks of implementation, the system will at that point be
capable of handling substantially more than the anticipated volume
associated with that segment of the country. Accordingly, the
Commission believes it is reasonable to expect rapid expansion of the
system within the first segment if, for example, request volumes prove
to be even greater than could be anticipated in the first week of
operations.
Representatives of the nationwide consumer reporting agencies also
comment that it may be unclear how the trigger for extraordinary
request volume would operate during the first seven days of the
transition. These commenters express concern that the provision may be
interpreted to mean that the reasonably anticipated volume would adjust
daily during that week. The Commission intends that the reasonably
anticipated volume for that first week of the transition would remain
constant.
Accordingly, final rule Sec. 610.2(i)(2) defines high request
volume during the first week as more than 115% of the daily total
number of consumers that were reasonably anticipated to contact the
centralized source and, from December 8, 2004 through the end of the
transition, as more than 115% of the daily rolling seven-day average
number of consumers that contact the centralized source. Similarly,
Sec. 610.2(i)(3) of the final rule defines extraordinary request
volume during the first week as more than 175% of the daily total
number of consumers that were reasonably anticipated to contact the
centralized source and, from December 8, 2004 through the end of the
transition, as more than 175% of the daily rolling seven-day average
number of consumers that contact the centralized source.
Section 610.3(a)--Streamlined process for requesting annual file
disclosures from nationwide specialty consumer reporting agencies-
Streamlined process requirements.
Section 211 of the FACT Act requires nationwide specialty consumer
[[Page 35490]]
reporting agencies \69\ to provide annual file disclosures to
consumers, once during any 12-month period upon the request of the
consumer and without charge to the consumer. The FACT Act directs the
Commission to prescribe regulations\70\ to require the establishment of
``a streamlined process'' for consumers to request their free annual
file disclosures from these nationwide specialty consumer reporting
agencies.\71\ The FACT Act expressly requires that the streamlined
process must, at a minimum, include the establishment by each
nationwide specialty consumer reporting agency of a toll-free telephone
number for such requests. FACT Act Sec. 211(a), codified at FCRA Sec.
612(a), 15 U.S.C. 1681j(a).
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\69\ As explained under Sec. 610.1(b)(10) of this notice,
supra, a ``nationwide specialty consumer reporting agency'' means
``a consumer reporting agency that compiles and maintains files on
consumers on a nationwide basis relating to (1) medical records or
payments; (2) residential or tenant history; (3) check writing
history; (4) employment history; or (5) insurance claims.'' FCRA
Sec. 603 (w), 15 U.S.C. 1681a (w).
\70\ In promulgating its regulations applicable to nationwide
specialty consumer reporting agencies, the Commission considered: 1)
the significant demands that may be placed on consumer reporting
agencies in providing annual file disclosures; 2) appropriate means
to ensure that consumer reporting agencies can satisfactorily meet
those demands, including the efficacy of a system of staggering the
availability to consumers of such file disclosures; and 3) the ease
by which consumers should be able to contact consumer reporting
agencies with respect to access to such file disclosures. FACT Act,
Sec. 211(a)(2).
\71\ One nationwide specialty consumer reporting agency suggests
that the FTC further define: the term ``nationwide specialty
consumer reporting agency;'' the meaning of the enumerated types of
information that trigger Sec. 603(w) status; the phrase ``compiled
and maintained;'' and the information required to be disclosed in
the ``annual file disclosure.'' See discussion under Sec. 610.1(b)
of this notice, supra.
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Streamlined process requirements. Under the proposed rule Sec.
610.3(a)(1), each nationwide specialty consumer reporting agency was
required to establish a streamlined process for accepting and
processing consumer requests for annual file disclosures, which, at a
minimum, shall include the establishment of a toll-free telephone
number for accepting such requests. To enable consumers to request
annual file disclosures by telephone, the proposed rule required that
nationwide specialty consumer reporting agencies make their streamlined
process toll-free number available to consumers in specific ways: by
publication in any telephone directory in which the entity has its
telephone number published, Sec. 610.3(a)(1)(ii), and by posting the
toll-free number, along with instructions for requesting disclosures
via any additional request methods, on any website owned or maintained
by the entity, Sec. 610.3(a)(1)(iii).
In response to a comment by CDIA, writing on behalf of its
nationwide specialty consumer reporting agency members, the Commission
modifies the wording of Sec. 610.3(a)(1)(i) and (iii) in the final
rule to make clear that the only required request method is the toll-
free number; provision of additional request methods, such as mail or
the Internet, is optional.
Further, one nationwide specialty consumer reporting agency
suggests that for companies that own and maintain many websites, the
requirement to post the toll-free number and instructions for
additional request methods on all websites is burdensome, may
artificially increase consumer demand for annual file disclosures, and
could potentially confuse consumers. The Commission has not deleted
this provision, but has modified it to make it clear that a nationwide
specialty consumer reporting agency need only post this information on
websites that it owns and maintains and that are related to consumer
reporting. The Sec. 610.3(a)(1)(iii) requirement is designed to make
it as easy as possible for consumers to locate the nationwide specialty
consumer reporting agencies and to learn how to request annual file
disclosures. Several consumer advocacy organizations, in a joint
comment, state that many consumers may be unfamiliar with the
nationwide specialty consumer reporting agencies and the types of
consumer files they maintain. They stress the importance of raising the
public visibility of these agencies and informing consumers about the
availability of these file disclosures. As the Commission noted in the
NPR, this provision was not intended to require nationwide specialty
consumer reporting agencies to post the toll-free telephone number on
every page of a website. Rather, it was intended to require them to
provide a clear and prominent link to such information on any website
that the nationwide specialty consumer reporting agency owns or
maintains that is related to consumer reporting. Final rule Sec.
610.3(a)(1)(iii) makes this clear.
Under proposed rule Sec. 610.3(a)(1)(i), nationwide specialty
consumer reporting agencies were permitted, but not required, to
provide request methods in addition to the required toll-free number,
provided that when consumers contact the agency via its toll-free
telephone number, they were given access to clear and easily
understandable instructions for requesting annual file disclosures by
any other available request method. In the final rule Sec.
610.3(a)(1)(i), the Commission modifies this provision slightly to make
clear that when a nationwide specialty consumer reporting agency
provides instructions to consumers for requesting disclosures by any
additional available request method, these instructions must ``not
interfere with, detract from, contradict, or otherwise undermine the
ability of consumers to obtain annual file disclosures through the
streamlined process.''
One nationwide specialty consumer reporting agency suggests that,
because of its own unique and unusual business methods, taking a
request by telephone would present difficulties for the company, such
that it might not be able to service a request by telephone in as
streamlined a manner as it could via alternative methods. The
Commission notes, however, that the mandate of the FACT Act is
unequivocal -- at a minimum, each nationwide specialty consumer
reporting agency must establish a toll-free telephone number for
consumers to request their free annual file disclosures. The FACT Act
and the final rule require nationwide specialty consumer reporting
agencies to accept consumer requests for file disclosures over the
telephone. A nationwide specialty consumer reporting agency that
consistently directs consumers to another request method and does not
permit requests to be made by telephone-by requiring consumers to go to
a website or sign a specific form, for example-does not meet the
mandate of the FACT Act or the final rule.
This commenter also suggests that requiring request methods other
than telephone-for example mailing a signed document-is necessary to
ensure proper identification of consumers. The Commission notes that
FCRA Sec. 610(a) requires consumer reporting agencies to obtain
``proper identification'' from consumers as a condition of providing a
file disclosure. 15 U.S.C. 1681h(a). The final rule, however, permits
nationwide and nationwide specialty consumer reporting agencies to
collect only as much personally identifiable information from consumers
as is reasonably necessary to properly identify the consumer. Final
rule Sec. Sec. 610.2(b)(2)(ii) and 610.3(a)(2)(ii). The Commission
does not believe that FCRA Sec. 610 is inconsistent with the
requirement to accept requests by telephone. Given the unambiguous
requirement of the FACT Act that nationwide specialty consumer
reporting agencies accept telephone requests for annual file
disclosures, it is incumbent upon nationwide specialty
[[Page 35491]]
consumer reporting agencies to develop methods to identify consumers by
telephone, to the extent practicable.
Operation of the streamlined process.
Under the proposed rule, the streamlined process was required to be
``designed, funded, implemented, maintained and operated'' in a manner
that: has adequate capacity to accept reasonably anticipated volume,
Sec. 610.3(a)(2)(i); collects only as much personal information as is
reasonably necessary to properly identify the consumer,
Sec. 610.3(a)(2)(ii); and provides clear and easily understandable
information and instructions, Sec. 610.3(a)(2)(iii). These
requirements are similar to the requirements for operation of the
centralized source, discussed under Sec. 610.2(b) of this notice,
supra.
The proposed rule requirement to provide clear and easily
understood information and instructions to consumers included a
requirement to inform consumers of the progress of their request while
they are in the process of making the request. Proposed rule Sec.
610.3(a)(2)(iii)(A). For a Web site request method, if a nationwide
specialty consumer reporting agency chooses to provide such a method,
the proposed rule also required the nationwide speciality consumer
reporting agencies to provide access to a ``help'' or ``frequently
asked questions'' screen and instructions for filing complaints with
the nationwide speciality consumer reporting agencies and the Federal
Trade Commission. Proposed rule Sec. 610.3(a)(2)(iii)(B). Finally, in
the event that a consumer cannot be properly identified in accordance
with the FCRA Sec. 610(a)(1), 15 U.S.C. 1681h(a)(1), and other
applicable laws and regulations, the proposed rule required the
nationwide specialty consumer reporting agencies to notify the consumer
of that fact, and to provide instructions on how to complete the
request. Proposed rule Sec. 610.3(a)(2)(iii)(C).
One nationwide speciality consumer reporting agency objects to the
proposed rule requirement to inform consumers of the progress of their
request while they are in the process of making the request, suggesting
that it be eliminated because it is unclear, burdensome, and
unworkable. For reasons similar to those discussed above in connection
with the requirements of Sec. 610.2(b)(2)(iv)(A) of the final rule,
the Commission declines to adopt this recommendation. The language of
this provision, which has been retained in the final rule, makes clear
that the status information requirement operates ``while the consumer
is in the process of making a request;'' thus, it would operate in the
context of both telephone and on-line requests. For example, a status
message that instructs telephone consumers to ``please hold while we
locate your file,'' would ensure that consumers do not mistakenly
discontinue the telephone ordering process without finishing their
request. The Commission recognizes, however, that for other possible
request methods, such as mail, the requirement would be inappropriate
and therefore not apply.
The Commission did not receive further significant comment relating
to proposed rule Sec. 610.3(a), and it is adopted with the
modifications discussed above.
Section 610.3(b)--Requirement to anticipate
Similar to the requirements relating to the centralized source,
discussed under Sec. 610.2(c) of this notice, supra, proposed rule
Sec. 610.3(b) required that nationwide specialty consumer reporting
agencies implement reasonable procedures to anticipate and respond to
the volume of consumers who will contact them to request file
disclosures through the streamlined process.
One nationwide specialty consumer reporting agency and CDIA suggest
that the requirements for contingency planning be deleted and replaced
by a provision to relieve entities of any obligation to deliver reports
when conditions beyond the control of the nationwide specialty consumer
reporting agency occur. The Commission declines to adopt this
suggestion. Rather, the final rule retains, but modifies, the
contingency planning provisions applicable to nationwide specialty
consumer reporting agencies, for the same reasons discussed under Sec.
610.2(c) of this notice, supra.
Section 610.3(c)--High request volume and Extraordinary request volume
Under proposed rule Sec. 610.3(c), nationwide specialty consumer
reporting agencies would not be deemed in violation of the adequate
capacity requirement in times of extraordinary request volume, provided
that they implemented reasonable procedures in compliance with Sec.
610.3(b).\72\ CDIA and a nationwide specialty consumer reporting agency
suggest that the proposed definition of extraordinary request volume--
i.e., volume that exceeds 200% of the rolling 90-day daily average--be
revised.\73\ In the NPR, the Commission sought data with regard to the
issue of setting the extraordinary request volume threshold; however,
it received very little specific information relating to nationwide
specialty consumer reporting agencies in this regard. For reasons
discussed under Sec. 610.2(e) of this notice supra, however, the final
rule modifies the extraordinary request volume threshold to 175% of
average daily volume.
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\72\ One commenter mistakenly suggests that the proposed rule
contains no definition of ``extraordinary request volume''
applicable to nationwide specialty consumer reporting agencies
beyond the transition period described in proposed rule Sec.
610.3(g). As final rule Sec. 610.1(a) explains, the definitions
contained in section 610.1(b) apply throughout this part, including
in both Sec. 610.2 and Sec. 610.3 of the final rule.
\73\ The consumer reporting agency recommends that
``extraordinary request volume'' be set at 110% of the rolling 90-
day daily average, and CDIA suggests that ``extraordinary request
volume'' should be more than 125% of the rolling 90-day daily
average.
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In response to comments received with regard to the centralized
source, as well as comments from CDIA, writing on behalf of its
nationwide specialty consumer reporting agency members, the Commission
has also crafted a provision to allow nationwide specialty consumer
reporting agencies to obtain relief during times of high request
volume. Final rule Sec. 610.3(c)(1) allows a nationwide specialty
consumer reporting agency to collect the request information in a queue
for processing at a reasonable later time, so long as the nationwide
specialty consumer reporting agency informs the consumer as to when the
request will be accepted for processing. The high request volume
trigger for nationwide specialty consumer reporting agencies is the
same as that which applies to the centralized source-more than 125% of
the rolling 90-day daily average. Final rule Sec. 610.1(b)(8).
As noted under Sec. 610.2(c) above, one comment from a nationwide
consumer reporting agency suggests the need for some protection to
apply during system maintenance. The Commission notes that this need is
equally applicable to the nationwide specialty consumer reporting
agencies. Final rule Sec. 610.3(b)(2) provides that a nationwide
specialty consumer reporting agency will not be deemed in violation of
the streamlined process requirements if the toll-free number is
unavailable to take requests for a reasonable period of time for
purposes of maintenance, provided that the agency makes other request
methods available to consumers during such time.
Section 610.3(d)--Information use and disclosure
Final rule Sec. 610.3(d) provides that, ``[a]ny personally
identifiable information collected from consumers as a result of a
request for annual file disclosure, or other disclosure required
[[Page 35492]]
by the Fair Credit Reporting Act, made through the streamlined process
required by this part, may be used or disclosed by the nationwide
specialty consumer reporting agencies only ``[1] to provide the annual
file disclosure or other disclosure required under the FCRA requested
by the consumer; [2] to process a transaction requested by the consumer
at the same time as a request for annual file disclosure or other
disclosure; [3] to comply with applicable legal requirements, including
those imposed by the Fair Credit Reporting Act and this part; and [4]
to update personally identifiable information already maintained by the
nationwide specialty consumer reporting agency for the purpose of
providing consumer reports, provided that the nationwide specialty
consumer reporting agency uses and discloses the updated personally
identifiable information subject to the same restrictions that would
apply, under any applicable provision of law or regulation, to the
information updated.'' This provision is nearly identical to the
information use and disclosure provision applicable to nationwide
consumer reporting agencies in Sec. 610.2(f), and is adopted subject
to the same analysis provided under Sec. 610.2(f) of this notice,
supra.
Under Sec. 610.3(d) of the proposed rule, nationwide specialty
consumer reporting agencies also were required to comply with the
Safeguards Rule, 16 CFR part 314, for information collected and
disclosed through the streamlined process. CDIA and America's Community
Bankers, a trade association for the banking industry, suggest that
this provision should not be applied to the nationwide specialty
consumer reporting agencies. They argue that to the extent these
entities are already subject to the Safeguards Rule under the GLBA,
this rule would subject them to another layer of regulatory oversight.
In addition, the commenters contend that under this rule, unlike under
the GLBA Safeguards Rule, nationwide specialty consumer reporting
agencies could be subject to private rights of action.
As noted under Sec. 610.2(f), supra, of this notice, the
information collected and disclosed by nationwide specialty consumer
reporting agencies is subject to a variety of existing laws relating to
unauthorized access and security of information, including, but not
limited to, the FCRA, the Safeguards Rule, and the FTC Act. The
Commission does not believe that it is necessary to duplicate or
augment those requirements in the final rule. Accordingly, the final
rule does not adopt proposed rule Sec. 610.3(d).
Section 610.3(e)--Requirement to accept or redirect requests
The FACT Act requires nationwide consumer reporting agencies to
provide annual file disclosures upon request, but only if such requests
are received through the centralized source. As noted in the NPR, there
is no similar statutory limitation applicable to the streamlined
process to be developed by the nationwide specialty consumer reporting
agencies. Accordingly, recognizing that many consumers may request
their free annual file disclosures through a method other than the
streamlined process, the final rule -- like the proposed rule --
requires nationwide specialty consumer reporting agencies either to
honor those requests or to redirect the consumer to the streamlined
process. Final rule Sec. 610.3(e).
CDIA suggests that this provision be revised to make it analogous
to the statutory requirement for the centralized source, i.e., to limit
consumers' ability to request free annual file disclosures from these
agencies to the required streamlined process methods. The Commission
declines to adopt this suggestion. Although it might easily have done
so, Congress did not limit the availability of annual file disclosures
from nationwide specialty consumer reporting agencies to only those
consumers who make requests through the streamlined process. Moreover,
the rule provision does not impose an onerous burden on the nationwide
specialty consumer reporting agencies; they can choose either to honor
the requests they may receive outside of the streamlined process
request methods, or simply redirect consumers to those methods.\74\
Accordingly, Sec. 610.3(e) is adopted as proposed.
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\74\ One nationwide specialty consumer reporting agency requests
that the rule include a general limitation on liability for private
causes of actions under proposed rule Sec. 610.3(e), as well as
other rule provisions, in order to limit the circumstances under
which a nationwide specialty consumer reporting agency is at risk of
private actions, including class actions. The FCRA, as amended by
the FACT Act, however, provides a specific scheme of enforcement and
liability for violations of the FCRA. Where Congress intended to
limit private rights of action, it did so. See FCRA Sec. 615(h)(8).
Accordingly, the Commission declines to include additional
limitations in the final rule.
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Section 610.3(f)--Effective date
The proposed rule provided that Sec. 610.3 become effective on
December 1, 2004, the same effective date as rule provisions for the
centralized source. This provision is unchanged in the final rule.
Final rule Sec. 610.3(f).
The Commission notes that the FACT Act requires that the rules
implementing the annual file disclosure requirements relating to
nationwide specialty consumer reporting agencies take effect no later
than six months after the date on which the regulations are issued in
final form-unless the Commission determines that up to an additional
three months is appropriate. Further, the FACT Act requires the
Commission to consider the ability of each nationwide specialty
consumer reporting agency to provide annual file disclosures in the
manner required under the Act, in determining the effective date for
these provisions.
The Commission has considered these, as well as the other factors
required by Sec. 211(a) of the FACT Act and has determined that
December 1, 2004, is an appropriate effective date for these
provisions. The Commission recognizes that while nationwide specialty
consumer reporting agencies will need some time to develop and
implement the streamlined process required under the proposed rule, it
appears that nearly six months from the issuance of the final rule is
adequate, given the limited requirements of the final rule for
nationwide specialty consumer reporting agencies.
One nationwide specialty consumer reporting agency requests that
the Commission delay the effective date of the streamlined process
requirement for three additional months in order to allow the agency to
study how it can integrate its own traditional business methods with
the new annual file disclosure obligation. This commenter further
suggests that if the streamlined process effective date were delayed
for three months, the nationwide specialty consumer reporting agencies
would be protected from surges in request volume likely to occur as a
result of publicity and consumer education surrounding the December 1,
2004, launch of the centralized source. Similarly, CDIA proposes that
the final rule provide for the nationwide specialty consumer reporting
agencies to activate their systems on December 1, 2004, but that they
be given a three-month grace period, such that they would not be
required to actually comply with the rule until March 1, 2005.
The Commission declines to delay the effective date for Sec. 610.3
of the final rule for several reasons. Under Sec. 610.3(g) of the
final rule, discussed infra, the nationwide specialty consumer
reporting agencies already receive protections from surges in volume
that exceed the reasonably anticipated volume for that time. Although
the rule provisions relating to nationwide
[[Page 35493]]
specialty consumer reporting agencies may require the development of
some new operations or systems, by December 1, 2004, they will have had
nearly one year since the FACT Act became effective to study the
issues, reasonably anticipate the volume, and implement appropriate
procedures to accept requests via toll-free numbers. In addition, the
Commission is adopting the same effective date for all parts of the
rule in order to help consumers better understand the availability of
annual file disclosures. The Commission believes that implementing a
grace period would provide industry very little in the way of useful
flexibility in complying with the rule, and would lead to greater
confusion by the public. Accordingly, December 1, 2004, is the
effective date for rule provisions relating to both nationwide consumer
reporting agencies and nationwide specialty consumer reporting
agencies. Final rule Sec. 610.3(f).
Section 610.3(g)--High request volume and extraordinary request volume
during initial transition
Nationwide specialty consumer reporting agencies must establish and
operate a streamlined process with adequate capacity to meet consumer
demand for annual file disclosures. Under the proposed rule, Sec.
610.3(g), during the first three months after the rule becomes
effective, liability under this provision would have been limited when
the agencies experience extraordinary request volume of more than twice
the anticipated request volume in a 24-hour period. After the three-
month transition, extraordinary request volume would have been
calculated as twice the daily rolling 90-day average.
Two nationwide specialty consumer reporting agencies and CDIA
suggest that these entities need greater protection against high volume
during a transition period, including a staggered rollout and lower
request volume thresholds to trigger relief from liability. CDIA
suggests that (in addition to delaying the effective date for three
months) the rule should: 1) expand the transition period for the
nationwide specialty consumer reporting agencies to encompass March 1,
2005 through November 30, 2005; 2) during the transition period, lower
the trigger for extraordinary request volume to 125% of the daily total
number of reasonably anticipated requests; and 3) add a high request
volume trigger that would allow the nationwide specialty consumer
reporting agencies to place requests into a queue for later processing
when the volume in a 24-hour period exceeds the daily total number of
reasonably anticipated requests.
The Commission recognizes that demand for consumer file disclosures
from nationwide specialty consumer reporting agencies may increase
significantly as a result of the new annual file disclosure
availability. In order to assist these agencies in meeting this
increase in demand, the Commission has modified Sec. 610.3(g), by
adding a high request volume benchmark to provide added protection from
liability. High request volume during the transition is defined as, in
any 24-hour period, more than 115% of the daily total number of
requests that were reasonably anticipated. Final rule Sec.
610.3(g)(1). Further, the extraordinary request volume provision has
been lowered to 175%. Thus, the thresholds for extraordinary request
volume and high request volume during the transition for the nationwide
specialty consumer reporting agencies are comparable to those
applicable to the nationwide consumer reporting agencies during the
centralized source transition. See discussion under Sec. 610.2(e) of
this notice, supra.
Further, the final rule retains the proposed three-month transition
period. Final rule Sec. 610.3(g). For the same reasons discussed under
Sec. 610.3(f) of this notice, supra, the Commission has concluded
that, given the limited requirements of the final rule as it applies to
nationwide specialty consumer reporting agencies, neither a lengthy
transition period nor a geographic rollout are appropriate.
Part 698 Appendix D--Standardized form for requesting annual file
disclosures
Section 211 of the FACT Act directs the Commission to prescribe a
regulation requiring that nationwide consumer reporting agencies employ
a standardized form for consumers to request, either by mail or through
an Internet website, annual file disclosures from the centralized
source. Section 610.2(b)(3) of the rule requires that the nationwide
consumer reporting agencies establish this form and make it available
through the centralized source. In addition, the Commission proposed a
model form, to be published in 16 CFR part 698, Appendix D (the ``model
standardized form''). The Commission stated in the proposed rule that
nationwide consumer reporting agencies could use this form to comply
with Sec. 610.2(b)(3) of the rule.
A trade association representing real estate brokers expressed
general support for the model standardized form, stating that it
provided adequate information and was minimally intrusive. No
commenters oppose the model standardized form, but several propose
modifications.
The Commission received several comments from nationwide consumer
reporting agencies and CDIA on the model standardized form. Some
commenters object to the section of the model that would permit a
consumer to designate the manner in which the consumer may be contacted
by the nationwide consumer reporting agency if additional information
is needed to process the consumer's request. These commenters assert
that permitting the consumer to designate an alternative telephone or
email address that the nationwide consumer reporting agency might not
be able to verify could create a risk of consumer fraud or identity
theft. In response to these comments, the Commission has modified the
model standardized form by deleting that section.
The same commenters also object to the last sentence of the
proposed model standardized form, which stated ``[y]ou can expect to
receive your report within 15 days after we receive your request.''
Nationwide consumer reporting agencies and CDIA point out that the
statute requires the nationwide consumer reporting agency to provide
the annual file disclosure ``no later than'' 15 days after receipt of
the request and that reports sent by mail might involve additional time
before the consumer actually receives the report. The Commission agrees
that an annual file disclosure mailed on the fifteenth day would meet
this requirement. Accordingly, the Commission has changed the last
sentence of the model standardized form to the following: ``[y]our
report will be sent within 15 days after we receive your request.''
Some commenters also suggest other changes to the form, which the
Commission did not adopt. Nationwide consumer reporting agencies and
CDIA object to the provision of the proposed model standardized form
that would allow the consumer to indicate his or her preferred delivery
method for the annual file disclosure. These commenters express concern
that the consumer's preferred delivery method might not be available or
appropriate under various circumstances. However, FCRA Sec. 610(b), 15
U.S.C. 1681h(b) specifies that disclosures may be made in such forms as
may be specified by the consumer and available from the agency.
Further, the model standardized form clearly states that the nationwide
consumer reporting agencies ``may not be able to offer every delivery
method to every consumer.'' The Commission
[[Page 35494]]
views the proposed change as inconsistent with the statute and has
declined to alter this part of the model standardized form.
The nationwide consumer reporting agencies also propose various
additions to the model standardized form. These commenters suggest that
the form include additional information adapting it to Internet use, a
certification by the consumer that the information provided by the
consumer is accurate, a warning to the consumer of the consequences of
making a fraudulent request, and a warning to the consumer that an
altered form will constitute an invalid request. One nationwide
consumer reporting agency proposes that the model standardized form add
more specific directions as to how the consumer's name and address
should be provided and request a former address for a consumer who has
resided less than two years at the current address. The Commission
declines to add such additional information to its model standardized
form, but notes that, as this form is a ``model,'' the nationwide
consumer reporting agencies may add additional information, provided
that such information or instructions are ``clear and easily
understandable,'' in compliance with final rule Sec. 610.2(b)(2)(iv).
Similarly, the nationwide consumer reporting agencies may require
additional categories of information, provided such information is
reasonably necessary to process the request, consistent with the
standard set forth in Sec. 610.2(b)(2)(ii) of the final rule. The form
could also, as one commenter suggests, be modified to offer credit
scores to consumers, provided that such additions did not interfere
with, detract from, contradict, or otherwise undermine the purpose of
the centralized source, as required under Sec. 610.2(g) of the rule.
IV. Substantially Nationwide Consumer Reporting Agencies.
Section 211(d)(6)(A) of the FACT Act directs the Commission to
determine, by rulemaking, ``whether to require a consumer reporting
agency that compiles and maintains files on consumers on substantially
a nationwide basis, other than one described in section 603(p) of the
Fair Credit Reporting Act, to make [annual file disclosures] available
upon consumer request, and if so, whether such consumer reporting
agencies should make such [annual file disclosures] available through
the centralized source described in paragraph (1)(A).''\75\
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\75\ In making this determination, the Commission is required by
the Act to consider the number of consumer reports sold by such
entities, the overall scope of operations of such entities, the
costs to such entities of providing annual file disclosures to
consumers, and the competitive viability of such entities if they
are required to provide free annual file disclosures.
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The term ``a consumer reporting agency that compiles and maintains
files on consumers on substantially a nationwide basis, other than one
described in section 603(p) of the Fair Credit Reporting Act''
(hereinafter ``substantially nationwide consumer reporting agencies'')
is not defined under the FCRA or under the FACT Act. In its NPR, the
Commission posed questions seeking detailed information about the
existence of such entities in the U.S., including their identity and
location, the population served by such agencies, the number of
requests for file disclosures received and consumer reports generated
by such entities, and the categories of information contained in such
reports. In addition, the Commission sought information about the
costs, benefits, and competitive effect of requiring any such agencies
to provide free annual file disclosures and to do so through the
centralized source.
The Commission received only minimal response to this question and
very little specific information. Two nationwide consumer reporting
agencies suggest that associated consumer reporting agencies, described
above as agencies that own or maintain consumer files within systems
operated by one or more nationwide consumer reporting agencies, should
be deemed to be substantially nationwide consumer reporting agencies
for purposes of this rule and required to participate in the
centralized source. As explained in the discussion under Sec. 610.2(d)
of this notice, supra, however, the Commission is not convinced that
associated consumer reporting agencies should be deemed substantially
nationwide based solely on their contractual relationships with
nationwide consumer reporting agencies.
Only one associated consumer reporting agency filed comments. It
states that, apart from the nationwide consumer reporting agencies, it
does not believe there are consumer reporting agencies in the U.S. that
compile and maintain consumer files on substantially a nationwide
basis.
In addition, a consumer advocacy organization suggests that
nationwide specialty consumer reporting agencies should be considered
to be substantially nationwide consumer reporting agencies. Pursuant to
Sec. 211(a) of the FACT Act, codified at FCRA Sec. 612(a), 15 U.S.C.
1681j(a) and Sec. 610.3 of the final rule, however, the nationwide
specialty consumer reporting agencies will be obligated to provide
consumers with free annual file disclosures. The FACT Act clearly
contemplated that these nationwide specialty agencies would not be
required to participate in the centralized source, but would be subject
to a different regulatory scheme.
In light of the information available to it, the Commission
determines that substantially nationwide consumer reporting agencies
should not, at this time, be required to provide annual file
disclosures. The Commission may, at a later time, determine that such
entities should provide annual file disclosures, and that such
disclosures should be made through the centralized source required by
this rule.
V. Final Regulatory Flexibility Analysis.
The Regulatory Flexibility Act (``RFA''), 5 U.S.C. 601-612,
requires that the Commission provide an Initial Regulatory Flexibility
Analysis (``IRFA'') with a proposed rule and a Final Regulatory
Flexibility Analysis (``FRFA''), if any, with the final rule, unless
the Commission certifies that the rule will not have a significant
economic impact on a substantial number of small entities (i.e., those
with less than $6,000,000 in average annual receipts). 5 U.S.C. 603-
605.
The Commission hereby certifies that the final rule will not have a
significant economic impact on a substantial number of small entities.
The rule applies to two types of consumer reporting agencies: (1)
nationwide consumer reporting agencies, and (2) nationwide specialty
consumer reporting agencies.\76\ As noted above, the Commission is
aware of three entities that meet the rule's definition, in Sec.
610.1(b)(9), of a ``nationwide
[[Page 35495]]
consumer reporting agency.'' The Commission has concluded that none of
these is a small entity. In addition, the Commission estimates, based
on its own experience and knowledge of industry practices and members,
that there are fewer than 50 nationwide specialty consumer reporting
agencies currently doing business in the U.S. The Commission has been
unable to determine how many, if any, of these nationwide specialty
consumer reporting agencies are small entities. In the March 19, 2004,
NPR, the Commission asked several questions related to the existence,
number and nature of small business entities covered by the proposed
rule, as well as the economic impact of the proposed rule on such
entities. The Commission received no comments responsive to these
questions. Based on its own experience and knowledge of industry
practices and members, however, the Commission believes that the number
of such agencies that are small entities, if any, is likely to be
insubstantial. While the economic impact of the final rule on a
particular small entity could be significant, overall the final rule
will not have a significant economic impact on a substantial number of
small entities. This document serves as notice to the Small Business
Administration of the agency's certification of no effect. Nonetheless,
the Commission has determined to publish a Final Regulatory Flexibility
Analysis with this final rule. Therefore, the Commission has prepared
the following analysis:
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\76\ In addition, the Commission's NPR solicited information
about two other types of consumer reporting agencies. As discussed
in section IV, supra, the FACT Act directed the Commission to
determine whether to promulgate a rule covering ``a consumer
reporting agency that compiles and maintains files on consumers on
substantially a nationwide basis.'' The Commission, at this time, is
not adopting a rule provision relevant to such agencies, if in fact
any such entities exist. In addition, the Commission sought
information about associated consumer reporting agencies, i.e.,
those consumer reporting agencies that own or maintain consumer
files within the systems of nationwide consumer reporting agencies.
The final rule, however, does not directly cover such agencies. The
rule obligates nationwide consumer reporting agencies that house
within their systems consumer files owned by associated consumer
reporting agencies to provide annual file disclosures to those
affected consumers.
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A. Need for and objectives of the rule.
The Fair and Accurate Credit Transactions Act of 2003, Pub. L. 108-
159, 117 Stat. 1952 (FACT Act or the Act), directs the Commission to
adopt a rule, no later than June 4, 2004, to require the establishment
of: (1) a centralized source through which consumers may request a free
annual file disclosure from each nationwide consumer reporting agency;
(2) a standardized form for consumer use in making such requests; and
(3) a streamlined process for consumers to request free annual file
disclosures from nationwide specialty consumer reporting agencies. In
this action, the Commission promulgates a final rule to fulfill the
statutory mandate. The rule is authorized by and based upon Sec.
211(a) and (d) of the FACT Act.
B. Significant issues raised by public comment.
The Commission received no public comments on the specific impact,
if any, of the rule on small entities. As explained above, the
Commission has estimated that there are few or no small entities that
will be affected by the final rule. In that regard, the rule generally
applies only to entities that would not be considered ``small
entities'' for purposes of the Regulatory Flexibility Act.\77\
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\77\ For example,Sec. 610.2 of the rule addresses the
establishment and operation of the centralized source through which
consumers may request a free annual file disclosure from each
nationwide consumer reporting agency, none of which is a small
entity. Similarly, Appendix D to Part 698 sets forth a model
standardized form for consumer use in making such requests from the
centralized source. The impact, if any, of this form is on
individuals, i.e., natural persons, who also are not small entities
under the Regulatory Flexibility Act.
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The Commission has considered that Sec. 610.3 of the rule, which
establishes requirements for a streamlined process for consumers to
request free annual file disclosures from nationwide specialty consumer
reporting agencies, could apply to small entities, if any of them meets
the definition of such a reporting agency. See final rule Sec.
610.1(b)(10); FCRA Sec. 603(w), 15 U.S.C. 1681a(w). Several commenters
questioned certain aspects of the streamlined process provisions set
forth in Sec. 610.3, although none directly commented on the potential
impact of those requirements on small entities, if any. In this
Statement of Basis and Purpose, the Commission has explained its
consideration of and response to those comments. The Commission has
made certain changes in the final rule that should further minimize its
impact on all nationwide specialty consumer reporting agencies, which
would include those, if any, that may be small entities. These changes,
which address limitations on liability during periods of high request
volume, are explained above in the discussion of the revisions made to
Sec. 610.3 of the rule.
C. Small entities to which the rule will apply.
The rule will apply to two types of consumer reporting agencies:
(1) nationwide consumer reporting agencies, and (2) nationwide
specialty consumer reporting agencies. The Commission has concluded
that none of the three identified nationwide consumer reporting
agencies is a small entity. In the NPR, the Commission estimated that
the number of nationwide specialty consumer reporting agencies that are
small entities is either very small or none. In addition, the
Commission invited comment and information on this issue. No comments
addressed this issue, and no information with respect to small entities
that might be affected by the rule was provided. Based on the lack of
response to its request for comments, the Commission believes that its
previous estimate is likely to be accurate.
D. Projected reporting, recordkeeping and other compliance
requirements.
Under the rule, nationwide specialty consumer reporting
agencies,\78\ which would be the only class of entities that could
include small entities, if any, will be required to do the following:
(1) provide consumers with free annual file disclosures; (2) establish
a streamlined process, including a toll-free telephone number, for
accepting and processing such consumer requests; (3) provide consumers
with clear instructions on how to obtain free annual file disclosures;
and (4) make additional disclosures to consumers during situations when
adverse circumstances or extraordinary request volume affect the
ability of the agency to accept consumer requests. The types of
professional skills that will be necessary to fulfill these compliance
requirements were described in the Commission's Paperwork Reduction Act
analysis, 69 FR at 13201-03.
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\78\ Nationwide consumer reporting agencies will have similar,
but more extensive, obligations under the rule. As stated above,
however, the Commission has concluded that there are no nationwide
consumer reporting agencies that are small entities.
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E. Steps taken to minimize significant economic impact of the rule on
small entities.
The Commission invited comment and information with regard to (1)
the existence of small business entities for which the proposed rule
would have a significant economic impact; and (2) suggested alternative
methods of compliance that, consistent with the statutory requirements,
would reduce the economic impact of the rule on such small entities.
The Commission received no information or suggestions in response
to these questions. As explained above, however, the Commission has
made certain changes to the final rule to minimize its impact on all
entities that are subject to the rule, including small entities, if
any, that may be subject to the rule.
VI. Paperwork Reduction Act.
In accordance with the Paperwork Reduction Act, as amended, 44
U.S.C. 3501 et seq., the Commission submitted the proposed Rule to the
Office of Management and Budget (``OMB'') for review. The OMB has
approved the Rule's information collection requirements through April
30, 2007, and has assigned OMB control number 3084-0128.
[[Page 35496]]
VII. Final Rule.
List of Subjects
16 CFR Part 610
Fair Credit Reporting Act, Consumer reports, Consumer reporting
agencies, Credit, Trade practices.
16 CFR Part 698
Fair Credit Reporting Act, Consumer reports, Consumer reporting
agencies, Credit, Trade practices.
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Accordingly, for the reasons set forth above, the FTC amends chapter I,
title 16, Code of Federal Regulations, as follows:
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1. Revise the heading of subchapter F of this chapter to read as
follows:
SUBCHAPTER F-FAIR CREDIT REPORTING ACT
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2. Add new part 610 to read as follows:
PART 610-FREE ANNUAL FILE DISCLOSURES
Sec.
610.1 Definitions and rule of construction.
610.2 Centralized source for requesting annual file disclosures from
nationwide consumer reporting agencies.
610.3 Streamlined process for requesting annual file disclosures
from nationwide specialty consumer reporting agencies.
Authority: Pub. L. 108-159, sections 211 (a) and (d).
Sec. 610.1 Definitions and rule of construction.
(a) The definitions and rule of construction set forth in this
section apply throughout this part.
(b) Definitions.
(1) Annual file disclosure means a file disclosure that is provided
to a consumer, upon consumer request and without charge, once in any
12-month period, in compliance with section 612(a) of the Fair Credit
Reporting Act, 15 U.S.C. 1681j(a).
(2) Associated consumer reporting agency means a consumer reporting
agency that owns or maintains consumer files housed within systems
operated by one or more nationwide consumer reporting agencies.
(3) Consumer means an individual.
(4) Consumer report has the meaning provided in section 603(d) of
the Fair Credit Reporting Act, 15 U.S.C. 1681a(d).
(5) Consumer reporting agency has the meaning provided in section
603(f) of the Fair Credit Reporting Act, 15 U.S.C. 1681a(f).
(6) Extraordinary request volume, except as provided in sections
610.2(i) and 610.3(g) of this part, occurs when the number of consumers
requesting or attempting to request file disclosures during any 24-hour
period is more than 175% of the rolling 90-day daily average of
consumers requesting or attempting to request file disclosures. For
example, if over the previous 90 days an average of 100 consumers per
day requested or attempted to request file disclosures, then
extraordinary request volume would be any volume greater than 175% of
100, i.e., 176 or more requests in a single 24-hour period.
(7) File disclosure means a disclosure by a consumer reporting
agency pursuant to section 609 of the Fair Credit Reporting Act, 15
U.S.C. 1681g.
(8) High request volume, except as provided in sections 610.2(i)
and 610.3(g) of this part, occurs when the number of consumers
requesting or attempting to request file disclosures during any 24-hour
period is more than 125% of the rolling 90-day daily average of
consumers requesting or attempting to request file disclosures. For
example, if over the previous 90 days an average of 100 consumers per
day requested or attempted to request file disclosures, then high
request volume would be any volume greater than 125% of 100, i.e., 126
or more requests in a single 24-hour period.
(9) Nationwide consumer reporting agency means a consumer reporting
agency that compiles and maintains files on consumers on a nationwide
basis as defined in section 603(p) of the Fair Credit Reporting Act, 15
U.S.C. 1681a(p).
(10) Nationwide specialty consumer reporting agency has the meaning
provided in section 603(w) of the Fair Credit Reporting Act, 15 U.S.C.
1681a(w).
(11) Request method means the method by which a consumer chooses to
communicate a request for an annual file disclosure.
(c) Rule of construction. The examples in this part are
illustrative and not exclusive. Compliance with an example, to the
extent applicable, constitutes compliance with this part.
Sec. 610.2 Centralized source for requesting annual file disclosures
from nationwide consumer reporting agencies.
(a) Purpose. The purpose of the centralized source is to enable
consumers to make a single request to obtain annual file disclosures
from all nationwide consumer reporting agencies, as required under
section 612(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681j(a).
(b) Establishment and operation. All nationwide consumer reporting
agencies shall jointly design, fund, implement, maintain, and operate a
centralized source for the purpose described in paragraph (a) of this
section. The centralized source required by this part shall:
(1) Enable consumers to request annual file disclosures by any of
the following request methods, at the consumer's option:
(i) A single, dedicated Internet website;
(ii) A single, dedicated toll-free telephone number; and
(iii) Mail directed to a single address;
(2) Be designed, funded, implemented, maintained, and operated in a
manner that:
(i) Has adequate capacity to accept requests from the reasonably
anticipated volume of consumers contacting the centralized source
through each request method, as determined in accordance with paragraph
(c) of this section;
(ii) Collects only as much personally identifiable information as
is reasonably necessary to properly identify the consumer as required
under the Fair Credit Reporting Act, section 610(a)(1), 15 U.S.C.
1681h(a)(1), and other applicable laws and regulations, and to process
the transaction(s) requested by the consumer;
(iii) Provides information through the centralized source website
and telephone number regarding how to make a request by all request
methods required under section 610.2(b)(1) of this part; and
(iv) Provides clear and easily understandable information and
instructions to consumers, including, but not necessarily limited to:
(A) Providing information on the progress of the consumer's request
while the consumer is engaged in the process of requesting a file
disclosure;
(B) For a website request method, providing access to a ``help'' or
``frequently asked questions'' screen, which includes specific
information that consumers might reasonably need to request file
disclosures, the answers to questions that consumers might reasonably
ask, and instructions whereby a consumer may file a complaint with the
centralized source and with the Federal Trade Commission;
(C) In the event that a consumer requesting a file disclosure
through the centralized source cannot be properly identified in
accordance with the Fair Credit Reporting Act, section 610(a)(1), 15
U.S.C. 1681h(a)(1), and other applicable laws and regulations,
providing a statement that the consumer's identity cannot be verified;
and directions on how to complete the request, including what
additional information or documentation will be required to complete
the request, and how to submit such information; and
[[Page 35497]]
(D) A statement indicating that the consumer has reached the
website or telephone number operated by the national credit reporting
agencies for ordering free annual credit reports, as required by
federal law; and
(3) Make available to consumers a standardized form established
jointly by the nationwide consumer reporting agencies, which consumers
may use to make a request for an annual file disclosure, either by mail
or on the Internet website required under section 610.2(b)(1) of this
part, from the centralized source required by this part. The form
provided at 16 CFR Part 698, Appendix D, may be used to comply with
this section.
(c) Requirement to anticipate. The nationwide consumer reporting
agencies shall implement reasonable procedures to anticipate, and to
respond to, the volume of consumers who will contact the centralized
source through each request method, to request, or attempt to request,
a file disclosure, including developing and implementing contingency
plans to address circumstances that are reasonably likely to occur and
that may materially and adversely impact the operation of the
nationwide consumer reporting agency, a centralized source request
method, or the centralized source.
(1) The contingency plans required by this section shall include
reasonable measures to minimize the impact of such circumstances on the
operation of the centralized source and on consumers contacting, or
attempting to contact, the centralized source.
(i) Such reasonable measures to minimize impact shall include, but
are not necessarily limited to:
(A) To the extent reasonably practicable under the circumstances,
providing information to consumers on how to use another available
request method;
(B) To the extent reasonably practicable under the circumstances,
communicating, to a consumer who attempts but is unable to make a
request, the fact that a condition exists that has precluded the
centralized source from accepting all requests, and the period of time
after which the centralized source is reasonably anticipated to be able
to accept the consumer's request for an annual file disclosure; and
(C) Taking all reasonable steps to restore the centralized source
to normal operating status as quickly as reasonably practicable under
the circumstances.
(ii) Reasonable measures to minimize impact may also include, as
appropriate, collecting request information but declining to accept the
request for processing until a reasonable later time, provided that the
consumer is clearly and prominently informed, to the extent reasonably
practicable under the circumstances, of when the request will be
accepted for processing.
(2) A nationwide consumer reporting agency shall not be deemed in
violation of section 610.2(b)(2)(i) of this part if a centralized
source request method is unavailable to accept requests for a
reasonable period of time for purposes of conducting maintenance on the
request method, provided that the other required request methods remain
available during such time.
(d) Disclosures required. If a nationwide consumer reporting agency
has the ability to provide a consumer report to a third party relating
to a consumer, regardless of whether the consumer report is owned by
that nationwide consumer reporting agency or by an associated consumer
reporting agency, that nationwide consumer reporting agency shall, upon
proper identification in compliance with section 610(a)(1) of the Fair
Credit Reporting Act, 15 U.S.C. 1681h(a)(1), provide an annual file
disclosure to such consumer if the consumer makes a request through the
centralized source.
(e) High Request volume and extraordinary request volume.
(1) High request volume. Provided that a nationwide consumer
reporting agency has implemented reasonable procedures developed in
accordance with paragraph (c) of this section, entitled ``requirement
to anticipate,'' the nationwide consumer reporting agency shall not be
deemed in violation of paragraph (b)(2)(i) of this section for any
period of time in which a centralized source request method, the
centralized source, or the nationwide consumer reporting agency
experiences high request volume, if the nationwide consumer reporting
agency:
(i) Collects all consumer request information and delays accepting
the request for processing until a reasonable later time; and
(ii) Clearly and prominently informs the consumer of when the
request will be accepted for processing.
(2) Extraordinary request volume. Provided that the nationwide
consumer reporting agency has implemented reasonable procedures
developed in compliance with paragraph (c) of this section, entitled
``requirement to anticipate,'' the nationwide consumer reporting agency
shall not be deemed in violation of paragraph (b)(2)(i) of this section
for any period of time during which a particular centralized source
request method, the centralized source, or the nationwide consumer
reporting agency experiences extraordinary request volume.
(f) Information use and disclosure. Any personally identifiable
information collected from consumers as a result of a request for
annual file disclosure, or other disclosure required by the Fair Credit
Reporting Act, made through the centralized source, may be used or
disclosed by the centralized source or a nationwide consumer reporting
agency only:
(1) To provide the annual file disclosure or other disclosure
required under the FCRA requested by the consumer;
(2) To process a transaction requested by the consumer at the same
time as a request for annual file disclosure or other disclosure;
(3) To comply with applicable legal requirements, including those
imposed by the Fair Credit Reporting Act and this part; and
(4) To update personally identifiable information already
maintained by the nationwide consumer reporting agency for the purpose
of providing consumer reports, provided that the nationwide consumer
reporting agency uses and discloses the updated personally identifiable
information subject to the same restrictions that would apply, under
any applicable provision of law or regulation, to the information
updated or replaced.
(g) Communications provided by centralized source.
(1) Any communications or instructions, including any advertising
or marketing, provided through the centralized source shall not
interfere with, detract from, contradict, or otherwise undermine the
purpose of the centralized source stated in paragraph (a) of this
section.
(2) Examples of interfering, detracting, inconsistent, and[sol]or
undermining communications include:
(i) A website that contains pop-up advertisements or other offers
or promotions that hinder the consumer's ability to complete an online
request for an annual file disclosure;
(ii) Centralized source materials that represent, expressly or by
implication, that a consumer must purchase a paid product in order to
receive or to understand the annual file disclosure;
(iii) Centralized source materials that represent, expressly or by
implication, that annual file disclosures are not free, or that
obtaining an annual file disclosure will have a negative impact on the
consumer's credit standing; and
(iv) Centralized source materials that falsely represent, expressly
or by implication, that a product or service offered ancillary to
receipt of a file
[[Page 35498]]
disclosure, such as a credit score or credit monitoring service, is
free, or fail to clearly and prominently disclose that consumers must
cancel a service, advertised as free for an initial period of time, to
avoid being charged, if such is the case.
(h) Effective date. Sections 610.1 and 610.2 shall become effective
on December 1, 2004.
(i) Transition.
(1) Regional rollout. The centralized source required by this part
shall be made available to consumers in a cumulative manner, as
follows:
(i) For consumers residing in Alaska, Arizona, California,
Colorado, Hawaii, Idaho, Montana, New Mexico, Nevada, Oregon, Utah,
Washington, and Wyoming, the centralized source shall become available
on or before December 1, 2004;
(ii) For consumers residing in Illinois, Indiana, Iowa, Kansas,
Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South
Dakota, and Wisconsin, the centralized source shall become available on
or before March 1, 2005;
(iii) For consumers residing in Alabama, Arkansas, Florida,
Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina,
Tennessee, and Texas, the centralized source shall become available on
or before June 1, 2005; and
(iv) For all other consumers, including consumers residing in
Connecticut, Delaware, District of Columbia, Maine, Maryland,
Massachusetts, New Hampshire, New Jersey, New York, North Carolina,
Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia, and all
United States territories and possessions, the centralized source shall
become available on or before September 1, 2005.
(2) High request volume during transition.
(i) During the period of December 1, 2004 through December 7, 2004,
high request volume shall mean the following:
(A) For an individual request method: High request volume occurs
when the number of consumers contacting or attempting to contact the
centralized source through the request method in any 24-hour period is
more than 115% of the daily total number of consumers that were
reasonably anticipated to contact the centralized source, in compliance
with paragraph (c) of this section, through that request method.
(B) For the centralized source as a whole: High request volume
occurs when the number of consumers contacting or attempting to contact
the centralized source in any 24-hour period is more than 115% of the
daily total number of consumers that were reasonably anticipated to
contact the centralized source, in compliance with paragraph (c) of
this section, through any request method.
(C) For a nationwide consumer reporting agency: High request volume
occurs when the number of consumers contacting or attempting to contact
the nationwide consumer reporting agency to request file disclosures in
any 24-hour period is more than 115% of the daily total number of
consumers that were reasonably anticipated to contact that nationwide
consumer reporting agency to request file disclosures, in compliance
with paragraph (c) of this section.
(ii) During the period of December 8, 2004 through August 31, 2005,
high request volume shall mean the following:
(A) For an individual request method: High request volume occurs
when the number of consumers contacting or attempting to contact the
centralized source through the request method in any 24-hour period is
more than 115 % of the rolling 7-day daily average number of consumers
who contacted or attempted to contact the centralized source to request
file disclosures through that request method.
(B) For the centralized source as a whole: High request volume
occurs when the number of consumers contacting or attempting to contact
the centralized source in any 24-hour period is more than 115% of the
rolling 7-day daily average number of consumers who contacted or
attempted to contact the centralized source to request file disclosures
through any request method.
(C) For a nationwide consumer reporting agency: High request volume
occurs when the number of consumers contacting or attempting to contact
the nationwide consumer reporting agency to request file disclosures in
any 24-hour period is more than 115% of the rolling 7-day daily average
of consumers who requested any type of file disclosure from that
nationwide consumer reporting agency.
(3) Extraordinary request volume during transition.
(i) During the period of December 1, 2004 through December 7, 2004,
extraordinary request volume shall mean the following:
(A) For an individual request method: Extraordinary request volume
occurs when the number of consumers contacting or attempting to contact
the centralized source through the request method in any 24-hour period
is more than 175% of the daily total number of consumers that were
reasonably anticipated to contact the centralized source, in compliance
with paragraph (c) of this section, through that request method.
(B) For the centralized source as a whole: Extraordinary request
volume occurs when the number of consumers contacting or attempting to
contact the centralized source in any 24-hour period is more than 175%
of the daily total number of consumers that were reasonably anticipated
to contact the centralized source, in compliance with paragraph (c) of
this section, through any request method.
(C) For a nationwide consumer reporting agency: Extraordinary
request volume occurs when the number of consumers contacting or
attempting to contact the nationwide consumer reporting agency to
request file disclosures in any 24-hour period is more than 175% of the
daily total number of consumers that were reasonably anticipated to
contact that nationwide consumer reporting agency to request their file
disclosures, in compliance with paragraph (c) of this section.
(ii) During the period of December 8, 2004 through August 31, 2005,
extraordinary request volume shall mean the following:
(A) For an individual request method: Extraordinary request volume
occurs when the number of consumers contacting or attempting to contact
the centralized source through the request method in a 24-hour period
is more than 175% of the rolling 7-day daily average number of
consumers who contacted or attempted to contact the centralized source
to request file disclosures through that request method.
(B) For the centralized source as a whole: Extraordinary request
volume occurs when the number of consumers contacting or attempting to
contact the centralized source in a 24-hour period is more than 175% of
the rolling 7-day daily average number of consumers who contacted or
attempted to contact the centralized source to request file disclosures
through any request method.
(C) For a nationwide consumer reporting agency: Extraordinary
request volume occurs when the number of consumers contacting or
attempting to contact the nationwide consumer reporting agency to
request file disclosures in a 24-hour period is more than 175% of the
rolling 7-day daily average of consumers who requested any type of file
disclosure from that nationwide consumer reporting agency.
[[Page 35499]]
Sec. 610.3 Streamlined process for requesting annual file disclosures
from nationwide specialty consumer reporting agencies.
(a) Streamlined process requirements. Any nationwide specialty
consumer reporting agency shall have a streamlined process for
accepting and processing consumer requests for annual file disclosures.
The streamlined process required by this part shall:
(1) Enable consumers to request annual file disclosures by a toll-
free telephone number that:
(i) Provides clear and prominent instructions for requesting
disclosures by any additional available request methods, that do not
interfere with, detract from, contradict, or otherwise undermine the
ability of consumers to obtain annual file disclosures through the
streamlined process required by this part;
(ii) Is published, in conjunction with all other published numbers
for the nationwide specialty consumer reporting agency, in any
telephone directory in which any telephone number for the nationwide
specialty consumer reporting agency is published; and
(iii) Is clearly and prominently posted on any website owned or
maintained by the nationwide specialty consumer reporting agency that
is related to consumer reporting, along with instructions for
requesting disclosures by any additional available request methods; and
(2) Be designed, funded, implemented, maintained, and operated in a
manner that:
(i) Has adequate capacity to accept requests from the reasonably
anticipated volume of consumers contacting the nationwide specialty
consumer reporting agency through the streamlined process, as
determined in compliance with paragraph (b) of this section;
(ii) Collects only as much personal information as is reasonably
necessary to properly identify the consumer as required under the Fair
Credit Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and
other applicable laws and regulations; and
(iii) Provides clear and easily understandable information and
instructions to consumers, including but not necessarily limited to:
(A) Providing information on the status of the consumer's request
while the consumer is in the process of making a request;
(B) For a website request method, providing access to a ``help'' or
``frequently asked questions'' screen, which includes more specific
information that consumers might reasonably need to order their file
disclosure, the answers to questions that consumers might reasonably
ask, and instructions whereby a consumer may file a complaint with the
nationwide specialty consumer reporting agency and with the Federal
Trade Commission; and
(C) In the event that a consumer requesting a file disclosure
cannot be properly identified in accordance with the Fair Credit
Reporting Act, section 610(a)(1), 15 U.S.C. 1681h(a)(1), and other
applicable laws and regulations, providing a statement that the
consumer's identity cannot be verified; and directions on how to
complete the request, including what additional information or
documentation will be required to complete the request, and how to
submit such information.
(b) Requirement to anticipate. A nationwide specialty consumer
reporting agency shall implement reasonable procedures to anticipate,
and respond to, the volume of consumers who will contact the nationwide
specialty consumer reporting agency through the streamlined process to
request, or attempt to request, file disclosures, including developing
and implementing contingency plans to address circumstances that are
reasonably likely to occur and that may materially and adversely impact
the operation of the nationwide specialty consumer reporting agency, a
request method, or the streamlined process.
(1) The contingency plans required by this section shall include
reasonable measures to minimize the impact of such circumstances on the
operation of the streamlined process and on consumers contacting, or
attempting to contact, the nationwide specialty consumer reporting
agency through the streamlined process.
(i) Such reasonable measures to minimize impact shall include, but
are not necessarily limited to:
(A) To the extent reasonably practicable under the circumstances,
providing information to consumers on how to use another available
request method;
(B) To the extent reasonably practicable under the circumstances,
communicating, to a consumer who attempts but is unable to make a
request, the fact that a condition exists that has precluded the
nationwide specialty consumer reporting agency from accepting all
requests, and the period of time after which the agency is reasonably
anticipated to be able to accept the consumer's request for an annual
file disclosure; and
(C) Taking all reasonable steps to restore the streamlined process
to normal operating status as quickly as reasonably practicable under
the circumstances.
(ii) Measures to minimize impact may also include, as appropriate,
collecting request information but declining to accept the request for
processing until a reasonable later time, provided that the consumer is
clearly and prominently informed, to the extent reasonably practicable
under the circumstances, of when the request will be accepted for
processing.
(2) A nationwide specialty consumer reporting agency shall not be
deemed in violation of section 610.3(a)(2)(i) if the toll-free
telephone number required by this part is unavailable to accept
requests for a reasonable period of time for purposes of conducting
maintenance on the request method, provided that the nationwide
specialty consumer reporting agency makes other request methods
available to consumers during such time.
(c) High request volume and extraordinary request volume.
(1) High request volume. Provided that the nationwide specialty
consumer reporting agency has implemented reasonable procedures
developed in accordance with paragraph (b) of this section, entitled
``requirement to anticipate,'' a nationwide specialty consumer
reporting agency shall not be deemed in violation of paragraph
(a)(2)(i) of this section for any period of time during which a
streamlined process request method or the nationwide specialty consumer
reporting agency experiences high request volume, if the nationwide
specialty consumer reporting agency:
(i) Collects all consumer request information and delays accepting
the request for processing until a reasonable later time; and
(ii) Clearly and prominently informs the consumer of when the
request will be accepted for processing.
(2) Extraordinary request volume. Provided that the nationwide
specialty consumer reporting agency has implemented reasonable
procedures developed in accordance with paragraph (b) of this section,
entitled ``requirement to anticipate,'' a nationwide specialty consumer
reporting agency shall not be deemed in violation of paragraph
(a)(2)(i) of this section for any period of time during which a
streamlined process request method or the nationwide specialty consumer
reporting agency experiences extraordinary request volume.
(d) Information use and disclosure. Any personally identifiable
information
[[Page 35500]]
collected from consumers as a result of a request for annual file
disclosure, or other disclosure required by the Fair Credit Reporting
Act, made through the streamlined process, may be used or disclosed by
the nationwide specialty consumer reporting agency only:
(1) To provide the annual file disclosure or other disclosure
required under the FCRA requested by the consumer;
(2) To process a transaction requested by the consumer at the same
time as a request for annual file disclosure or other disclosure;
(3) To comply with applicable legal requirements, including those
imposed by the Fair Credit Reporting Act and this part; and
(4) To update personally identifiable information already
maintained by the nationwide specialty consumer reporting agency for
the purpose of providing consumer reports, provided that the nationwide
specialty consumer reporting agency uses and discloses the updated
personally identifiable information subject to the same restrictions
that would apply, under any applicable provision of law or regulation,
to the information updated or replaced.
(e) Requirement to accept or redirect requests. If a consumer
requests an annual file disclosure through a method other than the
streamlined process established by the nationwide specialty consumer
reporting agency in compliance with this part, a nationwide specialty
consumer reporting agency shall:
(1) Accept the consumer's request; or
(2) Instruct the consumer how to make the request using the
streamlined process required by this part.
(f) Effective date. This section shall become effective on December
1, 2004.
(g) High request volume and extraordinary request volume during
initial transition.
(1) During the period of December 1, 2004 through February 28,
2005, high request volume shall mean the following:
(i) For an individual request method: High request volume occurs
when the number of consumers contacting or attempting to contact the
nationwide specialty consumer reporting agency through a streamlined
process request method in any 24-hour period is more than 115% of the
daily total number of consumers who were reasonably anticipated to
contact that request method, in compliance with paragraph (b) of this
section.
(ii) For a nationwide specialty consumer reporting agency: High
request volume occurs when the number of consumers contacting or
attempting to contact the nationwide specialty consumer reporting
agency to request file disclosures in any 24-hour period is more than
115% of the number of consumers who were reasonably anticipated to
contact the nationwide specialty consumer reporting agency to request
their file disclosures, in compliance with paragraph (b) of this
section.
(2) Extraordinary request volume. During the period of December 1,
2004 through February 28, 2005, extraordinary request volume shall mean
the following:
(i) For an individual request method: Extraordinary request volume
occurs when the number of consumers contacting or attempting to contact
the nationwide specialty consumer reporting agency through a
streamlined process request method in any 24-hour period is more than
175% of the daily total number of consumers who were reasonably
predicted to contact that request method, in compliance with paragraph
(b) of this section.
(ii) For a nationwide specialty consumer reporting agency:
Extraordinary request volume occurs when the number of consumers
contacting or attempting to contact the nationwide specialty consumer
reporting agency to request file disclosures in any 24-hour period is
more than 175% of the number of consumers who were reasonably
anticipated to contact the nationwide specialty consumer reporting
agency to request their file disclosures, in compliance with paragraph
(b) of this section.
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3. Add new Part 698 with the following heading and authority citation:
PART 698 - SUMMARIES, NOTICES, AND FORMS
Sec.
698.1 Authority and purpose.
698.2 Legal effect.
Appendix A-C to Part 698--[Reserved]
Appendix D to Part 698--Standardized Form for Requesting Free
File Disclosure.
Authority: 15 U.S.C. 1681g and 1681s; Pub. L. 108-159, sections
151, 153, 211(c) and (d), 213, and 311.
Sec. 698.1 Authority and purpose
(a) Authority. This part is issued by the Commission pursuant to
the provisions of the Fair Credit Reporting Act (15 U.S.C. 1681 et
seq.), as most recently amended by the Fair and Accurate Credit
Transactions Act of 2003, Public Law 108-159, 117 Stat. 1952 (Dec. 4,
2003).
(b) Purpose. The purpose of this part is to comply with sections
607(d), 609(c), and 612(a) of the Fair Credit Reporting Act, as
amended, and section 211 of the Fair and Accurate Credit Transactions
Act of 2003.
Sec. 698.2 Legal effect
These summaries, forms and notices prescribed by the FTC do not
constitute a trade regulation rule. They carry out the directives in
the statute that the FTC prescribe these documents, which will
constitute compliance with the part of any section of the FCRA
requiring that such summaries, notices, or forms be used by or supplied
to any person.
Appendix D to Part 698--Standardized form for requesting annual file
disclosures.
BILLING CODE 6750-01-S
[[Page 35501]]
[GRAPHIC] [TIFF OMITTED] TR24JN04.003
[[Page 35502]]
[GRAPHIC] [TIFF OMITTED] TR24JN04.004
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 04-14388 Filed 6-23-04; 8:45 am]
BILLING CODE 6750-01-C