[Federal Register Volume 72, Number 209 (Tuesday, October 30, 2007)]
[Rules and Regulations]
[Pages 61424-61464]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E7-21348]



[[Page 61423]]

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Part II





Federal Trade Commission





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16 CFR Parts 680 and 698



Affiliate Marketing Rule; Final Rule

  Federal Register / Vol. 72, No. 209 / Tuesday, October 30, 2007 / 
Rules and Regulations  

[[Page 61424]]


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FEDERAL TRADE COMMISSION

16 CFR Parts 680 and 698

[Regulation No. 411006]
RIN 3084-AA94


Affiliate Marketing Rule

AGENCY: Federal Trade Commission

ACTION: Final rule.

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SUMMARY: The Federal Trade Commission (FTC or Commission) is publishing 
a final rule to implement the affiliate marketing provisions in section 
214 of the Fair and Accurate Credit Transactions Act of 2003, which 
amends the Fair Credit Reporting Act. The final rule generally 
prohibits a person from using information received from an affiliate to 
make a solicitation for marketing purposes to a consumer, unless the 
consumer is given notice and a reasonable opportunity and a reasonable 
and simple method to opt out of the making of such solicitations. The 
FACT Act requires certain other federal agencies to publish similar 
rules, and mandates that the FTC and other agencies consult and 
cooperate so that their regulations implementing this provision are 
consistent and comparable with one another.

DATES: This rule is effective on January 1, 2008. The mandatory 
compliance date for this rule is October 1, 2008.

FOR FURTHER INFORMATION CONTACT: Loretta Garrison and Anthony 
Rodriguez, Attorneys, Federal Trade Commission, (202) 326-2252, 
Division of Privacy and Identity Protection, Federal Trade Commission, 
601 New Jersey Avenue, NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

The Fair Credit Reporting Act

    The Fair Credit Reporting Act (FCRA or Act), which was enacted in 
1970, sets standards for the collection, communication, and use of 
information bearing on a consumer's credit worthiness, credit standing, 
credit capacity, character, general reputation, personal 
characteristics, or mode of living. 15 U.S.C. 1681-1681x. In 1996, the 
Consumer Credit Reporting Reform Act extensively amended the FCRA. Pub. 
L. 104-208, 110 Stat. 3009.
    The FCRA, as amended, provides that a person may communicate to an 
affiliate or a non-affiliated third party information solely as to 
transactions or experiences between the consumer and the person without 
becoming a consumer reporting agency.\1\ In addition, the communication 
of such transaction or experience information among affiliates will not 
result in any affiliate becoming a consumer reporting agency. See FCRA 
Sec. Sec.  603(d)(2)(A)(i) and (ii).
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    \1\ The FCRA creates substantial obligations for a person that 
meets the definition of a ``consumer reporting agency'' in section 
603(f) of the statute.
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    Section 603(d)(2)(A)(iii) of the FCRA provides that a person may 
communicate ``other'' information--that is, information that is not 
transaction or experience information--among its affiliates without 
becoming a consumer reporting agency if it is clearly and conspicuously 
disclosed to the consumer that such information may be communicated 
among affiliates and the consumer is given an opportunity, before the 
information is communicated, to ``opt out'' or direct that the 
information not be communicated among such affiliates, and the consumer 
has not opted out.

The Fair and Accurate Credit Transactions Act of 2003

    The President signed into law the Fair and Accurate Credit 
Transactions Act of 2003 (FACT Act) on December 4, 2003. Pub. L. 108-
159, 117 Stat. 1952. In general, the FACT Act amends the FCRA to 
enhance the ability of consumers to combat identity theft, increase the 
accuracy of consumer reports, restrict the use of medical information 
in credit eligibility determinations, and allow consumers to exercise 
greater control regarding the type and number of solicitations they 
receive.
    Section 214 of the FACT Act added a new section 624 to the FCRA. 
This provision gives consumers the right to restrict a person from 
using certain information obtained from an affiliate to make 
solicitations to that consumer. Section 624 generally provides that if 
a person receives certain consumer eligibility information from an 
affiliate, the person may not use that information to make 
solicitations to the consumer about its products or services, unless 
the consumer is given notice and an opportunity and a simple method to 
opt out of such use of the information, and the consumer does not opt 
out. The statute also provides that section 624 does not apply, for 
example, to a person using eligibility information: (1) to make 
solicitations to a consumer with whom the person has a pre-existing 
business relationship; (2) to perform services for another affiliate 
subject to certain conditions; (3) in response to a communication 
initiated by the consumer; or (4) to make a solicitation that has been 
authorized or requested by the consumer. Unlike the FCRA affiliate 
sharing opt-out and the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., 
(GLBA) non-affiliate sharing opt-out, which apply indefinitely, section 
624 provides that a consumer's affiliate marketing opt-out election 
must be effective for a period of at least five years. Upon expiration 
of the opt-out period, the consumer must be given a renewal notice and 
an opportunity to renew the opt-out before information received from an 
affiliate may be used to make solicitations to the consumer.
    Section 624 governs the use of information by an affiliate, not the 
sharing of information among affiliates, and thus is distinct from the 
affiliate sharing opt-out under section 603(d)(2)(A)(iii) of the FCRA. 
Nevertheless, the affiliate marketing and affiliate sharing opt-outs 
and the information subject to the two opt-outs overlap to some extent. 
As noted above, the FCRA allows transaction or experience information 
to be shared among affiliates without giving the consumer notice and an 
opportunity to opt out, but provides that ``other'' information, such 
as information from credit reports and credit applications, may not be 
shared among affiliates without giving the consumer notice and an 
opportunity to opt out. The new affiliate marketing opt-out applies to 
both transaction or experience information and ``other'' information. 
Thus, certain information will be subject to two opt-outs, a sharing 
opt-out and a marketing use opt-out.
    Section 214(b) of the FACT Act requires the FTC, the Federal 
banking agencies,\2\ the Securities and Exchange Commission (SEC), and 
the National Credit Union Administration (NCUA) to prescribe 
regulations, in consultation and coordination with each other, to 
implement the FCRA's affiliate marketing opt-out provisions. In 
adopting its regulation, the Commission must ensure that the affiliate 
marketing notification methods provide a simple means for consumers to 
make choices under section 624, consider the affiliate sharing 
notification practices employed on the date of enactment by persons 
subject to section 624, and ensure that notices may be coordinated and 
consolidated with other notices required by law.
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    \2\ The Federal banking agencies are the Board of Governors of 
the Federal Reserve System (Board), the Office of the Comptroller of 
the Currency (OCC), the Federal Deposit Insurance Corporation 
(FDIC), and the Office of Thrift Supervision (OTS).

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[[Page 61425]]

II. The Proposed Regulation

    The Commission published its notice of proposed rulemaking in the 
Federal Register on June 15, 2004 (69 FR 33324) to implement section 
214 of the FACT Act.\3\
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    \3\ On July 15, 2004, the Federal banking agencies and the NCUA 
published their proposed affiliate marketing rule in the Federal 
Register (69 FR 42502). The SEC published its proposed affiliate 
marketing rule in the Federal Register on July 14, 2004 (69 FR 
42301).
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    The proposal defined the key terms ``pre-existing business 
relationship'' and ``solicitation'' essentially as defined in the 
statute. The Commission did not propose to include additional 
circumstances within the meaning of ``pre-existing business 
relationship'' or other types of communications within the meaning of 
``solicitation.''
    To address the scope of the affiliate marketing opt-out, the 
proposal defined ``eligibility information'' to mean any information 
the communication of which would be a ``consumer report'' if the 
statutory exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the FCRA for transaction or experience 
information and for ``other'' information that is subject to the 
affiliate-sharing opt-out did not apply. The Commission substituted the 
term ``eligibility information'' for the more complicated statutory 
language regarding the communication of information that would be a 
consumer report, but for clauses (i), (ii), and (iii) of section 
603(d)(2)(A) of the FCRA.\4\ In addition, the proposal incorporated 
each of the scope limitations contained in the statute, such as the 
pre-existing business relationship exception.
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    \4\ Under section 603(d)(1) of the FCRA, a ``consumer report'' 
means any written, oral, or other communication of any information 
by a consumer reporting agency bearing on a consumer's credit 
worthiness, credit standing, credit capacity, character, general 
reputation, personal characteristics, or mode of living which is 
used or expected to be used or collected in whole or in part for the 
purpose of serving as a factor in establishing the consumer's 
eligibility for credit or insurance to be used primarily for 
personal, family, or household purposes, employment purposes, or any 
other purpose authorized in section 604 of the FCRA. 15 U.S.C. 
1681a(d).
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    Section 624 does not state which affiliate must give the consumer 
the affiliate marketing opt-out notice. The proposal provided that the 
person communicating information about a consumer to its affiliate 
would be responsible for satisfying the notice requirement, if 
applicable. A rule of construction provided flexibility to allow the 
notice to be given by the person that communicates information to its 
affiliate, by the person's agent, or through a joint notice with one or 
more other affiliates. The Commission designed this approach to provide 
flexibility and to facilitate the use of a single coordinated notice, 
while taking into account existing affiliate sharing notification 
practices. At the same time, the approach sought to ensure that the 
notice would be effective because it generally would be provided by or 
on behalf of an entity from which the consumer would expect to receive 
important notices, and would not be provided along with solicitations.
    The proposal also provided guidance on the contents of the opt-out 
notice, what constitutes a reasonable opportunity to opt out, 
reasonable and simple methods of opting out, and the delivery of opt-
out notices. Finally, the proposal provided guidance on the effect of 
the limited duration of the opt-out and the requirement to provide an 
extension notice upon expiration of the opt-out period.

III. Overview of Comments Received

    The Commission received 49 comments. In addition, the Commission 
considered the comments submitted to the Federal banking agencies, the 
NCUA, and the SEC. Many commenters sent copies of the same letter to 
more than one agency. The Commission received comments from a variety 
of banks, thrifts, credit unions, credit card companies, mortgage 
lenders, other non-bank creditors, and industry trade associations. The 
Commission also received comments from consumer groups, the National 
Association of Attorneys General (``NAAG''), and individual consumers.
    Most industry commenters objected to several key aspects of the 
proposal. The most significant areas of concern raised by industry 
commenters related to which affiliate would be responsible for 
providing the notice, the scope of certain exceptions to the notice and 
opt-out requirement, and the content or the inclusion of definitions 
for terms such as ``clear and conspicuous'' and ``pre-existing business 
relationship.'' Consumer groups and NAAG generally supported the 
proposal, although these commenters believed that the proposal could be 
strengthened in certain respects. A more detailed discussion of the 
comments is contained in the Section-by-Section Analysis below.

IV. Section-by-Section Analysis

Section 680.1 Purpose and Scope

    Section 680.1 of the proposal set forth the purpose and scope of 
the regulation. The Commission received few comments on this section. 
Section 680.1(b) of the final rule identifies the persons covered by 
this part of the Commission's rule.

Section 680.2 Examples

    Proposed Sec.  680.2 described the scope and effect of the examples 
included in the proposed rule. Most commenters supported the proposed 
use of non-exclusive examples to illustrate the operation of the rule. 
One commenter, concerned that the use of examples would increase the 
risk of litigation, urged the Commission to delete all examples.
    The Commission does not believe the use of illustrative examples 
will materially increase the risk of litigation, but rather will 
provide useful guidance for compliance purposes, which may alleviate 
litigation risks for institutions.
    As Sec.  680.2 states, examples in a paragraph illustrate only the 
issue described in the paragraph and do not illustrate any other issue 
that may arise in the part. Similarly, the examples do not illustrate 
any issues that may arise under other laws or regulations.

Section 680.3 Definitions

    Section 680.3 of the proposal contained definitions for the 
following terms: ``Act,'' ``affiliate'' (as well as the related terms 
``company'' and ``control''); ``clear and conspicuous''; ``consumer''; 
``eligibility information''; ``person''; ``pre-existing business 
relationship''; ``solicitation''; and, ``you.''
    Those definitions that elicited comment are discussed below.

Affiliate, Common Ownership or Common Corporate Control, and Company

    The proposed rule included definitions for ``affiliate'' as well as 
for the related terms ``control'' and ``company.'' For the reasons 
discussed below, the final rule substituted ``common ownership or 
common corporate control'' as a substitute for the definition of 
``control,'' and renumbered it as Sec.  680.3(d). The term ``company'' 
is renumbered as Sec.  680.3(e).
    Several FCRA provisions apply to information sharing with persons 
``related by common ownership or affiliated by corporate control,'' 
``related by common ownership or affiliated by common corporate 
control,'' or ``affiliated by common ownership or common corporate 
control.'' E.g., FCRA, sections 603(d)(2), 615(b)(2), and 625(b)(2). 
Each of these provisions was enacted as part of the 1996 amendments to 
the FCRA. Similarly, section 2 of the FACT Act defines the term 
``affiliate'' to mean ``persons that are related by common ownership or 
affiliated by

[[Page 61426]]

corporate control.'' In contrast, the GLBA defines ``affiliate'' to 
mean ``any company that controls, is controlled by, or is under common 
control with another company.'' See 15 U.S.C. 6809(6).
    In the proposal, the Commission sought to harmonize the various 
FCRA and FACT Act formulations by defining ``affiliate'' to mean ``any 
person that is related by common ownership or common corporate control 
with another person.'' Industry commenters generally supported the 
Commission's goal of harmonizing the various FCRA definitions of 
``affiliate'' for consistency. Many of these commenters, however, 
believed that the most effective way to do this was for the Commission 
to incorporate into the FCRA the definition of ``affiliate'' used in 
the GLBA privacy regulations. In addition, a few industry commenters 
urged the Commission to incorporate into the definition of 
``affiliate'' certain concepts from California's Financial Information 
Privacy Act so as to exempt certain classes of corporate affiliates 
from the restrictions on affiliate sharing or marketing.\5\
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    \5\ These commenters noted that the California law places no 
restriction on information sharing among affiliates if they: (1) are 
regulated by the same or similar functional regulators; (2) are 
involved in the same broad line of business, such as banking, 
insurance, or securities; and (3) share a common brand identity.
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    The Commission does not believe there is a substantive difference 
between the FACT Act definition of ``affiliate'' and the definition of 
``affiliate'' in section 509 of the GLBA. The Commission is not aware 
of any circumstances in which two entities would be affiliates for 
purposes of the FCRA but not for purposes of the GLBA privacy rule, or 
vice versa. Also, even though affiliated entities have had to comply 
with different FCRA and GLBA formulations of the ``affiliate'' 
definition since 1999, commenters did not identify any specific 
compliance difficulties or uncertainty resulting from the fact that the 
two statutes use somewhat different wording to describe what 
constitutes an affiliate.
    Consistent with the definition of ``affiliate'' adopted by the 
Federal banking agencies in the final medical information rules, the 
Commission declines to incorporate into the definition of ``affiliate'' 
exceptions for entities regulated by the same or similar functional 
regulators, entities in the same line of business, or entities that 
share a common brand or identity. See 70 FR 70664-70665 (Nov. 22, 
2005). These exceptions were incorporated into the California Financial 
Information Privacy Act in August 2003.\6\ Congress, however, did not 
incorporate these exceptions from California law into the definition of 
``affiliate'' when it enacted the FACT Act at the end of 2003. 
Accordingly, the Commission believes that the approach adopted here 
best effectuates the intent of Congress.
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    \6\ See Cal. Financial Code Sec.  4053(c).
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    Under the GLBA privacy rule, the definition of ``control'' 
determines whether two or more entities meet the definition of 
``affiliate.''\7\ The Commission included the same definition of 
``control'' in the proposal and received no comments on the proposed 
definition. The Commission interprets the phrase ``related by common 
ownership or common corporate control'' used in the FACT Act to have 
the same meaning as ``control'' in the GLBA privacy rule. For example, 
if an individual owns 25 percent of two companies, the companies would 
be affiliates under both the GLBA and FCRA definitions. However, the 
individual would not be considered an affiliate of the companies 
because the definition of ``affiliate'' is limited to companies.
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    \7\ See 16 C.F.R. 313.3(g).
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    The proposal also defined the term ``company'' to mean any 
corporation, limited liability company, business trust, general or 
limited partnership, association, or similar organization. The proposed 
definition of ``company'' excluded some entities that are ``persons'' 
under the FCRA, including estates, cooperatives, and governments or 
governmental subdivisions or agencies, as well as individuals.

Clear and Conspicuous

    Proposed Sec.  680.3(c) defined the term ``clear and conspicuous'' 
to mean reasonably understandable and designed to call attention to the 
nature and significance of the information presented. Under this 
definition, institutions would retain flexibility in determining how 
best to meet the clear and conspicuous standard. The supplementary 
information to the proposal provided guidance regarding a number of 
practices that institutions might wish to consider in making their 
notices clear and conspicuous. These practices were derived largely 
from guidance included in the GLBA privacy rule.
    Industry commenters urged the Commission not to define ``clear and 
conspicuous'' in the final rule. The principal objection these 
commenters raised was that this definition would significantly increase 
the risk of litigation and civil liability. Although these commenters 
recognized that the proposed definition was derived from the GLBA 
privacy regulations, they noted that compliance with the GLBA privacy 
regulations is enforced exclusively through administrative action, not 
through private litigation. These commenters also stated that the 
Federal Reserve Board had withdrawn a similar proposal to define 
``clear and conspicuous'' for purposes of Regulations B, E, M, Z, and 
DD, in part because of concerns about civil liability. Some industry 
commenters believed that it was not necessary to define the term in 
order for consumers to receive clear and conspicuous disclosures based 
on industry's experience in providing clear and conspicuous affiliate 
sharing opt-out notices. Consumer groups believed that incorporation of 
the standard and examples from the GLBA privacy regulations was not 
adequate because they did not believe that the existing standard has 
proven sufficient to ensure effective privacy notices.
    Except for certain non-substantive changes made for purposes of 
clarity, the definition of ``clear and conspicuous'' is the same as in 
the proposal and is substantively the same as the definition used in 
the GLBA privacy rule. The Commission believes that the clear and 
conspicuous standard for the affiliate marketing opt-out notices should 
be substantially similar to the standard that applies to GLBA privacy 
notices because the affiliate marketing opt-out notice may be provided 
on or with the GLBA privacy notice.
    In defining ``clear and conspicuous,'' the Commission believes it 
is more appropriate to focus on the affiliate marketing opt-out notices 
that are the subject of this rulemaking, rather than adopting a 
generally applicable definition governing all consumer disclosures 
under the FCRA. This approach gives the Commission the flexibility to 
refine or clarify the clear and conspicuous requirement for different 
disclosures, if necessary.
    The statute directs the Commission to provide specific guidance 
regarding how to comply with the clear and conspicuous standard. See 15 
U.S.C. 1681s-3(a)(2)(B). For that reason, the Commission does not agree 
with commenters that requested the elimination of the definition of 
``clear and conspicuous'' and related guidance. Rather, the Commission 
believes it is necessary to define ``clear and conspicuous'' in the 
final rule and provide specific guidance for how to satisfy that 
standard in connection with this notice.

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    Accordingly, the final rule contains two types of specific guidance 
on satisfying the requirement to provide a clear and conspicuous opt-
out notice. First, as in the proposal, the supplementary information to 
the final rule describes certain techniques that may be used to make 
notices clear and conspicuous. These techniques are described below. 
Second, the Commission has adopted model forms that may, but are not 
required to, be used to facilitate compliance with the affiliate 
marketing notice requirements. The requirement for clear and 
conspicuous notices would be satisfied by the appropriate use of one of 
the model forms.
    As noted in the supplementary information to the proposal, 
institutions may wish to consider a number of methods to make their 
notices clear and conspicuous. The various methods described below for 
making a notice clear and conspicuous are suggestions that institutions 
may wish to consider in designing their notices. Use of any of these 
methods alone or in combination is voluntary. Institutions are not 
required to use any particular method or combination of methods to make 
their disclosures clear and conspicuous. Rather, the particular facts 
and circumstances will determine whether a disclosure is clear and 
conspicuous.
    A notice or disclosure may be made reasonably understandable 
through various methods that include: using clear and concise 
sentences, paragraphs, and sections; using short explanatory sentences; 
using bullet lists; using definite, concrete, everyday words; using 
active voice; avoiding multiple negatives; avoiding legal and highly 
technical business terminology; and avoiding explanations that are 
imprecise and are readily subject to different interpretations. In 
addition, a notice or disclosure may be designed to call attention to 
the nature and significance of the information in it through various 
methods that include: using a plain-language heading; using a typeface 
and type size that are easy to read; using wide margins and ample line 
spacing; and using boldface or italics for key words. Further, 
institutions that provide the notice on a Web page may use text or 
visual cues to encourage scrolling down the page, if necessary, to view 
the entire notice and may take steps to ensure that other elements on 
the Web site (such as text, graphics, hyperlinks, or sound) do not 
distract attention from the notice. When a notice or disclosure is 
combined with other information, methods for designing the notice or 
disclosure to call attention to the nature and significance of the 
information in it may include using distinctive type sizes, styles, 
fonts, paragraphs, headings, graphic devices, and appropriate groupings 
of information. However, there is no need to use distinctive features, 
such as distinctive type sizes, styles, or fonts, to differentiate an 
affiliate marketing opt-out notice from other components of a required 
disclosure, for example, where a GLBA privacy notice combines several 
opt-out disclosures in a single notice. Moreover, nothing in the clear 
and conspicuous standard requires segregation of the affiliate 
marketing opt-out notice when it is combined with a GLBA privacy notice 
or other required disclosures.
    The Commission recognizes that it will not be feasible or 
appropriate to incorporate all of the methods described above all the 
time. The Commission recommends, but does not require, that 
institutions consider the methods described above in designing their 
opt-out notices. The Commission also encourages the use of consumer or 
other readability testing to devise notices that are understandable to 
consumers.
    Finally, although the Commission understands the concerns of some 
industry commenters about the potential for civil liability, the 
Commission believes that these concerns are mitigated by the safe 
harbors afforded by the model forms in Appendix C to Part 698. The 
Commission notes that the affiliate sharing opt-out notice under 
section 603(d)(2)(A)(iii) of the FCRA, which may be enforced through 
private rights of action, must be included in the GLBA privacy notice. 
Therefore, the affiliate sharing opt-out notice generally is disclosed 
in a manner consistent with the clear and conspicuous standard set 
forth in the GLBA privacy regulations. Commenters did not identify any 
litigation that has resulted from the requirement to provide a clear 
and conspicuous affiliate sharing opt-out notice. The Commission 
believes that compliance with the examples and use of the model forms, 
although optional, should minimize the risk of litigation.

Concise

    Proposed Sec.  680.21(b) defined the term ``concise'' to mean a 
reasonably brief expression or statement. The proposal also provided 
that a notice required by this part may be concise even if it is 
combined with other disclosures required or authorized by federal or 
state law. Such disclosures include, but are not limited to, a GLBA 
privacy notice, an affiliate sharing notice under section 
603(d)(2)(A)(iii) of the FCRA, and other consumer disclosures. Finally, 
the proposal clarified that the requirement for a concise notice would 
be satisfied by the appropriate use of one of the model forms contained 
in proposed Appendix A to the Commission's rule, although use of the 
model forms is not required. The Commission received no comments on the 
proposed definition of ``concise.'' The final rule renumbers the 
definition of ``concise'' as Sec.  680.3(f). The reference to the model 
forms has been moved to Appendix C to Part 698, but otherwise the 
definition is adopted as proposed.

Consumer

    Proposed paragraph (e) defined the term ``consumer'' to mean an 
individual. This definition is identical to the definition of 
``consumer'' in section 603(c) of the FCRA.
    Several commenters asked the Commission to narrow the proposed 
definition to apply only to individuals who obtain financial products 
or services primarily for personal, family, or household purposes, in 
part to achieve consistency with the definition of ``consumer'' in the 
GLBA. The FCRA's definition of ``consumer,'' however, differs from, and 
is broader than, the definition of that term in the GLBA. The 
Commission believes that the use of distinct definitions of 
``consumer'' in the two statutes reflects differences in the scope and 
objectives of each statute. For purposes of this definition, an 
individual acting through a legal representative would qualify as a 
consumer. The final rule renumbers ``consumer'' as Sec.  680.3(g) but 
otherwise adopts it without change.

Eligibility Information

    Proposed Sec.  680.3(g) defined the term ``eligibility 
information'' to mean any information the communication of which would 
be a consumer report if the exclusions from the definition of 
``consumer report'' in section 603(d)(2)(A) of the FCRA did not apply. 
As proposed, eligibility information would include a person's own 
transaction or experience information, such as information about a 
consumer's account history with that person, and ``other'' information 
under section 603(d)(2)(A)(iii), such as information from consumer 
reports or applications.
    Most commenters generally supported the proposed definition of 
``eligibility information'' as an appropriate means of simplifying the 
statutory terminology without changing the scope of the information 
covered by the rule. A number of commenters requested that the 
Commission clarify that certain types of information do not constitute 
eligibility information, such as name,

[[Page 61428]]

address, telephone number, Social Security number, and other 
identifying information. One commenter requested the exclusion of 
publicly available information from the definition. Another commenter 
requested additional clarification regarding the term ``transaction or 
experience information.'' A few commenters suggested that the 
Commission include examples of what is and is not included within 
``eligibility information.'' Finally, one commenter urged the 
Commission to revise the definition to restate much of the statutory 
definition of ``consumer report'' to eliminate the need for cross-
references.
    The final rule renumbers the definition of ``eligibility 
information'' as 680.3(h). The Commission has revised the definition to 
clarify that the term ``eligibility information'' does not include 
aggregate or blind data that does not contain personal identifiers. 
Examples of personal identifiers include account numbers, names, or 
addresses, as indicated in the definition, as well as Social Security 
numbers, driver's license numbers, telephone numbers, or other types of 
information that, depending on the circumstances or when used in 
combination, could identify the individual.
    The Commission also believes that further clarification of, or 
exclusions from, the term ``eligibility information,'' such as the 
categorical exclusion of names, addresses, telephone numbers, other 
identifying information, or publicly available information, would 
directly implicate the definitions of ``consumer report'' and 
``consumer reporting agency'' in sections 603(d) and (f), respectively, 
of the FCRA. The Commission decided not to define the terms ``consumer 
report'' and ``consumer reporting agency'' in this rulemaking and not 
to interpret the meaning of terms used in those definitions, such as 
``transaction or experience'' information. The Commission also notes 
that financial institutions have relied on these statutory definitions 
for many years.

Person

    Proposed paragraph (h) defined the term ``person'' to mean any 
individual, partnership, corporation, trust, estate, cooperative, 
association, government or governmental subdivision or agency, or other 
entity. This definition is identical to the definition of ``person'' in 
section 603(b) of the FCRA.
    One commenter requested clarification of how the proposed 
definition of ``person'' would affect other provisions of the affiliate 
marketing rule. Specifically, this commenter asked how the 
supplementary information's discussion of agents might affect the scope 
provisions of the rule.
    The supplementary information to the proposal stated that a person 
may act through an agent, including but not limited to a licensed agent 
(in the case of an insurance company) or a trustee. The supplementary 
information also provided that actions taken by an agent on behalf of a 
person that are within the scope of the agency relationship would be 
treated as actions of that person. The Commission included these 
statements to address comprehensively the status of agents and to 
eliminate the need to refer specifically to licensed agents in the 
proposed definition of ``pre-existing business relationship.'' As 
discussed below, many commenters believed that licensed agents should 
be expressly included in the definition of ``pre-existing business 
relationship.'' The Commission has revised the final rule in response 
to those comments. By specifically addressing licensed agents, the 
final rule does not alter the general principles of principal-agent 
relationships that apply to all agents, not just licensed agents. The 
Commission will treat actions taken by an agent on behalf of a person 
that are within the scope of the agency relationship as actions of that 
person, regardless of whether the agent is a licensed agent or not. The 
final rule renumbers the definition of ``person'' as Sec.  680.3(i).

Pre-Existing Business Relationship

    Proposed Sec.  680.3(i) defined the term ``pre-existing business 
relationship'' to mean a relationship between a person and a consumer 
based on the following: (1) a financial contract between the person and 
the consumer that is in force; (2) the purchase, rental, or lease by 
the consumer of that person's goods or services, or a financial 
transaction (including holding an active account or a policy in force 
or having another continuing relationship) between the consumer and 
that person, during the 18-month period immediately preceding the date 
on which a solicitation covered by this part is sent to the consumer; 
or (3) an inquiry or application by the consumer regarding a product or 
service offered by that person during the three-month period 
immediately preceding the date on which a solicitation covered by this 
part is sent to the consumer.
    The proposed definition generally tracked the statutory definition 
contained in section 624 of the FCRA, with certain revisions for 
clarity. Although the statute gave the Commission the authority to 
identify by regulation other circumstances that qualify as a pre-
existing business relationship, the Commission did not propose to 
exercise this authority. In the final rule, the definition of ``pre-
existing business relationship'' has been renumbered as Sec. 680.3(j).
    Industry commenters suggested certain revisions to the proposed 
definition of ``pre-existing business relationship.'' Many industry 
commenters asked the Commission to include in the definition statutory 
language relating to ``a person's licensed agent.'' A number of these 
commenters noted that this concept was particularly important to the 
insurance industry where independent, licensed agents frequently act as 
the main point of contact between the consumer and the insurance 
company.
    In the final rule, the phrase ``or a person's licensed agent'' has 
been added to the definition of ``pre-existing business relationship'' 
to track the statutory language. For example, assume that a person is a 
licensed agent for the affiliated ABC life, auto, and homeowners' 
insurance companies. A consumer purchases an ABC auto insurance policy 
through the licensed agent. The licensed agent may use eligibility 
information about the consumer obtained in connection with the ABC auto 
policy it sold to the consumer to market ABC life and homeowner's 
insurance policies to the consumer for the duration of the pre-existing 
business relationship without offering the consumer the opportunity to 
opt out of that use.
    Regarding the first basis for a pre-existing business relationship 
(a financial contract in force), several industry commenters asked the 
Commission to clarify that a financial contract includes any in-force 
contract that relates to a financial product or service covered by 
title V of the GLBA. One commenter objected to the requirement that the 
contract be in force on the date of the solicitation. This commenter 
believed that the Commission should interpret the statute to permit the 
exception to apply if a contract is in force at the time the affiliate 
uses the information, rather than when the solicitation is sent, noting 
that there may be a delay between the use and the solicitation.
    The Commission has adopted the first prong of the definition of 
``pre-existing business relationship'' as proposed. Although a 
comprehensive definition of the term ``financial contract'' has not 
been included in the final rule, the Commission construes the statutory 
term ``financial contract'' at least to include a contract that relates 
to a

[[Page 61429]]

consumer's purchase or lease of a financial product or service that a 
financial holding company could offer under section 4(k) of the Bank 
Holding Company Act of 1956 (12 U.S.C. 1843(k)). In addition, a 
financial contract which is in force will, in virtually all instances, 
qualify as a ``financial transaction,'' as that term is used in the 
second prong of the definition of ``pre-existing business 
relationship.'' The Commission does not agree with the suggestion that 
the financial contract should be in force on the date of use rather 
than on the date the solicitation is sent. The approach taken in the 
proposed and final rule is consistent with the approach used in the 
other two prongs of the statutory definition.
    Industry commenters also suggested certain clarifications to the 
second basis for a pre-existing business relationship--a purchase, 
rental, or lease by the consumer of the person's goods or services, or 
a financial transaction between the consumer and the person during the 
preceding 18 months. Several industry commenters noted that, 
notwithstanding the example in the proposal regarding a lapsed 
insurance policy, it was not clear from what point in time the 18-month 
period begins to run in the case of many purchase, rental, lease, or 
financial transactions. These commenters asked the Commission to 
clarify that the 18-month period begins to run at the time all 
contractual responsibilities of either party under the purchase, 
rental, lease, or financial transaction expire. In addition, some 
commenters indicated that the term ``active account'' should be 
clarified to mean any account with outstanding contractual 
responsibilities on either side of an account relationship, regardless 
of whether specific transactions do or do not occur on that account.
    The Commission has adopted the second prong of the definition of 
``pre-existing business relationship'' as proposed. The Commission 
declines to interpret the term ``active account'' as requested by some 
commenters. The Commission notes that section 603(r)(4) of the FCRA 
defines the term ``account'' to have the same meaning as in section 903 
of the Electronic Fund Transfer Act (EFTA). Under the EFTA, the term 
``account'' means a demand deposit, savings deposit, or other asset 
account established primarily for personal, family, or household 
purposes. Some commenters, however, apparently believed that the term 
``active account'' included extensions of credit. Credit extensions 
presumably would qualify as ``another continuing relationship,'' as 
used in the definition of ``pre-existing business relationship.''
    More generally, however, even though a ``financial transaction'' 
would include in virtually all cases a financial contract which is in 
force, as noted above, the Commission does not believe it is 
appropriate to state that the 18-month period begins to run when all 
outstanding contractual responsibilities of both parties expire, 
regardless of whether specific transactions occur. Such a clarification 
would not appropriately address circumstances such as charge-offs, 
bankruptcies, early terminations, or extended periods of credit 
inactivity that could trigger commencement of the 18-month period. In 
addition, some contract provisions, such as arbitration clauses and 
choice of law provisions, may continue to have legal effect after all 
contractual performance has ended. The Commission does not believe that 
the continued effectiveness of such provisions should delay 
commencement of the 18-month period.
    Nevertheless, the Commission believes that a few examples may 
provide useful guidance to facilitate compliance. For example, in the 
case of a closed-end mortgage or auto loan, the 18-month period 
generally would begin to run when the consumer pays off the outstanding 
balance on the loan. In a lease or rental transaction, the 18-month 
period generally would begin to run when the lease or rental agreement 
expires or is terminated by mutual agreement. In the case of general 
purpose credit cards that are issued with an expiration date, the 18-
month period generally would begin to run when the consumer pays off 
the outstanding balance on the card and the card is either cancelled or 
expires without being renewed.
    Commenters also made certain suggestions regarding the third basis 
for a pre-existing business relationship--an inquiry or application by 
the consumer regarding a product or service offered by the person 
during the preceding three months. Consumer groups urged the Commission 
to clarify that an inquiry must be made of the specific affiliate, 
rather than a general inquiry about a product or service. Industry 
commenters expressed concern about certain statements in the 
supplementary information that explained the meaning of an inquiry.
    The Commission does not agree that an inquiry must be made of a 
specific affiliate. Many affiliated institutions use a central call 
center to handle consumer inquiries. The clarification urged by 
consumer groups could preclude the establishment of a pre-existing 
business relationship based on a consumer's call to a central call 
center about a specific product or service offered by an affiliate.
    In the supplementary information to the proposal, the Commission 
noted that certain elements of the definition of ``pre-existing 
business relationship'' were substantially similar to the definition of 
``established business relationship'' under the amended Telemarketing 
Sales Rule (TSR) (16 CFR 310.2(n)). The TSR definition was informed by 
Congress' intent that the ``established business relationship'' 
exemption to the ``do not call'' provisions of the Telephone Consumer 
Protection Act (47 U.S.C. 227 et seq.) should be grounded on the 
reasonable expectations of the consumer.\8\ The Commission observed 
that Congress' incorporation of similar language in the definition of 
``pre-existing business relationship''\9\ suggested that it would be 
appropriate to consider the reasonable expectations of the consumer in 
determining the scope of this exception. Thus, the Commission explained 
that, for purposes of this regulation, an inquiry would include any 
affirmative request by a consumer for information after which the 
consumer would reasonably expect to receive information from the 
affiliate about its products or services.\10\ Moreover, a consumer 
would not reasonably expect to receive information from the affiliate 
if the consumer did not request information or did not provide contact 
information to the affiliate.
---------------------------------------------------------------------------

    \8\ H.R. Rep. No. 102-317, at 14-15 (1991). See also 68 FR 4580, 
4591-94 (Jan. 29, 2003).
    \9\ 149 Cong. Rec. S13,980 (daily ed. Nov. 5, 2003) (statement 
of Senator Feinstein) (noting that the ``pre-existing business 
relationship'' definition ``is the same definition developed by the 
Federal Trade Commission in creating a national `Do Not Call' 
registry for telemarketers.'')
    \10\See 68 FR at 4594.
---------------------------------------------------------------------------

    Industry commenters objected to the discussion in the supplementary 
information. Some of these commenters believed that looking to the 
reasonable expectations of the consumer would narrow the scope of the 
exception and impose on institutions a subjective standard that 
depended upon the consumer's state of mind. These commenters also 
maintained that the availability of the exception should not depend 
upon the consumer both requesting information and providing contact 
information to the affiliate. Some commenters noted that either 
requesting information or providing contact information should suffice 
to establish an expectation of receiving solicitations. Other 
commenters noted that consumers would not provide

[[Page 61430]]

contact information if they believed that the affiliate would already 
have the consumer's contact information or would obtain it from the 
consumer's financial institution. Some commenters believed that the 
consumer should not have to make an affirmative request for information 
in order to have an inquiry. Commenters also expressed concern that the 
discussion in the supplementary information would require consumers to 
use specific words to trigger the exception.
    The Commission has adopted the third prong of the definition of 
``pre-existing business relationship'' as proposed. The Commission 
continues to believe that it is appropriate to consider what the 
consumer says in determining whether the consumer has made an inquiry 
about a product or service. It may not be necessary, however, for the 
consumer to provide contact information in all cases. As discussed 
below, the Commission has revised the examples of inquiries to 
illustrate different circumstances.
    Consumer groups and NAAG urged the Commission not to expand the 
definition of ``pre-existing business relationship'' to include any 
additional types of relationships. Industry commenters suggested a 
number of additional bases for establishing a pre-existing business 
relationship. Several industry commenters believed that the term ``pre-
existing business relationship'' should be defined to include 
relationships arising out of the ownership of servicing rights, a 
participation interest in lending transactions, and similar 
relationships. These commenters provided no further explanation for why 
such an expansion was necessary. One commenter urged the Commission to 
expand the definition of ``pre-existing business relationship'' to 
apply to affiliates that share a common trade name, share the same 
employees or representatives, operate out of the same physical location 
or locations, and offer similar products.
    In addition, a number of industry commenters requested 
clarification of the term ``pre-existing business relationship'' as 
applied to manufacturers that make sales through dealers. These 
commenters explained that automobile manufacturers do not sell vehicles 
directly to consumers, but through franchised dealers. Vehicle 
financing may be arranged through a manufacturer's captive finance 
company or independent sources of financing. These commenters noted 
that manufacturers often provide consumers with information about 
warranty coverage, recall notices, and other product information. 
According to these commenters, manufacturers also send solicitations to 
consumers about their products and services, drawing in part on 
transaction or experience information from the captive finance company. 
These commenters asked the Commission to clarify that the relationship 
between a manufacturer and a consumer qualifies as a pre-existing 
business relationship based on the purchase, rental, or lease of the 
manufacturer's goods, or, alternatively, to exercise its authority to 
add this relationship as an additional basis for a pre-existing 
business relationship. One commenter asked the Commission to clarify 
that a pre-existing business relationship could be established even if 
the person provides a product or service to the consumer without 
charging a fee.
    The Commission does not believe it is necessary to add any 
additional bases for a pre-existing business relationship. The 
Commission acknowledges that a pre-existing business relationship 
exists where a person owns the servicing rights to a consumer's loan 
and such person collects payments from, or otherwise deals directly 
with, the consumer. In the Commission's view, however, that situation 
qualifies as a financial transaction and thus falls within the second 
prong of the definition of ``pre-existing business relationship.'' The 
Commission has included an example, discussed below, to illustrate how 
the ownership of servicing rights can create a pre-existing business 
relationship.
    A pre-existing business relationship does not arise solely from a 
participation interest in a lending transaction because such an 
interest does not result in a financial contract or a financial 
transaction between the consumer and the participating party. The 
Commission declines to add a specific provision for franchised dealers. 
The statute contains no special provision addressing franchised 
dealers, as it does for licensed agents. Moreover, a franchised dealer 
and a manufacturer generally are not affiliates and thus are subject to 
the GLBA privacy rule relating to information sharing with non-
affiliated third parties. The Commission also finds no basis for 
including within the meaning of ``pre-existing business relationship'' 
any affiliate that shares a common trade name or representatives, or 
that operates from the same location or offers similar products. 
Finally, the Commission declines to add a provision that would create a 
pre-existing business relationship when a consumer obtains a product or 
service without charge from a person. Such a provision would be overly 
broad, is not necessary given the breadth of the statutory definition 
of ``pre-existing business relationship,'' and could result in 
circumvention of the notice requirement.
    Proposed Sec.  680.20(d)(1) provided four examples of the pre-
existing business relationship exception. In the final rule, these 
examples have been renumbered as Sec.  680.3(j)(2)(i)-(iv), and revised 
to illustrate the definition of ``pre-existing business relationship,'' 
rather than the corresponding exception.
    The two examples relating to the first and second prongs of the 
definition of ``pre-existing business relationship'' have been revised 
in Sec.  680.3(j)(2)(i) and (ii) to focus on a loan account creditor as 
the person with the pre-existing business relationship, but are 
otherwise substantively similar to the proposal. One commenter 
recommended expanding the example now contained in Sec.  680.3(j)(2)(i) 
to refer to the licensed agent that wrote the policy or services the 
relationship. The Commission believes that adding the term ``licensed 
agent'' to the definition is sufficient and sees no reason to further 
complicate this example to illustrate how the definition applies to 
licensed agents.
    Section 680.3(j)(2)(iii) is new and illustrates when a pre-existing 
business relationship is created in the context of a mortgage loan. 
This example specifically addresses circumstances where either the loan 
or ownership of the servicing rights to the loan is sold to a third 
party. As this example illustrates, sale of the entire loan by the 
original lender terminates the financial transaction between the 
consumer and that lender and creates a new financial transaction 
between the consumer and the purchaser of the loan. However, the 
original lender's sale of a fractional interest in the loan to an 
investor does not create a new financial transaction between the 
consumer and the investor. When the original lender sells a fractional 
interest in the consumer's loan to an investor but also retains an 
ownership interest in the loan, however, the original lender continues 
to have a pre-existing business relationship with the consumer because 
the consumer obtained a loan from the lender and the lender continues 
to own an interest in the loan. In addition, the ownership of servicing 
rights coupled with direct dealings with the consumer results in a 
financial transaction between the consumer and the owner of the 
servicing rights, thereby creating a pre-existing business relationship 
between the consumer and the owner of the servicing rights. The 
Commission notes that a financial institution that owns servicing 
rights generally has a customer

[[Page 61431]]

relationship with the consumer and an obligation to provide a GLBA 
privacy notice to the consumer.
    The example in proposed Sec.  680.20(d)(1)(iii) regarding 
applications and inquiries elicited comment. Some industry commenters 
urged the Commission to revise this example so that it does not depend 
upon the consumer's expectations or the consumer providing contact 
information. These commenters noted, for example, that the contact 
information would be self-evident if the consumer makes an e-mail 
request or provides a return address on an envelope. These commenters 
also believed that in the case of a telephone call initiated by a 
consumer, a captured telephone number should be sufficient to create an 
inquiry if the consumer requests information about products or 
services.
    In the final rule, the Commission has crafted three separate 
examples from proposed Sec.  680.20(d)(1)(iii). Section 680.3(j)(2)(iv) 
provides an example where a consumer applies for a product or service, 
but does not obtain the product or service for which she applied. 
Contact information is not mentioned in this example because the 
consumer presumably would have supplied it on the application.
    Section 680.3(j)(2)(v) provides an example where a consumer makes a 
telephone inquiry about a product or service offered by a depository 
institution and provides contact information to the institution, but 
does not obtain a product or service from or enter into a financial 
transaction with the institution. The Commission does not believe that 
an institution's capture of a consumer's telephone number during a 
telephone conversation with the consumer about the institution's 
products or services is sufficient to create an inquiry. In that 
circumstance, to ensure that an inquiry has been made, the institution 
should ask the consumer to provide his or her contact information, or 
confirm with the consumer that the consumer has a pre-existing business 
relationship with an affiliate.
    Section 680.3(j)(2)(vi) provides an example where the consumer 
makes an e-mail inquiry about a product or service offered by a 
creditor, but does not separately provide contact information. In that 
case, the consumer provides the creditor with contact information in 
the form of the consumer's e-mail address. In addition, e-mail 
communications, unlike telephone communications, do not provide 
institutions with the same opportunity to ask for the consumer's 
contact information.
    Industry commenters recommended deleting the example in proposed 
Sec.  680.20(d)(1)(iv) illustrating a call center scenario where a 
consumer would not reasonably expect to receive information from an 
affiliate. In the final rule, the Commission has included a positive 
example of an inquiry made by a consumer through a call center in Sec.  
680.3(j)(2)(vii), while retaining the negative example from the 
proposal in Sec.  680.3(j)(3)(i). In addition, the Commission has 
included in Sec.  680.3(j)(3)(ii) an example of a consumer call to ask 
about retail locations and hours, which does not create a pre-existing 
business relationship. This example is substantively similar to the 
example from proposed Sec.  680.20(d)(2)(iii).
    A new example in Sec.  680.3(j)(3)(iii) illustrates a case where a 
consumer responds to an advertisement that offers a free promotional 
item, but the advertisement does not indicate that an affiliate's 
products or services will be marketed to consumers who respond to the 
advertisement. The example illustrates that the consumer's response 
does not create a pre-existing business relationship because the 
consumer has not made an inquiry about a product or service, but has 
merely responded to an offer for a free promotional item. Similarly, if 
a consumer is directed by a company with which the consumer has a pre-
existing business relationship to contact the company's affiliate to 
receive a promotional item but the company does not mention the 
affiliate's products or services, the consumer's contact with the 
affiliate about the promotional item does not create a pre-existing 
business relationship between the consumer and the affiliate.

Solicitation

    Proposed Sec.  680.3(j) defined the term ``solicitation'' to mean 
marketing initiated by a person to a particular consumer that is based 
on eligibility information communicated to that person by its affiliate 
and is intended to encourage the consumer to purchase a product or 
service. The proposed definition further clarified that a 
communication, such as a telemarketing solicitation, direct mail, or e-
mail, would be a solicitation if it is directed to a specific consumer 
based on eligibility information. The proposed definition did not, 
however, include communications that were directed at the general 
public without regard to eligibility information, even if those 
communications were intended to encourage consumers to purchase 
products and services from the person initiating the communications.
    Congress gave the Commission the authority to determine by 
regulation that other communications do not constitute a solicitation. 
The Commission does not propose to exercise this authority. The 
Commission solicited comment on whether, and to what extent, various 
tools used in Internet marketing, such as pop-up ads, may constitute 
solicitations as opposed to communications directed at the general 
public, and whether further guidance was needed to address Internet 
marketing.
    Most commenters believed that the proposed definition tracked the 
statutory definition contained in section 624 of the FCRA. A number of 
industry commenters, however, believed that the proposed definition 
misstated the types of marketing that would not qualify as a 
solicitation. Specifically, the first sentence of proposed Sec.  
680.3(j)(2) provided that ``[a] solicitation does not include 
communications that are directed at the general public and distributed 
without the use of eligibility information communicated by an 
affiliate.'' These commenters believed that a solicitation should not 
include either marketing directed at the general public or marketing 
distributed without the use of eligibility information communicated by 
an affiliate. Several industry commenters also requested that the 
Commission include the phrase ``of a product or service'' in the 
introductory language for consistency with the statutory definition. 
Some industry commenters sought clarification that certain types of 
communications would not constitute solicitations, for example, 
marketing announcements delivered via pre-recorded call center 
messages, automated teller machine screens, or Internet sites, or 
product information provided at or through educational seminars, 
customer appreciation events, or newsletters.
    NAAG urged the Commission to clarify the portion of the definition 
that refers to ``a particular consumer.'' NAAG believed that mass 
mailings of the same or similar marketing materials to a large group of 
consumers could fall within the definition of ``solicitation,'' so long 
as the marketing is based on eligibility information received from an 
affiliate. NAAG expressed concern that some might construe the term 
``particular'' to narrow the meaning of a ``solicitation.''
    With regard to Internet marketing, industry commenters urged the 
Commission not to address such practices in this rulemaking. These

[[Page 61432]]

commenters believed that the definition of ``solicitation'' should 
provide specific guidance that ``pop-up'' ads and other forms of 
Internet marketing generally were directed to the general public and 
not based on eligibility information received from an affiliate, or 
that such marketing would fall within an exception. NAAG believed that 
such advertisements should be treated as solicitations if they were 
based on any eligibility information received from an affiliate. 
Consumer groups believed that if an affiliate's pop-up ads and other 
Internet marketing were the result of specific actions by the consumer 
or information collected based upon a consumer's experience on the 
Internet, then such marketing should be considered solicitations. These 
commenters also believed that pop-up ads and other Internet marketing 
targeted to all customers of a company should be treated as 
solicitations if based on the consumer's experience on the Internet.
    Section 680.3(k) of the final rule contains the definition of 
``solicitation.'' The definition has been revised to track the 
statutory language more closely. The phrase ``of a product or service'' 
has been added to the definition, as requested by some commenters. To 
ensure consistency with the definition of ``pre-existing business 
relationship,'' the phrase ``or obtain'' has been retained so that the 
definition of ``solicitation'' will include marketing for the rental or 
lease of goods or services, financial transactions, and financial 
contracts. The Commission has also deleted as unnecessary the reference 
to communications ``distributed without the use of eligibility 
information communicated by an affiliate.'' Marketing that is 
undertaken without the use of eligibility information received from an 
affiliate is not covered by the affiliate marketing rule. Moreover, 
there is no restriction on using eligibility information received from 
an affiliate in marketing directed at the general public, such as 
radio, television, or billboard advertisements. The phrase ``to a 
particular consumer'' has been retained because it is part of the 
statutory definition. The Commission does not believe that the phrase 
``to a particular consumer'' excludes large-scale marketing campaigns 
from the definition of ``solicitation'' because, within such campaigns, 
eligibility information received from an affiliate may be used to 
target individual consumers.
    The definition of ``solicitation'' does not distinguish between 
different mediums. A determination of whether a marketing communication 
constitutes a solicitation depends upon the facts and circumstances. 
The Commission has decided not to make those determinations in this 
rulemaking. Thus, the Commission is not adopting special rules or 
guidance regarding Internet-based marketing; whether Internet-based 
marketing is a solicitation in a particular case will be determined 
according to the same criteria that apply to other means of marketing. 
The Commission also declines to exclude categorically from the 
definition of ``solicitation'' marketing messages on voice response 
units, ATM screens, or other forms of media. Marketing delivered via 
such media may be solicitations if such marketing is targeted to a 
particular consumer based on eligibility information received from an 
affiliate. For example, a marketing message on an ATM screen would be a 
solicitation if it is targeted to a particular consumer based on 
eligibility information received from an affiliate, but would not be a 
solicitation if it is delivered to all consumers that use the ATM.
    Similarly, the Commission declines to exclude educational seminars, 
customer appreciation events, focus group invitations, and similar 
forms of communication from the definition of ``solicitation.'' The 
Commission believes that such activities must be evaluated according to 
the facts and circumstances and some of those activities may be coupled 
with, or a prelude to, a solicitation. For example, an invitation to a 
financial educational seminar where the invitees are selected based on 
eligibility information received from an affiliate may be a 
solicitation if the seminar is used to solicit the consumer to purchase 
investment products or services.

You

    The term ``you'' is defined as persons described in Sec.  680.1(a) 
and the definition has been renumbered as Sec.  680.3(l).

Section 680.21 Affiliate Marketing Opt-out and Exceptions

    The Commission proposed to establish certain rules relating to the 
requirement to provide the consumer with notice and a reasonable 
opportunity and a simple method to opt out of a person's use of 
eligibility information that it obtained from an affiliate for the 
purpose of making or sending solicitations to the consumer. The 
Commission noted that the statute is ambiguous because it does not 
specify which affiliate must provide the opt-out notice to the 
consumer. The Commission addressed this ambiguity by proposing to place 
certain responsibilities on the ``communicating affiliate'' and other 
responsibilities on the ``receiving affiliate.''
    Proposed Sec.  680.20(a) set forth the duties of a communicating 
affiliate. That section required the communicating affiliate to provide 
a notice to the consumer before a receiving affiliate could use 
eligibility information to make or send solicitations to the consumer. 
Under the proposal, the opt-out notice would state that eligibility 
information may be communicated to and used by the receiving affiliate 
to make or send solicitations to the consumer regarding the affiliate's 
products and services, and would give the consumer a reasonable 
opportunity and a simple method to opt out.
    Proposed Sec.  680.20(a) also contained two rules of construction 
relating to the communicating affiliate's duty to provide the notice. 
The first rule of construction would have allowed the notice to be 
provided either in the name of a person with which the consumer 
currently does or previously has done business or in one or more common 
corporate names shared by members of an affiliated group of companies 
that includes the common corporate name used by that person. The rule 
of construction also would have provided alternatives regarding the 
manner in which the notice could be given, such as by allowing the 
communicating affiliate to provide the notice either directly to the 
consumer, through an agent, or through a joint notice with one or more 
of its affiliates. The second rule of construction would have clarified 
that, to avoid duplicate notices, it would not be necessary for each 
affiliate that communicates the same eligibility information to provide 
an opt-out notice to the consumer, so long as the notice provided by 
the affiliate that initially communicated the information was broad 
enough to cover use of that information by each affiliate that received 
and used it to make solicitations. The proposal included examples to 
illustrate how each of these rules of construction would work.
    Proposed Sec.  680.20(b) set forth the general duties of a 
receiving affiliate. That section would have prohibited the receiving 
affiliate from using eligibility information it received from an 
affiliate to make solicitations to the consumer unless, prior to such 
use, the consumer was provided an opt-out notice that applied to that 
affiliate's use of eligibility information to make solicitations and a 
reasonable opportunity and simple method to opt out, and the consumer 
did not opt out of that use.

[[Page 61433]]

    Most industry commenters maintained that the final rule should not 
require any specific entity to provide the opt-out notice, but should 
only require that the consumer be provided an opt-out notice covering 
an affiliate's use of eligibility information before a solicitation is 
made to the consumer. These commenters believed the final rule should 
provide flexibility and allow either the receiving affiliate, the 
communicating affiliate, or any other affiliate to provide the opt-out 
notice. These commenters maintained that the statute is not ambiguous 
and does not impose any obligations on a specific entity, such as the 
communicating affiliate, to provide the opt-out notice. Some of these 
commenters acknowledged, however, that the communicating affiliate 
would, as a practical matter, most likely give the opt-out notice.
    A number of industry commenters expressed concern that the proposed 
rule would create a basis for civil liability against the communicating 
affiliate under section 624 because that section is covered by the 
FCRA's private right of action provisions in sections 616 and 617. Some 
commenters noted that, to avoid exposure to civil liability, a 
communicating affiliate would have to require receiving affiliates to 
commit to not using the information to make solicitations, give an opt-
out notice whenever they share eligibility information with affiliates, 
or never share eligibility information with affiliates. These 
commenters maintained that, in many cases, none of these solutions 
would be practical, for example, where a receiving affiliate 
negligently failed to comply with a commitment not to make 
solicitations unless notice has been given to the consumer.
    Several industry commenters noted that the language in section 
624(a)(1)(A) that ``information may be communicated'' could be included 
in an opt-out notice provided by the receiving affiliate. These 
commenters also believed that the statutory requirement that the 
Commission consider existing affiliate sharing notification practices 
and permit coordinated and consolidated notices did not imply that the 
communicating affiliate should be responsible for providing the opt-out 
notice.
    Industry commenters made several suggestions for revising the 
language of the proposal. Some suggested revising proposed Sec.  
680.20(a) to omit any reference to the communicating affiliate and to 
incorporate the passive voice used in the statute. Others suggested 
various ways of merging proposed Sec.  680.20(b) into proposed Sec.  
680.20(a) to focus exclusively on the responsibilities of the receiving 
affiliate. One commenter identified certain drafting problems it 
believed arose from the fact that the proposal focused alternately on 
the communicating affiliate and the receiving affiliate and that those 
two entities may be regulated by different regulatory agencies.
    A few industry commenters acknowledged that the Commission had 
raised legitimate concerns in the supplementary information to the 
proposal about how meaningful a notice could be when provided by a 
receiving affiliate that the consumer may not recognize. These 
commenters believed that this concern could be addressed through other 
means. One commenter, for example, suggested the following introductory 
language in paragraph (a)(2): ``The notice required by this paragraph 
(a) may be provided either in the name of the bank receiving the 
information (provided that such bank also identifies the affiliate 
which provided such information), in the name of the affiliate which 
provided such information, or in one or more common corporate names 
shared by such bank and the affiliate which provided the information, 
and may be provided in the following manner . . .'' Another industry 
commenter expressed support for the rules of construction with 
revisions to allow the use of brand names and trade names, as well as 
the actual ``corporate'' name, and to allow an agent or affiliate to 
send a common notice that uses more than one common name in a non-
deceptive manner.
    Consumer group commenters supported making the communicating 
affiliate responsible for providing the notice and opportunity to opt 
out. These commenters believed that allowing the receiving affiliate to 
send the opt-out notice would invite consumer confusion as to whether 
or not the opt-out notice itself is a solicitation. These commenters 
also believed that the Commission should require the names of the 
receiving affiliates to be clearly disclosed to the consumer. Consumer 
groups also believed that the proposed rules of construction struck a 
reasonable balance by allowing commonly named affiliates to share a 
notice while making clear that a notice from an affiliate with whom the 
consumer is not familiar will not be effective. They also suggested 
that the company with the pre-existing business relationship should be 
clearly marked on the opt-out notice.
    NAAG believed that a receiving affiliate should not be permitted to 
give the opt-out notice solely on its own behalf because a receiving 
affiliate is unlikely to be an entity from which the consumer would 
expect to receive important communications. NAAG also requested that 
the Commission revise certain portions of the proposed rules of 
construction, for example, by deleting from proposed Sec.  
680.20(a)(2)(i) the phrase ``or previously has done business'' based on 
concerns that it would render the notice partially ineffective because, 
even without this phrase, the notice would not be required for 18 
months after a customer relationship ends. NAAG also requested that the 
Commission revise proposed Sec. Sec.  680.20(a)(2)(B)(2) and (a)(2)(C) 
to clarify that the common name used must be one that includes the name 
used by the person providing the opt-out notice.
    In the proposal, the Commission did not require the opt-out notice 
to be provided in writing. The Commission noted, however, that it 
contemplated that the opt-out notice would be provided to the consumer 
in writing or, if the consumer agrees, electronically. The proposal 
solicited comment on whether there were circumstances in which it would 
be necessary and appropriate to allow oral notice and opt out and how 
an oral notice could satisfy the clear and conspicuous standard in the 
statute.
    Industry commenters believed that the final rule should permit oral 
notices. These commenters identified circumstances in which a 
relationship is established by telephone as an example of when oral 
notice would be appropriate. Some industry commenters also noted that 
an oral notice should be permitted because the affiliate sharing opt-
out notice under section 603(d)(2)(A)(iii) may be given orally, as well 
as in writing or electronically. Several industry commenters noted that 
the Commission in the Telemarketing Sales Rule and the OCC in 
regulations relating to debt cancellation contracts and debt suspension 
agreements have permitted clear and conspicuous oral notices. These 
commenters did not believe that allowing oral notice in these 
circumstances had created any enforcement difficulties for the 
Commission or OCC. Other industry commenters noted that institutions 
could demonstrate compliance through the use of scripts or by 
monitoring or recording calls.
    Consumer groups believed that a written opt-out notice should be 
required in all cases. These commenters believed that, with an oral 
notice, it is impossible to ensure that a consumer receives the 
appropriate notice or information on the right to opt out. They 
believed that allowing oral notices

[[Page 61434]]

would create enforcement barriers for regulators. Consumer groups also 
believed that institutions have strong economic incentives to prevent 
consumers from opting out and would engage in misrepresentations or 
otherwise use language in their scripts that is designed to discourage 
consumers from opting out. NAAG believed that oral notices would not 
meet the statutory requirement for a clear, conspicuous, and concise 
notice, that consumers would be less likely to comprehend oral notices, 
and enforcement would be more difficult if oral opt-out notices were 
allowed.
    Section 680.21(a) of the final rule contains the revised provisions 
regarding the initial notice and opt-out requirement. Although the 
language of this section has been revised and simplified, the substance 
of this provision is substantially similar to the proposal.
    Section 680.21(a)(1) sets forth the general rule. This section 
contains the three conditions that must be met before a person may use 
eligibility information about a consumer that it receives from an 
affiliate to make a solicitation for marketing purposes to the 
consumer. First, it must be clearly and conspicuously disclosed to the 
consumer in writing or, if the consumer agrees, electronically, in a 
concise notice that the person may use shared eligibility information 
to make solicitations to the consumer. Second, the consumer must be 
provided a reasonable opportunity and a reasonable and simple method to 
opt out of the use of that eligibility information to make 
solicitations to the consumer. Third, the consumer must not have opted 
out. Section 680.21(a)(2) of the final rule provides an example of the 
general rule.
    The Commission has concluded that the opt-out notice may not be 
provided orally, but must be provided in writing or, if the consumer 
agrees, electronically. The statute requires the Commission to consider 
the affiliate sharing notification practices employed on the date of 
enactment and to ensure that notices and disclosures may be coordinated 
and consolidated in promulgating regulations. The affiliate sharing 
notice under section 603(d)(2)(A)(iii) of the FCRA generally must be 
included in the GLBA privacy notice, which must be provided in writing, 
or if the consumer agrees, electronically. Requiring the affiliate 
marketing opt-out notice to be provided in writing, or if the consumer 
agrees, electronically, is thus consistent with existing affiliate 
sharing notification practices and promotes coordination and 
consolidation of the three privacy-related opt-out notices. The 
Commission is not persuaded that there are any circumstances where it 
would be necessary to provide an oral opt-out notice. A number of key 
exceptions to the initial notice and opt-out requirement, such as the 
pre-existing business relationship exception, consumer-initiated 
communication exception, and consumer authorization or request 
exception, may be triggered by an oral communication with the consumer. 
It also could be more difficult for the Commission to monitor and 
enforce compliance with the final rule if oral opt-out notices were 
allowed. Accordingly, the final rule requires the opt-out notice to be 
provided in writing or, if the consumer agrees, electronically.
    Section 680.21(a)(3) identifies those affiliates who may provide 
the initial opt-out notice. This section provides that the initial opt-
out notice must be provided either by an affiliate that has or has 
previously had a pre-existing business relationship with the consumer, 
or as part of a joint notice from two or more members of an affiliated 
group of companies, provided that at least one of the affiliates on the 
joint notice has or has previously had a pre-existing business 
relationship with the consumer. The final rule follows the general 
approach taken in the proposal to ensure that the notice is provided by 
an entity known to the consumer, while eliminating potentially 
ambiguous and confusing terms like ``communicating affiliate'' and 
``receiving affiliate.''
    The Commission also has eliminated as unnecessary the rules of 
construction. Joint notices are now addressed directly in Sec.  
680.21(a)(3). The Commission also has concluded that the provisions 
from the proposal relating to notice provided by an agent are 
unnecessary. General agency principles, however, continue to apply. An 
affiliate that has or has previously had a pre-existing business 
relationship with the consumer may direct its agent to provide the opt-
out notice on its behalf.
    The Commission has concluded that the statute's silence with regard 
to which affiliates may provide the opt-out notice makes the statute 
ambiguous on this point, despite industry comments to the contrary. The 
Commission also continues to believe that consumers are more likely to 
pay attention to a notice provided by a person known to the consumer. 
The Commission remains concerned that a notice provided by an entity 
unknown to the consumer may not provide meaningful or effective notice, 
and that consumers may ignore or discard notices provided by unknown 
entities. Industry comments on the proposal did little to address those 
concerns. For practical reasons, the Commission believes that affiliate 
marketing opt-out notices typically would be provided by an affiliate 
that has or has previously had a pre-existing business relationship 
with the consumer, or as part of a joint notice, whether or not 
required by the rule.
    The Commission appreciates industry concerns about civil liability 
and has revised the final rule to address those concerns. Specifically, 
in contrast to the proposal, the final rule does not impose duties on 
any affiliate other than the affiliate that intends to use shared 
eligibility information to make solicitations to the consumer. Although 
an opt-out notice must be provided by an affiliate that has or has 
previously had a pre-existing business relationship with the consumer 
(or as part of a joint notice), that affiliate has no duty to provide 
such a notice. Instead, the final rule provides that absent such a 
notice, an affiliate must not use shared eligibility information to 
make solicitations to the consumer. Industry concerns about civil 
liability also may be mitigated to some extent by the Supreme Court's 
recent decision in Safeco Ins. Co. of America v. Burr, 127 S. Ct. 2201 
(June 4, 2007).
    Finally, many institutions currently require consumers to provide 
their Social Security numbers when exercising their existing GLBA and 
FCRA opt-out rights. The Commission believes that institutions likely 
would follow their existing practice with regard to affiliate marketing 
opt-outs. To combat identity theft and prevent ``phishing,'' however, 
the Commission, along with many institutions, has been educating 
consumers not to provide their Social Security numbers to unknown 
entities. Furthermore, as co-Chair of the President's Identity Theft 
Task Force, the Commission has made a commitment to examine and 
recommend ways to limit the private sector's use of Social Security 
numbers.
    The approach recommended by industry commenters would allow an 
unknown entity not only to provide an affiliate marketing opt-out 
notice to the consumer, but also to require the consumer to reveal his 
or her Social Security number to that unknown entity in order to 
exercise the opt-out right. Such an approach would send conflicting 
messages to consumers about providing Social Security numbers to 
unknown entities. This approach also would be inconsistent with the 
Commission's current efforts to develop a comprehensive record on the 
uses of the Social Security number in the private sector and evaluate 
their

[[Page 61435]]

necessity, as recommended by the President's Identity Theft Task 
Force.\11\
---------------------------------------------------------------------------

    \11\See Combatting Identity Theft: A Strategic Plan, at 26-27 
(April 2007) (available at www.idtheft.gov).
---------------------------------------------------------------------------

Making Solicitations

    The proposal repeatedly referred to ``making or sending'' 
solicitations. Several commenters suggested revising the regulation to 
eliminate all references to ``sending'' solicitations. These commenters 
believed that the statute only concerns the use of eligibility 
information to ``make'' solicitations and does not address ``sending'' 
solicitations. Commenters expressed concern that by referring to 
``sending'' solicitations, the proposal would apply the notice and opt-
out requirements to servicers that send solicitations on behalf of 
another entity.
    The Commission has revised the final rule to eliminate all combined 
references to ``making or sending'' solicitations. The general rule in 
section 624(a)(1), along with the duration provisions in section 
624(a)(3) and the pre-existing business relationship exception in 
section 624(a)(4)(A), refer to ``making'' or ``to make'' a 
solicitation. Other provisions of the statute, such as the consumer 
choice provision in section 624(a)(2)(A), the service provider 
exception in section 624(a)(4)(C), the non-retroactivity provision in 
section 624(a)(5), and the definition of ``pre-existing business 
relationship'' in section 624(d)(1), refer to ``sending'' or ``to 
send'' a solicitation. The verb ``to send,'' as used in the statute, 
refers to a ministerial act that a service provider, such as a mail 
house, performs for the person making the solicitation, (see 15 U.S.C. 
1681s-3(a)(4)(C)), or indicates the point in time after which 
solicitations are no longer permitted. See 15 U.S.C. 1681s-3(d)(1)(B) 
and (C).
    The Commission concludes that ``making'' and ``sending'' 
solicitations are different activities and that the focus of the 
statute is primarily on the ``making'' of solicitations. For example, a 
service provider may send a solicitation on behalf of another entity, 
but it is the entity on whose behalf the solicitation is sent that is 
making the solicitation and thus is subject to the general prohibition 
on making a solicitation, unless the consumer is given notice and an 
opportunity to opt out. Accordingly, the Commission has revised the 
final rule to refer to ``making'' a solicitation, except where the 
statute specifically refers to ``sending'' solicitations.
    The statute, however, does not describe what a person must do in 
order ``to make'' a solicitation. Similarly, the legislative history 
does not contain guidance as to the meaning of ``making'' a 
solicitation. Nevertheless, the Commission believes it is important to 
provide clear guidance regarding what activities result in making a 
solicitation.
    One commenter suggested that the test for making a solicitation 
should turn on whether an affiliate having a pre-existing business 
relationship with the consumer retains the discretion to determine 
whether or not to send the solicitation. This commenter provided an 
example where a financial institution obtains a list of an affiliate's 
customers from a common shared database, applies its own criteria to 
this list, and then requests the affiliate with an existing business 
relationship to solicit the affiliate's own customers to purchase the 
financial institution's products or services. (Thus, the financial 
institution would be using eligibility information to select a list of 
its affiliate's customers to receive the financial institution's 
marketing materials.) This commenter believed that section 624 should 
not apply so long as the affiliate with the existing business 
relationship has discretion to determine whether or not to send the 
solicitations. This commenter also maintained that the applicability of 
section 624's notice and opt-out requirement should depend on who 
markets the product and not on what the product is or whose product it 
is.
    Nothing in the statute indicates that the discretion of the 
affiliate providing the eligibility information to determine whether or 
not to send a solicitation on behalf of a person who has received 
eligibility information from that affiliate is the test for what 
constitutes making a solicitation. Rather, the statute focuses on 
whether the person receiving eligibility information from an affiliate 
uses that information to market its products or services to consumers. 
A ``discretion to send'' test would also inappropriately link the terms 
``making'' and ``sending'' in a manner that would promote confusion and 
undercut arguments made by commenters urging the Commission to 
disassociate the two terms. Finally, a ``discretion to send'' test 
could foster circumvention of the notice and opt-out requirement, 
restrict the ability of consumers to prohibit solicitations in a manner 
not contemplated by the statute, and make it difficult for the 
Commission to administer and enforce the statute.
    Section 680.21(b) of the final rule clarifies what constitutes 
``making'' a solicitation for purposes of this part. Section 
680.21(b)(1) provides that a person makes a solicitation for marketing 
purposes to a consumer if: (a) the person receives eligibility 
information from an affiliate; (b) the person uses that eligibility 
information to do one of the following--identify the consumer or type 
of consumer to receive a solicitation, establish the criteria used to 
select the consumer to receive a solicitation, or decide which of its 
products or services to market to the consumer or tailor its 
solicitation to that consumer; and (c) as a result of the person's use 
of the eligibility information, the consumer is provided a solicitation 
about the person's products or services.
    The Commission recognizes that several common industry practices 
may complicate application of the rule outlined in Sec.  680.21(b)(1). 
First, affiliated groups often use a common database as the repository 
for eligibility information obtained by various affiliates, and 
information in that database may be accessible to multiple affiliates. 
Second, affiliated companies often use service providers to perform 
marketing activities, and some of those service providers may provide 
services for a number of different affiliates. Third, an affiliate may 
use its own eligibility information to market the products or services 
of another affiliate. Sections 680.21(b)(2)-(5) address these issues.
    Section 680.21(b)(2) clarifies that a person may receive 
eligibility information from an affiliate in various ways, including 
when the affiliate places that information into a common database that 
the person may access. Of course, receipt of eligibility information 
from an affiliate is only one element of the rule outlined in Sec.  
680.21(b)(1). In the case of a common database, use of the eligibility 
information will be the key element in determining whether a person has 
made a solicitation.
    Section 680.21(b)(3) provides that a person receives or uses an 
affiliate's eligibility information if a service provider acting on 
behalf of the person receives or uses that information in the manner 
described in Sec. Sec.  680.21(b)(1)(i) or (b)(1)(ii), except as 
provided in Sec.  680.21(b)(5), which is discussed below. Section 
680.21(b)(3) also provides that all relevant facts and circumstances 
will determine whether a service provider is acting on behalf of a 
person when it receives or uses an affiliate's eligibility information 
in connection with marketing that person's products or services.
    Section 680.21(b)(4) addresses constructive sharing. In the 
supplementary information to the proposal, the Commission solicited 
comment on whether the notice and

[[Page 61436]]

opt-out requirements of this rule should apply to circumstances that 
involve a ``constructive sharing'' of eligibility information to 
conduct marketing, given the policy objectives of section 214 of the 
FACT Act. By way of example, in a ``constructive sharing'' scenario, a 
consumer has a relationship with a financial institution, and the 
financial institution is affiliated with an insurance company. The 
insurance company develops specific eligibility criteria, such as 
consumers having combined deposit balances in excess of $50,000 or 
average monthly demand account deposits in excess of $10,000, without 
the use of eligibility information received from the financial 
institution. The insurance company provides its criteria to the 
financial institution and asks the institution to identify financial 
institution consumers that meet the eligibility criteria and send 
insurance company marketing materials to those consumers. The financial 
institution sends the marketing materials to those consumers who meet 
the insurance company's eligibility criteria. A consumer who meets the 
eligibility criteria contacts the insurance company after receiving the 
insurance company marketing materials in the manner specified in those 
materials. The consumer's response provides the insurance company with 
discernible eligibility information, such as through a response form 
that is coded to identify the consumer as an individual who meets the 
specific eligibility criteria.\12\
---------------------------------------------------------------------------

    \12\ The supplementary information to the proposal noted that 
the notice and opt-out requirement would not apply if, for example, 
an insurance company asked its affiliated financial institution to 
include insurance company marketing material in periodic statements 
sent to consumers by the financial institution without regard to 
eligibility information.
---------------------------------------------------------------------------

    Industry commenters urged the Commission not to apply the notice 
and opt-out requirement to ``constructive sharing'' situations. The 
principal arguments made by these commenters in support of their 
position were as follows. First, in a constructive sharing scenario, 
there is no sharing of eligibility information among affiliates. 
Rather, the consumer provides information to an affiliate when 
responding. Second, section 624 applies when a person uses eligibility 
information furnished by its affiliate to make a solicitation for its 
own products or services to the consumer. In constructive sharing, 
however, the person does not use eligibility information and does not 
make a solicitation as defined in the statute. Third, the affiliate 
that sends the marketing material has a pre-existing business 
relationship with the consumer and is thus exempt from the notice and 
opt-out requirements. Fourth, if the consumer responds to the marketing 
materials, for example, by returning a response card to an affiliate, 
one or more of the exceptions to the notice and opt-out requirement 
would apply, such as the consumer-initiated communication exception, 
the pre-existing business relationship exception, or both.
    Consumer groups believed that constructive sharing contravenes the 
intent of Congress and amounts to a loophole that should be fixed. 
Similarly, NAAG believed that the letter and spirit of section 624 
required subjecting constructive sharing to the notice and opt-out 
requirements and that to find otherwise would create a significant and 
unwarranted exception.
    After considering the constructive sharing issue, the Commission 
concludes that the statute only covers situations where a person uses 
eligibility information that it received from an affiliate to make a 
solicitation to the consumer about its products or services. In a 
``constructive sharing'' scenario like that described above, a pre-
existing business relationship is established between the consumer and 
the insurance company when the consumer contacts the insurance company 
to inquire about or apply for insurance products as a result of the 
consumer's receipt of the insurance marketing materials. This pre-
existing business relationship is established before the insurance 
company uses any shared eligibility information to make solicitations 
to the consumer. Because the insurance company does not use shared 
eligibility information to make solicitations to the consumer before it 
establishes a pre-existing business relationship with the consumer, the 
statute does not apply.
    The Commission acknowledges the concerns expressed by consumer 
groups and NAAG regarding the decision not to apply the notice and opt-
out requirements to constructive sharing situations. The statute's 
affiliate marketing provisions, however, only limit the use of 
eligibility information received from an affiliate to make 
solicitations to a consumer. A separate provision of the FCRA, section 
603(d)(2)(A)(iii), regulates the sharing of eligibility information 
among affiliates and prohibits the sharing of non-transaction or 
experience information, such as credit scores from a consumer report or 
income from an application, among affiliates, unless the consumer is 
given notice and an opportunity to opt out of such sharing. The FCRA 
does not restrict the sharing of transaction or experience information 
among affiliates unless that information is medical information. 
Section 603(d)(2)(A)(iii) operates independent of the affiliate 
marketing rule. Thus, the existence of a pre-existing business 
relationship between a consumer and an affiliate that seeks to use 
shared eligibility information, such as credit scores or income, to 
market to that consumer (or the applicability of another exception to 
this affiliate marketing rule) does not relieve the entity sharing the 
credit score or income information of the requirement to comply with 
the affiliate sharing notice and opt-out provisions of section 
603(d)(2)(A)(iii) of the FCRA before it shares that non-transaction or 
experience information with its affiliate.\13\
---------------------------------------------------------------------------

    \13\ A sharing of information occurs if a reference code 
included in marketing materials reveals one affiliate's information 
about a consumer to another affiliate upon receipt of a consumer's 
response.
---------------------------------------------------------------------------

    Section 680.21(b)(4) describes two situations where a person is 
deemed not to have made a solicitation subject to this part. Both 
situations assume that the person has not used eligibility information 
received from an affiliate in the manner described in Sec.  
680.21(b)(1)(ii). First, a person does not make a solicitation subject 
to this part if that person's affiliate uses its own eligibility 
information that it obtained in connection with a pre-existing business 
relationship it has or had with the consumer to market the person's 
products or services to the consumer. Second, if, in the situation just 
described, the person's affiliate directs its service provider to use 
the affiliate's own eligibility information to market the person's 
products or services to the consumer, and the person does not 
communicate directly with the service provider regarding that use of 
the eligibility information, then the person has not made a 
solicitation subject to this part.
    The core concept underlying the second prong of this provision is 
that the affiliate that obtained the eligibility information in 
connection with a pre-existing business relationship with the consumer 
controls the actions of the service provider using that information. 
Therefore, the service provider's use of the eligibility information 
should not be attributed to the person whose products or services will 
be marketed to consumers. In such circumstances, the service provider 
is acting on behalf of the affiliate that obtained the eligibility 
information in connection with a pre-existing business relationship 
with the consumer, and not on behalf of the

[[Page 61437]]

person whose products or services will be marketed to that affiliate's 
consumers.
    The Commission also recognizes that there may be situations where 
the person whose products or services are being marketed does 
communicate with the affiliate's service provider. This may be the 
case, for example, where the service provider performs services for 
various affiliates relying on information maintained in and accessed 
from a common database. In certain circumstances, the person whose 
products or services are being marketed may communicate with the 
affiliate's service provider, yet the service provider is still acting 
on behalf of the affiliate when it uses the affiliate's eligibility 
information in connection with marketing the person's products or 
services. Section 680.21(b)(5) describes the conditions under which a 
service provider would be deemed to be acting on behalf of the 
affiliate with the pre-existing business relationship, rather than the 
person whose products or services are being marketed, notwithstanding 
direct communications between the person and the service provider.
    Section 680.21(b)(5) builds upon the concept of control of a 
service provider and thus is a natural outgrowth of Sec.  680.21(b)(4). 
Under the conditions set out in Sec.  680.21(b)(5), the service 
provider is acting on behalf of an affiliate that obtained the 
eligibility information in connection with a pre-existing business 
relationship with the consumer because, among other things, the 
affiliate controls the actions of the service provider in connection 
with the service provider's receipt and use of the eligibility 
information. This provision is designed to minimize uncertainty that 
may arise from application of the facts and circumstances test in Sec.  
680.21(b)(3) to cases that involve direct communications between a 
service provider and a person whose products and services will be 
marketed to consumers.
    Section 680.21(b)(5) provides that a person does not make a 
solicitation subject to this part if a service provider (including an 
affiliated or third-party service provider that maintains or accesses a 
common database that the person may access) receives eligibility 
information from the person's affiliate that the person's affiliate 
obtained in connection with a pre-existing business relationship it has 
or had with the consumer and uses that eligibility information to 
market the person's products or services to the consumer, so long as 
the following five conditions are met.
    First, the person's affiliate controls access to and use of its 
eligibility information by the service provider (including the right to 
establish specific terms and conditions under which the service 
provider may use such information to market the person's products or 
services). This requirement must be set forth in a written agreement 
between the person's affiliate and the service provider. The person's 
affiliate may demonstrate control by, for example, establishing and 
implementing reasonable policies and procedures applicable to the 
service provider's access to and use of its eligibility information.
    Second, the person's affiliate establishes specific terms and 
conditions under which the service provider may access and use that 
eligibility information to market the person's products or services (or 
those of affiliates generally) to the consumer, and periodically 
evaluates the service provider's compliance with those terms and 
conditions. These terms and conditions may include the identity of the 
affiliated companies whose products or services may be marketed to the 
consumer by the service provider, the types of products or services of 
affiliated companies that may be marketed, and the number of times the 
consumer may receive marketing materials. The specific terms and 
conditions established by the person's affiliate must be set forth in 
writing, but need not be set forth in a written agreement between the 
person's affiliate and the service provider. If a periodic evaluation 
by the person's affiliate reveals that the service provider is not 
complying with those terms and conditions, the Commission expects the 
person's affiliate to take appropriate corrective action.
    Third, the person's affiliate requires the service provider to 
implement reasonable policies and procedures designed to ensure that 
the service provider uses the affiliate's eligibility information in 
accordance with the terms and conditions established by the affiliate 
relating to the marketing of the person's products or services. This 
requirement must be set forth in a written agreement between the 
person's affiliate and the service provider.
    Fourth, the person's affiliate is identified on or with the 
marketing materials provided to the consumer. This requirement will be 
construed flexibly. For example, the person's affiliate may be 
identified directly on the marketing materials, on an introductory 
cover letter, on other documents included with the marketing materials, 
such as a periodic statement, or on the envelope which contains the 
marketing materials.
    Fifth, the person does not directly use the affiliate's eligibility 
information in the manner described in Sec.  680.21(b)(1)(ii).
    These five conditions together ensure that the service provider is 
acting on behalf of the affiliate that obtained the eligibility 
information in connection with a pre-existing business relationship 
with the consumer because that affiliate controls the service 
provider's receipt and use of that affiliate's eligibility information.
    Section 680.21(b)(6) provides six illustrative examples of the rule 
relating to making solicitations as set forth in Sec. Sec.  
680.21(b)(1)-(5).

Exceptions

    Proposed Sec.  680.20(c) contained exceptions to the requirements 
of this part and incorporated each of the statutory exceptions to the 
affiliate marketing notice and opt-out requirements that are set forth 
in section 624(a)(4) of the FCRA. The Commission has revised the 
preface to the exceptions for clarity to provide that the provisions of 
this part do not apply to ``you'' if a person uses eligibility 
information that it receives from an affiliate in certain 
circumstances. In addition, each of the exceptions has been moved to 
Sec.  680.21(c) in the final rule and is discussed below.

Pre-existing Business Relationship Exception

    Proposed Sec.  680.20(c)(1) provided that the provisions of this 
part would not apply to an affiliate using eligibility information to 
make a solicitation to a consumer with whom the affiliate has a pre-
existing business relationship. As noted above, a pre-existing business 
relationship exists when: (1) there is a financial contract in force 
between the affiliate and the consumer; (2) the consumer and the 
affiliate have engaged in a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) during the 18 months immediately preceding the date of 
the solicitation; (3) the consumer has purchased, rented, or leased the 
affiliate's goods or services during the 18 months immediately 
preceding the date of the solicitation; or (4) the consumer has 
inquired about or applied for a product or service offered by the 
affiliate during the 3-month period immediately preceding the date of 
the solicitation. Proposed Sec.  680.20(d)(1) provided examples of the 
pre-existing business relationship exception. As explained above, the 
Commission has

[[Page 61438]]

revised the examples from proposed Sec.  680.20(d)(1) in the final rule 
and included them as examples of the definition of ``pre-existing 
business relationship'' rather than as examples of the pre-existing 
business relationship exception.
    Section 680.21(c)(1) of the final rule revises the pre-existing 
business relationship exception to delete the word ``send'' and to 
eliminate as unnecessary the cross-reference to the location of the 
definition of ``pre-existing business relationship.'' As discussed 
above, commenters made a number of suggestions regarding the definition 
of ``pre-existing business relationship.'' The Commission has addressed 
those comments elsewhere. Most commenters supported the proposed text 
of the pre-existing business relationship exception, which generally 
tracks the statutory language.
    Some commenters, however, apparently believed that the pre-existing 
business relationship exception is broader than it actually is. For 
example, assume that an insurance company has a pre-existing business 
relationship with a consumer and shares eligibility information about 
the consumer with its affiliates by putting that information into a 
common database that is accessible by all affiliates. The insurance 
company's lending affiliate accesses the database, reviews the data on 
the insurance company's consumers and, based on its review, decides to 
market to some of the insurance company's consumers. Rather than 
sending the solicitations itself, the lender asks the insurance company 
with the pre-existing business relationship to send solicitations on 
its behalf to the insurance company's consumers. As noted above, one 
commenter believed that in this circumstance the pre-existing business 
relationship exception would apply so long as the insurance company 
retained the discretion to decide whether or not to send the 
solicitations on behalf of the lender. However, the Commission 
concludes that this situation does not fall within the pre-existing 
business relationship exception. Instead, the lender makes the 
solicitation because it used eligibility information received from an 
affiliate to select the consumer to receive a solicitation about its 
products or services and, as a result, the consumer is provided a 
solicitation. To eliminate any confusion and clarify the scope of the 
exception, the Commission has added an example in Sec.  680.21(d)(1) of 
the final rule to illustrate a situation where the pre-existing 
business relationship exception would apply.

Employee Benefit Plan Exception

    Proposed Sec. 680.20(c)(2) provided that the provisions of this 
part would not apply to an affiliate using the information to 
facilitate communications to an individual for whose benefit the 
affiliate provides employee benefit or other services under a contract 
with an employer related to and arising out of a current employment 
relationship or an individual's status as a participant or beneficiary 
of an employee benefit plan. One commenter believed that the exception 
should be revised to permit communications ``to an affiliate about an 
individual for whose benefit an entity provides employee benefit or 
other services pursuant to a contract with an employer related to and 
arising out of the current employment relationship or status of the 
individual as a participant or beneficiary of an employee benefit 
plan.'' This commenter also suggested deleting the phrase ``you receive 
from an affiliate'' in the introduction to proposed Sec.  680.20(c). 
This commenter believed that this exception should permit an employer 
or plan sponsor to share information with its affiliates in order to 
offer other financial services, such as brokerage accounts or IRAs, to 
its employees. This commenter further requested clarification on 
whether the exception applies only if related to products offered as an 
employee benefit.
    Section 680.21(c)(2) of the final rule adopts the employee benefit 
exception as proposed. The Commission declined to adopt the changes 
suggested by the one commenter. First, the suggestion to make the 
exception applicable to communications ``to an affiliate about an 
individual for whose benefit an entity provides employee benefit or 
other services'' differs from the language of the statute. The language 
of the proposed and final rule focuses on facilitating communications 
``to an individual for whose benefit the person provides employee 
benefit or other services,'' which tracks the statutory language better 
than the alternative language proposed by the commenter.
    Second, the only person to whom section 624 might apply is a person 
that receives eligibility information from an affiliate. Specifically, 
the statutory preface to the exceptions provides that ``[t]his section 
shall not apply to a person'' using information to do certain things. 
The language of the statute thus makes clear that the exceptions in 
section 624(a)(4) of the FCRA were meant to apply to persons that 
otherwise would be subject to section 624. In the case of the employee 
benefit exception, the person using the information is also ``the 
person provid[ing] employee benefit or other services pursuant to a 
contract with an employer.'' Therefore, the Commission concludes that 
this exception, like the other provisions of this part, should apply 
only to a person that uses eligibility information it receives from an 
affiliate to make solicitations to consumers about its products or 
services.

Service Provider Exception

    Proposed Sec.  680.20(c)(3) provided that the provisions of this 
part would not apply to an affiliate using the information to perform 
services for another affiliate, unless the services involve making or 
sending solicitations on its own behalf or on behalf of an affiliate 
and the service provider or such affiliate is not permitted to make or 
send such solicitations as a result of the consumer's election to opt 
out. Thus, under the proposal, when the notice has been provided to a 
consumer and the consumer has opted out, an affiliate subject to the 
consumer's opt-out election may not circumvent the opt-out by 
instructing the person with the consumer relationship or another 
affiliate to send solicitations to the consumer on its behalf.
    Several industry commenters urged the Commission to revise the 
proposed exception to conform to the statutory language. Specifically, 
with respect to the exclusion from the service provider exception, 
these commenters recommended that the Commission delete the references 
to solicitations on behalf of the service provider. Some of these 
commenters maintained that the references to solicitations on behalf of 
the service provider itself would impose additional burdens and costs 
on companies that use a single affiliate to provide various 
administrative services to other affiliates and would make it more 
difficult to provide general educational materials to consumers. Some 
of these commenters also asked the Commission to clarify that the 
limitation in the service provider exception has no applicability to 
any other exception.
    Section 680.21(c)(3) of the final rule revises the service provider 
exception to delete as surplusage the references to solicitations by a 
service provider on its own behalf. The Commission notes that the 
general rule in Sec.  680.21(a)(1) prohibits a service provider from 
using eligibility information it received from an affiliate to make 
solicitations to the consumer about its own products or services unless 
the consumer is given notice and an opportunity to opt out or

[[Page 61439]]

unless one of the other exceptions applies. The service provider 
exception simply allows a service provider to do what the affiliate on 
whose behalf it is acting may do, such as using shared eligibility 
information to make solicitations to consumers to whom the affiliate is 
permitted to make such solicitations. The final rule also deletes the 
word ``make'' from the exception to the service provider exception 
because, as discussed above, ``making'' and ``sending'' solicitations 
are distinct activities and this provision of the statute uses the verb 
``to send.'' The Commission notes that, although the statute contains 
separate service provider and pre-existing business relationship 
exceptions, nothing in those exceptions prevents an affiliate that has 
a pre-existing business relationship with the consumer from relying 
upon the service provider exception, where appropriate. Section 
680.21(d)(2) of the final rule provides examples of the service 
provider exception.

Consumer-Initiated Communication Exception

    Proposed Sec.  680.20(c)(4) provided that the provisions of this 
part would not apply to an affiliate using the information to make 
solicitations in response to a communication initiated by the consumer. 
The proposed rule further clarified that this exception may be 
triggered by an oral, electronic, or written communication initiated by 
the consumer.
    The supplementary information noted that to be covered by the 
proposed exception, the use of eligibility information must be 
responsive to the communication initiated by the consumer. The 
supplementary information also explained that the time period during 
which solicitations remain responsive to the consumer's communication 
would depend on the facts and circumstances. As illustrated in the 
example in proposed Sec.  680.20(d)(2)(iii), if a consumer were to call 
an affiliate to ask about retail locations and hours, the affiliate 
could not use eligibility information to make solicitations to the 
consumer about specific products because those solicitations would not 
be responsive to the consumer's communication. Conversely, the example 
in proposed Sec.  680.20(d)(2)(i) illustrated that if the consumer 
calls an affiliate to ask about its products or services and provides 
contact information, solicitations related to those products or 
services would be responsive to the communication and thus permitted 
under the exception. Finally, as illustrated by the example in proposed 
Sec.  680.20(d)(2)(ii), the Commission also contemplated that a 
consumer would not initiate a communication if an affiliate made the 
initial call and left a message for the consumer to call back, and the 
consumer responded.
    Commenters generally supported the text of the proposed consumer-
initiated communication exception. Several commenters, however, urged 
the Commission to either delete the phrase ``orally, electronically, or 
in writing'' from the regulation or modify the language to read 
``whether orally, electronically, or in writing.'' These commenters 
maintained that other means of communication may be used by consumers 
in the future and should not be precluded by the regulations. Another 
commenter welcomed the reference to oral communications and requested 
that the Commission clarify that electronic communications refers to 
both e-mail and facsimile transmissions.
    Many industry commenters objected to the statement in the 
supplementary information that to qualify for this exception, the use 
of eligibility information ``must be responsive'' to the communication 
initiated by the consumer. These commenters believed that the concept 
of ``responsiveness'' creates a vague, subjective, and narrow standard 
that could subject institutions to compliance risk. These commenters 
noted that the Commission did not and could not provide a clear 
definition of what would be ``responsive.'' Some of these commenters 
noted that consumers may not be familiar with the various types of 
products or services available to them and the different affiliates 
that offer those products or services and may rely on the institution 
to inform them about available options. For this reason, most of these 
commenters maintained that the exception should not limit an affiliate 
from responding with solicitations about any product or service. Some 
of these commenters believed that it would be difficult to monitor 
compliance with or to develop scripts for a ``responsiveness'' standard 
by customer service representatives. One commenter noted that the 
Senate bill used more restrictive language in this exception than the 
final bill passed by Congress. Some commenters also objected to the 
statement that the time period during which solicitations remain 
responsive would depend on the facts and circumstances.
    NAAG supported the statement in the supplementary information that, 
to qualify for this exception, the use of eligibility information 
``must be responsive'' to the communication initiated by the consumer. 
NAAG believed this clarification was so important that it should be 
incorporated into the rule itself. NAAG also suggested imposing a 
specific time limit to allow solicitations to be made for no more than 
30 days after the consumer-initiated communication under this 
exception.
    Industry commenters also objected to some of the examples. In 
particular, industry commenters objected to the example in proposed 
Sec.  680.20(d)(2)(i) on two grounds. First, these commenters believed 
that the consumer should not have to supply contact information in 
order to trigger the exception. These commenters noted that such a 
requirement would seem to preclude solicitations over the phone during 
the same call by presuming that a solicitation would be made by mail or 
e-mail. Some of these commenters also believed that consumers would 
expect an affiliated company, especially a company with a common brand, 
to have their contact information already and would not want to provide 
it again. Second, as noted above, some commenters maintained that the 
affiliate should be able to respond by making solicitations about any 
product or service, not just those mentioned by the consumer.
    Many industry commenters objected to the example in proposed Sec.  
680.20(d)(2)(ii) about the consumer responding to a call back message. 
These commenters believed that such a call back should qualify as a 
consumer-initiated communication, noting that the consumer has the 
option of not returning the call. Moreover, these commenters noted that 
the customer service representative receiving the call would not know 
what prompted the consumer's call. Several commenters acknowledged that 
there may be concerns about calls made under false pretenses to prompt 
consumers to return the call, but suggested that those concerns should 
be addressed by other means, such as enforcement of the laws dealing 
with unfair or deceptive acts or practices.
    Finally, some industry commenters expressed concerns about the 
example in proposed Sec.  680.20(d)(2)(iii) regarding the consumer who 
calls to ask for retail locations and hours. These commenters noted 
that it is impossible to know what will transpire on a particular 
telephone call. One commenter noted, for example, that if a consumer 
called to ask for directions to an office, the customer service 
representative might ask why the consumer needed to go to that office. 
This, in turn, could prompt the consumer to mention a product or 
service that the consumer hoped to

[[Page 61440]]

obtain and lead to a discussion of specific products or services that 
might be appropriate for the consumer.
    Section 680.21(c)(4) of the final rule revises the consumer-
initiated communications exception to delete the reference to oral, 
electronic, or written communications. The Commission believes that any 
form of communication may come within the exception as long as the 
consumer initiates the communication, whether in-person or by mail, e-
mail, telephone, facsimile, or through other means. New forms of 
communication that may develop in the future could also come within the 
exception.
    Section 680.21(c)(4) of the final rule also provides that the 
communications covered by the exception are consumer-initiated 
communications about a person's products or services. For the exception 
to apply, the statute requires that a person use eligibility 
information ``in response to'' a communication initiated by a consumer. 
The Commission believes this statutory language contemplates that the 
consumer-initiated communications will relate to a person's products or 
services and that the solicitations covered by the exception will be 
those made in response to that communication.
    The Commission also believes the exceptions should be construed 
narrowly to avoid undermining the general rule requiring notice and 
opt-out. Thus, consistent with the purposes of the statute, the 
Commission does not believe that a consumer-initiated communication 
that is unrelated to a product or service should trigger the exception. 
A rule that allowed any consumer-initiated communication, no matter how 
unrelated to a product or service, to trigger the exception would not 
to give meaning to the phrase ``in response to'' and could produce 
incongruous results. For example, if a consumer calls an affiliate 
solely to obtain retail hours and directions or solely to opt out, the 
exception is not triggered because the communication does not relate to 
the affiliate's products or services and making a solicitation about 
products or services to the consumer in those circumstances would not 
be a reasonable response to that communication.
    The Commission recognizes, however, that if the conversation shifts 
to a discussion of products or services that the consumer may need, 
solicitations may be responsive depending upon the facts and 
circumstances. Likewise, if a consumer who has opted out of an 
affiliate's use of eligibility information to make solicitations calls 
the affiliate for information about a particular product or service, 
for example, life insurance, solicitations regarding life insurance 
could be made in response to that call, but solicitations regarding 
other products or services would not be responsive. Finally, the 
Commission does not believe it is appropriate to adopt a specific time 
limit for making solicitations following a consumer-initiated 
communication about products or services because solicitations will 
likely be made quickly and any time limit would be arbitrary.
    In the final rule, the Commission has renumbered the example in 
proposed Sec.  680.20(d)(2)(i) as Sec.  680.21(d)(3)(i), and revised it 
to delete the references to a telephone call as the specific form of 
communication and the reference to providing contact information. As 
discussed above and illustrated in the examples in Sec. Sec.  
680.20(j)(2)(ii)(E) and (F), the need to provide contact information 
may vary depending on the form of communication used by the consumer. 
The new example in Sec.  680.21(d)(3)(ii) responds to commenters' 
concerns by illustrating a circumstance involving a consumer-initiated 
communication in which a consumer does not know exactly what products 
or services he or she wants, but initiates a communication to obtain 
information about investing for a child's college education.
    The Commission has renumbered the call-back example in proposed 
Sec.  680.20(d)(2)(iii) as Sec.  680.21(d)(3)(iii) and revised it. The 
revised example provides that where the financial institution makes an 
initial marketing call without using eligibility information received 
from an affiliate and leaves a message that invites the consumer to 
apply for the credit by calling a toll-free number, the consumer's 
response qualifies as a consumer-initiated communication about a 
product or service. The revised example balances commenters' concerns 
about tracking which calls are call backs and the Commission's concern 
that consumers may be induced into triggering the consumer-initiated 
communication exception as a result of inaccurate, incomplete, or 
deceptive telephone messages.
    For the reasons discussed above, the Commission has renumbered the 
retail hours example in proposed Sec.  680.20(d)(2)(iii) as Sec.  
680.21(d)(3)(iv), but otherwise adopted it as proposed. In addition, 
the new example in Sec.  680.21(d)(3)(v) responds to commenters' 
concerns by illustrating a case where a consumer calls to ask about 
retail locations and hours and the call center representative, after 
eliciting information about the reason why the consumer wants to visit 
a retail location, offers to provide information about products of 
interest to the consumer by telephone and mail, thus demonstrating how 
the conversation may develop to the point where making solicitations 
would be responsive to the consumer's call.

Consumer Authorization or Request Exception

    Proposed Sec.  680.20(c)(5) clarified that the provisions of this 
part would not apply to an affiliate using the information to make 
solicitations affirmatively authorized or requested by the consumer. 
The proposal further provided that this exception may be triggered by 
an oral, electronic, or written authorization or request by the 
consumer. However, a pre-selected check box or boilerplate language in 
a disclosure or contract would not constitute an affirmative 
authorization or request under the proposal.
    The proposal noted that the consumer authorization or request 
exception could be triggered, for example, if a consumer obtains a 
mortgage from a mortgage lender and authorizes or requests to receive 
solicitations about homeowner's insurance from an insurance affiliate 
of the mortgage lender. The consumer could provide the authorization or 
make the request either through the person with whom the consumer has a 
business relationship or directly to the affiliate that will make the 
solicitation. Proposed Sec.  680.20(d)(3) provided an example of the 
affirmative authorization or request exception.
    Most industry commenters argued that the proposed exception did not 
track the language of the statute because the Commission included the 
word ``affirmative'' in the proposed exception. These commenters 
believed that including the word ``affirmative'' in the proposed rule 
narrowed the exception in a manner not intended by Congress. Several of 
these commenters noted that the Commission has declined to specify what 
constitutes consumer consent under the GLBA privacy rule and indicated 
that they were not aware of any policy considerations or compliance 
issues that would warrant a departure from the Commission's prior 
position.
    Some industry commenters believed that a pre-selected check box 
should be sufficient to evidence a consumer's authorization or request 
for solicitations. In other words, a consumer's decision not to 
deselect a pre-selected check box should constitute a knowing act of 
the consumer to authorize or request solicitations. Other industry

[[Page 61441]]

commenters believed that preprinted language in a disclosure or 
contract should be sufficient to evidence a consumer's authorization or 
request for solicitations. One commenter cited case law and Commission 
informal staff opinion letters relating to a consumer's written 
instructions to obtain a consumer report pursuant to section 604(a)(2) 
of the FCRA as support for allowing boilerplate language to constitute 
authorization or request.
    A few industry commenters requested that the Commission clarify 
that a consumer's authorization or request does not have to refer to a 
specific product or service or to a specific provider of products or 
services in order for the exception to apply. As discussed above, 
industry commenters had differing views regarding the reference to 
oral, written, or electronic means of triggering the exception.
    NAAG suggested imposing a specific time limit to allow 
solicitations to be made for no more than 30 days after the consumer's 
authorization or request under this exception.
    Section 680.21(c)(5) of the final rule revises the consumer 
authorization or request exception to delete the word ``affirmative'' 
as surplusage. The deletion of the word ``affirmative'' does not change 
the meaning of the exception however. The consumer still must take 
affirmative steps to ``authorize'' or ``request'' solicitations.
    The Commission construes this exception, like the other exceptions, 
narrowly and in a manner that does not undermine the general notice and 
opt-out requirement. For that reason, the Commission believes that 
affiliated companies cannot avoid use of the statute's notice and opt-
out provisions by including preprinted boilerplate language in the 
disclosures or contracts they provide to consumers, such as language 
stating that by applying to open an account, the consumer authorizes or 
requests to receive solicitations from affiliates. Such an 
interpretation would permit the exception to swallow the rule, a result 
that cannot be squared with the intent of Congress to give consumers 
notice and an opportunity to opt out of solicitations.
    The comparison made by some commenters to the GLBA privacy rule is 
misplaced. The GLBA and the privacy rule create an exception to permit 
the disclosure of nonpublic personal information ``with the consent or 
at the direction of the consumer.'' Section 624 of the FCRA creates an 
exception to permit the use of shared eligibility information ``in 
response to solicitations authorized or requested by the consumer.'' 
The Commission interprets the ``authorized or requested'' language in 
the FCRA exception to require the consumer to take affirmative steps in 
order to trigger the exception.
    The Commission has made conforming changes to the example in 
proposed Sec.  680.20(d)(3), which has been renumbered as Sec.  
680.21(d)(4)(i) in the final rule. In addition, the Commission has 
added three additional examples. The example in Sec.  680.21(d)(4)(ii) 
illustrates how a consumer can authorize or request solicitations by 
checking a blank check box. The examples in Sec. Sec.  
680.21(d)(4)(iii) and (iv) illustrate that preprinted boilerplate 
language and a pre-selected check box would not meet the authorization 
or request exception.
    The Commission does not believe it is appropriate to set a fixed 
time period for an authorization or request. As noted in the proposal, 
the duration of the authorization or request depends on what is 
reasonable under the facts and circumstances. In addition, an 
authorization to make solicitations to the consumer terminates if the 
consumer revokes the authorization.
    For the same reasons discussed above, the Commission has deleted 
the reference to oral, electronic, or written communications from this 
exception to track the language of the statute. Further, the Commission 
does not believe it is necessary to clarify the elements of an 
authorization or request. The statute clearly refers to ``solicitations 
authorized or requested by the consumer.'' The facts and circumstances 
will determine what solicitations have been authorized or requested by 
the consumer.

Compliance with Applicable Laws Exception

    Proposed Sec.  680.20(c)(6) clarified that the provisions of this 
part would not apply to an affiliate if compliance with the 
requirements of section 624 by the affiliate would prevent that 
affiliate from complying with any provision of state insurance laws 
pertaining to unfair discrimination in a state where the affiliate is 
lawfully doing business. See FCRA, section 624(a)(4). The Commission 
received no comments on this provision. Section 680.21(c)(6) of the 
final rule adopts the state insurance law compliance exception as 
proposed.
    One commenter requested the creation of an additional exception to 
permit the sharing of eligibility information among affiliates that are 
aligned under one line of business within an organization and that 
share common management, branding, and regulatory oversight (i.e., 
banking, securities, and insurance companies). This commenter was 
focused on private banking enterprises. As discussed above, the 
Commission finds no statutory basis for creating such an exception to 
the notice and opt-out requirement.

Relation to Affiliate-Sharing Notice and Opt-out

    Proposed Sec.  680.20(f) clarified the relationship between the 
affiliate sharing notice and opt-out under section 603(d)(2)(A)(iii) of 
the FCRA and the affiliate marketing notice and opt-out in new section 
624 of the FCRA. Specifically, the proposal provided that nothing in 
the affiliate marketing rule limits the responsibility of a company to 
comply with the notice and opt-out provisions of section 
603(d)(2)(A)(iii) of the FCRA before it shares information other than 
transaction or experience information among affiliates to avoid 
becoming a consumer reporting agency.
    One commenter urged the Commission to delete this provision as 
unnecessary. In the alternative, this commenter requested that the 
Commission clarify that section 603(d)(2)(A)(iii) applies to the 
sharing of information that would otherwise meet the definition of a 
``consumer report,'' and that the sharing affiliate does not 
automatically become a consumer reporting agency, but risks becoming a 
consumer reporting agency.
    This provision has been renumbered as Sec.  680.21(e) in the final 
rule. Section 680.21(e) has been revised to delete the clause that 
referred to becoming a consumer reporting agency and to substitute in 
its place the neutral phrase ``where applicable.''

Section 680.22 Scope and Duration of Opt-Out

Scope of the Opt-out

    The Commission addressed issues relating to the scope of the opt-
out in various sections of the proposal. In the supplementary 
information to the proposal, the Commission stated that the opt-out 
would be tied to the consumer, rather than to the information. Some 
industry commenters supported the approach of tying the opt-out to the 
consumer, rather than to the information. Other industry commenters, 
however, believed it was inappropriate to tie the opt-out to the 
consumer and requested that institutions have the flexibility to 
implement the consumer's opt-out at the account level, rather than at 
the consumer level. These commenters believed that an account-by-
account approach would be consistent with the

[[Page 61442]]

menu of opt-out choices provided in this rule and the GLBA privacy 
rule. These commenters also noted that an account-based approach would 
provide the consumer with a new notice and opportunity to opt out when 
a former customer decides to re-establish a new relationship with the 
institution.
    Proposed Sec.  680.21(c) provided that the notice could be designed 
to allow a consumer to choose from a menu of alternatives when opting 
out, such as by selecting certain types of affiliates, certain types of 
information, or certain modes of delivery from which to opt out, so 
long as one of the alternatives gave the consumer the opportunity to 
opt out with respect to all affiliates, all eligibility information, 
and all methods of delivering solicitations. Several industry 
commenters objected to the requirement that the institution provide a 
single universal opt-out option that would allow consumers to opt out 
completely of all solicitations. In addition, one commenter found the 
reference to all types of eligibility information confusing, while 
another commenter noted that some institutions may want to implement 
the opt-out on an account-by-account basis.
    Section 680.25(d) of the proposal provided that if a consumer's 
relationship with an institution terminated for any reason when a 
consumer's opt-out election was in force, the opt-out would continue to 
apply indefinitely, unless revoked by the consumer. Most industry 
commenters objected to having the opt-out period continue to apply 
indefinitely upon termination of the consumer's relationship with the 
institution. These commenters believed that this approach was not 
supported by the statute, would prove costly and difficult to 
administer, and would require the indefinite tracking of opt-outs. 
These commenters also believed that the five-year opt-out period would 
provide sufficient protection to consumers that terminate their 
relationship. One commenter noted that the proposed rule would impose 
particular hardships on mortgage lenders because those lenders often 
have consumer relationships of very short duration on account of 
selling the loans they originate into the secondary market. Consumer 
groups supported the proposed treatment of opt-outs for terminated 
consumer relationships.
    Upon further examination, the Commission believes that the scope of 
the opt-out should be addressed comprehensively in a single section of 
the final rule. The Commission also concludes that tying the opt-out to 
the consumer could have had unintended consequences. For example, if 
the opt-out were tied to the consumer, an institution would have to 
track the consumer indefinitely, even if the consumer's relationship 
with the institution terminated and a new relationship were 
subsequently established with that institution years later. The 
Commission does not believe that institutions should be required to 
track consumers indefinitely following termination. In addition, an 
opt-out tied to the consumer could apply to the use of all eligibility 
information, not just to eligibility information about the consumer, 
received from an affiliate and used to make solicitations to the 
consumer. It is not clear from the statute or the legislative history 
that Congress intended the opt-out provisions of section 624 to apply 
to eligibility information about consumers other than the consumer to 
whom a solicitation is made. Finally, the Commission does not believe 
it is necessary to make the opt-out effective in perpetuity upon 
termination of the relationship.
    Section 680.22(a) of the final rule brings together these different 
scope considerations to address comprehensively the scope of the opt-
out. Under the revised approach, the scope of the opt-out is derived 
from language of section 624(a)(2)(A) of the FCRA and generally depends 
upon the content of the opt-out notice. Section 680.22(a)(1) provides 
that, except as otherwise provided in that section, a consumer's 
election to opt out prohibits any affiliate covered by the opt-out 
notice from using the eligibility information received from another 
affiliate as described in the notice to make solicitations for 
marketing purposes to the consumer.
    Section 680.22(a)(2)(i) clarifies that, in the context of a 
continuing relationship, an opt-out notice may apply to eligibility 
information obtained in connection with a single continuing 
relationship, multiple continuing relationships, continuing 
relationships established subsequent to delivery of the opt-out notice, 
or any other transaction with the consumer. Section 680.22(a)(2)(ii) 
provides examples of continuing relationships. These examples are 
substantially similar to the examples used in the GLBA privacy rule 
with added references to relationships between the consumer and an 
affiliate.
    Section 680.22(a)(3)(i) limits the scope of an opt-out notice that 
is not connected with a continuing relationship. This section provides 
that if there is no continuing relationship between the consumer and a 
person or its affiliate, and if the person or its affiliate provides an 
opt-out notice to a consumer that relates to eligibility information 
obtained in connection with a transaction with the consumer, such as an 
isolated transaction or a credit application that is denied, the opt-
out notice only applies to eligibility information obtained in 
connection with that transaction. The notice cannot apply to 
eligibility information that may be obtained in connection with 
subsequent transactions or a continuing relationship that may be 
subsequently established by the consumer with the person or its 
affiliate. Section 680.22(a)(3)(ii) provides examples of isolated 
transactions.
    Section 680.22(a)(4) provides that a consumer may be given the 
opportunity to choose from a menu of alternatives when electing to 
prohibit solicitations. An opt-out notice may give the consumer the 
opportunity to elect to prohibit solicitations from certain types of 
affiliates covered by the opt-out notice but not other types of 
affiliates covered by the notice, solicitations based on certain types 
of eligibility information but not other types of eligibility 
information, or solicitations by certain methods of delivery but not 
other methods of delivery, so long as one of the alternatives is the 
opportunity to prohibit all solicitations from all of the affiliates 
that are covered by the notice. The Commission continues to believe 
that the language of section 624(a)(2)(A) of the FCRA requires the opt-
out notice to contain a single opt-out option for all solicitations 
within the scope of the notice.
    The Commission recognizes that consumers could receive a number of 
different opt-out notices, even from the same affiliate. The Commission 
will monitor industry notice practices and evaluate whether further 
action is needed.
    Section 680.22(a)(5) contains a special rule for notice following 
termination of a continuing relationship. This rule provides that a 
consumer must be given a new opt-out notice if, after all continuing 
relationships with a person or its affiliate have been terminated, the 
consumer subsequently establishes a new continuing relationship with 
that person or the same or a different affiliate and the consumer's 
eligibility information is to be used to make a solicitation. This 
special rule affords the consumer and the company a fresh start 
following termination of all continuing relationships by requiring a 
new opt-out notice if a new continuing relationship is subsequently 
established.
    The new opt-out notice must apply, at a minimum, to eligibility 
information obtained in connection with the new continuing 
relationship. The new opt-

[[Page 61443]]

out notice may apply more broadly to information obtained in connection 
with a terminated relationship and give the consumer the opportunity to 
opt out with respect to eligibility information obtained in connection 
with both the terminated and the new continuing relationships. Further, 
the consumer's failure to opt out does not override a prior opt-out 
election by the consumer applicable to eligibility information obtained 
in connection with a terminated relationship that is still in effect, 
regardless of whether the new opt-out notice applies to eligibility 
information obtained in connection with the terminated relationship. 
The final rule also contains an example of this special rule. The 
Commission notes, however, that where a consumer was not given an opt-
out notice in connection with the initial continuing relationship 
because eligibility information obtained in connection with that 
continuing relationship was not shared with affiliates for use in 
making solicitations, an opt-out notice provided in connection with a 
new continuing relationship would have to apply to any eligibility 
information obtained in connection with the terminated relationship 
that is to be shared with affiliates for use in making future 
solicitations.

Duration and Timing of Opt-Out

    Proposed Sec.  680.25 addressed the duration and effect of the 
consumer's opt-out election. Proposed Sec.  680.25(a) provided that the 
consumer's election to opt out would be effective for the opt-out 
period, which is a period of at least five years beginning as soon as 
reasonably practicable after the consumer's opt-out election is 
received. The supplementary information noted that if a consumer 
elected to opt out every year, a new opt-out period of at least five 
years would begin upon receipt of each successive opt-out election.
    Some industry commenters believed that the proposal was 
inconsistent with the statute because it provided that the opt-out 
period would begin as soon as reasonably practicable after the 
consumer's opt-out election is received. These commenters believed that 
the opt-out period should begin on the date the consumer's opt-out is 
received and that the final rule also should allow institutions a 
reasonable period of time to implement a consumer's initial or renewal 
opt-out election before it becomes effective. Consumer groups believed 
that the requirement to honor an opt-out ``beginning as soon as 
reasonably practicable'' was too vague. These commenters believed that 
a consumer's opt-out should be honored within a specific length of time 
not to exceed 30 days after the consumer responds to the opt-out 
notice.
    A few industry commenters urged the Commission to allow consumers 
to revoke an opt-out election orally. Other industry commenters 
requested that the final rule include a clear statement that an opt-out 
period may be shortened to a period of less than five years by the 
consumer's revocation of an opt-out election. Consumer groups approved 
of the Commission's statement that if a consumer opts out again during 
the five-year opt-out period, then a new five-year period begins. 
Consumer groups also supported allowing institutions to make the opt-
out period effective in perpetuity so long as this is clearly disclosed 
to the consumer in the original notice.
    The general provision regarding the duration of the opt-out has 
been renumbered as Sec.  680.22(b) in the final rule, consistent with 
the Commission's decision to address all scope issues in the same 
section. The Commission has revised the duration provision to clarify 
that the opt-out period expires if the consumer revokes the opt-out in 
writing or, if the consumer agrees, electronically. The requirement for 
a written or electronic revocation is retained and is consistent with 
the approach taken in the GLBA privacy rule. The Commission does not 
believe it is necessary or appropriate to permit oral revocation. The 
Commission notes that many of the exceptions to the notice and opt-out 
requirements may be triggered by oral communications, as discussed 
above, which would enable the use of shared eligibility information to 
make solicitations pending receipt of a written or electronic 
revocation. Also, as noted in the proposal, nothing prohibits setting 
an opt-out period longer than five years, including an opt-out period 
that does not expire unless revoked by the consumer.
    The Commission does not agree that the opt-out period should begin 
on the date the consumer's election to opt out is received. Commenters 
generally recognized that institutions cannot instantaneously implement 
a consumer's opt-out election but need time to do so. The Commission 
interprets the statutory language to mean that the consumer's opt-out 
election must be honored for a period of at least five years from the 
date such election is implemented. The Commission believes that 
Congress did not intend for the opt-out period to be shortened to a 
period of less than the five years specified in the statute to reflect 
the time between the date the consumer's opt-out election is received 
and the date the consumer's opt-out election is implemented.
    The Commission also believes it is neither necessary nor desirable 
to set a mandatory deadline for implementing the consumer's opt-out 
election. A general standard is preferable because the time it will 
reasonably take to implement a consumer's opt-out election may vary.
    Consistent with the special rule for a notice following termination 
of a continuing relationship, the duration of the opt-out is not 
affected by the termination of a continuing relationship. When a 
consumer opts out in the course of a continuing relationship and that 
relationship is terminated during the opt-out period, the opt-out 
remains in effect for the rest of the opt-out period. If the consumer 
subsequently establishes a new continuing relationship while the opt-
out period remains in effect, the opt-out period may not be shortened 
with respect to information obtained in connection with the terminated 
relationship by sending a new opt-out notice to the consumer when the 
new continuing relationship is established, even if the consumer does 
not opt out upon receipt of the new opt-out notice. A person may track 
the eligibility information obtained in connection with the terminated 
relationship and provide a renewal notice to the consumer, or may 
choose not to use eligibility information obtained in connection with 
the terminated relationship to make solicitations to the consumer.
    Proposed Sec.  680.25(c) clarified that a consumer may opt out at 
any time. As explained in the supplementary information to the 
proposal, even if the consumer did not opt out in response to the 
initial opt-out notice or if the consumer's election to opt out was not 
prompted by an opt-out notice, a consumer may still opt out. Regardless 
of when the consumer opts out, the opt-out must be effective for a 
period of at least five years.
    The Commission received few comments on this provision. Consumer 
groups urged the Commission to reinforce the continuing nature of the 
right to opt out by requiring institutions to give the opt-out notice 
annually along with the annual GLBA privacy notice. These commenters 
acknowledged that the FCRA does not specifically state that the notice 
is required annually, but noted that the statute also does not say that 
the consumer has only one opportunity to opt out.
    The Commission has renumbered the provision giving the consumer the 
right

[[Page 61444]]

to opt out at any time as Sec.  680.22(c) in the final rule, but 
otherwise adopted the provision as proposed. The Commission finds no 
statutory basis for requiring the provision of an annual opt-out notice 
to consumers along with the GLBA privacy notice.

Section 680.23 Contents of Opt-out Notice; Consolidated and Equivalent 
Notices

Contents in General

    Section 680.21 of the proposal addressed the contents of the opt-
out notice. Proposed Sec.  680.21(a) would have required that the opt-
out notice be clear, conspicuous, and concise, and accurately disclose: 
(1) that the consumer may elect to limit a person's affiliate from 
using eligibility information about the consumer that it obtains from 
that person to make or send solicitations to the consumer; (2) if 
applicable, that the consumer's election will apply for a specified 
period of time and that the consumer will be allowed to extend the 
election once that period expires; and (3) a reasonable and simple 
method for the consumer to opt out.
    Some commenters expressed concern about requiring the notice to 
specify the applicable time period and the consumer's right to extend 
the election once the opt-out expires. One commenter believed this 
would require institutions to determine in advance the length of the 
opt-out period. Another commenter urged the Commission to clarify that 
institutions could subsequently increase the duration of the opt-out or 
make it permanent without providing another notice to the consumer.
    The Commission has renumbered the provisions addressing the 
contents of the opt-out notice as Sec.  680.23(a) in the final rule and 
revised them. Section 680.23(a)(1) of the final rule requires 
additional information in opt-out notices. Section 680.23(a)(1)(i) 
provides that all opt-out notices must identify, by name, the 
affiliate(s) that is providing the notice. A group of affiliates may 
jointly provide the notice. If the notice is provided jointly by 
multiple affiliates and each affiliate shares a common name, such as 
``ABC,'' then the notice may indicate that it is being provided by 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies. Acceptable ways of identifying the 
multiple affiliates providing the notice include stating that the 
notice is provided by ``all of the ABC companies,'' ``the ABC banking, 
credit card, insurance, and securities companies,'' or by listing the 
name of each affiliate providing the notice. A representation that the 
notice is provided by ``the ABC banking, credit card, insurance, and 
securities companies'' applies to all companies in those categories, 
not just some of those companies. But if the affiliates providing the 
notice do not all share a common name, then the notice must either 
separately identify each affiliate by name or identify each of the 
common names used by those affiliates. For example, if the affiliates 
providing the notice do business under both the ABC name and the XYZ 
name, then the notice could list each affiliate by name or indicate 
that the notice is being provided by ``all of the ABC and XYZ 
companies'' or by ``the ABC banking and credit card companies and the 
XYZ insurance companies.''
    Section 680.23(a)(1)(ii) provides that an opt-out notice must 
contain a list of the affiliates or types of affiliates covered by the 
notice. The notice may apply to multiple affiliates and to companies 
that become affiliates after the notice is provided to the consumer. 
The rule for identifying the affiliates covered by the notice is 
substantially similar to the rule for identifying the affiliates 
providing the notice in Sec.  680.23(a)(1)(i), as described in the 
previous paragraph.
    Sections 680.23(a)(1)(iii)-(vii) respectively require the opt-out 
notice to include the following: a general description of the types of 
eligibility information that may be used to make solicitations to the 
consumer; a statement that the consumer may elect to limit the use of 
eligibility information to make solicitations to the consumer; a 
statement that the consumer's election will apply for the specified 
period of time stated in the notice and, if applicable, that the 
consumer will be allowed to renew the election once that period 
expires; if the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, a 
statement that the consumer who has chosen to limit marketing offers 
does not need to act again until the consumer receives a renewal 
notice; and a reasonable and simple method for the consumer to opt out. 
The statement described in Sec.  680.23(a)(1)(vi) regarding consumers 
who may have previously opted out does not apply to the model privacy 
form that the Commission is developing in a separate rulemaking. 
Appropriate use of the model forms in Appendix C will satisfy these 
content requirements.
    The Commission continues to believe that the opt-out notice must 
specify the length of the opt-out period, if one is provided. However, 
an institution that subsequently chooses to increase the duration of 
the opt-out period that it previously disclosed or honor the opt-out in 
perpetuity has no obligation to provide a revised notice to the 
consumer. In that case, the result is the same as if the institution 
established a five-year opt-out period and then did not send a renewal 
notice at the end of that period. A person receiving eligibility 
information from an affiliate would be prohibited from using that 
information to make solicitations to a consumer unless a renewal notice 
is first provided to the consumer and the consumer does not renew the 
opt-out. So long as no solicitations are made using eligibility 
information received from an affiliate, there would be no violation of 
the statute or regulation for failing to send a renewal notice in this 
situation.

Joint Notice

    Proposed Sec.  680.24(c) permitted a person subject to this rule to 
provide a joint opt-out notice with one or more of its affiliates that 
are identified in the notice, so long as the notice was accurate with 
respect to each affiliate jointly issuing the notice. Under the 
proposal, a joint notice would not have to list each affiliate 
participating in the joint notice by its name, but could state that it 
applies to ``all institutions with the ABC name'' or ``all affiliates 
in the ABC family of companies.''
    One commenter believed that individually listing each company could 
result in long and confusing notices. This commenter suggested revising 
the rule to permit the generic identification of the types of 
affiliates by whom eligibility information may be used to make 
solicitations and to allow the notice to apply to entities that become 
affiliates after the notice is sent.
    In the final rule, the separate joint notice provision has been 
eliminated. Instead, the final rule incorporates the joint notice 
option into the provisions that address which affiliates may provide 
the opt-out notice and the contents of the notice.

Joint relationships

    The proposal addressed joint relationships in the section dealing 
with delivery of opt-out notices. Proposed Sec.  680.24(d) set out a 
rule that would apply when two or more consumers jointly obtain a 
product or service from a person subject to the rule (referred to in 
the proposed regulation as ``joint consumers''), such as a joint credit 
card account. It also provided several examples. Under the proposal, a 
person subject to this rule could provide a single opt-out notice to 
joint accountholders. The notice would have

[[Page 61445]]

had to indicate whether the person would consider an opt-out by a joint 
accountholder as an opt-out by all of the associated accountholders, or 
whether each accountholder would have to opt out separately. The person 
could not require all accountholders to opt out before honoring an opt-
out direction by one of the joint accountholders. Because section 624 
of the FCRA deals with the use of information for marketing by 
affiliates, rather than the sharing of information among affiliates, 
comment was requested on whether information about a joint account 
should be allowed to be used for making solicitations to a joint 
consumer who has not opted out.
    Some commenters supported the flexible approach proposed by the 
Commission for dealing with joint accounts and notice to joint 
accountholders. One commenter suggested providing additional 
flexibility to enable consumers to opt out in certain circumstances, 
such as when eligibility information from a joint account is involved, 
but not in others, such as when eligibility information from an 
individual account is involved. Another commenter, however, believed 
that the provisions regarding joint relationships may not be 
appropriate for the affiliate marketing rule because section 624 
relates to the use of information for marketing to a particular 
consumer, not to the sharing of information among affiliates. Consumer 
groups urged the Commission to prohibit the use of eligibility 
information about a joint account for making solicitations to a 
consumer who has not opted out if the other joint consumer on the 
account has opted out.
    The Commission has renumbered the provision addressing joint 
relationships as Sec.  680.23(a)(2) in the final rule. The Commission 
has deleted the example of joint relationships from the final rule 
because it addressed, in part, the sharing of information, rather than 
the use of information. The Commission has made other revisions to 
enhance the readability of this provision. The revised provision is 
substantively similar to the joint relationships provision of the GLBA 
privacy rule, except to the extent that rule refers to the sharing of 
information among affiliates.
    The Commission believes that different issues may arise with regard 
to providing a single opt-out notice to joint consumers in the context 
of this rule, which focuses on the use of information, compared to 
issues that may arise with regard to providing such a notice in the 
context of other privacy rules that focus on the sharing of 
information. For example, a consumer may opt out with respect to 
affiliate marketing in connection with an individually-held account, 
but not opt out with respect to affiliate marketing in connection with 
a joint relationship. In that case, it could be challenging to identify 
which consumer information may and may not be used by affiliates to 
make solicitations to the consumer. Nevertheless, the final rule 
permits persons providing opt-out notices to consumers to provide a 
single opt-out notice to joint consumers.

Alternative Contents

    Proposed Sec.  680.21(d) provided that, where an institution elects 
to give consumers a broader right to opt out of marketing than is 
required by this part, the institution would have the ability to modify 
the contents of the opt-out notice to reflect accurately the scope of 
the opt-out right it provides to consumers. This section also noted 
that proposed Appendix A provided a model form that may be helpful for 
institutions that wish to allow consumers to opt out of all marketing 
from the institution and its affiliates, but use of the model form is 
not required. Commenters generally favored the flexibility afforded by 
this provision. The Commission has renumbered the provision addressing 
alternative contents as Sec.  680.23(a)(3) in the final rule, but 
otherwise adopted it as proposed.

Model Notices

    Section 680.23(a)(4) in the final rule states that model notices 
are provided in Appendix C of Part 698, renumbered from Appendix A of 
Part 680. The Commission has provided these model notices to facilitate 
compliance with the rule. However, the final rule does not require use 
of the model notices.

Consolidated and Equivalent Notices

    Proposed Sec.  680.27 provided that an opt-out notice required by 
this part could be coordinated and consolidated with any other notice 
or disclosure required to be issued under any other provision of law, 
including but not limited to the notice described in section 
603(d)(2)(A)(iii) of the FCRA and the notice required by title V of the 
GLBA. In addition, a notice or other disclosure that was equivalent to 
the notice required by this part, and that was provided to a consumer 
together with disclosures required by any other provision of law, would 
satisfy the requirements of this part. The proposal specifically 
requested comment on the consolidation of the affiliate marketing 
notice with the GLBA privacy notice and the affiliate sharing opt-out 
notice under section 603(d)(2)(A)(iii) of the FCRA.
    Commenters generally supported the proposed provision. Several 
commenters believed it was probable that most institutions would want 
to provide the affiliate marketing opt-out notice with their existing 
GLBA privacy notice to reduce compliance costs and minimize consumer 
confusion. One commenter believed that institutions would be less 
likely to include the opt-out notice as part of their annual GLBA 
privacy notice because section 214 does not have an annual notice 
requirement.
    The Commission has moved the provisions addressing consolidated and 
equivalent notices to the section addressing the contents of the notice 
and renumbered those provisions as Sec. Sec.  680.23(b) and (c) 
respectively in the final rule. Otherwise, those provisions have been 
adopted as proposed with one exception. The provision on equivalent 
notices clarifies that an equivalent notice satisfies the requirements 
of Sec.  680.23--not the entire part--because the part addresses many 
issues besides the content of the notice, such as delivery and renewal 
of opt-outs. The Commission believes that these provisions are related 
to the contents of the notice and should therefore be included in this 
section.
    The Commission encourages consolidation of the affiliate marketing 
opt-out notice with the GLBA privacy notice, including the affiliate 
sharing opt-out notice under section 603(d)(2)(A)(iii) of the FCRA, so 
that consumers receive a single notice they can use to review and 
exercise all privacy opt-outs. Consolidation of these notices, however, 
presents special issues. For example, the affiliate marketing opt-out 
may be limited to a period of at least five years, subject to renewal, 
whereas the GLBA privacy and FCRA section 603(d)(2)(A)(iii) opt-out 
notices are not time-limited. This difference, if applicable, must be 
made clear to the consumer. Thus, if a consolidated notice is used and 
the affiliate marketing opt-out is limited in duration, the notice must 
inform consumers that if they previously opted out, they do not need to 
opt out again until they receive a renewal notice when the opt-out 
expires or is about to expire. In addition, as discussed more fully 
below, the Commission has developed a model privacy form that includes 
the affiliate marketing opt-out. The Commission expects that once 
published in final form, use of the model privacy form will satisfy the 
requirement to provide an affiliate marketing opt-out notice.

[[Page 61446]]

Section 680.24 Reasonable Opportunity to Opt Out

    Section 680.22(a) of the proposal provided that before a receiving 
affiliate could use eligibility information to make or send 
solicitations to the consumer, the communicating affiliate would have 
to provide the consumer with a reasonable opportunity to opt out 
following delivery of the opt-out notice. Given the variety of 
circumstances in which institutions must provide a reasonable 
opportunity to opt out, the proposal construed the requirement for a 
reasonable opportunity to opt out as a general test that would avoid 
setting a mandatory waiting period in all cases.
    The proposed rule would not have required institutions subject to 
the rule to disclose how long a consumer would have to respond to the 
opt-out notice before eligibility information communicated to 
affiliates could be used to make or send solicitations to the consumer, 
although institutions would have the flexibility to include such 
disclosures in their notices. In this respect, the proposed rule was 
consistent with the GLBA privacy rule.
    Industry commenters generally supported the Commission's approach 
of treating the requirement for a reasonable opportunity to opt out as 
a general test that would avoid setting a mandatory waiting period. 
NAAG, on the other hand, believed that the Commission should set a 
mandatory waiting period of at least 45 days from the date of mailing 
or other transmission of the notice because consumers may be ill, away 
from home, or otherwise unable to respond to correspondence promptly.
    Industry commenters generally supported the Commission's decision 
not to require the disclosure of how long a consumer would have to 
respond to the opt-out notice before eligibility information could be 
used to make or send solicitations to the consumer. Consumer groups 
believed that consumers should be told how long they have to respond to 
the notice before eligibility information could be used by affiliates 
to make or send solicitations and that they may exercise their right to 
opt out at any time.
    The Commission has renumbered the section addressing a reasonable 
opportunity to opt out as Sec.  680.24 in the final rule and revised 
it. Section 680.24(a) of the final rule retains the approach of 
construing the requirement for a reasonable opportunity to opt out as a 
general test that avoids setting a mandatory waiting period in all 
cases. Given the variety of circumstances in which a reasonable 
opportunity to opt out must be provided, the Commission believes that 
the appropriate time to permit solicitations may vary depending upon 
the circumstances. A general standard provides flexibility to allow a 
person to use eligibility information it receives from an affiliate to 
make solicitations at an appropriate point in time that may vary 
depending upon the circumstances, while assuring that the consumer is 
given a realistic opportunity to prevent such use of this information. 
In the final rule, the Commission has retained the approach of not 
requiring affiliate marketing opt-out notices to disclose how long a 
consumer has to respond before eligibility information may be used to 
make solicitations to the consumer or that consumers may exercise their 
right to opt out at any time. However, an institution may, at its 
option, add this information to its opt-out notice.
    Section 680.22(b) of the proposal provided examples to illustrate 
what would constitute a reasonable opportunity to opt out. The proposed 
examples would have provided a generally applicable safe harbor for 
opt-out periods of 30 days. As explained in the supplementary 
information to the proposal, although 30 days would be a safe harbor, a 
person subject to this requirement could decide, at its option, to give 
consumers more than 30 days in which to decide whether or not to opt 
out. A shorter waiting period could be adequate in certain situations 
depending on the circumstances.
    Proposed Sec. 680.22(b)(1) contained an example of a reasonable 
opportunity to opt out when the notice was provided by mail. Proposed 
Sec.  680.22(b)(2) contained an example of a reasonable opportunity to 
opt out when the notice was provided by electronic means. The proposed 
examples were consistent with examples used in the GLBA privacy rule.
    Proposed Sec.  680.22(b)(3) contained an example of a reasonable 
opportunity to opt out where, in a transaction conducted 
electronically, the consumer was required to decide, as a necessary 
part of proceeding with the transaction, whether or not to opt out 
before completing the transaction, so long as the institution provided 
a simple process at the Internet Web site that the consumer could use 
at that time to opt out. In this example, the opt-out notice would 
automatically be provided to the consumer, such as through a non-
bypassable link to an intermediate Web page, or ``speedbump.'' The 
consumer would be given a choice of either opting out or not opting out 
at that time through a simple process conducted at the Web site. For 
example, the consumer could be required to check a box right at the 
Internet Web site in order to opt out or decline to opt out before 
continuing with the transaction. However, this example would not cover 
a situation where the consumer was required to send a separate e-mail 
or visit a different Internet Web site in order to opt out.
    Proposed Sec.  680.22(b)(4) illustrated that including the 
affiliate marketing opt-out notice in a notice under the GLBA would 
satisfy the reasonable opportunity standard. In such cases, the 
consumer would be allowed to exercise the opt-out in the same manner 
and would be given the same amount of time to exercise the opt-out as 
is provided for any other opt-out provided in the GLBA privacy notice.
    Proposed Sec.  680.22(b)(5) illustrated how an ``opt-in'' could 
meet the requirement to provide a reasonable opportunity to opt out. 
Specifically, if an institution has a policy of not allowing its 
affiliates to use eligibility information to market to consumers 
without the consumer's affirmative consent, providing the consumer with 
an opportunity to ``opt in'' or affirmatively consent to such use would 
constitute a reasonable opportunity to opt out. The supplementary 
information clarified that the consumer's affirmative consent must be 
documented and that a pre-selected check box would not evidence the 
consumer's affirmative consent.
    Some industry commenters supported the proposed 30-day safe harbor 
and the examples illustrating the safe harbor. Other industry 
commenters, however, expressed concern that the 30-day safe harbor 
would become the mandatory minimum waiting period in virtually all 
cases, particularly because of the risk of civil liability. For this 
reason, some industry commenters objected to the use of examples 
altogether and urged that the Commission delete the proposed examples. 
Other industry commenters asked the Commission to include only the 
examples from the GLBA.
    Consumer groups believed that the safe harbor should be 45 days, 
rather than 30 days. These commenters believed that 45 days was 
necessary in part to account for the time consumed in mail deliveries 
and in part to avoid penalizing consumers who are away from home for 
vacation or illness.
    Regarding the specific examples, a few commenters objected to the 
example in proposed Sec.  680.22(b)(2), stating that the acknowledgment 
of receipt requirement would be inconsistent with the Electronic 
Signatures in Global and National Commerce Act (E-Sign Act). One of

[[Page 61447]]

these commenters believed this requirement amounted to an opt-in for 
electronic notices. Several commenters believed that the example in 
proposed Sec.  680.22(b)(3) for requesting the consumer to opt out as a 
necessary step in proceeding with an electronic transaction should not 
be limited to electronic transactions, but should be expanded to apply 
to all transaction methods. A number of commenters believed that the 
example in proposed Sec.  680.22(b)(5) should either be deleted or, 
alternatively, should not refer to ``affirmative'' consent. These 
commenters noted that the example in proposed Sec.  680.22(b)(4) 
allowed a person to satisfy the reasonable opportunity standard by 
permitting the consumer to exercise the opt-out in the same manner and 
giving the consumer the same amount of time to exercise the opt-out as 
provided in the GLBA privacy notice and that the GLBA rule did not 
require ``affirmative'' consent.
    The Commission has renumbered the examples of a reasonable 
opportunity to opt out as Sec.  680.24(b) in the final rule, and 
revised them as discussed below. The Commission believes the examples 
are helpful in illustrating what constitutes a reasonable opportunity 
to opt out.
    The generally applicable 30-day safe harbor is retained in the 
final rule. The Commission believes that providing a generally 
applicable safe harbor of 30 days is helpful because it affords 
certainty to entities that choose to follow the 30-day waiting period. 
Although 30 days is a safe harbor in all cases, a person providing an 
opt-out notice may decide, at its option, to give consumers more than 
30 days in which to decide whether or not to opt out. A shorter waiting 
period could be adequate in certain situations, depending on the 
circumstances, in accordance with the general test for a reasonable 
opportunity to opt out. The use of examples and a 30-day safe harbor is 
consistent with the approach followed in the GLBA privacy rule. 
However, the Commission believes that the examples in this rule should 
differ to some extent from the examples in the GLBA privacy rule 
because the affiliate marketing opt-out requires a one-time, not an 
annual, notice. Further, the affiliate marketing notice may, but need 
not, be included in the GLBA privacy notice.
    In the final rule, the Commission has retained the example of a 
reasonable opportunity to opt out by mail with revisions for clarity. 
Commenters had no specific objections to this example.
    The Commission has revised the example of a reasonable opportunity 
to opt out by electronic means and divided it into two subparts in the 
final rule to illustrate the different means of delivering an 
electronic notice. The example illustrates that for notices provided 
electronically, such as by posting the notice at an Internet Web site 
at which the consumer has obtained a product or service, a reasonable 
opportunity to opt out would include giving the consumer 30 days after 
the consumer acknowledges receipt of the electronic notice to opt out 
by any reasonable means. The acknowledgment of receipt aspect of this 
example is consistent with an example in the GLBA privacy regulation. 
The example also illustrates that for notices provided by e-mail to a 
consumer who had agreed to receive disclosures by e-mail from the 
person sending the notice, a reasonable opportunity to opt out would 
include giving the consumer 30 days after the e-mail is sent to elect 
to opt out by any reasonable means. The Commission does not believe 
that consumer acknowledgment is necessary where the consumer has agreed 
to receive disclosures by e-mail.
    The Commission has determined that the electronic delivery of 
affiliate marketing opt-out notices does not require consumer consent 
in accordance with the E-Sign Act because neither section 624 of the 
FCRA nor this final rule requires that the notice be provided in 
writing. Thus, the Commission does not believe that the acknowledgment 
of receipt trigger is beyond the scope of their interpretive authority. 
Persons that provide affiliate marketing opt-out notices under this 
part electronically may do so pursuant to the agreement of the 
consumer, as specified in this rule, or in accordance with the 
requirements of the E-Sign Act.
    The Commission believes that the example of a consumer who is 
required to opt out as a necessary part of proceeding with the 
transaction should not be limited to electronic transactions. However, 
rather than revising the electronic transactions example, the 
Commission has retained the electronic transactions example in Sec.  
680.24(b)(3) and added a new example for in-person transactions in 
Sec.  680.24(b)(4). Together, these examples illustrate that an 
abbreviated opt-out period is appropriate when the consumer is given a 
``yes'' or ``no'' choice and is not permitted to proceed with the 
transaction unless the consumer makes a choice. For in-person 
transactions, consumers could be provided a form with a question that 
requires the consumer to write a ``yes'' or ``no'' to indicate their 
opt-out preference or a form that contains two blank check boxes: one 
that allows consumers to indicate that they want to opt out and one 
that allows consumers to indicate that they do not want to opt out.
    In the final rule, the Commission has retained the example of 
including the opt-out notice in a privacy notice in Sec.  680.24(b)(5) 
as consistent with the statutory requirement that the Commission 
consider methods for coordinating and combining notices. The Commission 
has deleted the example of providing an opt-in as a form of opting out 
as unnecessary and confusing.

Section 680.25 Reasonable and Simple Methods of Opting Out

    Section 680.23 of the proposal set forth reasonable and simple 
methods of opting out. This section generally tracked the examples of 
reasonable opt-out means from Sec.  313.7(a)(2)(ii) of the GLBA privacy 
regulation with certain revisions to give effect to Congress' mandate 
that methods of opting out be simple. For instance, proposed Sec.  
680.23(a)(2) referred to including a self-addressed envelope with the 
reply form and opt-out notice. The Commission also contemplated that a 
toll-free telephone number would be adequately designed and staffed to 
enable consumers to opt out in a single phone call.
    Proposed Sec.  680.23(b) set forth methods of opting out that are 
not reasonable and simple, such as requiring the consumer to write a 
letter to the institution or to call or write to obtain an opt-out form 
rather than including it with the notice. This section generally 
tracked the examples of unreasonable opt-out means from Sec.  
313.7(a)(2)(iii) of the GLBA privacy rule. In addition, the proposal 
contained an example of a consumer who agrees to receive the opt-out 
notice in electronic form only, such as by electronic mail or by using 
a process at a Web site. Such a consumer should not be required to opt 
out solely by telephone or paper mail.
    Many industry commenters asked the Commission to clarify that the 
examples are not the only ways to comply with the rule. These 
commenters believed that, as drafted, the proposal could be interpreted 
as an exclusive rule, rather than as examples. These commenters asked 
the Commission to make clear in the final rule that the methods set out 
in the rule are examples and do not exclude other reasonable and simple 
methods of opting out. A few industry commenters believed that the 
final rule should not include any examples of methods of opting out 
because of the potential for civil liability.

[[Page 61448]]

    Many industry commenters also urged the Commission to use the same 
examples used in the GLBA privacy rule. These commenters did not 
believe that Congress would allow coordinated and consolidated notices, 
but require different methods of opting out. For instance, these 
commenters recommended deleting the reference to a self-addressed 
envelope because there is no such reference in the GLBA privacy rule. 
One commenter noted that its experience with self-addressed envelopes 
was negative because consumers often used the envelopes for other 
purposes resulting in misdirected communications. Industry commenters 
also objected to requiring institutions to provide an electronic opt-
out mechanism to a consumer who agrees to receive an opt-out notice in 
electronic form. These commenters believed this example was unjustified 
and inconsistent with the GLBA privacy rule. Commenters also indicated 
that some institutions may not have the technical capabilities to 
accept electronic opt-outs. Several commenters recommended that the 
Commission clarify that an institution is not obligated to honor opt-
outs submitted through means other than those designated by the 
institution.
    Consumer groups generally believed that the proposal appropriately 
tracked the examples in the GLBA privacy regulation with revisions to 
give effect to Congress' mandate that methods of opting out be simple. 
These commenters believed, however, that the proposal was inadequate 
because it provided examples instead of requiring the use of certain 
methods. These commenters believed that the final rule should require 
self-addressed envelopes and require that toll-free numbers be 
adequately designed and staffed to enable consumers to opt out in a 
single phone call. According to these commenters, inadequate and poorly 
trained staff has been a shortcoming of the GLBA opt-out procedures. 
These commenters also recommended that consumers be given the 
opportunity to opt out by a simple check box on payment coupons. 
Finally, these commenters asked the Commission to clarify that the 
federal standard is a floor and that if the notice is combined with 
other choices made available under other federal and state laws, the 
most consumer-friendly means for opting out should apply.
    The Commission has renumbered the section addressing reasonable and 
simple methods of opting out as Sec.  680.25 in the final rule, and 
revised it as discussed below. The Commission has restructured this 
section to include a general rule and examples in separate paragraphs 
(a) and (b) respectively. This revision clarifies that the specific 
methods identified in the rule are examples, not an exhaustive list of 
permissible methods.
    The Commission believes that including examples in Sec.  680.25(b) 
is helpful. However, the Commission declines to adopt the GLBA examples 
without change. Section 624 of the FCRA requires the Commission to 
ensure that the consumer is given reasonable and simple methods of 
opting out. The GLBA did not require simple methods of opting out. The 
Commission believes that the methods of opting out can, in some 
instances, be simpler than some of the reasonable methods illustrated 
in the GLBA privacy rule. To effectuate the statutory mandate that 
consumers have simple methods of opting out, the Commission has 
modified, for purposes of this rulemaking, some of the examples of 
reasonable methods of opting out that were used in the GLBA privacy 
regulation.
    Most of the examples in the final rule are substantially similar to 
those in Sec.  680.23(a) and (b) of the proposal with revisions for 
clarity. The example in Sec.  680.25(b)(1)(ii) has been revised to 
reflect the Commission's understanding that the reply form and self-
addressed envelope would be included together with the opt-out notice. 
As in the proposal, the Commission contemplates that a toll-free 
telephone number that consumers may call to opt out, as illustrated by 
the example in Sec.  680.25(b)(1)(iv), would be adequately designed and 
staffed to enable consumers to opt out in a single phone call. In 
setting up a toll-free telephone number that consumers may use to 
exercise their opt-out rights, institutions should minimize extraneous 
messages directed to consumers who are in the process of opting out.
    One new example in Sec.  680.25(b)(1)(v) illustrates that 
reasonable and simple methods include allowing consumers to exercise 
all of their opt-out rights described in a consolidated opt-out notice 
that includes the GLBA privacy, FCRA affiliate sharing, and FCRA 
affiliate marketing opt-outs, by a single method, such as by calling a 
single toll-free telephone number. This example furthers the statutory 
directive to the Commission to ensure that notices and disclosures may 
be coordinated and consolidated. The final rule also clarifies the 
example renumbered as Sec.  680.25(b)(2)(iii) to illustrate that it is 
not reasonable or simple to require a consumer who receives the opt-out 
notice in electronic form, such as through posting at an Internet Web 
site, to opt out solely by paper mail or by visiting a different Web 
site without providing a link to that site.
    Section 680.25(c) has been added to clarify that each consumer may 
be required to opt out through a specific means, as long as that means 
is reasonable and simple for that consumer. This new section 
corresponds to a provision in the GLBA privacy rule, 16 CFR Sec.  
313.7(a)(2)(iv).

Section 680.26 Delivery of Opt-out Notices

General rule and examples

    Section 680.24 of the proposal addressed the delivery of opt-out 
notices. Proposed Sec.  680.24(a) provided that an institution would 
have to deliver an opt-out notice so that each consumer could 
reasonably be expected to receive actual notice. This standard would 
not have required actual notice. The supplementary information to the 
proposal also clarified that, for opt-out notices delivered 
electronically, the notices could be delivered either in accordance 
with the electronic disclosure provisions in this part or in accordance 
with the E-Sign Act. For example, the institution could e-mail its 
notice to a consumer who agreed to the electronic delivery of 
information or provide the notice on its Internet Web site for a 
consumer who obtained a product or service electronically from that Web 
site. Commenters generally supported the reasonable expectation of 
actual notice standard.
    Proposed Sec.  680.24(b) provided examples to illustrate what would 
constitute delivery of an opt-out notice. Commenters expressed concern 
about the electronic notice example in proposed paragraph (b)(1)(iii). 
Consumer groups objected to this example by pointing to a growing trend 
in which companies require consumers to agree to electronic notices if 
they conduct business on an Internet Web site. These commenters 
believed that there was nothing to ensure that the notice would be 
clearly accessible to consumers on the Web site. These commenters 
believed that, at a minimum, the Commission should require the notice 
to be sent to the consumer's e-mail address, rather than posted to an 
Internet Web site, where the consumer has expressly opted in to the 
electronic delivery of notices. Some industry commenters objected to 
the acknowledgment of receipt requirement in this example as 
inconsistent with the E-Sign Act. One of these commenters urged the 
Commission to explicitly incorporate the E-Sign Act into the

[[Page 61449]]

requirements for delivering opt-out notices.
    The Commission has renumbered the general rule regarding delivery 
of opt-out notices as Sec.  680.26(a) in the final rule and divided the 
examples into positive and negative examples in Sec. Sec.  680.26(b) 
and (c) respectively. In the final rule, the Commission has retained 
the reasonable expectation of actual notice standard, which does not 
require the institution to determine if the consumer actually received 
the opt-out notice. For example, mailing a printed copy of the opt-out 
notice to the last known mailing address of a consumer satisfies the 
requirement to deliver the opt-out notice so that there is a reasonable 
expectation that the consumer has received actual notice.
    The Commission has revised some of the examples of a reasonable 
expectation of actual notice for electronic notices. The new example in 
Sec.  680.26(b)(3) illustrates that the reasonable expectation of 
actual notice standard would be satisfied by providing notice by e-mail 
to a consumer who has agreed to receive disclosures by e-mail from the 
person providing the notice. The Commission reiterates that an 
acknowledgment of receipt is not necessary for a notice provided by e-
mail to such a consumer. Conversely, the example in Sec.  680.26(c)(2) 
illustrates that the reasonable expectation of actual notice standard 
would not be satisfied by providing notice by e-mail to a consumer who 
has not agreed to receive disclosures by e-mail from the person 
providing the notice.
    The revised example in Sec.  680.26(b)(4) illustrates that for a 
consumer who obtains a product or service electronically, the 
reasonable expectation standard would be satisfied by posting the 
notice on the Internet Web site at which the consumer obtains such 
product or services and requiring the consumer to acknowledge receipt 
of the notice. Conversely, the new example in Sec.  680.26(c)(3) 
illustrates that the reasonable expectation standard would not be 
satisfied by posting the notice on the Internet Web site without 
requiring the consumer to acknowledge receipt of the notice. As 
discussed above, the Commission has determined that the electronic 
delivery of opt-out notices does not require consumer consent in 
accordance with the E-Sign Act because neither section 624 of the FCRA 
nor the final rule require that the notice be provided in writing. 
Thus, requiring an acknowledgment of receipt is within the scope of the 
Commission's interpretive authority. This example is also consistent 
with an example in the GLBA privacy rule and seems appropriate where 
the notice is posted at an Internet Web site.
    The Commission declines to require the delivery of electronic 
notices by e-mail. Concerns about the security of e-mail, especially 
phishing, make it inappropriate to require e-mail as the only 
permissible form of electronic delivery for opt-out notices.

Section 680 .27 Renewal of Opt-out

    Proposed Sec.  680.26 described the procedures for extension of an 
opt-out. Proposed Sec.  680.26(a) provided that a receiving affiliate 
could not make or send solicitations to the consumer after the 
expiration of the opt-out period based on eligibility information it 
receives or has received from an affiliate, unless the person 
responsible for providing the initial opt-out notice, or its successor, 
has given the consumer an extension notice and a reasonable opportunity 
to extend the opt-out, and the consumer does not extend the opt-out. 
Thus, if an extension notice was not provided to the consumer, the opt-
out period would continue indefinitely. Proposed Sec.  680.26(b) 
provided that each opt-out extension would have to be effective for a 
period of at least five years.
    Proposed Sec.  680.26(c) addressed the contents of a clear, 
conspicuous, and concise extension notice and provided flexibility to 
comply in either of two ways. Under one approach, the notice would 
disclose the same items required to be disclosed in the initial opt-out 
notice, along with a statement explaining that the consumer's prior 
opt-out has expired or is about to expire, as applicable, and that if 
the consumer wishes to keep the consumer's opt-out election in force, 
the consumer must opt out again. Under a second approach, the extension 
notice would provide: (1) that the consumer previously elected to limit 
an affiliate from using eligibility information about the consumer that 
it obtains from the communicating affiliate to make or send 
solicitations to the consumer; (2) that the consumer's election has 
expired or is about to expire, as applicable; (3) that the consumer may 
elect to extend the consumer's previous election; and (4) a reasonable 
and simple method for the consumer to opt out. The supplementary 
information to the proposal clarified that institutions would not need 
to provide extension notices if they treated the consumer's opt-out 
election as valid in perpetuity, unless revoked by the consumer.
    Proposed Sec.  680.26(d) addressed the timing of the extension 
notice and provided that an extension notice could be given to the 
consumer either a reasonable period of time before the expiration of 
the opt-out period, or any time after the expiration of the opt-out 
period but before solicitations that would have been prohibited by the 
expired opt-out are made to the consumer. The Commission did not 
propose to set a fixed time for what would constitute a reasonable 
period of time before the expiration of the opt-out period to send an 
extension notice because a reasonable period of time may depend upon 
the amount of time afforded to the consumer for a reasonable 
opportunity to opt out, the amount of time necessary to process opt-
outs, and other factors. Proposed Sec.  680.26(e) made clear that 
sending an extension notice to the consumer before the expiration of 
the opt-out period does not shorten the five-year opt-out period.
    A few industry commenters objected to the fact that the contents of 
the extension notice would differ from the contents of the initial 
notice by requiring that the extension notice inform the consumer that 
the consumer's prior opt-out has expired or is about to expire, as 
applicable, and that the consumer must opt out again to keep the opt-
out election in force. These commenters argued that the added 
disclosure requirement would be costly and provide little benefit to 
consumers. One commenter maintained that the added disclosure 
requirement would make it difficult, if not impossible, to combine the 
extension notice with the GLBA privacy notice. Commenters also 
maintained that the language of the statute, particularly section 
624(a)(1), contemplates that the same notice would satisfy the 
requirements for the initial and extension notices. Consumer groups and 
NAAG recommended that the Commission define a ``reasonable 
opportunity'' to extend the opt-out as a period of at least 45 days 
before shared eligibility information is used to make solicitations to 
the consumer.
    The Commission has renumbered the provisions addressing the 
extension or renewal of opt-outs as Sec.  680.27 in the final rule and 
revised them. For purposes of clarity, the final rule refers to a 
``renewal'' notice, rather than an ``extension'' notice.
    Section 680.27(a) contains the general rule, which provides that 
after the opt-out period expires, a person may not make solicitations 
based on eligibility information received from an affiliate to a 
consumer who previously opted out unless the consumer has been given a 
compliant renewal notice and a reasonable opportunity to opt out, and 
the consumer does not renew the opt-out. This section also clarifies 
that a

[[Page 61450]]

person can make solicitations to a consumer after expiration of the 
opt-out period if one of the exceptions in Sec.  680.21(c) applies.
    The Commission declines to set a fixed minimum time period for a 
reasonable opportunity to renew the opt-out as unnecessary and 
inconsistent with the approach taken elsewhere in this rule and in the 
GLBA privacy rule. The provision regarding the duration of the renewed 
opt-out elicited no comment, and it has been retained in Sec.  
680.27(a)(2) of the final rule.
    Section 680.27(a)(3) identifies the affiliates who may provide the 
renewal notice. A renewal notice must be provided either by the 
affiliate that provided the previous opt-out notice or its successor, 
or as part of a joint renewal notice from two or more members of an 
affiliated group of companies, or their successors, that jointly 
provided the previous opt-out notice. This rule balances the 
Commission's goal of ensuring that the notice is provided by an entity 
known to the consumer with a recognition that flexibility is required 
to account for changes in the corporate structure that may result from 
mergers and acquisitions, corporate name changes, and other events.
    The Commission recognizes that the content of the extension or 
renewal notice differs from the content of the initial notice. Nothing 
in the statute, however, requires identical content in the initial and 
renewal notices. Moreover, the statute requires the Commission to 
provide specific guidance to ensure that opt-out notices are clear, 
conspicuous, and concise. It is unreasonable to expect consumers, upon 
receipt of a renewal notice, to remember that they previously opted out 
five years ago (or longer) or, even if they do remember, to know that 
they must opt out again in order to renew their opt-out decision. 
Therefore, to ensure that the renewal notice is meaningful, the 
Commission concludes that the renewal notice must remind the consumer 
that he or she previously opted out, inform the consumer that the opt-
out has expired or is about to expire, and advise the consumer that he 
or she must opt out again to renew the opt-out and continue to limit 
solicitations from affiliates. Under the final rule, the renewal notice 
can state that ``the consumer's election has expired or is about to 
expire.'' The Commission has deleted the words ``as applicable'' so 
that the notice does not have to be tailored to differentiate consumers 
for whom the election ``has expired'' from those for whom the election 
``is about to expire.''
    The Commission is not persuaded that the additional content of the 
renewal notice will have any impact on the ability to combine the opt-
out notice with the GLBA privacy notice. Even if the language of the 
renewal notice were identical to the initial notice, it still could be 
difficult to avoid honoring a consumer's opt-out in perpetuity if the 
affiliate marketing opt-out notice is incorporated into the GLBA 
privacy notice. Privacy notices typically state that if a consumer has 
previously opted out, it is not necessary for the consumer to opt out 
again. This statement would be accurate with respect to the affiliate 
marketing opt-out only if the consumer's opt-out is honored in 
perpetuity. It would not be accurate, however, if the affiliate 
marketing opt-out is effective only for a limited period of time, 
subject to renewal by the consumer at intervals of five years or 
longer. Thus, if the affiliate marketing opt-out notice was 
consolidated with GLBA privacy notices and was effective for a limited 
period of time, the privacy notices would have to be modified to make 
clear that statements that the consumer does not have to opt out again 
do not apply to the affiliate marketing renewal notice. Therefore, the 
Commission does not believe that requiring a renewal notice to contain 
information not included in an initial notice will significantly affect 
the ability to incorporate the affiliate marketing opt-out notice into 
GLBA privacy notices because consolidation of the notices is most 
likely to occur when the affiliate marketing opt-out will be honored in 
perpetuity. Entities that prefer not to provide renewal notices may do 
so by honoring the consumer's opt-out in perpetuity. The contents of 
the renewal notice are adopted in Sec.  680.27(b) with revisions that 
incorporate the changes to Sec.  680.23, as discussed above. Section 
680.27(b) of the final rule also omits the alternative contents set 
forth in the proposal, which the Commission now believes would be 
unnecessarily duplicative.
    Proposed Sec.  680.26(d) addressed the timing of the extension or 
renewal notice and elicited no comment. The Commission has renumbered 
this provision as Sec.  680.27(c) in the final rule and adopted it with 
technical revisions. As explained in the supplementary information to 
the proposal, providing the renewal notice a reasonable period of time 
before the expiration of the opt-out period would enable institutions 
to begin marketing to consumers who do not renew their opt-out upon 
expiration of the opt-out period. But giving a renewal notice too far 
in advance of the expiration of the opt-out period may confuse 
consumers. The Commission will deem a renewal notice provided on or 
with the last annual privacy notice required by the GLBA privacy 
provisions sent to the consumer before the expiration of the opt-out 
period to be reasonable in all cases.
    Proposed Sec.  680.26(e) regarding the effect of an extension or 
renewal notice on the existing opt-out period elicited no comment. The 
Commission has renumbered this provision as Sec.  680.27(d) in the 
final rule, and adopted it with technical changes.

Section 680.28 Effective Date, Compliance Date, and Prospective 
Application

Effective Date and Compliance Date

    Consistent with the requirements of section 624 of the FCRA, the 
proposal indicated that the final rule would become effective six 
months after the date on which it would be issued in final form. The 
Commission requested comment on whether there was any need to delay the 
mandatory compliance date beyond the effective date specifically to 
permit institutions to incorporate the affiliate marketing opt-out 
notice into their next annual GLBA privacy notice.
    Most industry commenters believed that the Commission should delay 
the mandatory compliance date until some time after the effective date 
of the final rule. These commenters suggested various periods for 
delaying the mandatory compliance date ranging from three months to 
more than 24 months. Common recommendations were for a delayed 
mandatory compliance date of six, 12, or 18 months.
    Some of these commenters suggested a two-part mandatory compliance 
date consisting of a delayed mandatory compliance date of either three 
or six months for new accounts or for general application and a special 
mandatory compliance date for institutions that intend to consolidate 
their affiliate marketing opt-out notice with their GLBA privacy 
notice. Under this special mandatory compliance date, institutions 
would have to comply at the time they provide their next GLBA privacy 
notice following the effective date of the final rule or a date 
certain, whichever is earlier.
    Industry commenters believed that a delayed mandatory compliance 
date was necessary in order to make significant changes to business 
practices and procedures, to implement necessary operational and 
systems changes, and to design and provide opt-out notices.

[[Page 61451]]

Industry commenters also noted that many institutions would like to 
send the affiliate marketing opt-out notice with their initial or 
annual GLBA privacy notices, both to minimize costs and to avoid 
consumer confusion. These commenters noted that many large institutions 
provide GLBA privacy notices on a rolling basis and that a delayed 
mandatory compliance date was necessary to enable institutions to 
introduce the affiliate marketing opt-out notice into this cycle. One 
large institution estimated that its first-year compliance costs would 
increase by a minimum of $660,000 if it was not able to consolidate the 
affiliate marketing opt-out notice with its GLBA privacy notice. A few 
industry commenters believed that Congress knew that an effective date 
is not necessarily the same as a mandatory compliance date because 
banking regulations commonly have effective dates and mandatory 
compliance dates that differ.
    Consumer groups and NAAG believed that the effective date of the 
final rule should be the mandatory compliance date. These commenters 
believed that institutions have had time to prepare for compliance 
since the FACT Act became law in December 2003. Consumer groups 
believed that if institutions need more time to comply, affiliates 
should cease using eligibility information to make solicitations until 
the notice and opportunity to opt out is provided.
    The final rule will become effective January 1, 2008. Consistent 
with the statute's directive that the Commission ensure that notices 
may be consolidated and coordinated, the mandatory compliance date is 
delayed to give institutions a reasonable amount of time to include the 
affiliate marketing opt-out notice with their initial and annual 
privacy notices. Accordingly, compliance with this part is required not 
later than October 1, 2008. The Commission believes that delaying the 
mandatory compliance date for approximately one year will give all 
institutions adequate time to develop and distribute opt-out notices 
and give most institutions sufficient time to develop and distribute 
consolidated notices if they choose to do so.

Prospective Application

    Proposed Sec.  680.20(e) provided that the provisions of this part 
would not apply to eligibility information that was received by a 
receiving affiliate prior to the date on which compliance with these 
regulations would be required. Some industry commenters supported this 
provision. Other industry commenters, however, believed that the 
proposed rule did not track the statutory language or reflect the 
intent of Congress. These commenters believed that the final rule 
should grandfather all information received by any financial 
institution or affiliate in a holding company prior to the mandatory 
compliance date, and not grandfather only that information received 
prior to the mandatory compliance date by a person that intends to use 
the information to make solicitations to the consumer. Some of these 
commenters recommended, in the alternative, that the Commission clarify 
that any information placed into a common database by an affiliate 
should be deemed to have been provided to an affiliated person if the 
Commission opts to retain the prospective application provision as 
proposed. These commenters argued that without such a clarification, 
affiliated companies would have to undertake the costly deconstruction 
of existing databases to ensure compliance.
    In the final rule, the provision addressing prospective application 
has been renumbered as Sec.  680.28(c), and revised. The Commission 
continues to believe that the better interpretation of the non-
retroactivity provision is that it is tied to receipt of eligibility 
information by a person that intends to use the information to make 
solicitations to the consumer. The final rule clarifies, however, that 
a person is deemed to receive eligibility information from its 
affiliate when the affiliate places that information in a common 
database where it is accessible by the person, even if the person has 
not accessed or used that information as of the compliance date. For 
example, assume that an affiliate obtains eligibility information about 
a consumer as a result of having a pre-existing business relationship 
with that consumer. The affiliate places that information into a common 
database that is accessible to other affiliates before the mandatory 
compliance date. The final rule does not apply to that information, and 
other affiliates may use that information for marketing to the 
consumer. On the other hand, if the affiliate obtains eligibility 
information about the consumer before the mandatory compliance date, 
but does not either place that information into a common database that 
is accessible to other affiliates or otherwise provide that information 
to another affiliate before the mandatory compliance date, the final 
rule will apply to that eligibility information. Further, if the 
database is updated with new eligibility information after the 
mandatory compliance date, the final rule will apply to the new or 
updated eligibility information.

Appendix C

    Appendix A of the proposal contained model forms to illustrate by 
way of example how institutions could comply with the notice and opt-
out requirements of section 624 and the proposed regulations. Appendix 
A included three proposed model forms. Model Form A-1 was a proposed 
form of an initial opt-out notice. Model Form A-2 was a proposed form 
of an extension notice. Model Form A-3 was a proposed form that 
institutions may use if they offer consumers a broader right to opt out 
of marketing than is required by law.
    The proposed model forms were designed to convey the necessary 
information to consumers as simply as possible. The Commission tested 
the proposed model forms using two widely available readability tests, 
the Flesch reading ease test and the Flesch-Kincaid grade level test, 
each of which generates a readability score.\14\ Proposed Model Form A-
1 had a Flesch reading ease score of 53.7 and a Flesch-Kincaid grade 
level score of 9.9. Proposed Model Form A-2 had a Flesch reading ease 
score of 57.5 and a Flesch-Kincaid grade level score of 9.6. Proposed 
Model Form A-3 had a Flesch reading ease score of 69.9 and a Flesch-
Kincaid grade level score of 6.7.
---------------------------------------------------------------------------

    \14\ The Flesch reading ease test generates a score between zero 
and 100, where the higher score correlates with improved 
readability. The Flesch-Kincaid grade level test generates a 
numerical assessment of the grade-level at which the text is 
written.
---------------------------------------------------------------------------

    Commenters generally supported the proposed model forms. As noted 
above, some commenters had concerns about the content of the initial 
and renewal notices. Some industry commenters expressed concern about 
requiring the notice to specify the applicable time period and the 
consumer's right to renew the election once the opt-out expires. 
Industry commenters also suggested revising the language of the notice 
to refer either to ``financial'' information or ``credit eligibility'' 
information for clarity. One commenter suggested deleting the examples 
of the types of information shared with affiliates. Another commenter 
suggested rephrasing the model forms in the passive voice. One 
commenter encouraged the Commission to clarify that use of the model 
forms provides a safe harbor. Another commenter believed that the 
optional third paragraph of Model Form A-1 should be revised, or an 
alternate paragraph added, to provide guidance on how to

[[Page 61452]]

clearly disclose to consumers that the opt-out may not limit the 
sharing of contact information and other information that does not meet 
the definition of ``consumer report.''
    Consumer groups and NAAG commended the Commission for reporting the 
Flesch reading ease score and Flesch-Kincaid grade-level score for each 
of the model forms. These commenters urged the Commission to modify the 
proposed rule to require that any person that does not use the model 
forms must provide a notice that achieves readability scores at least 
as good as the scores for the model forms. Consumer groups also 
suggested adding a sentence about providing the form annually to 
mitigate consumer confusion. These commenters also urged the Commission 
to adopt a short-form notice.
    The Commission has revised and expanded the number of model forms 
to reflect changes made to the final rule. In addition, the model forms 
have been renumbered as Appendix C to Part 698. The Commission believes 
that model forms are helpful for entities that give notices and 
beneficial for consumers. The model forms are provided as stand-alone 
documents. However, some persons may choose to combine the opt-out 
notice with other consumer disclosures, such as the GLBA privacy 
notice. Creating a consolidated model form is beyond the scope of this 
rulemaking, but, as discussed above, institutions can combine the 
affiliate marketing opt-out notice with other disclosures, including 
the GLBA privacy notice.
    On March 31, 2006, the FTC, Board, FDIC, NCUA, OCC, and SEC 
released a report entitled Evolution of a Prototype Financial Privacy 
Notice, prepared by Kleimann Communication Group, Inc., summarizing 
research that led to the development of a prototype short-form GLBA 
privacy notice. That prototype included an affiliate marketing opt-out 
notice. The prototype assumed that the notice would be provided by the 
affiliate that is sharing eligibility information. The Commission 
believes that providing model forms in this rule for stand-alone opt-
out notices that may be used in a more diverse set of circumstances 
than a model privacy form is appropriate and consistent with efforts to 
develop a model privacy form. On March 29, 2007, the FTC, Board, FDIC, 
NCUA, OCC, OTS, SEC, and the Commodity Futures Trading Commission 
published for public comment in the Federal Register (72 FR 14940) a 
model privacy form that includes the affiliate marketing opt-out. Once 
such a notice is published in final form, use of the model privacy form 
will satisfy the requirement to provide an initial affiliate marketing 
opt-out notice.
    The final rule includes five model forms. Model Form C-1 is the 
model for an initial notice provided by a single affiliate. Model Form 
C-2 is the model for an initial notice provided as a joint notice from 
two or more affiliates. Model Form C-3 is the model for a renewal 
notice provided by a single affiliate. Model Form C-4 is the model for 
a renewal notice provided as a joint notice from two or more 
affiliates. Model Form C-5 is a model for a voluntary ``no marketing'' 
opt-out.
    The Commission tested each of the model forms using two widely-
available readability tests, the Flesch reading ease test and the 
Flesch-Kincaid grade level test. In conducting these tests, the 
Commission eliminated parenthetical text wherever possible, included 
the optional clauses, and substituted the names of fictional entities, 
for example, ABC Lender or the ABC group of companies, as the names of 
the relevant entities to ensure that the test results were not skewed 
by the inclusion of descriptive text that would not be included in 
actual opt-out notices. The results of these tests are summarized for 
each of the model forms in Table 1 below.
    Although the Commission encourages the use of these tests as well 
as other types of consumer testing in designing opt-out notices, the 
Commission declines to adopt a prescriptive approach that requires 
notices to achieve certain scores under the Flesch reading ease or 
Flesch-Kincaid grade level tests. Some variation in readability scores 
is inevitable and may be caused by minor differences in the language of 
the notice, such as the name of the entity providing the notice or the 
types of information that may be used for marketing.

                                 Table 1
------------------------------------------------------------------------
                                                                 Flesch-
                                                         Flesch  Kincaid
                                                        reading   grade
                                                          ease    level
                                                         score    score
------------------------------------------------------------------------
Model Form C-1........................................     50.2  11.5
Model Form C-2........................................     51.7  11.5
Model Form C-3........................................     54.6   9.7
Model Form C-4........................................     54.2   9.8
Model Form C-5........................................     81.3   3.8
------------------------------------------------------------------------

    As noted in the proposal, use of the model forms is not mandatory. 
However, appropriate use of the model forms provides a safe harbor. 
There is flexibility to use or not use the model forms, or to modify 
the forms, so long as the requirements of the regulation are met. For 
example, although several of the model forms use five years as the 
duration of the opt-out period, an opt-out period of longer than five 
years may be used and the longer time period substituted in the opt-out 
notices. Alternatively, the consumer's opt-out may be treated as 
effective in perpetuity and, if so, the opt-out notice should omit any 
reference to the limited duration of the opt-out period or the right to 
renew the opt-out.
    The Commission has revised the model forms so that the disclosure 
regarding the duration of the opt-out may state that the opt-out 
applies either for a fixed number of years or ``at least 5 years.'' 
This revision permits institutions that use a longer opt-out period or 
that subsequently extend their opt-out period to rely on the model 
language. The model form also contains a reference to the consumer's 
right to revoke an opt-out. In addition, language has been added to the 
model forms to clarify that, with an opt-out of limited duration, a 
consumer does not have to opt out again until a renewal notice is sent.

V. Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act (PRA), as amended, 
44 U.S.C. 3501-3521, the Commission staff has submitted the final rule 
and a PRA Supporting Statement to the Office of Management and Budget 
(OMB) for review. As required by the PRA, the staff's annual burden 
estimates take into account the burden associated with the rule's 
reporting, recordkeeping, and third-party disclosure requirements.\15\
---------------------------------------------------------------------------

    \15\ 44 U.S.C. 3502(2); 5 CFR 1320.3(b)
---------------------------------------------------------------------------

    As set forth in the notice of proposed rulemaking (NPRM), the final 
rule likewise imposes disclosure requirements on certain affiliated 
companies subject to the Commission's jurisdiction. The final rule 
provides that if a company communicates certain information about a 
consumer (``eligibility information'') to an affiliate, the affiliate 
may not use that information to send solicitations to the consumer 
unless the consumer is given notice and an opportunity and a simple 
method to opt out of such use of the information and the consumer does 
not opt out. The final rule also contains model disclosures that 
companies may use to comply with the final rule's requirements.
    The staff's estimates reflect the average amount of burden incurred 
by entities subject to the final rule, taking into account that some 
entities may not share eligibility information with

[[Page 61453]]

affiliates for the purpose of making solicitations and other entities 
may choose to rely on the exceptions to the final rule's notice and 
opt-out requirements. In either of these cases, the notice would not be 
required, and the resulting burden would be zero. Moreover, the burden 
estimates take into account that a number of non-GLBA companies 
currently provide notices and opt-out choices voluntarily as a service 
to their customers. Since these entities already have systems and 
processes in place for providing the notice and implementing the opt-
out, the resulting PRA burden under the final rule for such entities 
would be de minimis.
    The staff's estimates assume a higher burden will be incurred 
during the first year of the OMB clearance period with a lesser burden 
incurred during the subsequent two years, since the notice is only 
required to be given once for a minimum period of at least five (5) 
years. The staff did not estimate the burden for preparing and 
distributing extension notices by persons that limit the duration of 
the opt-out time period because the minimum effective time period for 
the opt-out is five years while the relevant PRA clearance period is no 
more than three years. Moreover, entities providing the notice and opt-
out may elect to have a longer opt-out period, for example, ten years, 
or to make the opt-out election effective in perpetuity.
    The staff's labor cost estimates take into account: managerial and 
professional time for reviewing internal policies and determining 
compliance obligations; technical time for creating the notice and opt-
out, in either paper or electronic form; incremental training; and 
clerical time for disseminating the notice and opt-out.\16\ In 
addition, the staff's cost estimates presume that the availability of 
model disclosures and opt-out notices will simplify the compliance 
review and implementation processes, thereby significantly reducing the 
cost of compliance. Further, the final rule gives entities flexibility 
to provide a single joint notice on behalf of some or all of its 
affiliates, which should further reduce the cost of compliance.
---------------------------------------------------------------------------

    \16\ No clerical time was included in staff's burden analysis 
for GLBA entities as the notice would likely be combined with 
existing GLBA notices.
---------------------------------------------------------------------------

    The Commission staff previously estimated in the NPRM that the 
total paperwork burden for the proposed rule over a standard three-year 
OMB grant of clearance would be 2,715,000 hours and $63,144,000 in 
labor costs for both GLBA and non-GLBA entities, cumulatively.\17\ In 
preparation for this publication, staff has revisited those estimates, 
refining its analysis. There are no program changes from the NPRM that 
impact staff's prior PRA analysis. Rather, staff has adjusted its 
previously stated estimate of burden hours and the number of non-GLBA 
entities that may send the proposed affiliate marketing notice based 
on: (1) a refined numerical estimate of non-GLBA entities with 
affiliates under the Commission's jurisdiction and thus subject to the 
final rule; and (2) recognition that an entity need only give a notice 
once during the three-year clearance period. Thus, staff now estimates 
the total average annual burden hours and labor costs over the three-
year clearance period to be 1,105,000 and $31,302,000, respectively, as 
further explained below.
---------------------------------------------------------------------------

    \17\ 69 FR at 33335.
---------------------------------------------------------------------------

    The staff estimates that approximately 1.17 million (rounded) non-
GLBA entities under the jurisdiction of the Commission have affiliates 
and would be affected by the final rule.\18\ As in the NPRM, staff 
further estimates that there are an average of 5 businesses per family 
or affiliated relationship, and that the affiliated entities will 
choose to send a joint notice, as permitted by the final rule. Thus an 
estimated 233,400 (rounded) non-GLBA entities may send the new 
affiliate marketing notice. The staff estimates that the cumulative 
burden per non-GLBA entity will total 14 hours\19\ over a three-year 
PRA clearance cycle, not per year, as previously set forth in the NPRM. 
Based on updated population data, the Commission staff estimates that 
the total burden for non-GLBA entities during the prospective three-
year clearance period would be approximately 3,268,000 hours and 
associated labor costs would be approximately $92,247,000.\20\ However, 
non-GLBA entities will give notice only once during a three-year 
clearance period. Thus, averaged annually over that span, estimated 
burden for non-GLBA entities is 1,089,000 hours and $30,749,000 in 
labor costs, rounded.\21\
---------------------------------------------------------------------------

    \18\ This estimate is derived from an analysis of a database of 
U.S. businesses based on SIC codes for businesses that market goods 
or services to consumers, which included the following industries: 
transportation services; communication; electric, gas, and sanitary 
services; retail trade; finance, insurance, and real estate; and 
services (excluding business services and engineering, management 
services). This estimate excludes businesses not subject to the 
Commission's jurisdiction as well as businesses that do not use data 
or information subject to the rule.
    \19\ This estimate, as in the NPRM, is based on a projected 
apportionment of 7 hours managerial time, 2 hours technical time, 
and 5 hours of clerical assistance.
    \20\ The hourly rates are based on average annual Bureau of 
Labor Statistics National Compensation Survey data, June 2005 (with 
2005 as the most recent whole year information available at the BLS 
Web site). http://www.bls.gov/ncs/ocs/sp/ncbl0832.pdf (Table 1.1), 
and further adjusted by a multiplier of 1.06426, a compounding for 
approximate wage inflation for 2005 and 2006, based on the BLS 
Employment Cost Index. The dollar total above is derived from the 
estimated 7 hours of managerial labor at $34.21 per hour; 2 hours of 
technical labor at $29.80 per hour; and 5 hours of clerical labor at 
$14.44 per hour--a combined $371.27--multiplied by 1.06426 (a 
combined $395.13)--for the estimated 233,400+ non-GLBA business 
families subject to the Rule.
    \21\ 3,268,000 hours / 3 = 1,089,000; $92,247,000 / 3 = 
$30,749,000.
---------------------------------------------------------------------------

    As stated in the NPRM, the number of GLBA entities under the 
Commission's jurisdiction is 3,350.\22\ As before, staff estimates that 
GLBA entities would incur 6 hours of paperwork burden during the first 
year of the clearance period,\23\ given that the final rule provides 
model notices. This would thus approximate 20,000 hours, cumulatively, 
during the first year of a three-year OMB clearance period. Labor 
costs, as adjusted, would approximate $716,000.\24\ Allowing for 
increased familiarity with procedure, the paperwork burden in ensuing 
years would decline, with GLBA entities each incurring 4 hours of 
annual burden\25\ during the remaining two years of the clearance 
period. At an estimated 3,350 GLBA entities under the Commission's 
jurisdiction, this amounts to 13,400 hours and $472,000 in labor 
costs\26\ in each of the ensuing two years. Thus, averaged over the 
three-year clearance period, the estimated annual burden for GLBA 
entities is 15,600 hours and $533,000 in labor costs.
---------------------------------------------------------------------------

    \22\See 69 FR at 33334.
    \23\ This estimate is based on 5 hours of managerial time and 1 
hour of technical time to execute the notice. As in the NPRM, staff 
excludes clerical time from the estimate because the notice likely 
would be combined with existing GLBA notices.
    \24\ 3,350 GLBA entities x ($34.21 x 5 hours) + ($29.80 x 1 
hour)] x 1.06426 wage inflation multiplier. See note 20.
    \25\ This estimate, carried over from the NPRM, is based on 3 
hours of managerial time and 1 hour of technical time.
    \26\ 3,350 GLBA entities x [($34.21 x 3 hours) + ($29.80 x 1 
hour)] x 1.06426 wage inflation multiplier. See note 20.
---------------------------------------------------------------------------

    Combining estimates for GLBA and non-GLBA entities, total average 
annual burden over a prospective three-year clearance period, is 
approximately 1,105,000 hours and $31,302,000 in labor costs, rounded. 
As noted in the NPRM, GLBA entities are already providing notices to 
their customers so there are no new capital or other non-labor costs, 
as this notice may be consolidated into their current notices. For non-
GLBA entities, the final rule provides for simple and concise model 
forms that institutions may use to

[[Page 61454]]

comply. Thus, any capital or non-labor costs associated with compliance 
for these entities are negligible.
    The Commission staff recognized that the amount of time needed for 
any particular entity subject to the proposed requirements may be 
higher or lower, but believes that the above stated averages are 
reasonable estimates. In arriving at these estimates, staff determined 
that many entities do not have affiliates and are not covered by 
section 214 of the FACT Act or the rule. Entities that have affiliates 
may choose not to engage in the sharing of certain information or 
marketing to consumers covered by section 214 of the FACT Act or the 
rule. Moreover, to minimize the compliance costs and burdens for 
entities, particularly small businesses, the final rule contains model 
disclosures and opt-out notices that may be used to satisfy the 
statutory requirements. Finally, the final rule gives covered entities 
flexibility to satisfy the notice and opt-out requirement by sending 
the consumer a free-standing opt-out notice or by adding the opt-out 
notice to the privacy notices already provided to consumers, such as 
those provided in accordance with the provisions of Title V of the 
GLBA. For covered persons that choose to prepare a free-standing opt-
out notice, the time necessary to prepare it would be minimal because 
those persons could simply copy the model disclosure, making minor 
adjustments as indicated by it. Similarly, for covered persons that 
choose to incorporate the opt-out notice into their GLBA privacy 
notices, the time necessary to integrate them would be minimal.
    In response to the PRA section of the NPRM, the Commission received 
one comment, from the Mortgage Bankers Association (``MBA''). The MBA 
expressed concern that the NPRM's burden estimates convey a misleading 
impression of the cost of compliance with the final rule.\27\ The MBA's 
principal objection was that the cost estimates assume that the major 
cost is sending the disclosures, rather than processing any opt-out 
requests and ensuring that solicitations are not sent to consumers who 
have opted out or have not yet had a reasonable opportunity to do so. 
The MBA added that the NPRM's cost estimates did not reflect the costs 
associated with building compliance systems, such as costs attributed 
to significant database programming, coordination across business 
entities, legal and managerial review, employee training, and business 
process changes. As an example, the MBA stated that one of its members, 
a medium-sized mortgage banker, estimated that it would cost at least 
$5 million in direct costs to modify its data warehouse computer system 
to accommodate the opt-outs and to send disclosures to all of its 
customers, plus hundreds of thousands of dollars for indirect costs. 
The MBA stated that the NPRM did not consider the significant clerical 
effort needed to comply with the then-proposed rule. The MBA also 
stated that companies that currently provide GLBA privacy and FCRA 
affiliate sharing opt-out notices would still incur significant costs 
because: (1) in contrast to the GLBA, the new opt-out right applies to 
the sharing of information with affiliates; and (2) in contrast to the 
FCRA, the new opt-out right applies to transaction and experience 
information. Finally, the MBA stated that compliance with the then-
proposed rule would be particularly difficult because software 
modifications and employee training will be required to ensure that 
both bank and mortgage company employees have access to consumers' 
transaction and experience information in order to service their 
accounts, but they are prevented from using such information to solicit 
business from consumers who have exercised their opt-out rights.
---------------------------------------------------------------------------

    \27\ The MBA's comment is available at http://www.ftc.gov/os/comments/affiliate_marketing/04-13481-0033.pdf. No other comments 
relating to paperwork burden were received.
---------------------------------------------------------------------------

    The Commission staff continues to believe that its estimate of the 
average amount of time to prepare and distribute an initial notice to 
consumers is reasonable. As a preliminary matter, the Commission staff 
notes that the PRA does not require an estimate all of the costs that 
may be associated with implementing the opt-out, but only the 
information collection costs. The annual burden estimates take into 
account the requisite burden associated with the reporting, 
recordkeeping, and third-party disclosure requirements, including any 
incremental training costs that may be associated with implementing the 
final rule's requirements. Further, the Commission's staff estimates 
are over-inclusive with respect to the number of entities that must 
comply with the rule. As stated earlier, many entities voluntarily 
provide consumers with the right to opt out of advertising by 
affiliates, and thus will not be subject to the final rule's 
requirements and attendant costs. The Commission continues to believe 
that institutions should be able to modify existing database systems 
and employee training programs, used to comply with the GLBA and FCRA 
notice and opt-out requirements, to meet the requirements of this final 
rule. The Commission also believes that use of an average amount of 
time is appropriate because some persons may not share eligibility 
information with affiliates for the purpose of making solicitations or 
may choose to rely on the exceptions to the notice and opt-out 
requirement. In either of these cases, the notice would not be 
required, and the resulting burden would be zero.
    The Commission also believes that the availability of model 
disclosures and opt-out notices may significantly reduce the cost of 
compliance. In addition, as stated earlier the final rule gives persons 
considerable flexibility to provide a joint opt-out notice on behalf of 
multiple affiliates and to define the scope and the duration of the 
opt-out. This flexibility may reduce the cost of compliance by allowing 
covered persons to make choices that are most appropriate for their 
business. Moreover, because the notice is only required to be given 
once for a minimum period of at least five years, the Commission's 
estimates assume a higher burden will be incurred during the first year 
of the OMB clearance period with a lesser burden incurred during the 
subsequent two years.

VI. 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''), with the final rule, unless the 
Commission certifies that the rule will not have a significant economic 
impact on a substantial number of small business entities. See 5 U.S.C. 
603-605. For the majority of entities subject to the final rule, a 
small business entity is defined by the Small Business Administration 
as one whose average annual receipts do not exceed $6 million or that 
has fewer than 500 employees. See http://www.sba.gov/size/indextableofsize.html.

1. Statement of the need for, and objectives of, the final rule.

    The FACT Act amends the FCRA and was enacted, in part, for the 
purpose of allowing consumers to limit the use of eligibility 
information received from an affiliate to make solicitations to the 
consumer. Section 214 of the FACT Act generally prohibits a person from 
using certain information received from an affiliate to make a 
solicitation for marketing purposes to a consumer,

[[Page 61455]]

unless the consumer is given notice and an opportunity and simple 
method to opt out of the making of such solicitations. Section 214 
requires the Commission, together with the other agencies, to issue 
regulations implementing the section in consultation and coordination 
with each other. The Commission received no comments on the reasons for 
the proposed rule. The Commission is adopting the final rule to 
implement Sec.  214 of the FACT Act. The Supplementary Information 
above contains information on the objectives of the final rule.

2. Summary of issues raised by comments in response to the initial 
regulatory flexibility analysis.

    In accordance with Section 3(a) of the RFA, the Commission 
conducted an initial regulatory flexibility analysis in connection with 
the proposed rule. One commenter, the Mortgage Bankers Association 
(MBA), believed that the Commission and the other agencies had 
underestimated the costs of compliance. The issues raised by the MBA 
are described in the Paperwork Reduction Act section above. The MBA's 
concerns applied equally to small entities and larger entities. The MBA 
did not raise any issues unique to small entities.

3. Description and estimate of small entities affected by the final 
rule.

    The affiliate marketing rule, which closely tracks the language of 
section 214 of the FACT ACT, would apply to ``[a]ny person that 
receives from another person related to it by common ownership or 
affiliated by corporate control a communication of information that 
would be a consumer report, but for clauses (i), (ii), and (iii) of 
section 603(d)(2)(A).'' In short, section 214 applies to any entity 
that (1) is under the Commission's jurisdiction pursuant to the FCRA 
and (2) receives consumer report information from an affiliate and uses 
that information to make a marketing solicitation to the consumer. The 
entities covered by the Commission's rule would include non-bank 
lenders, insurers, retailers, landlords, mortgage brokers, automobile 
dealers, telecommunication firms, and any other business that shares 
eligibility information with its affiliates. It is not readily feasible 
to determine a precise number of small entities that will be subject to 
the rule, but it is not likely that many of the entities covered by 
this new rule are small as defined by the Small Business Administration 
since most of the entities with affiliates are likely to be above the 
$6 million level. See http://www.sba.gov/size/indextableofsize.html.
    Although all small entities covered by the Commission's rule 
potentially could be subject to the final rule, small entities that do 
not have affiliates would not be subject to the final rule. In 
addition, small entities that have affiliates may choose not to engage 
in activities that would require compliance with the final rule. For 
example, small entities may choose not to share eligibility information 
with their affiliates for the purpose of making solicitations. 
Alternatively, small entities and their affiliates may structure their 
marketing activities in a way that does not trigger the requirement to 
comply with the final rule, such as by relying upon the exceptions to 
the notice requirement contained in the final rule.

4. Recordkeeping, reporting, and other compliance requirements.

    The final rule requires small entities to provide opt-out notices 
and renewal notices to consumers in certain circumstances, as discussed 
in the Supplementary Information above. The final rule also requires 
small entities to implement consumers' opt-out elections. The final 
rule contains no requirement to report information to the Commission.
    Small entities that have affiliates and that share eligibility 
information with those affiliates for purposes of making solicitations 
may be subject to the rule. Small entities that do not have affiliates, 
do not share eligibility information with their affiliates for 
marketing purposes, use shared eligibility information for purposes of 
making solicitations only in accordance with one of the exceptions set 
forth in the final rule, or structure their marketing activities to 
eliminate the need to provide an opt-out notice would not be subject to 
the final rule. The professional skills necessary for preparation of 
the opt-out notice include compliance and/or privacy specialists and 
computer programmers.

5. Steps taken to minimize the economic impact on small entities.

    The Commission has attempted to minimize the economic impact on 
small entities by adopting a rule that is consistent with the other 
federal agencies and choosing alternatives that provide for joint 
notices and model forms small institutions may, but are not required 
to, use to minimize the cost of compliance.
    Some commenters suggested an alternative that would allow any 
affiliate to provide the opt-out notice to consumers instead of 
requiring the affiliate the consumer has a relationship with to provide 
the notice. The Commission chose the alternative that requires the 
affiliate with the relationship with the consumer to provide the 
notice. See section IV, supra. This alternative is not expected to have 
a significant impact on small businesses since, as stated earlier, many 
small businesses are not likely to be subject to the rule or they may 
opt not to engage in practices that would subject them to the rule's 
requirements.

List of Subjects

16 CFR Part 680

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

16 CFR Part 698

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

0
The Federal Trade Commission amends chapter I, title 16, Code of 
Federal Regulations, as follows:
0
1. Add new part 680 as follows:

PART 680--AFFILIATE MARKETING

Sec.
680.1 Purpose and scope.
680.2 Examples.
680.3 Definitions.
680.4-680.20 [Reserved]
680.21 Affiliate marketing opt-out and exceptions.
680.22 Scope and duration of opt-out.
680.23 Contents of opt-out notice; consolidated and equivalent 
notices.
680.24 Reasonable opportunity to opt out.
680.25 Reasonable and simple methods of opting out.
680.26 Delivery of opt-out notices
680.27 Renewal of opt-out.
680.28 Effective date, compliance date, and prospective application.

    Authority: Sec. 214(b), Pub. L. 108-159; 15 U.S.C. 1681s-3


Sec.  680.1  Purpose and scope.

    (a) Purpose. The purpose of this part is to implement section 214 
of the Fair and Accu-rate Credit Transactions Act of 2003, which (by 
adding section 624 to Fair Credit Reporting Act) regulates the use, for 
marketing solicitation purposes, of consumer information provided by 
persons affiliated with the person making the solicitation.
    (b) Scope. This part applies to any person over which the Federal 
Trade Commission has jurisdiction that uses information from its 
affiliates for the purpose of marketing solicitations, or provides 
information to its affiliates for that purpose.


Sec.  680.2  Examples.

    The examples in this part are not exclusive. Compliance with an 
example,

[[Page 61456]]

to the extent applicable, constitutes compliance with this part. 
Examples in a paragraph illustrate only the issue described in the 
paragraph and do not illustrate any other issue that may arise in this 
part.


Sec.  680.3  Definitions.

    As used in this part:
    (a) Act. The term ``Act'' means the Fair Credit Reporting Act (15 
U.S.C. 1681 et seq.).
    (b) Affiliate. The term ``affiliate'' means any company that is 
related by common ownership or common corporate control with another 
company.
    (c) Clear and conspicuous. The term ``clear and conspicuous'' means 
reasonably under-standable and designed to call attention to the nature 
and significance of the information presented.
    (d) Common ownership or common corporate control. The term ``common 
ownership or common corporate control'' means a relationship between 
two companies under which:
    (1) One company has, with respect to the other company:
    (i) Ownership, control, or the power to vote 25 percent or more of 
the outstanding shares of any class of voting security of a company, 
directly or indirectly, or acting through one or more other persons;
    (ii) Control in any manner over the election of a majority of the 
directors, trustees, or general partners (or individuals exercising 
similar functions) of a company; or
    (iii) The power to exercise, directly or indirectly, a controlling 
influence over the management or policies of a company, as the 
Commission determines; or
    (2) Any person has, with respect to both companies, a relationship 
described in paragraphs (d)(1)(i) through (d)(1)(iii) of this section.
    (e) Company. The term ``company'' means any corporation, limited 
liability company, business trust, general or limited partnership, 
association, or similar organization.
    (f) Concise--(1) In general. The term ``concise'' means a 
reasonably brief expression or statement.
    (2) Combination with other required disclosures. A notice required 
by this part may be concise even if it is combined with other 
disclosures required or authorized by federal or state law.
    (g) Consumer. The term ``consumer'' means an individual.
    (h) Eligibility information. The term ``eligibility information'' 
means any information the communication of which would be a consumer 
report if the exclusions from the definition of ``consumer report'' in 
section 603(d)(2)(A) of the Act did not apply. Eligibility information 
does not include aggregate or blind data that does not contain personal 
identifiers such as account numbers, names, or addresses.
    (i) Person. The term ``person'' means any individual, partnership, 
corporation, trust, estate, cooperative, association, government or 
governmental subdivision or agency, or other entity.
    (j) Pre-existing business relationship--(1) In general. The term 
``pre-existing business relationship'' means a relationship between a 
person, or a person's licensed agent, and a consumer based on--
    (i) A financial contract between the person and the consumer which 
is in force on the date on which the consumer is sent a solicitation 
covered by this part;
    (ii) The purchase, rental, or lease by the consumer of the persons' 
goods or services, or a financial transaction (including holding an 
active account or a policy in force or having another continuing 
relationship) between the consumer and the person, during the 18-month 
period immediately preceding the date on which the consumer is sent a 
solicitation covered by this part; or
    (iii) An inquiry or application by the consumer regarding a product 
or service offered by that person during the three-month period 
immediately preceding the date on which the consumer is sent a 
solicitation covered by this part.
    (2) Examples of pre-existing business relationships. (i) If a 
consumer has an existing loan account with a creditor, the creditor has 
a pre-existing business relationship with the consumer and can use 
eligibility information it receives from its affiliates to make 
solicitations to the consumer about its products or services.
    (ii) If a consumer obtained a mortgage from a mortgage lender, but 
refinanced the mortgage loan with a different lender when the mortgage 
loan came due, the first mortgage lender has a pre-existing business 
relationship with the consumer and can use eligibility information it 
receives from its affiliates to make solicitations to the consumer 
about its products or services for 18 months after the date the 
outstanding balance of the loan is paid and the loan is closed.
    (iii) If a consumer obtains a mortgage, the mortgage lender has a 
pre-existing business relationship with the consumer. If the mortgage 
lender sells the consumer's entire loan to an investor, the mortgage 
lender has a pre-existing business relationship with the consumer and 
can use eligibility information it receives from its affiliates to make 
solicitations to the consumer about its products or services for 18 
months after the date it sells the loan, and the investor has a pre-
existing business relationship with the consumer upon purchasing the 
loan. If, however, the mortgage lender sells a fractional interest in 
the consumer's loan to an investor but also retains an ownership 
interest in the loan, the mortgage lender continues to have a pre-
existing business relationship with the consumer, but the investor does 
not have a pre-existing business relationship with the consumer. If the 
mortgage lender retains ownership of the loan, but sells ownership of 
the servicing rights to the consumer's loan, the mortgage lender 
continues to have a pre-existing business relationship with the 
consumer. The purchaser of the servicing rights also has a pre-existing 
business relationship with the consumer as of the date it purchases 
ownership of the servicing rights, but only if it collects payments 
from or otherwise deals directly with the consumer on a continuing 
basis.
    (iv) If a consumer applies to a creditor for a product or service 
that it offers, but does not obtain a product or service from or enter 
into a financial contract or transaction with the creditor, the 
creditor has a pre-existing business relationship with the consumer and 
can therefore use eligibility information it receives from an affiliate 
to make solicitations to the consumer about its products or services 
for three months after the date of the application.
    (v) If a consumer makes a telephone inquiry to a creditor about its 
products or services and provides contact information to the creditor, 
but does not obtain a product or service from or enter into a financial 
contract or transaction with the creditor, the creditor has a pre-
existing business relationship with the consumer and can therefore use 
eligibility information it receives from an affiliate to make 
solicitations to the consumer about its products or services for three 
months after the date of the inquiry.
    (vi) If a consumer makes an inquiry to a creditor by e-mail about 
its products or services, but does not obtain a product or service from 
or enter into a financial contract or transaction with the creditor, 
the creditor has a pre-existing business relationship with the consumer 
and can therefore use eligibility information it receives from an 
affiliate to make solicitations to the consumer about its products or 
services

[[Page 61457]]

for three months after the date of the inquiry.
    (vii) If a consumer has an existing relationship with a creditor 
that is part of a group of affiliated companies, makes a telephone call 
to the centralized call center for the group of affiliated companies to 
inquire about products or services offered by the insurance affiliate, 
and provides contact information to the call center, the call 
constitutes an inquiry to the insurance affiliate that offers those 
products or services. The insurance affiliate has a pre-existing 
business relationship with the consumer and can therefore use 
eligibility information it receives from its affiliated creditor to 
make solicitations to the consumer about its products or services for 
three months after the date of the inquiry.
    (3) Examples where no pre-existing business relationship is 
created. (i) If a consumer makes a telephone call to a centralized call 
center for a group of affiliated companies to inquire about the 
consumer's existing account with a creditor, the call does not 
constitute an inquiry to any affiliate other than the creditor that 
holds the consumer's account and does not establish a pre-existing 
business relationship between the consumer and any affiliate of the 
account-holding creditor.
    (ii) If a consumer who has a loan account with a creditor makes a 
telephone call to an af-filiate of the creditor to ask about the 
affiliate's retail locations and hours, but does not make an inquiry 
about the affiliate's products or services, the call does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate. Also, the 
affiliate's capture of the consumer's telephone number does not 
constitute an inquiry and does not establish a pre-existing business 
relationship between the consumer and the affiliate.
    (iii) If a consumer makes a telephone call to a creditor in 
response to an advertisement that offers a free promotional item to 
consumers who call a toll-free number, but the advertisement does not 
indicate that creditor's products or services will be marketed to 
consumers who call in response, the call does not create a pre-existing 
business relationship between the consumer and the creditor because the 
consumer has not made an inquiry about a product or service offered by 
the creditor, but has merely responded to an offer for a free 
promotional item.
    (k) Solicitation--(1) In general. The term ``solicitation'' means 
the marketing of a product or service initiated by a person to a 
particular consumer that is--
    (i) Based on eligibility information communicated to that person by 
its affiliate as described in this part; and
    (ii) Intended to encourage the consumer to purchase or obtain such 
product or service.
    (2) Exclusion of marketing directed at the general public. A 
solicitation does not include marketing communications that are 
directed at the general public. For example, television, general 
circulation magazine, and billboard advertisements do not constitute 
solicitations, even if those communications are intended to encourage 
consumers to purchase products and services from the person initiating 
the communications.
    (3) Examples of solicitations. A solicitation would include, for 
example, a telemarketing call, direct mail, e-mail, or other form of 
marketing communication directed to a particular consumer that is based 
on eligibility information received from an affiliate.
    (l) You means a person described in Sec.  680.1(b).


Sec. Sec.  680.4-680.20  [Reserved]


Sec.  680.21  Affiliate marketing opt-out and exceptions.

    (a) Initial notice and opt-out requirement--(1) In general. You may 
not use eligibility information about a consumer that you receive from 
an affiliate to make a solicitation for marketing purposes to the 
consumer, unless--
    (i) It is clearly and conspicuously disclosed to the consumer in 
writing or, if the consumer agrees, electronically, in a concise notice 
that you may use eligibility information about that consumer received 
from an affiliate to make solicitations for marketing purposes to the 
consumer;
    (ii) The consumer is provided a reasonable opportunity and a 
reasonable and simple method to ``opt out,'' or prohibit you from using 
eligibility information to make solicitations for marketing purposes to 
the consumer; and
    (iii) The consumer has not opted out.
    (2) Example. A consumer has a homeowner's insurance policy with an 
insurance company. The insurance company furnishes eligibility 
information about the consumer to its affiliated creditor. Based on 
that eligibility information, the creditor wants to make a solicitation 
to the consumer about its home equity loan products. The creditor does 
not have a pre-existing business relationship with the consumer and 
none of the other exceptions apply. The creditor is prohibited from 
using eligibility information received from its insurance affiliate to 
make solicitations to the consumer about its home equity loan products 
unless the consumer is given a notice and opportunity to opt out and 
the consumer does not opt out.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph (a) must be provided:
    (i) By an affiliate that has or has previously had a pre-existing 
business relationship with the consumer; or
    (ii) As part of a joint notice from two or more members of an 
affiliated group of companies, provided that at least one of the 
affiliates on the joint notice has or has previously had a pre-existing 
business relationship with the consumer.
    (b) Making solicitations--(1) In general. For purposes of this 
part, you make a solicitation for marketing purposes if--
    (i) You receive eligibility information from an affiliate;
    (ii) You use that eligibility information to do one or more of the 
following:
    (A) Identify the consumer or type of consumer to receive a 
solicitation;
    (B) Establish criteria used to select the consumer to receive a 
solicitation; or
    (C) Decide which of your products or services to market to the 
consumer or tailor your solicitation to that consumer; and
    (iii) As a result of your use of the eligibility information, the 
consumer is provided a solicitation.
    (2) Receiving eligibility information from an affiliate, including 
through a common database. You may receive eligibility information from 
an affiliate in various ways, including when the affiliate places that 
information into a common database that you may access.
    (3) Receipt or use of eligibility information by your service 
provider. Except as provided in paragraph (b)(5) of this section, you 
receive or use an affiliate's eligibility information if a service 
provider acting on your behalf (whether an affiliate or a nonaffiliated 
third party) receives or uses that information in the manner described 
in paragraphs (b)(1)(i) or (b)(1)(ii) of this section. All relevant 
facts and circumstances will determine whether a person is acting as 
your service provider when it receives or uses an affiliate's 
eligibility information in connection with marketing your products and 
services.
    (4) Use by an affiliate of its own eligibility information. Unless 
you have used eligibility information that you receive from an 
affiliate in the manner described in paragraph (b)(1)(ii) of this

[[Page 61458]]

section, you do not make a solicitation subject to this part if your 
affiliate:
    (i) Uses its own eligibility information that it obtained in 
connection with a pre-existing business relationship it has or had with 
the consumer to market your products or services to the consumer; or
    (ii) Directs its service provider to use the affiliate's own 
eligibility information that it obtained in connection with a pre-
existing business relationship it has or had with the consumer to 
market your products or services to the consumer, and you do not 
communicate directly with the service provider regarding that use.
    (5) Use of eligibility information by a service provider. (i) In 
general. You do not make a solicitation subject to this part if a 
service provider (including an affiliated or third-party service 
provider that maintains or accesses a common database that you may 
access) receives eligibility information from your affiliate that your 
affiliate obtained in connection with a pre-existing business 
relationship it has or had with the consumer and uses that eligibility 
information to market your products or services to the consumer, so 
long as--
    (A) Your affiliate controls access to and use of its eligibility 
information by the service provider (including the right to establish 
the specific terms and conditions under which the service provider may 
use such information to market your products or services);
    (B) Your affiliate establishes specific terms and conditions under 
which the service provider may access and use the affiliate's 
eligibility information to market your products and services (or those 
of affiliates generally) to the consumer, such as the identity of the 
affiliated companies whose products or services may be marketed to the 
consumer by the service provider, the types of products or services of 
affiliated companies that may be marketed, and the number of times the 
consumer may receive marketing materials, and periodically evaluates 
the service provider's compliance with those terms and conditions;
    (C) Your affiliate requires the service provider to implement 
reasonable policies and procedures designed to ensure that the service 
provider uses the affiliate's eligibility information in accordance 
with the terms and conditions established by the affiliate relating to 
the marketing of your products or services;
    (D) Your affiliate is identified on or with the marketing materials 
provided to the consumer; and
    (E) You do not directly use your affiliate's eligibility 
information in the manner described in paragraph (b)(1)(ii) of this 
section.
    (ii) Writing requirements. (A) The requirements of paragraphs 
(b)(5)(i)(A) and (C) of this section must be set forth in a written 
agreement between your affiliate and the service provider; and
    (B) The specific terms and conditions established by your affiliate 
as provided in paragraph (b)(5)(i)(B) of this section must be set forth 
in writing.
    (6) Examples of making solicitations. (i) A consumer has a loan 
account with a creditor, which is affiliated with an insurance company. 
The insurance company receives eligibility information about the 
consumer from the creditor. The insurance company uses that eligibility 
information to identify the consumer to receive a solicitation about 
insurance products, and, as a result, the insurance company provides a 
solicitation to the consumer about its insurance products. Pursuant to 
paragraph (b)(1) of this section, the insurance company has made a 
solicitation to the consumer.
    (ii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that after using the eligibility information to 
identify the consumer to receive a solicitation about insurance 
products, the insurance company asks the creditor to send the 
solicitation to the consumer and the creditor does so. Pursuant to 
paragraph (b)(1) of this section, the insurance company has made a 
solicitation to the consumer because it used eligibility information 
about the consumer that it received from an affiliate to identify the 
consumer to receive a solicitation about its products or services, and, 
as a result, a solicitation was provided to the consumer about the 
insurance company's products.
    (iii) The same facts as in the example in paragraph (b)(6)(i) of 
this section, except that eligibility information about consumers that 
have loan accounts with the creditor is placed into a common database 
that all members of the affiliated group of companies may independently 
access and use. Without using the creditor's eligibility information, 
the insurance company develops selection criteria and provides those 
criteria, marketing materials, and related instructions to the 
creditor. The creditor reviews eligibility information about its own 
consumers using the selection criteria provided by the insurance 
company to determine which consumers should receive the insurance 
company's marketing materials and sends marketing materials about the 
insurance company's products to those consumers. Even though the 
insurance company has received eligibility information through the 
common database as provided in paragraph (b)(2) of this section, it did 
not use that information to identify consumers or establish selection 
criteria; instead, the creditor used its own eligibility information. 
Therefore, pursuant to paragraph (b)(4)(i) of this section, the 
insurance company has not made a solicitation to the consumer.
    (iv) The same facts as in the example in paragraph (b)(6)(iii) of 
this section, except that the creditor provides the insurance company's 
criteria to the creditor's service provider and directs the service 
provider to use the creditor's eligibility information to identify 
creditor consumers who meet the criteria and to send the insurance 
company's marketing materials to those consumers. The insurance company 
does not communicate directly with the service provider regarding the 
use of the creditor's information to market its products to the 
creditor's consumers. Pursuant to paragraph (b)(4)(ii) of this section, 
the insurance company has not made a solicitation to the consumer.
    (v) An affiliated group of companies includes a creditor, an 
insurance company, and a service provider. Each affiliate in the group 
places information about its consumers into a common database. The 
service provider has access to all information in the common database. 
The creditor controls access to and use of its eligibility information 
by the service provider. This control is set forth in a written 
agreement between the creditor and the service provider. The written 
agreement also requires the service provider to establish reasonable 
policies and procedures designed to ensure that the service provider 
uses the creditor's eligibility information in accordance with specific 
terms and conditions established by the creditor relating to the 
marketing of the products and services of all affiliates, including the 
insurance company. In a separate written communication, the creditor 
specifies the terms and conditions under which the service provider may 
use the creditor's eligibility information to market the insurance 
company's products and services to the creditor's consumers. The 
specific terms and conditions are: a list of affiliated companies 
(including the insurance company) whose products or services may be 
marketed to the creditor's consumers by the service provider; the 
specific products or types of products that may be marketed to the 
creditor's consumers by the service provider; the categories of 
eligibility information that may be used by the service provider in 
marketing products or services to the creditor's consumers; the types 
or

[[Page 61459]]

categories of the creditor's consumers to whom the service provider may 
market products or services of creditor affiliates; the number and/or 
types of marketing communications that the service provider may send to 
the creditor's consumers; and the length of time during which the 
service provider may market the prod-ucts or services of the creditor's 
affiliates to its consumers. The creditor periodically evaluates the 
service provider's compliance with these terms and conditions. The 
insurance company asks the service provider to market insurance 
products to certain consumers who have loan accounts with the creditor. 
Without using the creditor's eligibility information, the insurance 
company develops selection criteria and provides those criteria, 
marketing materials, and related instructions to the service provider. 
The service provider uses the creditor's eligibility information from 
the common database to identify the creditor's consumers to whom 
insurance products will be marketed. When the insurance company's 
marketing materials are provided to the identified consumers, the name 
of the creditor is displayed on the insurance marketing materials, an 
introductory letter that accompanies the marketing materials, an 
account statement that accompanies the marketing materials, or the 
envelope containing the marketing materials. The re-quirements of 
paragraph (b)(5) of this section have been satisfied, and the insurance 
company has not made a solicitation to the consumer.
    (vi) The same facts as in the example in paragraph (b)(6)(v) of 
this section, except that the terms and conditions permit the service 
provider to use the creditor's eligibility information to market the 
products and services of other affiliates to the creditor's consumers 
whenever the service provider deems it appropriate to do so. The 
service provider uses the creditor's eligibility information in 
accordance with the discretion af-forded to it by the terms and 
conditions. Because the terms and conditions are not specific, the 
requirements of paragraph (b)(5) of this section have not been 
satisfied.
    (c) Exceptions. The provisions of this part do not apply to you if 
you use eligibility information that you receive from an affiliate:
    (1) To make a solicitation for marketing purposes to a consumer 
with whom you have a pre-existing business relationship;
    (2) To facilitate communications to an individual for whose benefit 
you provide employee benefit or other services pursuant to a contract 
with an employer related to and arising out of the current employment 
relationship or status of the individual as a participant or 
beneficiary of an employee benefit plan;
    (3) To perform services on behalf of an affiliate, except that this 
paragraph shall not be construed as permitting you to send 
solicitations on behalf of an affiliate if the affiliate would not be 
permitted to send the solicitation as a result of the election of the 
consumer to opt out under this part;
    (4) In response to a communication about your products or services 
initiated by the consumer;
    (5) In response to an authorization or request by the consumer to 
receive solicitations; or
    (6) If your compliance with this part would prevent you from 
complying with any provision of State insurance laws pertaining to 
unfair discrimination in any State in which you are lawfully doing 
business.
    (d) Examples of exceptions--(1) Example of the pre-existing 
business relationship exception. A consumer has a loan account with a 
creditor. The consumer also has a relationship with the creditor's 
securities affiliate for management of the consumer's securities 
portfolio. The creditor receives eligibility information about the 
consumer from its securities affiliate and uses that information to 
make a solicitation to the consumer about the creditor's wealth 
management services. The creditor may make this solicitation even if 
the consumer has not been given a notice and opportunity to opt out 
because the creditor has a pre-existing business relationship with the 
consumer.
    (2) Examples of service provider exception. (i) A consumer has an 
insurance policy issued by an insurance company. The insurance company 
furnishes eligibility information about the consumer to an affiliated 
creditor. Based on that eligibility information, the creditor wants to 
make a solicitation to the consumer about its credit products. The 
creditor does not have a pre-existing business relationship with the 
consumer and none of the other exceptions in para-graph (c) of this 
section apply. The consumer has been given an opt-out notice and has 
elected to opt out of receiving such solicitations. The creditor asks a 
service provider to send the solicitation to the consumer on its 
behalf. The service provider may not send the solicitation on behalf of 
the creditor because, as a result of the consumer's opt-out election, 
the creditor is not permitted to make the solicitation.
    (ii) The same facts as in paragraph (d)(2)(i) of this section, 
except the consumer has been given an opt-out notice, but has not 
elected to opt out. The creditor asks a service provider to send the 
solicitation to the consumer on its behalf. The service provider may 
send the solicitation on behalf of the creditor because, as a result of 
the consumer's not opting out, the creditor is permitted to make the 
solicitation.
    (3) Examples of consumer-initiated communications. (i) A consumer 
who has a consumer loan account with a finance company initiates a 
communication with the creditor's mortgage lending affiliate to request 
information about a mortgage. The mortgage lender affiliate may use 
eligibility information about the consumer it obtains from the finance 
company or any other affiliate to make solicitations regarding mortgage 
products in response to the consumer-initiated communication.
    (ii) A consumer who has a loan account with a creditor contacts the 
creditor to request information about how to save and invest for a 
child's college education without specifying the type of product in 
which the consumer may be interested. Information about a range of 
different products or services offered by the creditor and one or more 
affiliates of the creditor may be responsive to that communication. 
Such products or services may include the following: mutual funds 
offered by the creditor's mutual fund affil-iate; section 529 plans 
offered by the creditor, its mutual fund affiliate, or another 
securities affiliate; or trust services offered by a different creditor 
in the affiliated group. Any affiliate offering investment products or 
services that would be responsive to the consumer's request for 
information about saving and investing for a child's college education 
may use eligibility information to make solicitations to the consumer 
in response to this communication.
    (iii) A credit card issuer makes a marketing call to the consumer 
without using eligibility information received from an affiliate. The 
issuer leaves a voice-mail message that invites the consumer to call a 
toll-free number to apply for the issuer's credit card. If the consumer 
calls the toll-free number to inquire about the credit card, the call 
is a consumer-initiated communication about a product or service and 
the credit card issuer may now use eligibility information it receives 
from its affiliates to make solicitations to the consumer.
    (iv) A consumer calls a creditor to ask about retail locations and 
hours, but does not request information about products or services. The 
creditor may not use eligibility information it receives from an 
affiliate to make

[[Page 61460]]

solicitations to the consumer about its products or services because 
the consumer-initiated communication does not relate to the creditor's 
products or services. Thus, the use of eligibility information received 
from an affiliate would not be responsive to the communication and the 
exception does not apply.
    (v) A consumer calls a creditor to ask about office locations and 
hours. The customer service representative asks the consumer if there 
is a particular product or service about which the consumer is seeking 
information. The consumer responds that the consumer wants to stop in 
and find out about second mortgage loans. The customer service 
representative offers to provide that information by telephone and mail 
additional information and application materials to the consumer. The 
consumer agrees and provides or confirms contact information for 
receipt of the materials to be mailed. The creditor may use eligibility 
information it receives from an affiliate to make solicitations to the 
consumer about mortgage loan products because such solicitations 
respond to the consumer-initiated communication about products or 
services.
    (4) Examples of consumer authorization or request for 
solicitations. (i) A consumer who obtains a mortgage from a mortgage 
lender authorizes or requests information about homeowner's insurance 
offered by the mortgage lender's insurance affiliate. Such 
authorization or request, whether given to the mortgage lender or to 
the insurance affiliate, would permit the insurance affiliate to use 
eligibility information about the consumer it obtains from the mortgage 
lender or any other affiliate to make solicitations to the consumer 
about homeowner's insurance.
    (ii) A consumer completes an online application to apply for a 
credit card from a department store. The store's online application 
contains a blank check box that the consumer may check to authorize or 
request information from the store's affiliates. The consumer checks 
the box. The consumer has authorized or requested solicitations from 
store's affiliates.
    (iii) A consumer completes an online application to apply for a 
credit card from a department store. The store's online application 
contains a pre-selected check box indicating that the consumer 
authorizes or requests information from the store's affiliates. The 
consumer does not deselect the check box. The consumer has not 
authorized or requested solicitations from the store's affiliates.
    (iv) The terms and conditions of a credit account agreement contain 
preprinted boilerplate language stating that by applying to open an 
account the consumer authorizes or requests to receive solicitations 
from the creditor's affiliates. The consumer has not authorized or 
requested solicitations from the creditor's affiliates.
    (e) Relation to affiliate-sharing notice and opt-out. Nothing in 
this part limits the responsibility of a person to comply with the 
notice and opt-out provisions of section 603(d)(2)(A)(iii) of the Act 
where applicable.


Sec.  680.22  Scope and duration of opt-out.

    (a) Scope of opt-out--(1) In general. Except as otherwise provided 
in this section, the consumer's election to opt out prohibits any 
affiliate covered by the opt-out notice from using eligibility 
information received from another affiliate as described in the notice 
to make solicitations to the consumer.
    (2) Continuing relationship--(i) In general. If the consumer 
establishes a continuing relationship with you or your affiliate, an 
opt-out notice may apply to eligibility information obtained in 
connection with--
    (A) A single continuing relationship or multiple continuing 
relationships that the consumer establishes with you or your 
affiliates, including continuing relationships established subsequent 
to delivery of the opt-out notice, so long as the notice adequately 
describes the continuing relationships covered by the opt-out; or
    (B) Any other transaction between the consumer and you or your 
affiliates as described in the notice.
    (ii) Examples of continuing relationships. A consumer has a 
continuing relationship with you or your affiliate if the consumer--
    (A) Opens a credit account with you or your affiliate;
    (B) Obtains a loan for which you or your affiliate owns the 
servicing rights;
    (C) Purchases an insurance product from you or your affiliate;
    (D) Holds an investment product through you or your affiliate, such 
as when you act or your affiliate acts as a custodian for securities or 
for assets in an individual retirement arrangement;
    (E) Enters into an agreement or understanding with you or your 
affiliate whereby you or your affiliate undertakes to arrange or broker 
a home mortgage loan for the consumer;
    (F) Enters into a lease of personal property with you or your 
affiliate; or
    (G) Obtains financial, investment, or economic advisory services 
from you or your affiliate for a fee.
    (3) No continuing relationship--(i) In general. If there is no 
continuing relationship between a consumer and you or your affiliate, 
and you or your affiliate obtain eligibility information about a 
consumer in connection with a transaction with the consumer, such as an 
isolated transaction or a credit application that is denied, an opt-out 
notice provided to the consumer only applies to eligibility information 
obtained in connection with that transaction.
    (ii) Examples of isolated transactions. An isolated transaction 
occurs if--
    (A) The consumer uses your or your affiliate's ATM to withdraw cash 
from an account at a financial institution; or
    (B) You or your affiliate sells the consumer a money order, airline 
tickets, travel insurance, or traveler's checks in isolated 
transactions.
    (4) Menu of alternatives. A consumer may be given the opportunity 
to choose from a menu of alternatives when electing to prohibit 
solicitations, such as by electing to prohibit solicitations from 
certain types of affiliates covered by the opt-out notice but not other 
types of affiliates covered by the notice, electing to prohibit 
solicitations based on certain types of eligibility information but not 
other types of eligibility information, or electing to prohibit 
solicitations by certain methods of delivery but not other methods of 
delivery. However, one of the alternatives must allow the consumer to 
prohibit all solicitations from all of the affiliates that are covered 
by the notice.
    (5) Special rule for a notice following termination of all 
continuing relationships--(i) In general. A consumer must be given a 
new opt-out notice if, after all continuing relationships with you or 
your affiliate(s) are terminated, the consumer subsequently establishes 
another continuing relationship with you or your affiliate(s) and the 
consumer's eligibility information is to be used to make a 
solicitation. The new opt-out notice must apply, at a minimum, to 
eligibility information obtained in connection with the new continuing 
relationship. Consistent with paragraph (b) of this section, the 
consumer's decision not to opt out after receiving the new opt-out 
notice would not override a prior opt-out election by the consumer that 
applies to eligibility information obtained in connection with a 
terminated relationship, regardless of whether the new opt-out notice 
applies to eligibility information obtained in connection with the 
terminated relationship.
    (ii) Example. A consumer has an automobile loan account with a 
creditor

[[Page 61461]]

that is part of an affiliated group. The consumer pays off the loan. 
After paying off the loan, the consumer subsequently obtains a second 
mortgage loan from the creditor. The consumer must be given a new 
notice and opportunity to opt out before the creditor's affiliates may 
make solicitations to the consumer using eligibility information 
obtained by the creditor in connection with the new mortgage 
relationship, regardless of whether the consumer opted out in 
connection with the automobile loan account.
    (b) Duration of opt-out. The election of a consumer to opt out must 
be effective for a period of at least five years (the ``opt-out 
period'') beginning when the consumer's opt-out election is received 
and implemented, unless the consumer subsequently revokes the opt-out 
in writing or, if the consumer agrees, electronically. An opt-out 
period of more than five years may be established, including an opt-out 
period that does not expire unless revoked by the consumer.
    (c) Time of opt-out. A consumer may opt out at any time.


Sec.  680.23  Contents of opt-out notice; consolidated and equivalent 
notices.

    (a) Contents of opt-out notice--(1) In general. A notice must be 
clear, conspicuous, and concise, and must accurately disclose:
    (i) The name of the affiliate(s) providing the notice. If the 
notice is provided jointly by multiple affiliates and each affiliate 
shares a common name, such as ``ABC,'' then the notice may indicate 
that it is being provided by multiple companies with the ABC name or 
multiple companies in the ABC group or family of companies, for 
example, by stating that the notice is provided by ``all of the ABC 
companies,'' ``the ABC banking, credit card, insurance, and securities 
companies,'' or by listing the name of each affiliate providing the 
notice. But if the affiliates providing the joint notice do not all 
share a common name, then the notice must either separately identify 
each affiliate by name or identify each of the common names used by 
those affiliates, for example, by stating that the notice is provided 
by ``all of the ABC and XYZ companies'' or by ``the ABC banking and 
credit card companies and the XYZ insurance companies;''
    (ii) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice 
is provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance 
companies;''
    (iii) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (iv) That the consumer may elect to limit the use of eligibility 
information to make solicitations to the consumer;
    (v) That the consumer's election will apply for the specified 
period of time stated in the notice and, if applicable, that the 
consumer will be allowed to renew the election once that period 
expires;
    (vi) If the notice is provided to consumers who may have previously 
opted out, such as if a notice is provided to consumers annually, that 
the consumer who has chosen to limit solicitations does not need to act 
again until the consumer receives a renewal notice; and
    (vii) A reasonable and simple method for the consumer to opt out.
    (2) Joint relationships. (i) If two or more consumers jointly 
obtain a product or service, a single opt-out notice may be provided to 
the joint consumers. Any of the joint consumers may exercise the right 
to opt out.
    (ii) The opt-out notice must explain how an opt-out direction by a 
joint consumer will be treated. An opt-out direction by a joint 
consumer may be treated as applying to all of the associated joint 
consumers, or each joint consumer may be permitted to opt out 
separately. If each joint consumer is permitted to opt out separately, 
one of the joint consumers must be permitted to opt out on behalf of 
all of the joint consumers and the joint consumers must be permitted to 
exercise their separate rights to opt out in a single response.
    (iii) It is impermissible to require all joint consumers to opt out 
before implementing any opt-out direction.
    (3) Alternative contents. If the consumer is afforded a broader 
right to opt out of receiving marketing than is required by this part, 
the requirements of this section may be satisfied by providing the 
consumer with a clear, conspicuous, and concise notice that accurately 
discloses the consumer's opt-out rights.
    (4) Model notices. Model notices are provided in Appendix C of Part 
698 of this chapter.
    (b) Coordinated and consolidated notices. A notice required by this 
part may be coordinated and consolidated with any other notice or 
disclosure required to be issued under any other provision of law by 
the entity providing the notice, including but not limited to the 
notice de-scribed in section 603(d)(2)(A)(iii) of the Act and the 
Gramm-Leach-Bliley Act privacy notice.
    (c) Equivalent notices. A notice or other disclosure that is 
equivalent to the notice required by this part, and that is provided to 
a consumer together with disclosures required by any other provision of 
law, satisfies the requirements of this section.


Sec.  680.24  Reasonable opportunity to opt out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable opportunity to opt out, as required by
    Sec.  680.21(a)(1)(ii) of this part.
    (b) Examples of a reasonable opportunity to opt out. The consumer 
is given a reasonable opportunity to opt out if:
    (1) By mail. The opt-out notice is mailed to the consumer. The 
consumer is given 30 days from the date the notice is mailed to elect 
to opt out by any reasonable means.
    (2) By electronic means. (i) The opt-out notice is provided 
electronically to the consumer, such as by posting the notice at an 
Internet Web site at which the consumer has obtained a product or 
service. The consumer acknowledges receipt of the electronic notice. 
The consumer is given 30 days after the date the consumer acknowledges 
receipt to elect to opt out by any reasonable means.
    (ii) The opt-out notice is provided to the consumer by e-mail where 
the consumer has agreed to receive disclosures by e-mail from the 
person sending the notice. The consumer is given 30 days after the e-
mail is sent to elect to opt out by any reasonable means.
    (3) At the time of an electronic transaction. The opt-out notice is 
provided to the consumer at the time of

[[Page 61462]]

an electronic transaction, such as a transaction conducted on an 
Internet Web site. The consumer is required to decide, as a necessary 
part of proceeding with the transaction, whether to opt out before 
completing the transaction. There is a simple process that the consumer 
may use to opt out at that time using the same mechanism through which 
the transaction is conducted.
    (4) At the time of an in-person transaction. The opt-out notice is 
provided to the consumer in writing at the time of an in-person 
transaction. The consumer is required to decide, as a necessary part of 
proceeding with the transaction, whether to opt out before completing 
the transaction, and is not permitted to complete the transaction 
without making a choice. There is a simple process that the consumer 
may use during the course of the in-person transaction to opt out, such 
as completing a form that requires consumers to write a ``yes'' or 
``no'' to indicate their opt-out preference or that requires the 
consumer to check one of two blank check boxes--one that allows 
consumers to indicate that they want to opt out and one that allows 
consumers to indicate that they do not want to opt out.
    (5) By including in a privacy notice. The opt-out notice is 
included in a Gramm-Leach-Bliley Act privacy notice. The consumer is 
allowed to exercise the opt-out within a reasonable period of time and 
in the same manner as the opt-out under that privacy notice.


Sec.  680.25  Reasonable and simple methods of opting out.

    (a) In general. You must not use eligibility information about a 
consumer that you receive from an affiliate to make a solicitation to 
the consumer about your products or services, unless the consumer is 
provided a reasonable and simple method to opt out, as required by 
Sec.  680.21(a)(1)(ii) of this part.
    (b) Examples--(1) Reasonable and simple opt-out methods. Reasonable 
and simple methods for exercising the opt-out right include--
    (i) Designating a check-off box in a prominent position on the opt-
out form;
    (ii) Including a reply form and a self-addressed envelope together 
with the opt-out notice;
    (iii) Providing an electronic means to opt out, such as a form that 
can be electronically mailed or processed at an Internet Web site, if 
the consumer agrees to the electronic delivery of information;
    (iv) Providing a toll-free telephone number that consumers may call 
to opt out; or
    (v) Allowing consumers to exercise all of their opt-out rights 
described in a consolidated opt-out notice that includes the privacy 
opt-out under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 et seq., the 
affiliate sharing opt-out under the Act, and the affiliate marketing 
opt-out under the Act, by a single method, such as by calling a single 
toll-free telephone number.
    (2) Opt-out methods that are not reasonable and simple. Reasonable 
and simple methods for exercising an opt-out right do not include--
    (i) Requiring the consumer to write his or her own letter;
    (ii) Requiring the consumer to call or write to obtain a form for 
opting out, rather than including the form with the opt-out notice;
    (iii) Requiring the consumer who receives the opt-out notice in 
electronic form only, such as through posting at an Internet Web site, 
to opt out solely by paper mail or by visiting a different Web site 
without providing a link to that site.
    (c) Specific opt-out means. Each consumer may be required to opt 
out through a specific means, as long as that means is reasonable and 
simple for that consumer.


Sec.  680.26  Delivery of opt-out notices.

    (a) In general. The opt-out notice must be provided so that each 
consumer can reasonably be expected to receive actual notice. For opt-
out notices provided electronically, the notice may be provided in 
compliance with either the electronic disclosure provisions in this 
part or the provisions in section 101 of the Electronic Signatures in 
Global and National Commerce Act, 15 U.S.C. 7001 et seq.
    (b) Examples of reasonable expectation of actual notice. A consumer 
may reasonably be expected to receive actual notice if the affiliate 
providing the notice:
    (1) Hand-delivers a printed copy of the notice to the consumer;
    (2) Mails a printed copy of the notice to the last known mailing 
address of the consumer;
    (3) Provides a notice by e-mail to a consumer who has agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or
    (4) Posts the notice on the Internet Web site at which the consumer 
obtained a product or service electronically and requires the consumer 
to acknowledge receipt of the notice.
    (c) Examples of no reasonable expectation of actual notice. A 
consumer may not reasonably be expected to receive actual notice if the 
affiliate providing the notice:
    (1) Only posts the notice on a sign in a branch or office or 
generally publishes the notice in a newspaper;
    (2) Sends the notice via e-mail to a consumer who has not agreed to 
receive electronic disclosures by e-mail from the affiliate providing 
the notice; or
    (3) Posts the notice on an Internet Web site without requiring the 
consumer to acknowledge receipt of the notice.


Sec.  680.27  Renewal of opt-out.

    (a) Renewal notice and opt-out requirement--(1) In general. After 
the opt-out period expires, you may not make solicitations based on 
eligibility information you receive from an affiliate to a consumer who 
previously opted out, unless:
    (i) The consumer has been given a renewal notice that complies with 
the requirements of this section and Sec. Sec.  680.24 through 680.26 
of this part, and a reasonable opportunity and a reasonable and simple 
method to renew the opt-out, and the consumer does not renew the opt-
out; or
    (ii) An exception in Sec.  680.21(c) of this part applies.
    (2) Renewal period. Each opt-out renewal must be effective for a 
period of at least five years as provided in Sec.  680.22(b) of this 
part.
    (3) Affiliates who may provide the notice. The notice required by 
this paragraph must be provided:
    (i) By the affiliate that provided the previous opt-out notice, or 
its successor; or
    (ii) As part of a joint renewal notice from two or more members of 
an affiliated group of companies, or their successors, that jointly 
provided the previous opt-out notice.
    (b) Contents of renewal notice. The renewal notice must be clear, 
conspicuous, and concise, and must accurately disclose:
    (1) The name of the affiliate(s) providing the notice. If the 
notice is provided jointly by multiple affiliates and each affiliate 
shares a common name, such as ``ABC,'' then the notice may indicate 
that it is being provided by multiple companies with the ABC name or 
multiple companies in the ABC group or family of companies, for 
example, by stating that the notice is provided by ``all of the ABC 
companies,'' ``the ABC banking, credit card, insurance, and securities 
companies,'' or by listing the name of each affiliate providing the 
notice. But if the affiliates providing the joint notice do not all 
share a common name, then the notice must either separately identify 
each affiliate by name or identify each of the common names used by 
those affiliates, for

[[Page 61463]]

example, by stating that the notice is provided by ``all of the ABC and 
XYZ companies'' or by ``the ABC banking and credit card companies and 
the XYZ insurance companies;''
    (2) A list of the affiliates or types of affiliates whose use of 
eligibility information is covered by the notice, which may include 
companies that become affiliates after the notice is provided to the 
consumer. If each affiliate covered by the notice shares a common name, 
such as ``ABC,'' then the notice may indicate that it applies to 
multiple companies with the ABC name or multiple companies in the ABC 
group or family of companies, for example, by stating that the notice 
is provided by ``all of the ABC companies,'' ``the ABC banking, credit 
card, insurance, and securities companies,'' or by listing the name of 
each affiliate providing the notice. But if the affiliates covered by 
the notice do not all share a common name, then the notice must either 
separately identify each covered affiliate by name or identify each of 
the common names used by those affiliates, for example, by stating that 
the notice applies to ``all of the ABC and XYZ companies'' or to ``the 
ABC banking and credit card companies and the XYZ insurance 
companies;''
    (3) A general description of the types of eligibility information 
that may be used to make solicitations to the consumer;
    (4) That the consumer previously elected to limit the use of 
certain information to make solicitations to the consumer;
    (5) That the consumer's election has expired or is about to expire;
    (6) That the consumer may elect to renew the consumer's previous 
election;
    (7) If applicable, that the consumer's election to renew will apply 
for the specified period of time stated in the notice and that the 
consumer will be allowed to renew the election once that period 
expires; and
    (8) A reasonable and simple method for the consumer to opt out.
    (c) Timing of the renewal notice--(1) In general. A renewal notice 
may be provided to the consumer either--
    (i) A reasonable period of time before the expiration of the opt-
out period; or
    (ii) Any time after the expiration of the opt-out period but before 
solicitations that would have been prohibited by the expired opt-out 
are made to the consumer.
    (2) Combination with annual privacy notice. If you provide an 
annual privacy notice under the Gramm-Leach-Bliley Act, 15 U.S.C. 6801 
et seq., providing a renewal notice with the last annual privacy notice 
provided to the consumer before expiration of the opt-out period is a 
reasonable period of time before expiration of the opt-out in all 
cases.
    (d) No effect on opt-out period. An opt-out period may not be 
shortened by sending a renewal notice to the consumer before expiration 
of the opt-out period, even if the consumer does not renew the opt out.


Sec.  680.28  Effective date, compliance date, and prospective 
application.

    (a) Effective date. This part is effective January 1, 2008.
    (b) Mandatory compliance date. Compliance with this part is 
required not later than October 1, 2008.
    (c) Prospective application. The provisions of this part shall not 
prohibit you from using eligibility information that you receive from 
an affiliate to make solicitations to a consumer if you receive such 
information prior to October 1, 2008. For purposes of this section, you 
are deemed to receive eligibility information when such information is 
placed into a common database and is accessible by you.

PART 698--AMENDED

0
2. Revise the authority citation for Part 698 to read as follows:

    Authority: 15 U.S.C. 1681e, 1681g, 1681j, 1681m, 1681s, and 
1681s-3; sections 211(d) and 214(b), Pub. L. 108-159, 117 Stat.1952.

0
3. Amend Sec.  698.1 by revising paragraph (b) to read as follows:


Sec.  698.1  Authority and purpose.

* * * * *
    (b) Purpose. The purpose of this part is to comply with sections 
607(d), 609(c), 609(d), 612(a), 615(d), and 624 of the Fair Credit 
Reporting Act, as amended by the Fair and Accurate Credit Transactions 
Act of 2003, and sections 211(d) and 214(b) of the Fair and Accurate 
Credit Transactions Act of 2003.

0
4. Add Appendix C to Part 698 as follows:

APPENDIX C TO PART 698--MODEL FORMS FOR AFFILIATE MARKETING OPT-OUT 
NOTICES

    A. Although use of the model forms is not required, use of the 
model forms in this Appendix (as applicable) complies with the 
requirement in section 624 of the Act for clear, conspicuous, and 
concise notices.
    B. Certain changes may be made to the language or format of the 
model forms without losing the protection from liability afforded by 
use of the model forms. These changes may not be so extensive as to 
affect the substance, clarity, or meaningful sequence of the 
language in the model forms. Persons making such extensive revisions 
will lose the safe harbor that this Appendix provides. Acceptable 
changes include, for example:
    1. Rearranging the order of the references to ``your income,'' 
``your account history,'' and ``your credit score.''
    2. Substituting other types of information for ``income,'' 
``account history,'' or ``credit score'' for accuracy, such as 
``payment history,'' ``credit history,'' ``payoff status,'' or 
``claims history.''
    3. Substituting a clearer and more accurate description of the 
affiliates providing or covered by the notice for phrases such as 
``the [ABC] group of companies,'' including without limitation a 
statement that the entity providing the notice recently purchased 
the consumer's account.
    4. Substituting other types of affiliates covered by the notice 
for ``credit card,'' ``insurance,'' or ``securities'' affiliates.
    5. Omitting items that are not accurate or applicable. For 
example, if a person does not limit the duration of the opt-out 
period, the notice may omit information about the renewal notice.
    6. Adding a statement informing consumers how much time they 
have to opt out before shared eligibility information may be used to 
make solicitations to them.
    7. Adding a statement that the consumer may exercise the right 
to opt out at any time.
    8. Adding the following statement, if accurate: ``If you 
previously opted out, you do not need to do so again.''
    9. Providing a place on the form for the consumer to fill in 
identifying information, such as his or her name and address.

C-1 Model Form for Initial Opt-out notice (Single-Affiliate Notice)
C-2 Model Form for Initial Opt-out notice (Joint Notice)
C-3 Model Form for Renewal Notice (Single-Affiliate Notice)
C-4 Model Form for Renewal Notice (Joint Notice)
C-5 Model Form for Voluntary ``No Marketing'' Notice

C-1 Model Form for Initial Opt-out Notice (Single-Affiliate Notice)

    [Your Choice to Limit Marketing]/[Marketing Opt-out]

-- [Name of Affiliate] is providing this notice.
-- [Optional: Federal law gives you the right to limit some but not 
all marketing from our affiliates. Federal law also requires us to 
give you this notice to tell you about your choice to limit 
marketing from our affiliates.]
-- You may limit our affiliates in the [ABC] group of companies, 
such as our [credit card, insurance, and securities] affiliates, 
from marketing their products or services to you based on your 
personal information that we collect and share with them. This 
information includes your [income], your [account history with us], 
and your [credit score].
-- Your choice to limit marketing offers from our affiliates will 
apply [until you tell us to change your choice]/[for x years from 
when you tell us your choice]/[for at least 5 years from when you 
tell us your choice]. [Include if the opt-out period

[[Page 61464]]

expires.] Once that period expires, you will receive a renewal 
notice that will allow you to continue to limit marketing offers 
from our affiliates for [another x years]/[at least another 5 
years].
-- [Include, if applicable, in a subsequent notice, including an 
annual notice, for consumers who may have previously opted out.] If 
you have already made a choice to limit marketing offers from our 
affiliates, you do not need to act again until you receive the 
renewal notice.

To limit marketing offers, contact us [include all that apply]:

-- By telephone: 1-877--

-- On the Web: www.--.com
-- By mail: check the box and complete the form below, and send the 
form to:

    [Company name]
    [Company address]

    ---- Do not allow your affiliates to use my personal information 
to market to me.

C-2 Model Form for Initial Opt-out Notice (Joint Notice)

    [Your Choice to Limit Marketing]/[Marketing Opt-out]

-- The [ABC group of companies] is providing this notice.
-- [Optional: Federal law gives you the right to limit some but not 
all marketing from the [ABC] companies. Federal law also requires us 
to give you this notice to tell you about your choice to limit 
marketing from the [ABC] companies.]
-- You may limit the [ABC companies], such as the [ABC credit card, 
insurance, and securities] affiliates, from marketing their products 
or services to you based on your personal information that they 
receive from other [ABC] companies. This information includes your 
[income], your [account history], and your [credit score].
-- Your choice to limit marketing offers from the [ABC] companies 
will apply [until you tell us to change your choice]/[for x years 
from when you tell us your choice]/[for at least 5 years from when 
you tell us your choice]. [Include if the opt-out period expires.] 
Once that period expires, you will receive a renewal notice that 
will allow you to continue to limit marketing offers from the [ABC] 
companies for [another x years]/[at least another 5 years].
-- [Include, if applicable, in a subsequent notice, including an 
annual notice, for consumers who may have previously opted out.] If 
you have already made a choice to limit marketing offers from the 
[ABC] companies, you do not need to act again until you receive the 
renewal notice.

To limit marketing offers, contact us [include all that apply]:

-- By telephone: 1-877--

-- On the Web: www.--.com
-- By mail: check the box and complete the form below, and send the 
form to:

    [Company name]
    [Company address]

    ---- Do not allow any company [in the ABC group of companies] to 
use my personal information to market to me.

C-3 Model Form for Renewal Notice (Single-Affiliate Notice)

    [Renewing Your Choice to Limit Marketing]/[Renewing Your 
Marketing Opt-out]

-- [Name of Affiliate] is providing this notice.
-- [Optional: Federal law gives you the right to limit some but not 
all marketing from our affiliates. Federal law also requires us to 
give you this notice to tell you about your choice to limit 
marketing from our affiliates.]
-- You previously chose to limit our affiliates in the [ABC] group 
of companies, such as our [credit card, insurance, and securities] 
affiliates, from marketing their products or services to you based 
on your personal information that we share with them. This 
information includes your [income], your [account history with us], 
and your [credit score].
-- Your choice has expired or is about to expire.

To renew your choice to limit marketing for [x] more years, contact 
us [include all that apply]:

-- By telephone: 1-877--

-- On the Web: www.--.com
-- By mail: check the box and complete the form below, and send the 
form to:

    [Company name]
    [Company address]

    ---- Renew my choice to limit marketing for [x] more years.

C-4 Model Form for Renewal Notice (Joint Notice)

    [Renewing Your Choice to Limit Marketing]/[Renewing Your 
Marketing Opt-out]

-- The [ABC group of companies] is providing this notice.
-- [Optional: Federal law gives you the right to limit some but not 
all marketing from the [ABC] companies. Federal law also requires us 
to give you this notice to tell you about your choice to limit 
marketing from the [ABC] companies.]
-- You previously chose to limit the [ABC companies], such as the 
[ABC credit card, insurance, and securities] affiliates, from 
marketing their products or services to you based on your personal 
information that they receive from other [ABC] companies. This 
information includes your [income], your [account history], and your 
[credit score].
-- Your choice has expired or is about to expire.

    To renew your choice to limit marketing for [x] more years, 
contact us [include all that apply]:

-- By telephone: 1-877--

-- On the Web: www.--.com
-- By mail: check the box and complete the form below, and send the 
form to:

    [Company name]
    [Company address]

    ---- Renew my choice to limit marketing for [x] more years.

C-5 Model Form for Voluntary ``No Marketing'' Notice

    Your Choice to Stop Marketing

-- [Name of Affiliate] is providing this notice.
-- You may choose to stop all marketing from us and our affiliates.

To stop all marketing offers, contact us [include all that apply]:

-- By telephone: 1-877--

-- On the Web: www.--.com
-- By mail: check the box and complete the form below, and send the 
form to:

    [Company name]
    [Company address]

    ---- Do not market to me.

    The Federal Trade Commission.
    Dated: October 22, 2007.
    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. E7-21348 Filed 10-29-07: 8:45 am]
BILLING CODE 6750-01-S