[Federal Register Volume 75, Number 41 (Wednesday, March 3, 2010)]
[Rules and Regulations]
[Pages 9726-9746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4273]



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Part IV





Federal Trade Commission





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16 CFR Part 610



Free Annual File Disclosures; Final Rule

  Federal Register / Vol. 75, No. 41 / Wednesday, March 3, 2010 / Rules 
and Regulations  

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FEDERAL TRADE COMMISSION

16 CFR Part 610

RIN 3084-AA94


Free Annual File Disclosures

AGENCY: Federal Trade Commission.

ACTION: Final rule.

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SUMMARY: Section 205 of the Credit Card Accountability Responsibility 
and Disclosure Act of 2009 requires the Federal Trade Commission to 
issue a rule to prevent deceptive marketing of free credit reports. To 
that end, the Commission amends the Free Annual File Disclosures Rule 
to require certain advertisements for ``free credit reports'' to 
include prominent disclosures designed to prevent consumers from 
confusing these ``free'' offers with the federally mandated free annual 
file disclosures available through the single centralized source. In 
addition, the final amended Rule requires nationwide consumer reporting 
agencies to delay advertisements for products and services through the 
centralized source until after consumers receive their free annual file 
disclosures, and prohibits other practices that may interfere with the 
free annual file disclosure process. The final amended Rule also 
implements certain technical changes to the original Rule.

DATES:  The effective date is April 2, 2010, except for Sec.  
610.4(b)(1)(i) and (2), which are effective September 1, 2010.

ADDRESSES: Requests for copies of the final amended Rule and this 
document should be sent to: Public Records Branch, Room 130, Federal 
Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. 
The public record of this proceeding is also available at that address. 
Relevant portions of the proceeding, including the final amended Rule 
and this document, are available at (http://www.ftc.gov).

FOR FURTHER INFORMATION CONTACT: Katherine Armstrong, Steven Toporoff, 
or Tiffany George, Attorneys, Division of Privacy and Identity 
Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., 
Washington, DC 20580, (202) 326-2252.

SUPPLEMENTARY INFORMATION:

I. Background

    This final Rule amends the Free Annual File Disclosures Rule 
(``Free Reports Rule'' or ``original Rule''),\1\ which went into effect 
in 2004. The original Rule set out the procedures that nationwide 
consumer reporting agencies (``CRAs'')\2\ and nationwide specialty 
CRAs\3\ must follow to comply with section 612 of the Fair Credit 
Reporting Act (``FCRA''),\4\ which gives consumers the right to obtain 
free annual file disclosures from the nationwide CRAs through a single 
centralized source. The final amended Rule modifies the original Rule 
by implementing section 205 of the Credit Card Accountability 
Responsibility and Disclosure Act of 2009 (``Act''), which directs the 
Federal Trade Commission (``FTC'' or ``Commission'') to promulgate a 
rule, within nine months from the date of enactment of the Act, 
requiring certain disclosures in the advertising for ``free credit 
reports'' to reduce consumer confusion.\5\ The final amended Rule also 
addresses certain practices that interfere with or detract from 
consumers' ability to obtain their free annual file disclosures and 
makes certain technical changes to the original Rule described below.
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    \1\ 16 CFR Part 610.
    \2\ Section 603(p) of the FCRA defines a ``nationwide consumer 
reporting agency'' as a consumer reporting agency that compiles and 
maintains files on consumers on a nationwide basis. 15 U.S.C. 
1681a(p). At this time, there are three nationwide consumer 
reporting agencies - Equifax Inc. (``Equifax''), Experian 
Information Solutions, Inc. (``Experian''), and TransUnion LLC 
(``TransUnion'').
    \3\ Nationwide specialty consumer reporting agencies are defined 
in section 603(w) of the FCRA. 15 U.S.C. 1681a(w). Specifically, 
section 603(w) defines ``nationwide specialty consumer reporting 
agency'' as a CRA that compiles and maintains files on consumers on 
a nationwide basis relating to: (1) medical records or payments; (2) 
residential or tenant history; (3) check writing history; (4) 
employment history; or (5) insurance claims.
    \4\ 15 U.S.C. 1681j.
    \5\ Pub. L. 111-24, 123 Stat. 1734 (May 22, 2009).
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A. The Free Annual File Disclosures Rule

    The Fair and Accurate Credit Transactions Act of 2003 (``FACT 
Act'') amended the FCRA and directed the Commission to promulgate a 
rule specifying the procedures for consumers to obtain free annual file 
disclosures from nationwide CRAs and nationwide specialty CRAs.\6\ To 
carry out this directive, the Commission promulgated the Free Reports 
Rule, which took effect in a structured roll-out beginning on the West 
Coast in December 2004 and ending on the East Coast in September 
2005.\7\ The purpose of the original Rule was to enable consumers to 
detect and dispute inaccurate or incomplete information in the files of 
nationwide CRAs by providing consumers with the opportunity to obtain 
annual file disclosures free of charge.
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    \6\ Prior to the FACT Act, consumers could purchase file 
disclosures from consumer reporting agencies, but could receive a 
free file disclosure only under limited circumstances. For example, 
section 615 of the FCRA provides that consumers denied credit or 
employment based upon information contained in a consumer report may 
obtain a free file disclosure from the CRA that provided the report. 
15 U.S.C. 1681m.
    \7\ 16 CFR 610.2(h). The Commission staggered implementation of 
the original Rule across the country to manage requests for free 
annual file disclosures.
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    The original Rule required that the nationwide CRAs jointly 
establish and operate a centralized source from which consumers can 
obtain free annual file disclosures through a single dedicated Internet 
website (AnnualCreditReport.com),\8\ a toll-free telephone number, or a 
postal address.\9\ Consumers may request and obtain their free annual 
file disclosures from each nationwide CRA at one time or stagger their 
requests throughout the year.
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    \8\ Most requests for free annual file disclosures through the 
centralized source occur through the AnnualCreditReport.com website. 
AnnualCreditReport.com is the only federally authorized website for 
obtaining free annual file disclosures.
    \9\ 16 CFR 610.2(a).
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B. The Advertising of ``Free Credit Reports''

    As discussed in the Notice of Proposed Rulemaking (``NPRM'') in 
this proceeding,\10\ since issuance of the original Rule, there has 
been a proliferation of confusing advertising regarding where consumers 
can obtain their free annual file disclosures. Some nationwide CRAs and 
others have advertised ``free credit reports'' in connection with the 
purchase of products and services, such as credit scores and credit 
monitoring. Although some advertising predated the original Rule, the 
bulk of the advertising for ``free credit reports'' now takes advantage 
of consumers' general knowledge that free annual file disclosures are 
available under federal law. These advertisements direct consumers not 
to AnnualCreditReport.com, the authorized source for free annual file 
disclosures, but to commercial websites operated by nationwide CRAs or 
others that sell a variety of products and services. Further, when a 
consumer uses an Internet search engine to locate the website for free 
annual file disclosures, the search engine will usually list 
``sponsored'' links - again, selling products and services - such as 
``FreeCreditReport.com'' first.\11\
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    \10\ 74 FR 52915 (Oct. 15, 2009).
    \11\ ``FreeCreditReport.com'' is owned and operated by 
Consumerinfo.com, Inc., an Experian company.
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    As a result of this advertising, consumers are often misled and 
confused about where to obtain the free annual file disclosure mandated 
by federal law. Indeed, the Commission has received numerous consumer

[[Page 9727]]

complaints demonstrating confusion and frustration about how and where 
to obtain a free annual file disclosure. As discussed below, comments 
received during this proceeding further illustrate both consumer 
confusion with and frustration in obtaining ``free annual file 
disclosures'' and ``free credit reports.''\12\
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    \12\ As discussed in the NPRM, the Commission has undertaken 
enforcement and extensive education to address these practices. For 
example, in 2005, the Commission filed an action against 
Consumerinfo.com, Inc., a marketer of ``free credit reports.'' FTC 
v. Consumerinfo.com, Inc., SACV05-801 AHS (MLGx) (C.D. Cal. Aug. 15, 
2005). In that action, the Commission alleged that Consumerinfo.com, 
Inc., which advertised ``free credit reports'' to consumers on the 
Internet, through emails, and through television and radio 
advertisements, engaged in deceptive acts or practices in violation 
of section 5 of the FTC Act. 15 U.S.C. 45(a). These deceptive 
practices included failing to disclose or to disclose adequately 
that the ``free'' credit reports they were offering were not 
associated with the federally-mandated annual free credit report 
program, but rather were part of a commercial promotion. The 
settlement required Consumerinfo.com, Inc., to pay consumer redress, 
prohibited it from making deceptive and misleading claims about 
``free'' reports, and required disclosure of the terms and 
conditions of any ``free'' offers. The defendant also agreed to 
forgo $950,000 in ill-gotten gains. Two years later, the Commission 
entered a second order with Consumerinfo.com, Inc., settling 
allegations that it violated the 2005 order. FTC v. 
Consumerinfo.com, Inc., SACV05-801 AHS (MLGx) (C.D. Cal., Jan. 8, 
2007) (prohibiting defendant from failing to make required 
disclosures mandated by the 2005 order and requiring $300,000 
payment for consumer redress).
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C. Section 205 of the Act

    To dispel this consumer confusion, Congress enacted section 205 of 
the Act (``section 205''). Section 205 directs the Commission to 
promulgate a rule, within nine months from the date of enactment of the 
Act, that would require advertisements for ``free credit reports'' in 
any medium to include certain prominent disclosures. For television and 
radio advertisements, section 205 specifies the language for the 
required disclosure: ``This is not the free credit report provided for 
by Federal law.'' This disclosure must appear in both the audio and 
visual portion of the advertisement. For all other media, section 205 
directs the Commission to issue a rule determining the content and 
placement of the disclosures. Finally, section 205 requires the 
following interim advertising disclosure if a rule is not finalized 
within nine months: ``Free credit reports are available under Federal 
law at: AnnualCreditReport.com.''

II. Overview of the Proposed Rule and Comments Received

    On October 15, 2009, the Commission published an NPRM, setting 
forth the text of a proposed amended Rule.\13\ The NPRM sought to 
achieve three goals.
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    \13\ 74 FR 52915 (Oct. 15, 2009). The Commission released a 
version of the NPRM on its website on October 7, 2009.
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    First, it implemented section 205 of the Act by proposing a new 
section 610.4 in the Free Reports Rule that would require prominent 
disclosures to prevent consumer confusion and deceptive marketing of 
``free credit reports.''\14\ The proposed section 610.4 included 
general requirements to ensure that the disclosures were sufficiently 
prominent; it also included media-specific requirements for the 
disclosures. For example, the NPRM proposed that the required 
disclosures for Internet websites offering ``free credit reports'' 
appear on a separate landing page.
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    \14\ Id. at 52918-22.
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    Second, the NPRM proposed amendments to section 610.2 of the 
original Rule to prohibit practices that interfere with consumers' 
ability to obtain free annual file disclosures from the centralized 
source. Specifically, it required a delay in advertising for products 
and services through the centralized source until after the consumer 
obtained his or her free annual file disclosure. It also: (1) 
prohibited the placement of hyperlinks to the nationwide CRAs' websites 
that transported consumers away from the AnnualCreditReport.com 
website; (2) prohibited the nationwide CRAs from requiring consumers to 
establish an account to obtain a file disclosure through the 
centralized source; and (3) prohibited the nationwide CRAs from 
imposing any ``terms and conditions'' on consumers' access to their 
file disclosures.
    Third, the NPRM proposed technical amendments that would eliminate 
now obsolete roll-out provisions in the original Rule.\15\
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    \15\ Id. at 52922.
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    In response to the NPRM, the Commission received over 1,080 
comments, submitted by consumers; nationwide CRAs; consumer report 
resellers; businesses and trade organizations; State Attorneys General; 
consumer advocates; law firms; members of Congress; and academics.\16\ 
Of the comments submitted, over 1,000 came from consumers. Appendix A 
contains a list of each of the non-consumer commenters, with the 
abbreviations used to identify them in this document. Some general 
comments are summarized below. Comments addressing particular issues 
relating to the proposed Rule are discussed in greater detail in the 
Section-by-Section discussion below.
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    \16\ The comments are available at (http://www.ftc.gov/os/comments/freeannualfilenprm/index.shtm).
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    Overall, industry and business groups, as well as Representatives 
Boozman and Ross, opposed one or more of the NPRM's proposals, such as 
the delay in advertising on AnnualCreditReport.com until after the 
consumer has obtained a free annual file disclosure, the prohibition on 
hyperlinks on the AnnualCreditReport.com website, and the proposed 
separate landing page requirement for Internet websites.
    In contrast, consumer advocates, NAAG, the States of Florida and 
Minnesota, and Senators Levin and Schumer either supported the proposed 
Rule or urged the Commission to strengthen it. For example, some 
commenters asserted that the Commission should ban all advertising on 
AnnualCreditReport.com, rather than delaying it as the Commission had 
proposed.\17\ These commenters also generally supported the proposed 
disclosures for ``free credit report'' advertisements, as well as the 
separate landing page proposal for disclosures on Internet websites.
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    \17\ NCLC at 3; State of Florida at 4; State of Minnesota at 3.
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    Almost all individual consumers responding to the NPRM urged 
Commission action in this area.\18\ Many consumers explicitly supported 
the proposed Rule, in many instances relating personal stories of 
confusion when trying to obtain their free annual file disclosure. 
Similarly, many consumers said that they unwittingly paid various sums 
for unwanted services when they attempted to obtain what they thought 
was their free annual file disclosure.\19\ Other consumers stated that 
the current process for

[[Page 9728]]

obtaining a free annual file disclosure is confusing.\20\
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    \18\ Only a few consumers stated that Commission action is 
unnecessary. See M. Buckley; K. Hix; P. Johnson.
    \19\ E.g., C. Thompson (``I signed up for freecreditreport.com, 
and couldn't find out [how] to cancel the membership I didn't want 
in the first place because I had to join just to get 1 report, and 
never could get all 3 reports.''); B. Meyer (``Experian 
automatically signs you up for a $14.95/month credit report with the 
provision you have seven days to cancel the subscription . . . . 
Please end the ability of these companies to sign consumers to a 
contract/subscription they have no interest in.''); E. Julbar (``I 
was deceptively led into providing my credit card number (falsely 
understanding that it was needed to prove identity) and then 
received multiple billings on my credit card from the `service' 
provider.''); K. Foster (``I was charged $14.99. This is NOT FREE, 
this is a lie, I was deceived . . . .''); L. Falk (``I have a 
Master's degree and I got scammed by these people. Free does not 
mean you pay $14.95!''); LaRosa (``I consider myself a generally 
savvy consumer, yet I still fell into their trap and was 
fraudulently charged over $100 by them before I realized what 
happened.'').
    \20\ E.g., M. Neal (``The phony `free' credit report come-ons 
are confusing and thwart citizens who are trying to exercise their 
right to obtain an annual credit report.''); G. Albelo (``[T]he free 
credit report site is guaranteed to manipulate one into paying for a 
service that should be free. The site is a maze of confusing sites, 
words and suggestions that the average person probably won't get 
through without paying for something, or falling prey to identity 
theft.'').
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    Many consumers agreed that there should be no advertising on 
AnnualCreditReport.com until after consumers have received the 
requested file disclosure.\21\ Consumers also agreed with the proposal 
that hyperlinks from AnnualCreditReport.com to the CRAs' proprietary 
websites should be eliminated.\22\ In addition, several consumers 
agreed with the proposed Internet website disclosures for free credit 
reports.\23\ In particular, over 170 consumers supported the proposed 
separate landing page for Internet websites offering free credit 
reports.\24\
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    \21\ E.g., F. Colantuono (``Have you ever tried to get your 
`free' credit report online? . . . [Y]ou are bombarded with sales 
offers to sign up for ALL MANNER of products before you can request 
your credit report . . . . [B]anning all advertising until AFTER you 
make your request for your free report. This one is a winner!''); J. 
Ellis (``[A]gencies should be able to ask those requesting reports 
if they wish to receive additional information or services for a fee 
. . . only . . . after the fact . . . .''); F. Martin (``If 
advertising is allowed at all, it should be AFTER the consumer 
obtains the free report.'').
    \22\ E.g., J. Matey (``The link from the main annual report page 
should NOT LINK to anything except the free report.''). Mr. Matey 
added that he would agree to ``a single link [on] the form `FOR 
ADDITIONAL SERVICES FOR WHICH YOU WILL BE CHARGED, PRESS THIS 
BUTTON.''' Otherwise, ``[t]here should be absolutely NO INTERWEAVING 
between the free report and any other service.''); S. Ratkowski 
(``There should be . . . no hyperlinks to commercial sites.''); see 
also M. Neal (``The links to the big three credit reporting agencies 
only serve to distract or confuse consumers in their quest to obtain 
their credit reports.''); J. Nielsen (``It should be criminal to 
attach links away from the free website.'').
    \23\ M. Neal (``Any website purporting to offer a free credit 
report should be required to display a disclaimer that it is NOT the 
official site, and to give user a link to the real site.''); see 
also K. Morris (``Requiring ads for sites that are not the 
centralized free access site to carry prominent notice that they are 
advertising a for-profit site is a good idea.''); C. Thompson (``All 
advertisements for `free credit reporting' should be clearly stated 
that they are private firms and not Government mandated.''); D. 
Enfield (``[T]here should be a clear warning to me that I have 
landed on a page that is irrelevant to the task of getting my free 
report.''); Young (``I also support that certain blatantly 
misleading ADS for `free credit reports' be required to include 
PROMINENT disclosures about the official source to prevent confusion 
and/or to stop indicating that the advertised credit reports are in 
fact free.'').
    \24\ E.g., M. Baldissero; Professor K. Guenther; S. McGechie; B. 
Miller; C. Peltz; M. Ronsonette; Dr. J. Sitomer (``I support your 
proposal to require a separate landing page on sites that advertise 
free reports which explains that the reports are NOT the free 
reports guaranteed by the federal government.'').
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    In addition to commenting on the proposed changes and additions to 
the original Rule, many consumers, as well as certain States, urged the 
Commission to prohibit the advertising of ``free'' credit reports, 
unless such reports come with no strings attached.\25\ A typical 
consumer comment is: ``These reports should not be marketed as `free' 
if they are contingent upon the purchase of a product.''\26\
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    \25\ See, e.g., State of Minnesota at 3. Cf. Professor D. 
Friedman (attaching Free Offers: A New Look, 38 N.M.L. Rev. 49 
(2008), which suggests the Commission reconsider approaches 
addressing free offers).
    \26\ W. Marciniak; see also T. Rusch (``[I] find it personally 
disgusting and certainly unethical that some company can advertise 
`free credit reports' on the backstop of a Dodgers' baseball game 
when I know that there's not much free about it.''); D. Wadsworth 
(``Websites that use the word `free' should in fact be free, no 
charge for any services.''); Miller (``Either credit reports are 
free or they are not free. The current advertising which relates to 
`free credit reports' is misleading at best, in truth such ads are 
disingenuous, false and dishonest on their face.''); A. Drew (``I 
REALLY don't think the credit report companies should try and 
bamboozle people into paying for their free report!''); M. Kramer 
(``These services are NOT FREE and extremely DECEPTIVE.''). Numerous 
other consumers complained about deceptive or misleading advertising 
by credit companies. E.g., H. Bagao (``The hidden trap of a free 
trial with automatic charges is tantamount to fraud and thievery. In 
fact, deceiving names such as FreeCreditReport should be prohibited, 
as it is a clear, blatant form of false advertisement.''); K. Noreen 
(``Getting people to sign up for surprise credit-card charges is 
predatory lending, pure and simple.''); M. Wunderli (``False 
advertising regarding free financial services that are not free 
perpetuates mistrust of financial systems.'').
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    The Commission acknowledges the many comments questioning the use 
of the word ``free'' when associated with the offer of ``free credit 
reports'' that require the purchase of additional products and 
services. In response, the Commission notes that it will continue to 
scrutinize offers for ``free credit reports'' on a case-by-case basis 
to determine whether such offers are unfair or deceptive under the FTC 
Act.\27\
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    \27\ Cf. FTC v. Berkeley Premium Nutraceuticals, Inc., No. 1:06-
CV-51 (S.D. Ohio Feb. 2, 2006) (alleging that marketers offered 
consumers ``free'' samples of dietary supplements only to enroll 
them in an automatic shipment program and bill them without their 
authorization); FTC v. Conversion Marketing, Inc., No. SACV 04-1264 
(C.D. Cal. Jan 17, 2006) (alleging that advertisers offered ``free 
samples'' of weight loss and tooth-whitening products and then 
debited consumers' accounts and enrolled them in automatic shipment 
programs without their knowledge or authorization).
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    The Commission does not, however, have the authority to ban 
advertising of ``free credit reports'' altogether under the Act. 
Congress was aware of the consumer confusion in the marketplace over 
use of the phrase ``free credit reports.''\28\ It chose to enact a 
disclosure law, directing the Commission to prescribe specific 
disclosures in advertisements for ``free credit reports.'' Congress did 
not, however, prohibit the advertising of ``free credit reports;'' nor 
did it authorize the Commission to prohibit such advertising. 
Therefore, the Commission declines to do so. In any event, the 
Commission believes that the prominent disclosure requirements of 
section 610.4, as described below, will alleviate much of the consumer 
confusion in connection with the offer of ``free credit reports.''
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    \28\ See 155 Cong. Rec. S6178, S6179 (June 4, 2009) (statement 
of Sen. Levin) (``Mandatory disclosures will help ensure that 
consumers are given accurate information about how to obtain a free 
credit report with no strings attached. It is an effort to end the 
deceptive activities of companies that attempt to trick people into 
buying something that they are entitled by Federal law to receive 
for free.'').
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III. Section-by-Section Discussion of Final Amended Rule

A. Section 610.2(g): Communications provided through centralized source

    Section 610.2 of the original Free Reports Rule permitted the 
nationwide CRAs to advertise their proprietary products and services 
through the centralized source. When it promulgated the original Rule, 
the Commission recognized the potential for confusion from such 
advertising and marketing, but chose not to forbid it.\29\ Instead, to 
address concerns about confusion from such advertising, the Commission 
restricted communications on the centralized source to the extent that 
they ``interfere with, detract from, contradict, or otherwise undermine 
the purpose of the centralized source.''\30\
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    \29\ Among other things, the Commission reasoned that the FACT 
Act required nationwide CRAs to inform consumers of the availability 
of credit scores when providing file disclosures to them and that 
there was a benefit to those consumers wishing to purchase a credit 
score to do so at the same time that they obtain their annual file 
disclosures. See Statement of Basis and Purpose for Original Free 
Reports Rule, 69 FR 35468, 35486 (June 24, 2004).
    \30\ 16 CFR 610.2(g)(1).
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    Section 610.2(g) of the proposed Rule retained this requirement 
from the original Rule.\31\ It proposed to modify the original Rule, 
however, by requiring that the nationwide CRAs delay advertising or 
marketing for products or services through the centralized source until 
after the consumer has obtained his or her free annual file disclosure. 
The final amended Rule adopts section 610.2(g) as proposed with certain 
modifications discussed below.
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    \31\ The original restriction found in section 610.2(g)(1) has 
been renumbered as section 610.2(g)(2) in the final amended Rule.
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1. Delay in advertising
    The Commission's proposal to amend section 610.2(g)(1) of the 
original Rule to delay advertising on the centralized source until 
after the consumer has

[[Page 9729]]

obtained his or her free annual file disclosure generated a substantial 
number of comments. Consumer advocates and many consumers either 
supported the proposal, or stated that it did not go far enough. For 
example, NAAG, as well as over 255 consumers, supported the 
proposal.\32\ Others, including NCLC, the States of Florida and 
Minnesota, as well as over 250 consumers, recommended a complete ban of 
all advertising on the centralized source. A typical consumer comment 
stated: ``The FTC should remove all advertising and marketing by the 
credit bureaus before, during and even after the process of getting a 
free credit report. People should be able to get their reports and exit 
the Web site without having to go through a gauntlet of sales 
pitches.''\33\ Similarly, another consumer stated: ``Why aren't the 
free reports on a commercial-free site where I can go in, give the 
information I need without worrying who I'm giving it to, without a 
gauntlet of commercials and confusing links that send me to more places 
that want to get my money?''\34\
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    \32\ See, e.g., NAAG at 2; see also Empire Justice at 4 (urging 
the Commission to ``[r]emove all `pop-up ads' and any other 
advertising on the pages that a consumer must use to access his or 
her credit report.'').
    \33\ N. Guzman.
    \34\ B. Irwin; see also, J. Matey (``There should be NO 
ADVERTISING on the free report pages.''); R. Robinson (``[P]lease 
make them take all forms of advertising for a paid service 
completely off the `free' website.''); P. Wilson (``There should be 
no selling involved with the request for a free credit file review. 
There is no need to sell anything. Let's make the process 
transparent and just provide what is requested.''); B. Meyer 
(``AnnualCreditReport.com should be commercial free!''); C. Epley 
(``Remove all advertisements! This page exists for me, the public, 
not for the firms who sell credit reports.''); Munsch (``Remove all 
advertising and marketing by credit bureaus entirely before, during 
and after the process of getting the free credit report. One should 
be able to obtain the report(s) and exit without enduring sales 
pitches.'').
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    Industry and business groups, in contrast, opposed the proposal. 
One CRA noted that the centralized source is a springboard for 
providing consumers with beneficial credit-related products and 
services.\35\ This commenter also argued that the proposed delay of 
advertising would prevent CRAs from complying with section 609(a)(6) of 
the FCRA, which requires CRAs to provide a statement that consumers can 
request a credit score when a consumer requests a credit file.\36\ CDIA 
suggested that a better approach would be to require that 
advertisements for additional products or services on the centralized 
source be ``no more conspicuous'' than the centralized source's 
features for obtaining free annual file disclosures.\37\
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    \35\ TransUnion at 3.
    \36\ Id.
    \37\ CDIA at 5.
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    The Commission has carefully considered these comments and has 
retained the restriction on advertising until after the consumer has 
obtained his or her file disclosure. As noted in the NPRM, the general 
standard contained in the original Rule, that advertising not 
``interfere with, detract from, contradict, or otherwise undermine'' 
the centralized source, has not been effective in ensuring that 
consumers have an unfettered, easy-to-use mechanism for obtaining their 
free annual file disclosure. Consumers have been subjected to 
substantial amounts of advertising for the nationwide CRAs' proprietary 
products or services while navigating AnnualCreditReport.com to obtain 
their free annual file disclosures. Indeed, when consumers access the 
website, they encounter offers for a variety of add-on goods or 
services - such as credit scores and credit monitoring services - which 
they must purchase or decline, one by one, before obtaining their free 
annual file disclosures. These advertisements make it cumbersome and 
time consuming for consumers to exercise their right to obtain their 
free annual file disclosures.\38\
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    \38\ 74 FR at 52917. The Commission also noted that consumers 
reported feeling compelled to purchase the advertised products or 
services in order to obtain their free annual file disclosure.
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    A substantial number of commenters confirmed that existing 
advertising impedes consumers' ability to obtain their free annual file 
disclosures on AnnualCreditReport.com. As one consumer noted, ``[a]s a 
user of the annualcreditreport website, I feel it is like tiptoeing 
through a minefield to try to get past all the paid offers to the 
actual free credit report guaranteed by Federal law.''\39\ Another 
consumer stated that ``If you are not extremely careful it is almost 
impossible to avoid ordering a product that is available only for a 
fee.''\40\ The comments confirm the problems the Commission articulated 
in the NPRM, and thus, the Commission continues to believe that a delay 
in advertising is necessary to ensure that consumers can exercise their 
federal right to obtain their free annual file disclosures, without 
unnecessary obstruction and delay.
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    \39\ See T. Hillegass.
    \40\ See W. Stuart; see also K. Graham (``This site is currently 
the best example of `limiting access by obfuscation' that I have 
ever seen.'').
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    The Commission recognizes that prohibiting all advertising on 
AnnualCreditReport.com would advance the Commission's interest in 
restricting aggressive advertising that impedes consumers' ability to 
obtain free file disclosures. The Commission believes, however, that 
the less restrictive approach of delaying advertising would achieve its 
goal of improving ``the ease by which consumers should be able to 
contact consumer reporting agencies with respect to access to such 
consumer reports.''\41\ Delaying such advertising or other 
communications\42\ enables consumers to focus first on obtaining their 
free annual file disclosure and decide thereafter whether to purchase 
additional products or services, including credit scores pursuant to 
section 609(a)(6) of the FCRA.\43\
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    \41\ 15 U.S.C. 1681j(a)(1)(C)(ii)(III). CDIA asserted that the 
Commission lacks any statutory authority to implement the proposal 
to delay advertising. CDIA at 3 (``The FTC lacks the authority to 
prescribe rules that prohibit the consumer reporting agency's 
advertising or marketing of products or services after the 
consumer's request has been received and when the consumer reporting 
agency is fulfilling that request.''). In response, the Commission 
notes that its authority for amending this provision in the original 
Rule derives from the rulemaking authority in the FACT Act 
amendments to the FCRA and the Commission's authority to amend its 
rules under the Administrative Procedure Act. 15 U.S.C. 1681j; 5 
U.S.C. 551(5) and 553. Congress initially authorized the Commission 
to promulgate the Free Reports Rule to establish the centralized 
source. In promulgating this Rule, Congress required the Commission 
to consider ``the ease by which consumers should be able to contact 
consumer reporting agencies . . . .'' The proliferation of 
distracting or confusing advertising and marketing on the 
centralized source affects its ``ease'' of use, and it is therefore 
within the Commission's authority to amend the original Rule to 
address this issue.
    \42\ As discussed below, the final amended Rule revises proposed 
section 610.2(g)(1) to restrict any request by a CRA to establish an 
account until after the consumer has obtained his or her file 
disclosure.
    \43\ The Commission will monitor and evaluate the effectiveness 
of this provision and may take additional action, as necessary.
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2. Definition of ``obtained''
    Proposed section 610.2(g)(1)(i) clarified when consumers have 
``obtained'' a free annual file disclosure for purposes of the delay in 
advertising by providing that, for telephone and written requests for 
free annual file disclosures, the consumer ``has obtained'' the file 
disclosure when the file disclosure is mailed to the consumer. 
Similarly, proposed section 610.2(g)(1)(ii) provided that, for free 
annual file disclosures requested through the Internet, the consumer 
``has obtained'' the file disclosure when it is delivered to the 
consumer through the Internet.\44\
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    \44\ As stated in the NPRM, a file disclosure is ``delivered'' 
for purposes of this section when it is provided in a form that 
permits the consumer to store, download, print, or otherwise 
maintain the file disclosure for future reference. 74 FR at 52917-
918. Cf. Franchise Rule, 16 CFR 436.6(b) (addressing disclosure in 
an online environment).

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[[Page 9730]]

    Some commenters objected to the NPRM's proposed definition of when 
a consumer has ``obtained'' his or her free annual file disclosure. 
Schwartz & Ballen, a law firm, asserted that the CRAs should be 
prohibited from promoting additional products and services during the 
same telephone or website session or in the same envelope as the 
requested file disclosure because consumers may misinterpret the 
importance of material that accompanies information requested pursuant 
to a federally mandated right.\45\ NCLC asserted that, for Internet 
requests, consumers should only be shown advertising after they have 
their ``report in hand,'' so that ``there is a clear separation in time 
and activity that gives the consumer adequate chance to reflect on 
whether he or she really wants to purchase other products.''\46\ In 
contrast, TransUnion objected to the proposal with respect to mail or 
telephone requests, asserting that CRAs should be permitted to 
advertise other products or services after the consumer has requested 
his or her file disclosure and the CRA has indicated that it will 
provide the file disclosure through the mail, asserting that it is 
easier for consumers to request products such as credit scores at the 
time of their request for their file disclosure.\47\
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    \45\ Schwartz & Ballen at 3.
    \46\ NCLC at 4.
    \47\ TransUnion at 4.
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    The final amended Rule adopts section 610.2(g)(1) as proposed. The 
Commission believes that the final amended Rule strikes the appropriate 
balance, by minimizing the risk that consumers may be misled before 
obtaining their free annual file disclosure, while still allowing the 
CRAs to offer additional products and services. The approach proposed 
by Schwartz & Ballen - that CRAs be prohibited from advertising during 
the same ``website session'' - would essentially ban advertising 
through the centralized source. As discussed above, the Commission 
believes a ban is more restrictive than necessary at this time.\48\ The 
approach proposed by NCLC would require a CRA to be sure that the 
consumer has his or her report ``in hand'' before delivering 
advertising to that consumer. The Commission questions the feasability 
of this approach, as it is unclear whether a CRA would be able to 
ascertain, in all instances, when the consumer has the report ``in 
hand.'' With respect to TransUnion's request to modify the proposal for 
mail and telephone requests to allow advertising before the report is 
placed in the mail, the Commission believes that, for example, allowing 
advertising messages to be relayed in the same telephone call during 
which the free credit report order is placed would cause the same 
consumer confusion and obfuscation described above. In addition, the 
Commission notes that the final amended Rule applies a consistent 
approach regardless of how the consumer obtains his or her report - 
advertising may be provided at the time the report is delivered or 
later. Therefore, the final amended Rule adopts section 610.2(g)(1) as 
proposed, with minor non-substantive changes.\49\
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    \48\ The Commission will continue to monitor carefully 
consumers' experiences with the centralized source. If the 
Commission finds that the delayed advertising permitted by the final 
amended Rule results in significant consumer confusion, it will 
revisit the issue of a ban.
    \49\ The Commission changed the language of proposed section 
610.2(g)(1)(ii) to make it parallel with section 610.2(g)(1)(i). As 
in the proposed Rule, sections 610.2(g)(2) and (3) of the final 
amended Rule retain the original Rule requirement that any 
advertising on the centralized source shall not ``interfere with, 
detract from, contradict, or otherwise undermine the purpose of the 
centralized source.''
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B. Section 610.2(h): Additional prohibited practices

    Proposed section 610.2(h) prohibited three types of conduct on the 
centralized source: (1) hyperlinks to commercial or proprietary 
websites on the centralized source Internet website; (2) any request or 
requirement that consumers establish an account in order to obtain 
their free annual file disclosures; and (3) any request or requirement 
that consumers agree to terms and conditions in order to obtain their 
free annual file disclosures. In the NPRM, the Commission proposed to 
prohibit these types of conduct because they interfere with and 
undermine consumers' ability to obtain their free annual file 
disclosures through the centralized source. The final amended Rule 
adopts section 610.2(h) with certain modifications discussed below.
1. Section 610.2(h)(1): Prohibition on hyperlinks to commercial 
websites
    In the NPRM, the Commission noted that, currently, the initial page 
of AnnualCreditReport.com contains hyperlinks to the websites of the 
three nationwide CRAs. If a consumer clicks on one of the CRA's 
hyperlinks on the initial page of AnnualCreditReport.com, the consumer 
is transported to that CRA's commercial website, where the consumer is 
unable to obtain his or her free annual file disclosure provided by 
federal law. For these reasons, the Commission proposed to prohibit 
such hyperlinks to reduce the possibility that consumers attempting to 
obtain their free annual file disclosures will be transferred to 
commercial websites that do not provide the federally mandated free 
annual file disclosures but instead sell various products or services.
    A number of comments addressed the proposed prohibition of 
hyperlinks on the centralized source. Several commenters noted that the 
proposal will better protect consumers and reduce confusion as 
consumers attempt to access their free annual file disclosures.\50\ 
Industry commenters objected to the proposal, asserting that the 
hyperlinks do not confuse consumers.\51\ CDIA noted that, from a 
technical standpoint, the centralized source must transfer consumers to 
each of the CRA's individual websites to facilitate the fulfillment of 
the free annual file disclosures requests.\52\
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    \50\ See, e.g., NAAG at 2; see also J. Smallwood (``at every 
turn there were confusing links, questions, and other chaff tossed 
in my way all designed to confuse and confound a consumer who simply 
wanted what was promised: an honest to goodness free credit 
report.'').
    \51\ TransUnion at 5-6; CDIA at 5-6.
    \52\ CDIA at 5.
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    In response to the comments, the final amended Rule retains the 
prohibition of hyperlinks, with two clarifications. First, it permits 
hyperlinks to a fulfillment web page on which consumers can order their 
annual file disclosure. Aside from fulfillment, the Commission finds no 
reason why hyperlinks should appear on the centralized source web site 
before a consumer orders his or her annual file disclosure, and in view 
of the potential for confusion, believes that the restriction is 
necessary. Second, consistent with the provision allowing advertising 
after the consumer has obtained his or her annual file disclosure, the 
CRAs may include hyperlinks in such advertising.
2. Section 610.2(h)(2): Prohibition on requiring the establishment of 
accounts
    Proposed section 610.2(h)(2) prohibited nationwide CRAs from 
requesting or requiring a consumer to establish an account as a 
prerequisite to obtaining a free annual file disclosure through the 
centralized source. A number of commenters, including the BBB and NAAG, 
supported this proposal. The BBB noted that it has received thousands 
of complaints from consumers who complain about having to set up 
accounts before obtaining their free annual file disclosure: 
``Permitting this practice to continue places an

[[Page 9731]]

unnecessary barrier between consumers and their free annual credit 
report.''\53\
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    \53\ BBB at 3; see also NAAG at 2; E-Commerce at 2 (supporting a 
provision barring sites from requiring consumers to register in 
order to obtain the annual file disclosure).
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    In contrast, TransUnion and CDIA noted that the setting up of 
accounts could be beneficial to consumers. TransUnion stated that, 
among other things, establishing an account allows consumers to access 
their free annual file disclosure online for a period of time and makes 
the authentication process easier when consumers seek to obtain their 
file disclosures the following year.\54\
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    \54\ TransUnion at 6-7; see also CDIA at 6.
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    The Commission has determined that requiring the establishment of 
an account as a prerequisite to obtaining a free annual file disclosure 
interferes with the intent of the original Rule because it imposes a 
condition on the consumer's ability to obtain free annual file 
disclosures.\55\ Further, because creating an account generally 
necessitates the collection of additional personally identifiable 
information, ``requiring'' such an account runs counter to the 
prohibition in section 610.2(2)(b)(ii) of the original Rule, which 
limits the collection of information to that which is reasonably 
necessary to properly identify the consumer and to process the 
consumer's transaction(s). Accordingly, the Commission has determined 
to retain the proposed prohibition against CRAs requiring consumers to 
set up an account to obtain a free annual file disclosure.
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    \55\ Requiring the establishment of an account is contrary to 
existing Commission commentary on the provision of file disclosures. 
See FTC Commentary on the Fair Credit Reporting Act, 16 CFR 600 
Appendix, comment 610-2 (``A consumer reporting agency may not add 
conditions not set out in the FCRA as a prerequisite to the required 
disclosure.'').
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    The Commission, however, agrees with TransUnion that consumers may 
derive a benefit from the establishment of accounts with CRAs when they 
obtain their free annual file disclosures and does not want to 
foreclose this option. As a result, the final amended Rule eliminates 
the NPRM's proposed prohibition on ``asking'' consumers to set up an 
account and allows CRAs to give consumers the option to establish an 
account. The Commission believes that such an option should be provided 
only after the consumer has obtained his or her file disclosure, in 
order to reduce the potential that a consumer may be confused into 
believing that an account is required to access his or her free file 
disclosure. Accordingly, the Commission has amended section 610.2(g)(1) 
to allow CRAs to provide an option to establish an account, but only 
after a consumer has obtained his or her file disclosure.
3. Section 610.2(h)(3): Prohibition on requiring terms or conditions
    Proposed section 610.2(h)(3) prohibited CRAs from requesting or 
requiring consumers to agree to terms and conditions as a prerequisite 
to obtaining their free annual file disclosures through the centralized 
source. NAAG and Schwartz & Ballen supported prohibiting terms and 
conditions on consumers' access to their file disclosures.\56\ CDIA and 
TransUnion objected to the proposal. TransUnion asserted that the terms 
and conditions required for consumers requesting their free annual file 
disclosure via the Internet are intended to deter consumers from 
accessing someone else's file disclosure.\57\
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    \56\ NAAG at 2; Schwartz & Ballen at 3-4.
    \57\ TransUnion at 7 (asserting that terms and conditions are 
justified because consumers are obtaining immediate access to file 
disclosure).
---------------------------------------------------------------------------

    The Commission believes that a consumer's right to obtain a free 
annual file disclosure should be unfettered and without any 
restrictions or conditions, apart from providing appropriate 
identifying information, as is required under the FCRA.\58\ Further, 
after reviewing the comments, the Commission does not believe that 
there is any reason to permit CRAs to ask or require consumers, 
including those who attempt to access their free annual file 
disclosures through the Internet, to agree to terms and conditions.\59\ 
The Commission has determined, therefore, to retain the proposed Rule's 
prohibition on requiring or requesting that consumers agree to terms 
and conditions in connection with obtaining a free annual file 
disclosure.
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    \58\ See 15 U.S.C. 1681h(a)(1).
    \59\ In response to TransUnion's comment, if a consumer is 
determined to access someone else's file disclosure, it is unclear 
how requiring that person to agree to terms and conditions will 
serve as a deterrent. In any event, TransUnion does not require 
terms and conditions for mail or telephone requests for free credit 
reports; thus, requiring such terms and conditions does not seem 
necessary for Internet transactions.
---------------------------------------------------------------------------

    The final amended Rule, however, revises the proposed language in 
two respects. First, consistent with comments received, it eliminates 
the term ``prerequisite'' to clarify that any request or requirement to 
agree to terms or conditions in connection with obtaining free annual 
file disclosures is prohibited, even one made after the consumer 
obtains his or her file disclosure. The Commission believes that, even 
if such terms and conditions are presented after the consumer obtains 
his or her file disclosure, the consumer might reasonably believe that 
accepting the terms and conditions is required. Second, the final 
amended Rule substitutes ``terms or conditions'' for ``terms and 
conditions.'' The Commission believes this revision is necessary to 
clarify that the prohibition does not extend only to documents or text 
labeled ``terms and conditions.'' Rather, it extends to any legal 
impediment on consumers' access to a free annual file disclosure, 
regardless of whether that impediment is presented as ``terms and 
conditions,'' ``notice,'' ``legal notice,'' or another term.

C. Section 610.4: Prevention of deceptive marketing of ``free credit 
reports''

    Section 610.4 implements the Congressional directive in section 205 
of the Act to combat the deceptive marketing of ``free credit reports'' 
through ``prominent'' disclosures in advertisements for ``free credit 
reports.'' Proposed section 610.4 included general requirements to 
ensure that the disclosures are sufficiently prominent, such as 
requiring that all audio disclosures be delivered in a slow and 
deliberate manner and providing specific guidance to ensure that visual 
disclosures are prominent. This section also included disclosure 
requirements specific to each of the various media in which advertising 
may occur. Where possible, the disclosure standards in the proposed 
Rule were drawn from comparable FTC or other federal law addressing the 
prominence of specific required disclosures - in particular the 
Prescreen Opt Out Notice Rule\60\ and the Trade Regulation Rule 
Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992 
(``Pay Per Call Rule'').\61\ The standards also were drawn from 
relevant Commission law enforcement actions and business education 
materials. Proposed section 610.4 consisted of three sections: 
definitions, general disclosure requirements, and media-specific 
requirements. These are discussed below in turn.
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    \60\ 16 CFR Part 642.
    \61\ 16 CFR Part 308.
---------------------------------------------------------------------------

1. Definitions
a. Section 610.4(a)(1): The term ``AnnualCreditReport.com and 877-322-
8228''
    Proposed section 610.4 defined the term ``AnnualCreditReport.com 
and 877-322-8228'' to mean the Uniform Resource Locator and toll-free 
telephone number currently used by the

[[Page 9732]]

centralized source. Proposed section 610.4 also provided that if the 
centralized source's website (currently AnnualCreditReport.com) or 
toll-free telephone number (currently 877-322-8228) were to change, the 
centralized source must substitute the new website or toll-free 
telephone number in all disclosures required by this section of the 
Rule. In response to the NPRM, the Commission received only one 
comment. CDIA agreed with the proposed definition, but urged the 
Commission to include a reference to a ``reasonable time'' in order to 
provide the centralized source an opportunity to update the 
disclosures.\62\ The Commission believes this modification is 
appropriate and has revised the proposed Rule accordingly.
---------------------------------------------------------------------------

    \62\ CDIA at 9 (``[T]he FTC should clarify in the Rule that 
covered entities will be provided with a reasonable opportunity to 
update the information.'').
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b. Section 610.4(a)(2): The term ``free credit report''
    Proposed section 610.4 set forth the following definition of ``free 
credit report'':

 Free credit report. For the purposes of this section, ``free credit 
report'' means a consumer report or file disclosure that is prepared by 
or obtained, directly or indirectly, from a nationwide consumer 
reporting agency (as defined in section 603(p) of the Fair Credit 
Reporting Act); that is represented, either expressly or impliedly, to 
be available to the consumer free of charge; and that is, in any way, 
tied to the purchase of a product or service.

    As noted in the NPRM, the term ``free credit report'' is undefined 
in section 205 of the Act, the FCRA, or the Free Reports Rule.\63\ The 
Commission defined the phrase in the proposed Rule, however, in order 
to clarify the scope of the Rule's disclosure requirements. As 
explained more fully below, based on the comments received, the 
Commission has revised the proposed definition of ``free credit 
reports'' as follows:
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    \63\ 74 FR at 52918.

 Free credit report means a file disclosure prepared by or obtained, 
directly or indirectly, from a nationwide consumer reporting agency (as 
defined in section 603(p) of the Fair Credit Reporting Act), that is 
represented, either expressly or impliedly, to be available to the 
consumer at no cost if the consumer purchases a product or service, or 
---------------------------------------------------------------------------
agrees to purchase a product or service subject to cancellation.

i. Scope of the term ``free credit report''
    Proposed section 610.4 defined ``free credit report'' to include 
``a consumer report or file disclosure prepared by or obtained . . . 
from a nationwide consumer reporting agency (as defined in section 
603(p) of the Fair Credit Reporting Act).'' NCLC and TransUnion urged 
the Commission to broaden the definition to include reports offered by 
nationwide specialty CRAs.\64\ In that regard, TransUnion stated: ``As 
a general matter, it is not clear why this provision pertains to Free 
Reports involving only nationwide CRAs. If an entity is advertising a 
`free credit report,' it would seem that the disclosures are 
appropriate regardless of the provider or source of information.''\65\ 
NCLC also observed that the statutory language of the Act is not 
limited to nationwide CRAs.\66\
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    \64\ NCLC at 4; TransUnion at 8. At the same time, NCLC noted 
that the disclosures set forth in the Act for nationwide CRAs would 
have to be modified if applied to nationwide specialty CRAs by 
omitting references to AnnualCreditReport.com. NCLC at 4.
    \65\ TransUnion at 8.
    \66\ NCLC at 4.
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    On the other hand, several commenters, including CDIA and Experian, 
urged the Commission to narrow the definition of ``free credit 
report,'' asserting that section 610.4 should cover only file 
disclosures of the type that the nationwide CRAs must make available 
through the centralized source. For example, Experian's comment states:

 [The statute] seeks to assure that consumers will be able to 
distinguish between a free credit report offered by a commercial entity 
and the free annual file disclosures available at 
[AnnualCreditReport.com]. The statute does not cover other aspects of 
the consumer credit system such as credit scores or the many other 
types of information that can qualify as `consumer reports' under the 
FCRA.\67\
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    \67\ Experian at 28-29; see also Schwartz & Ballen at 2 (``CRAs 
. . . offer their services in connection with their sponsorship of 
the website AnnualCreditReport.com, which is where consumers may 
obtain their free credit reports under Federal law.''); CDIA at 8 
(asserting that the proposed definition would ``apply to many 
products and services that are not in direct competition with the 
credit file disclosures required to be made available through the 
centralized source because the Free Annual File Disclosures Rule 
cannot and does not require similar options.'').

    The Commission agrees that the NPRM's inclusion of the term 
``consumer report'' in the proposed definition of ``free credit 
report'' was too broad, sweeping in the offer of reports that go beyond 
the requirements of section 205 of the Act, and potentially adding to 
consumer confusion. Section 205 was intended to address the confusion 
between the information offered through the centralized source and 
similar information offered from private or other commercial sources. 
Indeed, the disclosures contemplated by section 205 of the Act would 
not be useful, for example, for advertising of offers of consumer 
reports from nationwide specialty CRAs, as those reports are not 
available through the centralized source. Similarly, the term 
``consumer report'' would include ``credit scores;'' thus, under the 
proposed Rule, an advertisement for a ``free credit score'' would have 
triggered the requirement to disclose the existence of 
AnnualCreditReport.com. Consumers seeing an advertisement for a free 
credit score might be confused if they are directed to 
AnnualCreditReport.com, only to find that they could not get a free 
credit score on that site. Accordingly, section 610.4 of the final 
amended Rule is limited in scope to reports of the type disseminated 
through the centralized source.
ii. Applicability of the term ``free credit report'' to trial offers
    The definition of ``free credit report'' in proposed section 610.4 
applied to an offer of free credit reports ``that is, in any way, tied 
to the purchase of a product or service.'' Several commenters objected 
to the use of the phrase ``in any way, tied to the purchase of a 
product or service.'' NAAG suggested that the term ``purchase'' might 
be interpreted to exclude negative option offers, where the consumer 
may cancel the purchase before having paid anything: ``If a consumer 
receives a free credit report and cancels any service within the 
allotted time without paying anything, some may argue that the report 
is not technically `tied to the purchase of a product or 
service.'''\68\
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    \68\ NAAG at 2-3. Similarly, the States of Florida and Minnesota 
urged that the definition cover trial offers or trial periods. State 
of Florida at 6 (``The definition of `free credit report' should 
encompass . . . trial subscriptions to make it abundantly clear that 
trial offers are covered.''); State of Minnesota at 3 (``The FTC 
should adopt a broad definition of `free credit report' that 
explicitly covers . . . `trial periods.'''). Other commenters 
expressed confusion about the phrase ``tied to'' the purchase of a 
product or service. For example, NCLC noted that the term ``tied 
to'' could be confused with the antitrust concept of ``tying,'' 
where a seller conditions the sale of one product or service on the 
customer's agreement to take a second product or service. NCLC at 5.
---------------------------------------------------------------------------

    The Commission agrees and has changed the definition of ``free 
credit report'' to better clarify the types of ``free credit report'' 
offers intended to be covered by the Rule - those ``represented, either 
expressly or

[[Page 9733]]

impliedly, to be available to the consumer at no cost if the consumer 
purchases a product or service, or agrees to purchase a product or 
service subject to cancellation.'' This language clarifies that a 
``free credit report'' offered in connection with a trial offer of 
another product or service will fall within the scope of the Rule and 
trigger the disclosure requirement.\69\
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    \69\ Section 610.4(a) of the final amended Rule makes clear that 
representations made both expressly and impliedly about an offer of 
a ``free credit report'' will trigger the Rule's disclosure 
obligations. Schwartz & Ballen contended that the word ``impliedly'' 
is vague, ambiguous, and ``will unnecessarily result in significant 
uncertainty in its application.'' Schwartz & Ballen at 4. The 
Commission believes that the use of the term ``impliedly'' is 
consistent with well-established advertising law under section 5 of 
the FTC Act. See generally FTC Policy Statement on Deception 
(``Deception Statement''), Appended to Cliffdale Associates, Inc., 
103 F.T.C. 110, 174 (1984) (``In cases of implied claims, the 
Commission will often be able to determine meaning through an 
examination of the representation itself, including an evaluation of 
such factors as the entire document, the juxtaposition of various 
phrases in the document, the nature of the claim, and the nature of 
the transactions. In other situations, the Commission will require 
extrinsic evidence that reasonable consumers reach the implied 
claims.'').
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iii. Bundled offerings that include credit reports
    Several commenters urged the Commission to clarify that section 
610.4 does not apply to advertisements for every bundle of products or 
services that may include a ``free credit report.''\70\ For example, 
CDIA contended that ``where a company offers a package of services 
together with a credit report - such as combined credit monitoring, 
identity theft assistance, or other products or services - the 
disclosure requirements should not apply if a complimentary credit 
report is not a dominant part of the offer.''\71\ These commenters 
asserted that there is no confusion between the offering of bundled 
products and services and the federally mandated dissemination of free 
annual file disclosures through the centralized source. In that regard, 
Intersections, a business commenter, stated: ``If a consumer were to 
compare an offer for a free trial of Intersection's Bundled Products 
with the annual federally mandated disclosure, it would be clear to the 
consumer even upon a cursory review that he or she was reviewing 
separate and wholly unrelated products.''\72\ In addition, American 
Express noted that it offers a complimentary credit score and report 
once a year as part of a package of Cardmember services and that the 
disclosure requirement should not apply to this service.\73\
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    \70\ See Intersections at 1; American Express at 2; Schwartz & 
Ballen at 4; TransUnion at 8.
    \71\ CDIA at 9 (``The FTC does not further the goal of 
preventing consumer confusion between the federally mandated annual 
disclosure and commercial `free credit report' offers by applying 
these disclosures to advertisements for these packages.'').
    \72\ Intersections at 2 and 7.
    \73\ American Express at 1.
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    The Commission declines to modify the proposed Rule in response to 
these comments. The Commission disagrees that the types of bundled 
products mentioned by commenters do not cause consumer confusion. 
Indeed, the Commission believes that advertising for bundled products 
that promote free credit reports, in addition to other products and 
services, such as credit monitoring, is the very type of advertising 
that is likely to confuse consumers. Thus, the final amended Rule does 
not include any type of exemption for bundled products. With respect to 
the free credit reports offered by American Express as a benefit of 
membership, the Commission notes that the advertising of a free credit 
report to a non-member in this instance would fall within the Rule's 
definition of ``free credit report.'' However, once a consumer becomes 
a member, a statement that a no-strings-attached ``free credit report'' 
is a benefit of membership does not fall within the Rule's definition 
because such a free credit report is not being advertised ``in 
connection with the purchase of a product or service.''\74\
---------------------------------------------------------------------------

    \74\ An offer of a ``free credit report if you extend your 
membership'' would be made ``in connection with a purchase'' and 
therefore covered by the Rule.
---------------------------------------------------------------------------

2. Section 610.4(a)(3): General requirements for disclosures
    Section 610.4(a)(3) of the final amended Rule implements the Act's 
mandate that the required disclosures for ``free credit reports'' be 
``prominent.'' It also sets forth general requirements for, among other 
things, visual, audio, and program-length advertisements.\75\ These 
requirements are designed to ensure that the mandated disclosures can 
be readily seen and/or heard by consumers.\76\ In addition, the final 
amended Rule clarifies that the disclosures must be limited to the 
prescribed text with no other content to ensure that the consumer is 
not distracted from the message contained in the disclosure.
---------------------------------------------------------------------------

    \75\ These general disclosure standards are drawn from several 
Commission trade regulation rules. See Pay Per Call Rule, 16 CFR 
Part 308; Rule Concerning Cooling-Off Period for Sales Made at Homes 
or at Certain Other Locations (``Cooling-Off Rule''), 16 CFR Part 
429; Franchise Rule, 16 CFR Part 436; Business Opportunity Rule, 16 
CFR Part 437; and Regulations under the Fair Packaging and Labeling 
Act, 16 CFR Part 500.
    \76\ The Commission also recognizes that States and individuals 
have the ability to enforce parts of the FCRA. By setting forth 
these requirements, section 610.4(a)(4) of the final amended Rule is 
intended to avoid a patchwork of differing interpretations of what 
constitutes ``prominent'' disclosures.
---------------------------------------------------------------------------

a. Section 610.4(a)(3)(i): Prominent
    Section 610.4(a)(3)(i) of the final amended Rule revises the NPRM 
by adding a new section incorporating the statutory mandate that all 
disclosures for ``free credit reports'' be ``prominent.'' In response 
to the NPRM, the Commission received numerous comments on how the final 
Rule should address prominence, including comments on the placement, 
format, and timing of the required disclosures, as discussed in detail 
below. Accordingly, the Commission has added in the final amended Rule 
a general requirement that all disclosures must be ``prominent,'' 
consistent with the language of section 205.\77\ This general 
``prominence'' requirement applies to all disclosures in any medium.
---------------------------------------------------------------------------

    \77\ Commission precedent establishes that disclosures in fine 
print or buried in dense blocks of text are not prominent. The 
mandate that disclosures be ``clear and conspicuous'' or ``clear and 
prominent'' dates back more than 60 years. See, e.g., Hillman 
Periodicals v. FTC, 174 F.2d 122 (2d Cir. 1949) (upholding 
Commission order that company selling shortened versions of books 
disclose that its publications are abridged ``in immediate 
connection with the title and in clear, conspicuous type'').
---------------------------------------------------------------------------

b. Section 610.4(a)(3)(iii): Language usage
    Proposed section 610.4 required that any disclosure mandated by 
this section be provided in the same language as that principally used 
in the advertisement. The proposed requirement drew from identical 
language in section 308.3(a)(1) of the Pay Per Call Rule and the 
Commission's belief that a disclosure in a language different from that 
which is principally used in an advertisement would be deceptive.\78\ 
No comments addressed this issue. Accordingly, the final amended Rule 
adopts this section, as proposed in the NPRM.
---------------------------------------------------------------------------

    \78\ See also 16 CFR 429.1(a) (requiring disclosure of right to 
cancel door-to-door sales ``in the same language, e.g., Spanish, as 
that principally used in the oral sales presentation'').
---------------------------------------------------------------------------

c. Section 610.4(a)(3)(iii): Visual disclosures
    Proposed section 610.4(a)(4) provided that visual disclosures 
``shall be of a color or shade that readily contrasts with the 
background of the advertisement, in a font easily read by a reasonable 
consumer, and be parallel to the base of the advertisement.'' The 
proposed section drew from the Pay Per Call Rule, which requires 
disclosures to be (1) in ``a color or shade that readily contrasts with 
the background of the

[[Page 9734]]

advertisement'' and (2) ``parallel to the base of the 
advertisement.''\79\
---------------------------------------------------------------------------

    \79\ See also In re Swisher Int'l, Inc., C-3964 (2000) 
(requiring warnings on cigar advertisements to appear ``parallel . . 
. to the base of the advertisement''); Regulation under Section 4 of 
the Fair Packaging and Labeling Act, 16 CFR 500.4 (requiring 
statement of identity for packaged goods to appear ``in lines 
generally parallel to the base on which the packaging or commodity 
rests as it is designed to be displayed''). ``Parallel to the base'' 
means that a consumer need not turn his or her head in order to read 
the disclosure. Accordingly, swirling or diagonal text, for example, 
will not be parallel to the base of the advertisement or screen.
---------------------------------------------------------------------------

    Several commenters offered suggestions on how to add specificity to 
ensure that the visual disclosures are prominent. For example, the 
State of Florida recommended that print and Internet disclosures appear 
within ``a border similar to the Surgeon General's cigarette warning. . 
. .''\80\ NYCPB recommended that print disclosures ``be presented in a 
box and/or in a contrasting color to help ensure its prominence.''\81\ 
The Commission agrees that more specificity is required to ensure that 
all visual disclosures are prominent.
---------------------------------------------------------------------------

    \80\ See State of Florida at 7.
    \81\ See NYCPB at 2.
---------------------------------------------------------------------------

    Thus, the Commission has modified the proposed section to add 
specific requirements to strengthen the prominence of visual 
disclosures. First, the Commission has added a general requirement that 
visual disclosures be easily readable. For example, as noted in the 
NPRM, a disclosure in an Old English Text font would not be ``easily 
readable,'' even if it were sufficiently large. In addition, 
manipulating the letter width, letter spacing, word spacing, or line 
height so that the letters of the disclosure appear to be condensed in 
comparison to the rest of the text on the page or screen would violate 
the requirement for the disclosure to be ``easily readable.''\82\ 
Similarly, a disclosure presented in all italics or underlined would 
likely be difficult to read; if so, it would not comply with the 
requirement to be ``easily readable.''
---------------------------------------------------------------------------

    \82\ See Final Model Privacy Form Under the Gramm Leach Bliley 
Act, 74 FR 62889, at 62899 -900 (Dec. 1, 2009) (setting forth 
general guidance for easily readable type).
---------------------------------------------------------------------------

    Second, instead of merely requiring visual disclosures that 
``readily contrast with the background'' of the disclosure, the final 
amended Rule requires that there be a ``high degree of contrast.'' The 
Commission believes that such a clarification is necessary to ensure 
prominence. As an example, a disclosure in which the text contrasts 
slightly with the background (e.g., light gray on dark gray) would not 
constitute a sufficiently ``high degree of contrast'' to satisfy this 
requirement.\83\
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    \83\ The Pay Per Call Rule required only that the disclosure 
``readily contrast'' with the background. In this rulemaking, 
modification of the Pay Per Call Rule standard is warranted in light 
of changes in technology that have developed since promulgation of 
that rule. Indeed, as CDIA noted, the Pay Per Call Rule does not 
address Internet disclosures at all. CDIA at 12-13.
---------------------------------------------------------------------------

    Third, drawing from the Commission's Prescreen Opt-Out Rule, the 
final amended Rule requires that visual disclosures be distinct from 
other text, such as inside a border.\84\ Fourth, the final Rule 
requires that the disclosure be ``in a distinct type style, such as 
bold.''\85\ Finally, because the final amended Rule addresses 
disclosures beyond print, such as television and Internet websites, the 
Commission has modified the requirement that the disclosure be 
``parallel to the base of the advertisement'' to state that the 
disclosure must be ``parallel to the base of the advertisement or 
screen.''\86\
---------------------------------------------------------------------------

    \84\ See 16 CFR 642.3(a)(2).
    \85\ As noted above, although text in, italics, or underlined 
may be ``in a distinct type style,'' if they are difficult to read, 
they would not satisfy the ``easily readable'' requirement.
    \86\ The final amended Rule also eliminates the term ``color'' 
in recognition of the fact that certain advertising, such as 
newspaper advertising, often contains no color.
---------------------------------------------------------------------------

d. Section 610.4(a)(3)(iv): Audio disclosures
    Proposed section 610.4 required that audio disclosures be delivered 
in a slow and deliberate manner and in a reasonably understandable 
volume. In response to the NPRM, a few commenters suggested additional 
specificity for this section, such as requirements for pitch and a 
particular volume level.\87\ The Commission agrees that adding a 
requirement that the audio disclosure be at a reasonable pitch will 
further ensure that audio disclosures can be heard by consumers. The 
Commission has modified the final amended Rule accordingly. The 
Commission, however, believes that adding a specific volume level is 
unnecessary, given that the Rule already requires the disclosure to be 
made at ``a reasonably understandable volume.''
---------------------------------------------------------------------------

    \87\ See NAAG at 4 (suggesting that audio disclosure be made 
``every time the triggering term is used and at the same decibel''); 
State of Florida at 7 (suggesting that ``audio disclosures should 
parallel the volume and approximate pitch of the primary 
advertisement or be at least as audible as the primary 
advertisement'').
---------------------------------------------------------------------------

    One commenter suggested that the audio disclosure be made each time 
the triggering term ``free credit report'' is used.\88\ The Commission 
believes that multiple disclosures in a short audio advertisement could 
make all of the messages in the advertisement (including the 
disclosure) difficult for consumers to understand; therefore, the 
Commission declines to make this change. For program-length 
advertisements, however, section 610.4(a)(3)(v) of the final amended 
Rule does require multiple audio disclosures, as discussed below.
---------------------------------------------------------------------------

    \88\ See NAAG at 4 (suggesting that audio disclosure be made 
``every time the triggering term is used . . .'').
---------------------------------------------------------------------------

e. Section 610.4(a)(3)(v): Program-length advertisements
    Proposed section 610.4 required that any program-length television, 
radio, or Internet-hosted multi-media advertisement for ``free credit 
reports'' provide the required disclosures at the beginning, near the 
middle, and at the end of the advertisement. No substantive comments 
addressed this provision. Accordingly, the final amended Rule adopts 
this proposal.\89\
---------------------------------------------------------------------------

    \89\ The Commission notes that this provision is identical to 
section 308.3(a)(6) of the Pay Per Call Rule, and is designed to 
enable consumers tuning in to the program-length advertisement at 
different stages of the broadcast to receive the required 
disclosure. Cf. In re Synchronal Corp., 116 FTC 1189 (1993) 
(requiring video or commercial advertisements 15 minutes or longer 
to disclose that program is a paid advertisement within the first 30 
seconds and immediately before presentation of ordering 
instructions).
---------------------------------------------------------------------------

f. Section 610.4(a)(3)(vi): Inconsistent and contrary information
    Proposed section 610.4 provided that ``nothing contrary to, 
inconsistent with, or in mitigation of the required disclosures shall 
be used in any advertisement in any medium . . . .'' The proposed 
section also prohibited any audio, visual, or print technique that is 
likely to detract significantly from the communication of any required 
disclosure. This provision was drawn from section 308.3(a)(5) of the 
Pay Per Call Rule and was designed to prevent circumvention of the Rule 
requirements through the conveyance of contrary or inconsistent 
information, or other actions that undermine the disclosures to 
consumers.\90\
---------------------------------------------------------------------------

    \90\ Cf. Franchise Rule, 16 CFR 436.9(a) and Business 
Opportunity Rule, 16 CFR 437.1(a)(21) (prohibiting the making of any 
claim or representation, orally or visually, or in writing, that 
contradicts the information required to be disclosed by the Rule); 
Guides for Environmental Marketing Claims, 16 CFR 260.6(a) (noting 
that an absence of contrary claims will help make disclosures clear 
and prominent).
---------------------------------------------------------------------------

    In its comment, Schwartz & Ballen asserted that the phrase ``in 
mitigation'' fails to provide sufficient guidance as to what language 
is prohibited by this section.\91\ The Commission agrees that the term 
``in mitigation'' is vague; thus, the final amended Rule substitutes 
the

[[Page 9735]]

phrase ``that undermines'' for the phrase ``in mitigation.''\92\ 
Accordingly, the relevant portion of section 610.4(a)(3)(vi) of the 
final amended Rule reads, ``nothing that is contrary to, inconsistent 
with, or undermines the required disclosures shall be used in any 
advertisement in any medium . . . .''
---------------------------------------------------------------------------

    \91\ Schwartz & Ballen at 5.
    \92\ Further, the phrase ``that undermines'' is drawn from and 
parallel to other sections of the original Rule. See 16 CFR 
610.2(g)(1), renumbered as section 610.2(g)(2) in the final amended 
Rule (prohibiting ``communications . . . [that] undermine the 
purpose of the centralized source'').
---------------------------------------------------------------------------

3. Section 610.4(b): Medium-specific advertising disclosures
    Proposed section 610.4(b) set forth the statutory requirements 
relating to prominence in specific media. The wording and presentation 
of required disclosures for each medium are described below.
a. Section 610.4(b)(1): Disclosures for television advertisements
    Section 205 of the Act prescribes the specific wording of the 
disclosures for television, requires that the disclosures be made in 
both audio and video formats, and requires the audio and video 
disclosures to be made at the same time.\93\ Accordingly, consistent 
with the Act, proposed section 610.4(b)(1) required that all 
advertisements for ``free credit reports'' broadcast on television 
include the following disclosure: ``This is not the free credit report 
provided for by Federal law'' in the audio and visual parts of the 
advertisement at the same time. Proposed section 610.4(b)(1) also 
required that the disclosure be at least four percent of the vertical 
picture height, and appear for a minimum of four seconds. This 
requirement is consistent with comparable Federal Election Commission 
requirements for the disclosure of the funding source of a political 
advertisement on television.\94\
---------------------------------------------------------------------------

    \93\ Section 205(a)(2): ``In the case of an advertisement 
broadcast by television or radio, the disclosure required under 
paragraph (1) ''shall be included in the audio and visual part of 
such advertisement.''
    \94\ See 11 CFR 110.11(c)(3)(iii)(B).
---------------------------------------------------------------------------

    The Commission received few comments on this proposed section. NAAG 
suggested that the Commission add the following statement to the 
disclosure: ``This report is only free if you make a purchase.''\95\ As 
noted above, however, the statute specifies the wording of the 
disclosure for television and radio advertisements, and the 
Commission's Rule follows this wording.
---------------------------------------------------------------------------

    \95\ NAAG at 3.
---------------------------------------------------------------------------

    One commenter disagreed with the proposed Rule's use of the Federal 
Election Commission requirements for the size of the visual disclosure, 
asserting that the standard is ``overly rigid and excessively 
burdensome.''\96\ The commenter did not provide any additional 
information or support; nor did it offer an alternative standard. The 
Commission continues to believe that the Federal Election Commission 
requirements provide a useful standard for prominent disclosures in 
television advertisements. Accordingly, the Commission retains this 
standard in the final amended Rule.
---------------------------------------------------------------------------

    \96\ Schwartz & Ballen at 5.
---------------------------------------------------------------------------

    In addition, NAAG, the State of Florida, and NYCPB offered several 
suggestions regarding the timing of the disclosure. For example, the 
State of Florida suggested that the visual disclosure appear throughout 
the entire advertisement and that the size of the disclosure be at 
least as large as the company name.\97\ NYCPB suggested that the 
disclosure ``should be provided at the front or beginning of the 
advertisement'' to be consistent with the proposed Internet website 
disclosure.\98\ NAAG suggested that the disclosure be ``equally 
prominent and in close proximity to the triggering claim . . . .''\99\
---------------------------------------------------------------------------

    \97\ State of Florida at 7.
    \98\ NYCPB at 2.
    \99\ NAAG at 3.
---------------------------------------------------------------------------

    The Commission agrees that, consistent with long-standing 
Commission interpretations of prominence, the audio and video 
disclosure should appear in close proximity to the first mention of a 
free credit report. Indeed, as FTC staff has stated in its prior 
business guidance, ``[a] disclosure is more effective if it is placed 
near the claim it qualifies or other relevant information. Proximity 
increases the likelihood that consumers will see the disclosures and 
relate it to the relevant claim or product.''\100\ In keeping with this 
principle, section 610.4(b)(1)(i) now reads, ``all advertisements for 
free credit reports broadcast on television shall include the following 
disclosure in close proximity to the first mention of a free credit 
report: `This is not the free credit report provided for by Federal 
law.'''\101\
---------------------------------------------------------------------------

    \100\ See Federal Trade Commission Guidance, Dot Com 
Disclosures: Information about Online Advertising, at 6, available 
at (http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus41.pdf) 
(``Dot Com Disclosures'').
    \101\ In response to commenters' additional suggestions to 
address prominence in television advertising, the Commission notes 
that, rather than adding specific requirements to this section, it 
has tried to tighten the prominence requirements for all 
disclosures, as discussed above.
---------------------------------------------------------------------------

b. Section 610.4(b)(2): Disclosures for radio advertisements
    Proposed section 610.4(b)(2) also incorporated the section 205 
disclosure for all advertisements for ``free credit reports'' broadcast 
on radio: ``This is not the free credit report provided for by Federal 
law.''
    Similar to the television disclosure, NAAG suggested that the 
Commission add to the disclosure the following statement: ``This report 
is only free if you make a purchase.''\102\ As noted above, the statute 
specifies the wording of the disclosure for television and radio 
advertisements, and the Commission's Rule follows this wording.
---------------------------------------------------------------------------

    \102\ NAAG at 3.
---------------------------------------------------------------------------

    With respect to the timing of the disclosure, NAAG suggested that 
it appear ``in close proximity to the triggering claim . . . .''\103\ 
Another commenter suggested that the disclosure ``should be provided at 
the front or beginning of the advertisement'' to be consistent with the 
proposed Internet website disclosure.\104\ The Commission agrees that a 
timing requirement would be appropriate. Rather than mandating the 
disclosure up front, however, the Commission has decided to add a 
requirement that the disclosure be made in close proximity to the first 
mention of ``free credit report,'' consistent with the requirement for 
television advertising discussed above. Thus, the final amended Rule 
section 610.4(b)(2) states that ``all advertisements for free credit 
reports broadcast on radio shall include the following disclosure in 
close proximity to the first mention of free credit report: `This is 
not the free credit report provided for by Federal law.'''
---------------------------------------------------------------------------

    \103\ Id. In addition, NAAG and the State of Florida offered 
suggestions regarding the placement and/or audibility of the 
disclosures. These comments are addressed in the discussion of the 
general requirements for prominent advertising disclosures above.
    \104\ NYCPB at 2.
---------------------------------------------------------------------------

c. Section 610.4(b)(3): Disclosures for print advertisements
    Proposed section 610.4(b)(3) provided that all print advertisements 
for ``free credit reports'' include the following disclosure: ``This is 
not the free credit report provided for by Federal law. To get your 
free report, visit (www.AnnualCreditReport.com) or call 877-322-8228.'' 
Further, it required that each letter of the disclosure be, at a 
minimum, one half the size of the largest letter or numeral used in the 
name of the website or the telephone number to which consumers are 
referred

[[Page 9736]]

to receive what is advertised as a free credit report.\105\
---------------------------------------------------------------------------

    \105\ As noted in the NPRM, this approach is identical to that 
of the Pay Per Call Rule, section 308.3(b)(v)(2)(i).
---------------------------------------------------------------------------

    States and consumer advocates generally supported the proposal and 
offered suggestions to make the disclosure more prominent. For example, 
NAAG suggested that the disclosure should be equally prominent and in 
close proximity to the triggering claim of ``free'' or ``free credit 
report.''\106\ The State of Florida and NYCPB suggested that the Rule 
include formatting requirements, such as the use of a border or 
contrasting color.\107\ NCLC suggested that the Rule include placement 
requirements for the disclosure, such as near the most prominent 
listing of the website or telephone number for the commercial entity 
and, for multi-page advertisements, on the front side of the first page 
of the principal promotional document.\108\ In addition, Schwartz & 
Ballen suggested that the second sentence of the disclosure should be 
the same as the language for the interim disclosure specified in the 
Act because it is more clear than the disclosure proposed in the 
NPRM.\109\
---------------------------------------------------------------------------

    \106\ NAAG at 4.
    \107\ State of Florida at 7; NYCPB at 2.
    \108\ NCLC at 5.
    \109\ Schwartz & Ballen at 6. Section 205(b)(3) of the Act 
provides that the interim disclosure shall include ``Free credit 
reports are available under Federal law at: 
`AnnualCreditReport.com'.''. In addition, CDIA commented that the 
proposed disclosure exceeds the Commission's statutory authority 
because of the inclusion of the first sentence and suggested that 
the disclosure should be limited to the second sentence. CDIA at 13. 
As stated in the NPRM, section 205 of the Act does not specify the 
wording of the advertising disclosure required in print 
advertisements. Rather, it only requires that the disclosure be 
``prominent'' and authorizes the Commission to determine the 
appropriate wording of the advertising disclosure through this 
rulemaking.
---------------------------------------------------------------------------

    The Commission agrees that the print disclosures should be made 
more prominent, and accordingly has modified the proposal in several 
ways. First, the Commission has added a general prominence requirement 
and strengthened the general requirements for visual disclosures in the 
final amended Rule, as discussed above. All of these requirements apply 
to print advertising.
    Second, proposed section 610.4(d)(3) required only that the 
disclosure text be one-half the size of the largest letter or numeral 
used in the website address or telephone number to which consumers are 
referred to obtain their ``free credit report'' listed in the print 
advertisement. Section 610.4(b)(3) of the final amended Rule provides 
that each letter of the disclosure text shall be, at minimum, one-half 
the size of the largest character used in the advertisement. Linking 
the type size of the disclosure to the largest character used in the 
entire advertisement (as opposed to only the website address or the 
telephone number), combined with the general requirements of section 
610.4(a) of the final amended Rule, will strengthen the prominence of 
the print disclosure.
    Third, the Commission agrees with the comments suggesting inclusion 
of a requirement that the disclosure be in close proximity to the free 
report claim. As with the radio and television disclosures, this 
modification is consistent with longstanding FTC practice requiring 
disclosures be made in close proximity to the triggering claim. Thus, 
the final amended Rule provides that the required disclosure appear in 
close proximity to the first mention of a ``free credit report.''\110\
---------------------------------------------------------------------------

    \110\ For example, a print advertisement that features a ``free 
credit report'' offer at the top of the page, intervening text, and 
the disclosure at the bottom of the page would not satisfy the close 
proximity requirement.
---------------------------------------------------------------------------

    With respect to the comment on the text of the disclosure, the 
Commission agrees that the text could be clearer. Particularly when the 
disclosure is made in close proximity to the offer of a free credit 
report, the consumer might be confused by conflicting messages. For 
example, a consumer might see an advertisement saying ``get a free 
credit report'' and, in close proximity, the consumer would see the 
disclosure that begins with the phrase ``This is not the free credit 
report . . . .'' The Commission believes that the juxtaposition of the 
two messages - particularly when placed in close proximity - would 
likely cause consumer confusion, and has changed the disclosure text in 
two respects to address this issue.
    First, the Commission has added a requirement that the disclosure 
include the following header centered on the first line of the 
disclosure: ``THIS NOTICE IS REQUIRED BY LAW.'' This header clarifies 
that the disclosure is coming from a source other than the commercial 
entity advertising a free credit report. In addition, the requirement 
to include a header is consistent with numerous other Commission rules 
that title disclosures to alert consumers to the importance of the 
message delivered.\111\
---------------------------------------------------------------------------

    \111\ See, e.g., Cooling Off Rule, 16 CFR Part 429 (requiring a 
form captioned either ``NOTICE OF RIGHT TO CANCEL'' or ``NOTICE OF 
CANCELLATION''); Prescreen Rule, 16 CFR Part 642 (requiring a form 
captioned ``PRESCREEN AND OPT-OUT NOTICE'').
---------------------------------------------------------------------------

    Second, rather than starting the disclosure with the sentence 
``This is not the free credit report provided by federal law.'', the 
final amended Rule's disclosure includes only the affirmative 
statement: ``You have the right to a free credit report from 
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source 
under federal law.'' The Commission notes that beginning the disclosure 
with the phrase ``This is not the free credit report'' could be 
confusing in that it may be unclear what the term ``this'' refers to. 
Thus, the Commission believes that these changes make the required 
disclosure clearer for consumers.\112\
---------------------------------------------------------------------------

    \112\ The potential for confusion with the disclosure in the 
proposed Rule text is also discussed in the section on Internet 
website disclosures below. The text of the disclosure for all media, 
except for television and radio (for which the text of the 
disclosure is statutorily mandated), has been modified in a similar 
way, for consistency.
---------------------------------------------------------------------------

d. Section 610.4(b)(4): Disclosures for Internet websites
    Proposed section 610.4(b)(4) required any website offering ``free 
credit reports'' to first display on a separate landing page the 
following visual disclosure: ``This is not the free credit report 
provided for by Federal law. To get your free report, visit 
(www.AnnualCreditReport.com) or call 877-322-8228.'' Proposed section 
610.4(b)(4) also required that the separate landing page contain no 
other information aside from the statement: ``Go to [hyperlink to 
company's website.]'' Further, the disclosure was to: (1) be visible to 
consumers without requiring them to scroll down the webpage; (2) 
contain an operational hyperlink directing consumers to 
(www.AnnualCreditReport.com) that appears before the hyperlink to the 
advertised company's commercial website; and (3) be in a type at least 
twice the size as the hyperlink to the company's website or display of 
the company's Uniform Resource Locator. Finally, proposed section 
610.4(b)(4) provided that the separate landing page must occupy the 
full screen and that no other information, graphics, or material could 
be shown to the consumer unless and until the consumer affirmatively 
selected one of the two hyperlinks described above.\113\
---------------------------------------------------------------------------

    \113\ 74 FR at 52927.
---------------------------------------------------------------------------

    Consumer advocates such as NCLC, as well as NAAG, the States of 
Florida and Minnesota, Senator Levin, and many individual consumers 
generally supported the proposed separate landing page requirement. 
Some consumer advocates recommended strengthening the proposed separate 
landing page. For example, NCLC commented that the separate landing 
page should appear in multiple

[[Page 9737]]

locations, including on the purchase confirmation page, to prevent 
circumvention.\114\
---------------------------------------------------------------------------

    \114\ NCLC at 6; see also State of Florida at 8.
---------------------------------------------------------------------------

    Businesses and industry groups, as well Representatives Boozman and 
Ross, opposed the separate landing page.\115\ These commenters raised 
one or more arguments, including that requiring a separate landing 
page: (1) exceeds the FTC's statutory authority; (2) impermissibly 
restricts truthful commercial speech, thereby implicating First 
Amendment concerns; (3) departs from longstanding FTC policy on 
``prominent'' disclosures in close proximity to the relevant advertised 
claim; and (4) would confuse consumers or may discourage them from 
seeking their file disclosure. As to this final point, Experian 
submitted market research that tested consumers' experiences with a 
separate landing page similar to what was proposed in the NPRM. 
Experian presented research suggesting a high rate of consumer 
confusion as evidenced by, among other things, consumers spending a 
long time on the landing page, few consumers continuing on to 
AnnualCreditReport.com, and indeed, many consumers abandoning the 
separate landing page without continuing on either to 
AnnualCreditReport.com or Experian's commercial website.\116\ In 
addition, some commenters noted that consumers unfamiliar with a 
separate landing page may believe it is suspect, such as an illegal 
``phishing site.''\117\
---------------------------------------------------------------------------

    \115\ See, e.g., Experian, CDIA, TransUnion, IAB, ANA, 
Intersections, Schwartz & Ballen, E-Commerce, and U.S. Chamber of 
Commerce, Representatives Boozman and Ross.
    \116\ Experian at 9-12; see also AOL, Microsoft, Yahoo! 
(jointly) at 2 (``Because the separate landing page is unprecedented 
and unfamiliar, it will perplex consumers who visit an affected 
website for the first time.''); DMA at 2 (``[R]equiring a separate 
landing page . . . could actually increase consumer confusion.''); 
Schwartz & Ballen at 6 (``[S]eparate landing page will prove 
confusing to consumers.''); IAB at 5 (asserting that a separate 
landing page ``will likely confuse and annoy consumers.''); 
TransUnion at 9 (asserting that consumers seeing an ``unrelated 
splash page'' will be confused).
    \117\ Representatives Boozman and Ross at 1; CDIA at 11 
(asserting that consumers may simply think that they clicked on a 
faulty link, or even a phishing site, and shut down their browser); 
U.S. Chamber of Commerce at 3 (``When presented with such a landing 
page that covers the entire screen, consumers could think they run 
[sic] into a scam or could be concerned that such a page is 
malware.'').
---------------------------------------------------------------------------

    The Commission is particularly concerned with the data suggesting 
that the separate landing page, as proposed, would cause consumer 
confusion. Indeed, based on the comments submitted, the Commission is 
persuaded that the separate landing page, which would not be in close 
proximity to the relevant claims, has the potential to confuse 
consumers and create suspicion about the legitimacy of the disclosure 
in this context.\118\ Because the very purpose of section 205 of the 
Act and the amendments to section 610.2 of the original Rule is to 
reduce such confusion, the Commission has determined to eliminate the 
separate landing page in favor of a prominent disclosure on the website 
page(s) where the free credit report claim appears, as well as on each 
page of the ordering process.\119\
---------------------------------------------------------------------------

    \118\ The Commission notes that the decision to abandon the 
separate landing page in this rulemaking is based on the existing 
record at this time. It may revisit the concept of a separate 
landing page in this or other contexts at a later time.
    \119\ Although the Act contemplated that the disclosures could 
appear on Internet advertisements, the Commission believes that a 
disclosure on the website would be more useful to consumers in this 
instance. As noted in the NPRM, based on its experience in designing 
disclosures, the Commission has found that certain disclosures are 
most effective when given at the moment that a consumer is making a 
decision regarding a product or service. 74 FR at 52920. In 
addition, some Internet advertising, such as buttons, ``sponsored 
links,'' and banner ads, are size restricted. In light of such 
restrictions, it would be difficult to design a disclosure in this 
context that would satisfy the statutory ``prominence'' requirement. 
The Commission notes, however, that Internet-hosted multi-media 
advertising will require disclosures under section 610.4(b)(5), as 
this type of advertising is similar to television advertising 
because it contains both audio and visual components. Finally, the 
Commission will monitor and evaluate the effectiveness of 
disclosures on Internet websites and will consider additional 
changes as necessary, including requiring disclosures on Internet 
advertisements, to achieve the purpose of the Act.
---------------------------------------------------------------------------

    As described below, the Commission also has added certain specific 
requirements to ensure the prominence of the Internet website 
disclosures. Given that the final amended Rule does not require a 
separate landing page, the disclosure will now compete with additional 
content on an existing Internet web page, such as eye-catching 
graphics, banners, buttons, images, colors, and text. Thus, the final 
amended Rule contains several additional requirements, which are 
necessary to strengthen prominence. Finally, as with print disclosures, 
the Commission has modified the text of the disclosure to make it 
clearer for consumers. Taken together, the Commission believes that the 
requirements for Internet website disclosures in the final amended Rule 
provide clearer, more prominent, and, ultimately, a more effective 
disclosure than that of the proposed Rule.
(i) Placement of the disclosure
    With respect to placement, section 610.4(b)(4) of the final amended 
Rule requires that any website offering free credit reports make the 
required disclosure on ``each page that mentions a free credit report 
and on each page of the ordering process.'' As discussed in the NPRM, 
based on its experience, the Commission has found that certain 
disclosures are most effective when given at the moment that a consumer 
is making a decision regarding a product or service.\120\ Here, the 
disclosure will occur both at the moment that a vendor is making a 
claim about a ``free credit report''\121\ and at the moment that a 
consumer is seeking to place an order for a ``free credit report'' 
online\122\ - critical times to prevent deception and the possible 
purchase of unwanted goods and services. The final amended Rule's 
requirement that the disclosure appear on each page mentioning ``free 
credit reports'' also ensures that consumers seeking a ``free credit 
report'' will see the disclosure regardless of their point of entry 
into a website.\123\ The requirement to provide the disclosure on each 
page of the ordering process will further ensure that consumers receive 
a prominent disclosure. Requiring the disclosure to be displayed to the 
consumer at multiple locations on the website is similar to the Act's 
requirement for dual-modality disclosures for television 
advertisements, which ``have been found to achieve much higher levels 
of message recall than single-modality disclosures.''\124\ The 
Commission has determined that the required disclosures for Internet 
websites must reflect the same clarity and prominence that are the 
hallmarks of the dual-modality disclosure Congress mandated for 
television advertisements.\125\
---------------------------------------------------------------------------

    \120\ See Dot Com Disclosures at 11 (disclosures are more likely 
to be effective if they are provided when the consumer is 
considering the purchase).
    \121\ See generally FTC v. TALX Corp., Civ. No. 4:09-cv-01071 
(E.D. Mo. 2009) (requiring ``clear and prominent'' disclosures on 
the principal website screen or landing page where the disclosures 
are most relevant).
    \122\ The requirement that the disclosure appear on the first 
page of the ordering process applies to any website, including order 
fulfillment websites, where a request for a ``free credit report'' 
is processed.
    \123\ See NCLC at 6 (``The proposed rule should have a goal of 
placing the disclosure in multiple locations so as to prevent 
concealment of the consumer's right to obtain a free consumer report 
from the centralized source. . .'').
    \124\ Michael B. Mazis and Louis A. Morris, Channel, in Warnings 
and Risk Communication, 106 (Michael S. Wogalter, et al., eds., 
1999) (citations omitted).
    \125\ See Dot Com Disclosures at 3 (noting that general 
advertising law principles apply regardless of the medium used).
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    Further, section 610.4(b)(4) requires that the disclosure be 
visible across the top of each web page where the

[[Page 9738]]

disclosure is required to appear.\126\ ``Visible'' means that the 
disclosure must be unavoidable. Thus, it must appear in the viewable 
portion of the screen when the consumer opens the web page. Similarly, 
it must not be obscured by other features such as pop-ups or graphics 
and cannot be a flashing or dissolving image. ``Across the top'' means 
that the disclosure shall appear before any content, such as 
advertisements, other text, images, logos, or navigation links.
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    \126\ The Commission has deleted the requirement that the 
disclosure be ``visible to consumers without requiring them to 
scroll down the webpage.'' The Commission believes that the general 
``prominence'' requirement addresses this point; in addition, the 
Commission understands that, as computer devices get smaller, 
consumers may have to scroll to view any content on a web page.
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(ii) Content of the disclosure
    In order to ensure that the disclosure is prominent, consumers must 
be drawn to it and must be able to distinguish the federally mandated 
free credit report contained in the disclosure from the competing 
commercial offers on the website. To achieve these goals, the 
Commission has modified the content of the disclosure, as described 
below.\127\ To assist in designing disclosures that will comply with 
this section, the Commission has provided examples for Internet website 
disclosures at (www.ftc.gov/freereportsdisclosure).
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    \127\ See 155 Cong. Rec. S6178, S6179 (June 4, 2009) (statement 
of Sen. Levin) (``The goal of section 205 is to eliminate consumer 
confusion and deception by preventing commercial promotions from 
posing as the Federal free annual report program, and by ensuring 
that consumers know how to get their truly free annual reports.'').
---------------------------------------------------------------------------

    First, the final amended Rule requires that the disclosure appear 
inside a box; that the background of the box be a solid color in a high 
degree of contrast from the background of the web page; and that the 
color of the box not appear elsewhere on the page. These requirements 
strengthen prominence of the disclosure. If the disclosure were not in 
a box, or if the background color of the box were to blend in with 
other colors on the page, the Commission believes that the disclosure 
would likely not catch the viewer's eye. Second, the Rule requires that 
all text contained in the disclosure be displayed as plain text, not as 
an image or banner, and be in a sans serif font, such as Arial. This 
requirement ensures that entities subject to the Rule do not use 
highly-stylized or highly-condensed fonts that would be difficult to 
read. Third, the Rule includes specific requirements for line spacing 
and top, bottom, left, and right margins for the disclosures, to ensure 
readability.\128\ Finally, all text contained in the box must be in a 
high degree of contrast with the immediate background on which it is 
placed, to strengthen prominence and readability.
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    \128\ See Final Model Privacy Form Under the Gramm Leach Bliley 
Act, 74 FR 62889, at 62898 (stating that ``the guidance from 
communications experts and form designers is that appropriate white 
space between the text and the margins . . . make a more effective, 
readable notice'').
---------------------------------------------------------------------------

    Beyond these requirements, the disclosure contained in the final 
amended Rule consists of three elements: a disclosure header, 
disclosure text, and a disclosure button. This section describes 
requirements applicable to each in turn.
(A) Disclosure Header
    As set forth in paragraph 610.4(b)(4)(i), the first element of the 
disclosure shall consist of the following header: ``THIS NOTICE IS 
REQUIRED BY LAW. Read more at FTC.GOV''. The reference to FTC.GOV shall 
be an operational hyperlink to (www.ftc.gov/freereports). As discussed 
in the print disclosures section above, the use of a header: (1) alerts 
the viewer that the message being delivered is from a source other than 
the commercial entity offering free credit reports on the page; and (2) 
is consistent with other Commission rules that title disclosures to 
alert consumers to the importance of the message delivered.
    In addition, for Internet websites, the Commission has added a 
second sentence to the header informing consumers that they can ``Read 
more at FTC.GOV''. The Rule requires that FTC.GOV be an operational 
hyperlink to an FTC web page where consumers can obtain more 
information about the availability of free credit reports under federal 
law. The Commission believes that adding a .gov domain name in the 
header - that consumers can click immediately to reach an official 
government website - will add to consumer confidence that the 
disclosure is coming from the federal government. Indeed, in arguing 
that the centralized source itself should use a .gov domain name, 
several commenters suggested that the .gov domain name creates 
legitimacy.\129\ Although the centralized source is operated by the 
nationwide CRAs and is thus not eligible for a .gov domain name,\130\ 
the Commission is persuaded that adding a .gov domain name to the 
disclosure will bolster the legitimacy of the message.
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    \129\ See Empire Justice at 4 (urging the Commission to exert 
oversight of the centralized source and to use a .gov domain name 
for the centralized source); see also R. Lang (noting generally that 
a .gov URL ``would help people to know for certain that they are on 
the correct site'').
    \130\ See 15 U.S.C. 1681j(a)(1)(B).
---------------------------------------------------------------------------

    The header must be centered on its own line and be one-half the 
size of the rest of the required disclosure text. These requirements 
are intended to enhance readability of the disclosure in a medium where 
there will be a multiplicity of competing text, fonts, content, and 
images. A smaller header centered on its own line will ensure 
sufficient negative space around the text to enhance readability of the 
header, and at the same time, will ensure that the header does not 
overpower the text of the disclosure.\131\ Having most of the text of 
the header in all capital letters, in contrast with the actual 
disclosure text, which will be primarily in lower-case, will further 
enhance readability of the header.
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    \131\ The size of the disclosure header varies between print 
advertisements and Internet websites. For print advertisements, the 
main disclosure text can be half the size of the largest character 
in the advertisement; for Internet websites, the disclosure is 
required to be larger, in relation to other characters on the page. 
Because the main disclosure text on print advertisements can be 
smaller, the Commission is concerned that the header might not be 
readable if it were smaller than the main disclosure text.
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(B) Disclosure Text
    As set forth in paragraph 610.4(b)(4)(ii), the second element of 
the disclosure shall contain the following language and appear below 
the header: ``You have the right to a free credit report from 
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source 
under federal law.''\132\ The Commission believes that the text of this 
disclosure - which is identical to the disclosure for print 
advertisements - is clearer than that of the proposed Rule, for the 
reasons stated above. In particular, because the Internet website 
disclosure requirement has moved from a separate landing page to an 
existing web page, the disclosure will be in close proximity to other 
mentions of ``free'' reports; to avoid confusion, the Commission 
believes the more straightforward, simpler disclosure telling consumers 
where they can obtain the free annual file disclosures authorized by 
law will be more effective.
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    \132\ As in the proposed Rule, the reference to 
AnnualCreditReport.com shall be an operational hyperlink to the 
centralized source.
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    The final amended Rule contains two additional requirements 
applicable specifically to the disclosure text. First, to emphasize the 
hyperlink to AnnualCreditReport.com, the final amended Rule requires it 
to be underlined and in a color that is in a high degree of contrast to 
both the color

[[Page 9739]]

of the other disclosure text and background of the box. Second, because 
the disclosure will now appear with other text and eye-catching 
graphics on an existing web page, the Commission has determined that 
the best way to ensure prominence is to require that the text be at 
least as large as the largest character on the page. For example, if 
the largest character on the page is 24 point type size, then all of 
the characters in the disclosure must be at a minimum 24 point type 
size.\133\
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    \133\ A few commenters questioned the different type size 
requirements for print advertisements and Internet websites. See 
AOL, Microsoft, Yahoo! at 2; IAB at 4. The Commission reviewed these 
comments and concludes that the different nature of these media 
demands different type size requirements for the disclosure. 
Specifically, an Internet website requires a larger type size for 
the disclosure because it is the location from which consumers have 
the ability to place an order for a ``free credit report.'' In 
contrast, print advertisements direct consumers to another source, 
such as a telephone number or Internet website, to order a ``free 
credit report'' and consumers will receive another disclosure at 
that time. In addition, there may be greater space limitations in 
some print media that do not exist on Internet websites.
    The final amended Rule also clarifies that ``characters'' 
includes those in an image or graphic banner - not just characters 
technically coded on the Internet website as text.
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(C) Disclosure Button
    As set forth in paragraph 610.4(b)(4)(v), the third element of the 
disclosure shall be a distinct button below the disclosure text, which 
hyperlinks to AnnualCreditReport.com. The Commission has added this 
requirement, recognizing that websites may use distinctive ``order'' 
buttons to draw the viewer's eye. Because the disclosure now must 
appear on an existing web page, it may compete with these ``order'' 
buttons for the viewer's attention. To compete effectively, the 
Commission believes that including a button in the disclosure is 
necessary.
    The final amended Rule requires that the button contain the text 
``Take me to the authorized source''. This text, in conjunction with 
the disclosure text described above, will inform consumers that they 
can click to obtain easily the free credit report they are entitled to 
under federal law. The text's specific reference to ``the authorized 
source'' will also avoid the possibility of having two identical 
buttons on the page, which might lead a consumer to believe that 
clicking on either button will take him or her to the same place.
    Finally, the final amended Rule includes additional requirements to 
strengthen prominence of the button, including requirements that: (1) 
the background of the button must be the same color as the hyperlink to 
AnnualCreditReport.com contained in the disclosure;\134\ (2) the text 
``Take me to the authorized source'' must be in a high degree of 
contrast to the background of the button; (3) the button must be 
centered on its own line; and (4) the text of the button must be the 
same size as the disclosure text (i.e., at least the same size as the 
largest character on the web page).\135\
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    \134\ The final amended Rule already requires that the hyperlink 
to AnnualCreditReport.com be in a high degree of contrast to the 
background of the box containing the disclosure; linking the color 
of the button to the color of the hyperlink will ensure that both 
elements will appear in high contrast to the background color of the 
box. In addition, tying the two colors together will create a visual 
cue that clicking on either link will get the consumer to the 
authorized source. The Commission notes further that the requirement 
that the two links be the same color applies to the page as the 
consumer initially views it. For example, the Rule is not violated 
if the two links appear initially in the same color, a consumer 
clicks the hyperlink, returns to the site, and finds that the 
hyperlink subsequently appears in a different color.
    \135\ This requirement will ensure the prominence of the button 
because the button must be large enough to accommodate the required 
text in the required size.
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    In sum, the Commission believes that the placement, content and 
size requirements of the Internet website disclosure, coupled with the 
general requirements for visual disclosures, will help ensure 
prominence.\136\ Further, these requirements will make it easier for 
consumers to distinguish the disclosure from competing messages on a 
website and will enable consumers to easily access 
AnnualCreditReport.com. The Commission will monitor and evaluate the 
effectiveness of the disclosure required under the final amended Rule 
and will consider additional changes, including revisiting the separate 
landing page concept, as necessary to achieve the statutory purpose and 
minimize consumer confusion.
---------------------------------------------------------------------------

    \136\ As discussed in the NPRM, Congress' use of the word 
``prominent'' must be viewed as an expression of intent that the new 
disclosures be more noticeable and more effective than those 
currently required or used in advertising for ``free credit 
reports.''
---------------------------------------------------------------------------

e. Section 610.4(b)(5): Disclosures for Internet-hosted multi-media 
advertising
    Proposed section 610.4(b)(5) required Internet-hosted multi-media 
advertisements for ``free credit reports'' disseminated in both audio 
and visual formats to include the same disclosure as proposed for 
Internet websites. It further required that the disclosure appear 
simultaneously in the audio and visual part of the advertisement and 
that the visual disclosure be in a type at least the same size as the 
largest hyperlink to the company's website, display of the Uniform 
Resource Locator of the company's website, or display of the company's 
telephone number. This section was intended to address innovative forms 
of advertising for ``free credit reports'' in multi-media platforms, 
such as smart phone applications, YouTube.com, and comparable visual 
and audio mechanisms, that may not be captured by other medium-specific 
provisions of the Rule.
    Several commenters offered suggestions regarding placement and 
format of disclosures for Internet-hosted multi-media. For example, 
NAAG suggested that the disclosure should be equally prominent and in 
close proximity to the triggering claim of ``free'' or ``free credit 
report.''\137\ NCLC suggested that the visual disclosures should be 
displayed for the entire duration of the advertisement due to the wide 
variation in the duration of advertisements in this medium.\138\ In 
addition, Schwartz & Ballen opposed the type size requirement because 
it is inconsistent with the requirement for television advertisements.
---------------------------------------------------------------------------

    \137\ NAAG at 4-5.
    \138\ NCLC at 6.
---------------------------------------------------------------------------

    In response to the comments, the Commission has modified the 
proposal in a number of ways. Consistent with changes to the other 
sections, the Commission has added a requirement that the disclosure be 
made in close proximity to the first mention of a free credit report. 
In addition, the Commission notes that the strengthened requirements 
for prominence in section 610.4(a) of the final amended Rule address 
the comments offering placement, format, and timing suggestions.\139\
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    \139\ In response to Schwartz & Ballen's comment about the 
inconsistencies between the size of the television and multi-media 
disclosures, the Commission notes that the Internet-hosted multi-
media disclosures will likely be on smaller screens; therefore, the 
differences in the specific type-size requirements are appropriate.
---------------------------------------------------------------------------

    Further, the Commission has modified the language of the disclosure 
to be consistent with the changes to the print and Internet website 
disclosures discussed in detail above. Accordingly, the Commission has 
determined that the disclosure must include ``THIS NOTICE IS REQUIRED 
BY LAW'' as a header followed by: ``You have the right to a free credit 
report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized 
source under federal law.'' Finally, the Commission notes that not all 
Internet-hosted multi-media ads will include text; thus, the final 
amended Rule clarifies that the specific size requirement for the 
visual disclosure applies only if there are characters on the 
advertisement. In other instances,

[[Page 9740]]

the Rule's general prominence requirement applies.\140\
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    \140\ The Commission notes that this section applies to 
Internet-hosted multi-media advertising, as opposed to Internet 
websites. Internet websites with audio and visual components must 
comply with the disclosures for Internet websites.
---------------------------------------------------------------------------

    The Commission will monitor and evaluate the effectiveness of this 
section and innovations in technology and advertising and will consider 
additional changes as necessary to achieve the statutory mandate.
f. Section 610.4(b)(6): Disclosures for telephone requests
    Proposed section 610.4(b)(6) addressed the content and timing of 
the disclosures for when consumers call any telephone number, other 
than the number of the centralized source, appearing in an 
advertisement for ``free credit reports.'' Proposed section 610.4(b)(6) 
required that companies offering ``free credit reports'' via telephone 
make the disclosure at the beginning of the telephone call and include 
the introductory sentence: ``You have reached [name of company or 
service].''\141\
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    \141\ The timing requirement drew from the Commission's 
Telemarketing Sales Rule, which, among other things, prohibits 
telemarketers from failing to disclose that the purpose of the call 
is to sell goods or services and the nature of the goods or 
services. 16 CFR 310.3.
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    One commenter opposed the timing of the disclosure, asserting that 
a telephone disclosure should be provided not at the beginning of the 
call, but at the first mention of a ``free credit report,'' which 
triggers the need for the disclosure.\142\ The Commission agrees. In 
certain circumstances consumers may be making telephone requests about 
advertisements for bundled products, and may want to ask about an 
advertised product other than the ``free credit report.'' In this case, 
a disclosure about ``free credit reports'' at the outset of the call 
could be confusing. Instead, the Commission has decided to modify the 
proposed section to make it consistent with the approach taken 
throughout section 610.4 of the final amended Rule, which requires the 
disclosure in close proximity to the triggering claim. Thus, section 
610.4(b)(6) now requires the disclosures for inbound telemarketing to 
be made at the first mention of a ``free credit report.'' In addition, 
the final amended Rule modifies the language of the disclosure 
consistent with the changes for print advertisements and Internet 
websites, with one minor change. The required disclosure for inbound 
telemarketing is: ``The following notice is required by law. You have 
the right to a free credit report from AnnualCreditReport.com or 877-
322-8228, the only authorized source under federal law.'' The Internet 
website and print disclosure text begins with the header ``This notice 
is required by law''. Because the disclosure here is an audio one, it 
would be difficult for the consumer to understand what the ``this'' in 
``this notice'' is referring to. The ``following notice'' language will 
provide a cue for the consumer that he or she is about to hear a 
message required by law.
---------------------------------------------------------------------------

    \142\ Schwartz & Ballen at 7 (asserting that consumers will 
likely interpret the required disclosure at the beginning of a 
telephone call to mean that they have dialed an incorrect telephone 
number and will likely terminate the telephone call).
---------------------------------------------------------------------------

g. Section 610.4(b)(7): Telemarketing solicitations
    Proposed section 610.4(b)(7) also required outbound telemarketers 
to include the required disclosures at the beginning of their 
telemarketing solicitations. Similar to the modifications made to 
section 610.4(b)(6), the final amended Rule requires that any 
telemarketing call made to a consumer that offers a ``free credit 
report'' include, at the first mention of a ``free credit report,'' the 
following disclosure: ``The following notice is required by law. You 
have the right to a free credit report from AnnualCreditReport.com or 
877-322-8228, the only authorized source under federal law.''\143\
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    \143\ The Commission notes that the word ``free'' was 
inadvertently omitted in the proposed Rule. Indeed, the Section-by-
Section discussion of the NPRM correctly defined the trigger as 
``the first mention of `free credit report.''' 74 FR 52921-22. In 
addition, as with the language for telephone requests, the language 
of the disclosure required by this section has been modified 
consistent with the changes for print advertisements.
---------------------------------------------------------------------------

D. Elimination of Obsolete ``Roll-out'' Provisions of the Original Rule

    As proposed in the NPRM, the final amended Rule eliminates the 
``roll-out'' provisions contained in sections 610.2(i) and 610.3(g) of 
the original Rule. When the Commission promulgated the original Rule, 
it provided for a structured ``roll-out'' of the availability of free 
annual file disclosures, beginning in the western states on December 1, 
2004, and concluding with eastern states on September 1, 2005. This 
original Rule provision is now obsolete and serves no useful purpose. 
No comments were submitted on this issue. Accordingly, the final 
amended Rule deletes sections 610.2(i) and 610.3(g) of the original 
Rule.\144\
---------------------------------------------------------------------------

    \144\ In addition to the proposed revisions and additions 
discussed above, proposed section 610.2(b)(2)(iv)(D) removes an 
erroneous reference to ``national credit reporting agencies.''
---------------------------------------------------------------------------

E. Effective Date and Interim Disclosures

    The effective date of the Rule amendments shall be April 1, 2010, 
except for the wording of the disclosures for television and radio 
advertisements in sections 610.4(b)(1)(i) and (2), which shall be 
September 1, 2010.
    Section 205(b)(3) of the Act provides for interim disclosures for 
advertisements in the event that the Rule is not ``finalized'' before 
the nine-month deadline specified in the Act:

 If an advertisement subject to section 612(g) of the [FCRA], as added 
by this section, is made public after the 9-month deadline specified in 
paragraph (1), but before the rule . . . is finalized, such 
advertisements shall include the disclosure: ``Free credit reports are 
available under Federal law at: `AnnualCreditReport.com.'''

    The Commission has determined that the final amended Rule is 
``finalized'' upon its effective date. The effective date is April 1, 
2010, except for the wording of the disclosures for television and 
radio advertisements. Prior to April 1, 2010, covered entities must 
make the interim disclosures required by the Act in a prominent manner, 
as required by the statute.
    The Commission believes that a delay in the effective date for the 
wording of the disclosures in television and radio advertisements is 
warranted beyond April 2010. As one commenter noted, compliance with 
the required interim disclosures followed by compliance with the 
different final disclosures will impose additional costs for television 
and radio advertisers: ``[I]t would require advertisers and advertising 
agencies to create two sets of commercials: one set to run beginning on 
February 22, 2010, and the second set to run when the Rule goes into 
effect. This would substantially and unnecessarily increase the costs 
to provide television and radio commercials.''\145\
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    \145\ Manatt, Phelps & Phillips at 4-5.
---------------------------------------------------------------------------

    In order to reduce the cost burden on television and radio 
advertisers, the Commission believes flexibility is warranted, and has 
provided a later effective date for the wording of the disclosures for 
television and radio advertisements. Accordingly, prior to September 1, 
2010, television and radio advertisers must make the interim 
disclosures required by the Act in a prominent manner, as required by 
the statute and the final amended Rule. On and after September 1, 2010, 
all television and radio advertisements

[[Page 9741]]

must include only the disclosures set forth in section 610.4(b)(1) and 
(2) of the final amended Rule. The Commission notes, however, that 
because the other provisions of the final amended Rule take effect on 
April 1, 2010, television and radio advertisers must comply with those 
provisions as of that date.\146\
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    \146\ Manatt, Phelps & Phillips urged the Commission to make 
clear that only the section 610.4(b)(1) and (2) disclosures - drawn 
from section 205(a)(2) of the Act - should apply during the interim 
period. The statute, however, sets forth the disclosures required 
during the interim period. Further, the Commission believes that the 
delayed effective date will ensure that television and radio 
advertisers have ample time to come into compliance with the final 
amended Rule, thus reducing compliance costs.
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IV. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (``RFA'')\147\ requires the 
Commission to provide an Initial Regulatory Flexibility Analysis 
(``IRFA'') with a proposed rule, and a Final Regulatory Flexibility 
Analysis (``FRFA'') with a final rule, unless the Commission certifies 
that the rule will have no significant economic impact on a substantial 
number of small entities.\148\
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    \147\ 5 U.S.C. 601-612.
    \148\ 5 U.S.C. 603-605.
---------------------------------------------------------------------------

    The Commission anticipates that the final amended Rule will have no 
significant economic impact on a substantial number of small entities. 
As discussed above, section 610.2 of the amended final Rule will apply 
exclusively to the nationwide CRAs that currently operate and maintain 
the centralized source pursuant to section 612(a) of the FCRA, 15 
U.S.C. 1681j(a). None of the three nationwide CRAs is a small entity. 
Further, section 610.4 of the final amended Rule sets forth disclosures 
concerning the advertising or marketing of ``free credit reports,'' 
pursuant to section 205 of the Act. The Commission believes that the 
universe of entities offering ``free credit reports'' is likely to be 
small, comprised mostly of the three nationwide CRAs and their 
subsidiaries and affiliates. As explained more fully below, the 
Commission believes the number of small entities offering ``free credit 
reports'' is likely to be insubstantial and, therefore, the overall 
economic impact of the final amended Rule is not likely to have a 
significant impact on a substantial number of small entities. 
Accordingly, the Commission certifies that the final amended Rule will 
have no significant impact on a substantial number of small entities. 
Nonetheless, to ensure that no such impact, if any, has been 
overlooked, the Commission had conducted the following FRFA, as 
follows.

A. Need for and objectives of the final amended Rule

    The final amended Rule implements section 205 of the Act, which 
mandates that advertisements offering ``free credit reports'' contain 
prominent disclosures informing consumers that federally mandated free 
annual file disclosures are available at AnnualCreditReport.com. 
Further, the Free Reports Rule requires, among other things, a 
centralized source through which consumers may request a free annual 
file disclosure from each nationwide CRA. Amendments to the Rule 
eliminate practices that interfere with consumers' ability to obtain 
free annual file disclosures through the centralized source, in 
violation of section 610.2(g) of the original Rule. Finally, the final 
amended Rule eliminates obsolete provisions from the original Rule that 
no longer serve any purpose.

B. Significant issues raised by public comment, summary of agency's 
assessment of these issues, and changes, if any, made in response to 
such comments

    The Commission received over 1,080 comments in response to the 
NPRM, mostly from consumers who either supported the proposed Rule, or 
urged the Commission to take additional action to stem the deceptive 
and confusing marketing of ``free credit reports.'' In particular, many 
consumers and consumer advocates supported the proposed delay in 
advertising of ``free credit reports'' on the centralized source until 
after consumers received their free annual file disclosures. Although 
the Commission considered the view of business interests opposing a 
delay in advertising on the centralized source, the Commission has 
adopted this proposal in the final amended Rule because the record 
reveals that consumers seeking their free credit report are confused by 
such advertising. The Commission, however, did not ban advertising in 
connection with the dissemination of free annual file disclosures, a 
position advocated by some consumers and consumer advocates. As 
explained in the Statement of Basis and Purpose, delaying advertising 
is a less restrictive means of addressing consumer confusion. 
Accordingly, the Commission believes that the delay in advertising on 
the centralized source strikes the appropriate balance between ensuring 
consumers' unfettered right to receive free annual file disclosures and 
the desire on the part of business to advertise other useful products 
and services (such as credit scores) to consumers.
    The Commission also received comments both supporting and opposing 
the proposal that disclosures in connection with Internet 
advertisements appear on a separate landing page. The arguments for and 
against such a requirement are discussed in depth above in the Section-
by-Section discussion. After considering these comments, the Commission 
agreed with many of the commenters that the ``separate landing page'' 
requirement may be confusing to consumers, some of whom may believe the 
unexpected appearance of such a page means it is a scam, such as an 
unauthorized pop-up or, worse, a ``phishing'' website - one that mimics 
a true website in order to capture consumers' information. The 
Commission has decided that the ``separate landing page'' requirement 
is unnecessary to accomplish the goal of reducing deceptive marketing 
of ``free credit reports;'' rather, for Internet websites, disclosures 
on each page on which the triggering claims for ``free credit reports'' 
appear, as well as on each page of the ordering process, are sufficient 
to accomplish that goal.
    The Commission also received comments on the scope of the proposed 
definition of ``free credit report,'' as well as the language of the 
specific proposed required disclosures. The Commission has revised both 
the definition of ``free credit report'' and the required disclosures 
in light of these comments. Specifically, the definition of ``free 
credit report'' in the final amended Rule makes clear that it pertains 
only to file disclosures obtained directly or indirectly from a 
nationwide CRA (as opposed to a specialty CRA, for example) and that 
the definition covers free credit reports bundled with trial offers of 
other products. Further, as discussed at length in the Section-by-
Section discussion above, the language of the required disclosures has 
been clarified in several instances, adding greater consistency and 
precision and tracking more closely Commission precedent in this field.

C. Description and estimate of the number of small entities subject to 
the final amended Rule or explanation why no estimate is available

    As noted above, section 610.2 of the final amended Rule limits 
advertising through the centralized source and prohibits other conduct 
in connection with the provision of annual file disclosures to 
consumers. By its terms, amended section 610.2 will apply exclusively 
to the nationwide CRAs that currently operate and maintain the

[[Page 9742]]

centralized source pursuant to section 612(a) of the FCRA, 15 U.S.C. 
1681j(a). None of the three nationwide CRAs is a small entity.\149\
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    \149\ Covered entities are classified as small businesses if 
they satisfy the Small Business Administration's relevant size 
standards, as determined by the Small Business Size Standards 
component of the North American Industry Classification System 
(``NAICS''). The closest NAICS size standard relevant to the final 
amended Rule is for ``credit bureaus,'' which is $7 million maximum 
in annual receipts. See (http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf). See also 69 FR 
34568, at 35494-95 (June 24, 2004) (``[T]he Commission is aware of 
three entities that meet the rule definition . . . . of a 
`nationwide consumer reporting agency.' The Commission has concluded 
that none of these is a small entity.''). In the original Notice of 
Proposed Rulemaking for the Free Reports Rule, the Commission 
specifically asked several questions related to the existence, 
number and nature of small business entities covered by the proposed 
Free Reports Rule. The Commission received no comments responsive to 
those questions. 69 FR 35495. No additional data has been provided 
in response to the NPRM.
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    In addition, section 610.4 of the final amended Rule sets forth 
disclosures concerning the advertising or marketing of ``free credit 
reports,'' pursuant to section 205 of the Act. The universe of entities 
offering ``free credit reports'' is small, comprised mostly of the 
three nationwide CRAs and their subsidiaries and affiliates. Based upon 
its knowledge of industry practices and members, Commission staff 
estimates that there may also be a small number of independently 
operating CRAs or resellers of consumer reports that, in theory, might 
offer ``free credit reports'' subject to the final amended Rule. For 
example, when the original Rule was first implemented, several 
resellers of reports appeared, using imposter websites, such as those 
misspelling AnnualCreditReport.com, or using sound-alike websites names 
that did not link to AnnualCreditReport.com. In 2005, the Commission 
staff sent warning letters to the known operators of those suspect 
sites, totaling 29 operators. This suggests that the total number of 
independent resellers of reports may be small and that the number of 
small entities offering ``free credit reports'' is likely to be 
insubstantial.
    Nonetheless, the Commission specifically sought comment in the NPRM 
``on the number of entities likely to be affected by the proposed 
section 610.4 to the Rule and the number of those, if any, that are 
small entities.''\150\ The Commission received no responsive comments. 
The lack of additional evidence on both the number of small entities 
offering ``free credit reports'' and how the proposed Rule might impact 
small entities, tends to support the Commission staff's initial 
assessment that few, if any, independently operating sellers or 
resellers of credit reports are likely to be small entities.
---------------------------------------------------------------------------

    \150\ 74 FR at 52923-24.
---------------------------------------------------------------------------

D. Description of the projected reporting, recordkeeping, and other 
compliance requirements of the final amended Rule, including an 
estimate of the classes of small entities that will be subject to the 
final amended Rule and the type of professional skills that will be 
necessary to comply

    Section 610.2 of the final amended Rule limits advertising by the 
CRAs on the centralized source until after consumers have obtained 
their free annual file disclosures, and prohibits practices that 
interfere with consumers' ability to obtain free annual file 
disclosures through the centralized source. As discussed more fully 
below in connection with the Paperwork Reduction Act, these amendments 
to the Rule will impose no more than a de minimis, one-time burden of 
12 hours to be completed by professional technical personnel and/or 
management personnel.
    Further, section 610.4 of the final amended Rule sets forth 
statutorily-mandated advertising disclosures for offering of ``free 
credit reports'' in television and radio advertisements, as well as 
other media, including print and Internet advertising. The amendments 
to the original Rule pertain to all advertisements for ``free credit 
reports'': the Act does not distinguish between large and small 
entities that advertise for ``free credit reports,'' nor does the Act 
contemplate any exemptions to the disclosure requirements. Most likely, 
these disclosures will be prepared by professional and management 
personnel. At the same time, section 610.4 imposes no reporting or 
recordkeeping obligations.

E. Steps the agency has taken to minimize any significant economic 
impact on small entities, consistent with the stated objectives of the 
applicable statutes, including the factual, policy, and legal reason(s) 
for selecting alternative(s) finally adopted, and why each of the 
significant alternatives, if any, was rejected.

    The Commission believes that the Rule amendments are likely to have 
an insignificant impact on small entities. Nonetheless, the Commission 
solicited comment on alternatives that would minimize compliance costs. 
The Commission received no information or suggestions in response to 
those questions. As explained in the statement of basis and purpose 
above, however, the Commission has made certain changes to the amended 
Rule that will reduce costs for all covered entities, including any 
small entities that may be subject to the final amended Rule. These 
include elimination of the proposed separate landing page requirement 
for advertisements for free annual file disclosures on Internet 
websites.

VI. Paperwork Reduction Act

    In conjunction with the NPRM, the Commission submitted the proposed 
amended Rule and a Supporting Statement for Information Collection 
Provisions to the Office of Management and Budget (``OMB'') for review 
under the Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3521. The 
OMB has approved the Rule's information collection requirements through 
November 30, 2012 (OMB Control No. 3084-0128).
    In the NPRM, the Commission invited comments to: (1) evaluate 
whether the proposed collections of information are necessary for the 
proper performance of the functions of the Commission, including 
whether the information will serve a useful purpose; (2) evaluate the 
accuracy of the Commission's estimate of the burden of the proposed 
collection of information, including the validity of the methodology 
and assumptions used; (3) enhance the quality, utility, and clarity of 
the information to be collected; and (4) minimize the burden of the 
collections of information on those who must comply, including through 
the use of appropriate automated, electronic, mechanical, or other 
technological techniques, or other forms of information technology. 
While commenters questioned the appropriateness of various proposals in 
the NPRM, no commenters specifically sought to answer the data 
collection questions posed above.

A. Original Rule

    The original Rule required nationwide CRAs and nationwide specialty 
CRAs to disclose information to third parties by requiring those 
consumer reporting agencies to provide to consumers, upon request, one 
free annual file disclosure. It also required the nationwide CRAs to 
provide consumers with the ability to request this disclosure through a 
centralized Internet website, a toll-free telephone number, and a 
postal address. In addition, the original Rule required the nationwide 
CRAs to establish a standardized form for Internet and mail requests, 
and it provided a model standardized form that may be used to comply 
with that requirement.

[[Page 9743]]

B. Section 610.4 of the Final Amended Rule

    Section 610.4 of the final amended Rule requires all advertisements 
for ``free credit reports'' to contain certain prescribed disclosures 
tailored to the medium used. As such, these disclosures do not 
constitute a collection of information, as defined by OMB's regulations 
that implement the PRA.\151\ Accordingly, implementation of section 205 
of the Act presents no associated PRA collection of information burden.
---------------------------------------------------------------------------

    \151\ See 5 CFR 1320.3(c)(2) (excluding from the definition of 
``collection of information'' the ``public disclosure of information 
originally supplied by the Federal government to the recipient for 
the purpose of disclosure to the public'').
---------------------------------------------------------------------------

C. Amended Section 610.2 of the Final Amended Rule

    Section 610.2 of the final amended Rule is designed to prevent 
interference with consumers' ability to obtain their free annual file 
disclosures through the centralized source, as permitted by law. 
Amended section 610.2 does not modify the nationwide CRAs' original 
obligation to provide consumers with free annual file disclosures upon 
request. Nor is amended section 610.2 likely to increase or decrease 
the estimated number of annual file disclosures made available to 
consumers, whether through the Internet, telephone, or mail. Rather, 
the amendments are intended to make it easier for consumers to obtain 
their free annual file disclosures from the centralized source without 
distracting advertising, including advertising leading consumers to 
commercial websites.
    Moreover, amended section 610.2 is unlikely to increase 
significantly the administrative burden on the nationwide CRAs 
providing consumers with annual file disclosures through the 
centralized source. As discussed above, amended section 610.2 requires 
the nationwide CRAs to remove links on the initial page of the 
centralized source website to their commercial or proprietary websites. 
Finally, if a nationwide CRA chooses to advertise products and services 
- such as credit scores or credit monitoring - through the centralized 
source, it can do so only after the consumer has obtained his or her 
free annual file disclosure. Accordingly, in order to advertise through 
the centralized source, the nationwide CRAs must establish a mechanism 
to verify that consumers have completed their transaction.
1. Estimated Hours Burden and Associated Labor Cost
    The above-noted administrative amendments to section 610.2 will 
impose no more than a de minimis, one-time burden, as the three 
nationwide CRAs reconfigure the centralized source and their own 
proprietary websites. Commission staff estimates that these steps will 
take approximately 12 hours to complete per CRA.\152\
---------------------------------------------------------------------------

    \152\ This figure derives from consultation with FTC staff 
experienced in web design and operations.
---------------------------------------------------------------------------

    Commission staff estimates labor costs by applying appropriate 
estimated hourly cost figures to the burden hours described above. It 
is difficult to calculate with precision the labor costs associated 
with the final amended Rule, because they entail varying compensation 
levels of management (e.g., administrative services, computer and 
information systems, systems analysts, and network and computer system 
administrators). Commission staff assumes that professional technical 
personnel and/or management personnel will implement the amendments, at 
an hourly rate of $39.42.\153\
---------------------------------------------------------------------------

    \153\ See (http://www.bls.gov/ncs/ncswage2008.htm#Wage_Tables) 
(National Compensation Survey: Occupational Earnings in the United 
States 2008, US Department of Labor released August 2009, Bulletin 
2720, Table 3) (``Full-time civilian workers,'' mean and median 
hourly wages). The above amount is an average of the mean hourly 
wages of administrative services managers, computer and information 
systems managers, computer systems analysts, and network and 
computer systems administrators.
---------------------------------------------------------------------------

    Based upon the above estimates and assumptions, the total labor 
cost for each of the three nationwide CRAs to comply with the 
amendments to the Rule is $473.00 (12 hours x $39.42) or, cumulatively, 
$1,419.
2. Estimated Capital/Other Non-Labor Cost Burden
    Commission staff believes that the Rule amendments will not impose 
any capital or other non-labor costs. Commission staff assumes that the 
nationwide CRAs will continue their current practice of using third-
party contractors (instead of their own employees) to fulfill consumer 
requests for annual file disclosures, pursuant to the Rule. Because of 
the way these contracts are typically established, these costs will 
likely be incurred on a continuing basis, and will be calculated based 
on the number of annual file disclosures requested by consumers. As 
discussed above, Commission staff believes that the amendments, while 
making it easier for consumers to obtain their free annual file 
disclosures from the centralized source, will not increase the burden 
on industry to supply such file disclosures, nor affect the overall 
number of file disclosures provided to consumers annually, because 
consumers will likely be redirected from websites that require 
consumers to pay for their ``free credit report'' to the centralized 
source.

Appendix A

List of Non-Consumer NPRM Commenters

American Express Company (``American Express'')
AOL, Microsoft, Yahoo! (``AOL, Microsoft, Yahoo!'')
Association of National Advertisers (``ANA'')
Representative John Boozman (``Representative Boozman'')
Chamber of Commerce of the United States of America (``U.S. Chamber 
of Commerce'')
Consumer Data Industry Association (``CDIA'')
Council of Better Business Bureaus (``BBB'')
Direct Marketing Association (``DMA'')
Empire Justice Center (``Empire Justice'')
Evergreen Credit Reporting, Inc. (``Evergreen'')
Experian Information Solutions, Inc. (``Experian'')
Bill McCollum, Attorney General, State of Florida (``State of 
Florida'')
Professor David A. Friedman (``Friedman'')
Interactive Advertising Bureau (``IAB'')
Intersections Inc. (``Intersections'')
Senator Carl Levin (``Senator Levin'')
Lori Swanson, Attorney General, State of Minnesota (``State of 
Minnesota'')
Mannatt, Phelps & Phillips (``Mannatt, Phelps & Phillips'')
National Association of Attorneys General (``NAAG'')
National Business Coalition for E-Commerce and Privacy (``E-
Commerce'')
National Consumer Law Center (``NCLC'')
Mindy A. Bockstein, Chairperson and Executive Director, State of New 
York, Consumer Protection Board (``NYCPB'')
Representative Mike Ross (``Representative Ross'')
Senator Charles Schumer (``Senator Schumer'')
Schwartz & Ballen LLP (``Schwartz & Ballen'')
TransUnion (``TransUnion'')

FINAL RULE

List of Subjects in 16 CFR Part 610

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

Authority and Issuance

0
For the reasons discussed in the statement of basis and purpose, the 
Federal Trade Commission amends title

[[Page 9744]]

16, Chapter I, Subchapter F, of the Code of Federal Regulations, part 
610, as follows:

PART 610--FREE ANNUAL FILE DISCLOSURES

0
1. The authority citation for part 610 is revised to read as follows:

    Authority: 15 U.S.C. 1681a, g, and h; sec. 211(a) and (d), Pub. 
L. 108-159, 117 Stat. 1968 and 1972 (15 U.S.C. 1681j); Pub. L. 111-
24.

0
2. Revise Sec.  610.2 to read as follows:


Sec.  610.2  Centralized source for requesting annual file disclosures 
from nationwide consumer reporting agencies.

    (a) Purpose. The purpose of the centralized source is to enable 
consumers to make a single request to obtain annual file disclosures 
from all nationwide consumer reporting agencies, as required under 
section 612(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681j(a).
    (b) Establishment and operation. All nationwide consumer reporting 
agencies shall jointly design, fund, implement, maintain, and operate a 
centralized source for the purpose described in paragraph (a) of this 
section. The centralized source required by this part shall:
    (1) Enable consumers to request annual file disclosures by any of 
the following request methods, at the consumers' option:
    (i) A single, dedicated Internet website,
    (ii) A single, dedicated toll-free telephone number; and
    (iii) Mail directed to a single address;
    (2) Be designed, funded, implemented, maintained, and operated in a 
manner that:
    (i) Has adequate capacity to accept requests from the reasonably 
anticipated volume of consumers contacting the centralized source 
through each request method, as determined in accordance with paragraph 
(c) of this section;
    (ii) Collects only as much personally identifiable information as 
is reasonably necessary to properly identify the consumer as required 
under the Fair Credit Reporting Act, section 610(a)(1), 15 U.S.C. 
1681h(a)(1), and other applicable laws and regulations, and to process 
the transaction(s) requested by the consumer;
    (iii) Provides information through the centralized source website 
and telephone number regarding how to make a request by all request 
methods required under Sec.  610.2(b)(1) of this part; and
    (iv) Provides clear and easily understandable information and 
instructions to consumers, including, but not necessarily limited to:
    (A) Providing information on the progress of the consumer's request 
while the consumer is engaged in the process of requesting a file 
disclosure;
    (B) For a website request method, providing access to a ``help'' or 
``frequently asked questions'' screen, which includes specific 
information that consumers might reasonably need to request file 
disclosures, the answers to questions that consumers might reasonably 
ask, and instructions whereby a consumer may file a complaint with the 
centralized source and with the Federal Trade Commission;
    (C) In the event that a consumer requesting a file disclosure 
through the centralized source cannot be properly identified in 
accordance with the Fair Credit Reporting Act, section 610(a)(1), 15 
U.S.C. 1681h(a)(1), and other applicable laws and regulations, 
providing a statement that the consumers' identity cannot be verified; 
and directions on how to complete the request, including what 
additional information or documentation will be required to complete 
the request, and how to submit such information; and
    (D) A statement indicating that the consumer has reached the 
website or telephone number for ordering free annual credit reports as 
required by federal law; and
    (3) Make available to consumers a standardized form established 
jointly by the nationwide consumer reporting agencies, which consumers 
may use to make a request for an annual file disclosure, either by mail 
or on the Internet website required under Sec.  610.2(b)(1) of this 
part, from the centralized source required by this part. The form 
provided at 16 CFR Part 698, Appendix D, may be used to comply with 
this section.
    (c) Requirement to anticipate. The nationwide consumer reporting 
agencies shall implement reasonable procedures to anticipate, and to 
respond to, the volume of consumers who will contact the centralized 
source through each request method, to request, or attempt to request, 
a file disclosure, including developing and implementing contingency 
plans to address circumstances that are reasonably likely to occur and 
that may materially and adversely impact the operation of the 
nationwide consumer reporting agency, a centralized source request 
method, or the centralized source.
    (1) The contingency plans required by this section shall include 
reasonable measures to minimize the impact of such circumstances on the 
operation of the centralized source and on consumers contacting, or 
attempting to contact, the centralized source.
    (i) Such reasonable measures to minimize impact shall include, but 
are not necessarily limited to:
    (A) The extent reasonably practicable under the circumstances, 
providing information to consumers on how to use another available 
request method;
    (B) The extent reasonably practicable under the circumstances, 
communicating, to a consumer who attempts but is unable to make a 
request, the fact that a condition exists that has precluded the 
centralized source from accepting all requests, and the period of time 
after which the centralized source is reasonably anticipated to be able 
to accept the consumers' request for an annual file disclosure; and
    (C) Taking all reasonable steps to restore the centralized source 
to normal operating status as quickly as reasonably practicable under 
the circumstances.
    (ii) Reasonable measures to minimize impact may also include, as 
appropriate, collecting request information but declining to accept the 
request for processing until a reasonable later time, provided that the 
consumer is clearly and prominently informed, to the extent reasonably 
practicable under the circumstances, of when the request will be 
accepted for processing.
    (2) A nationwide consumer reporting agency shall not be deemed in 
violation of Sec.  610.2(b)(2)(i) of this part if a centralized source 
request method is unavailable to accept requests for a reasonable 
period of time for purposes of conducting maintenance on the request 
method, provided that the other required request methods remain 
available during such time.
    (d) Disclosures required. If a nationwide consumer reporting agency 
has the ability to provide a consumer report to a third party relating 
to a consumer, regardless of whether the consumer report is owned by 
that nationwide consumer reporting agency or by an associated consumer 
reporting agency, that nationwide consumer reporting agency shall, upon 
proper identification in compliance with section 610(a)(1) of the Fair 
Credit Reporting Act, 15 U.S.C. 1681h(a)(1), provide an annual file 
disclosure to such consumer if the consumer makes a request through the 
centralized source.
    (e) High request volume and extraordinary request volume - (1) High 
request volume. Provided that a nationwide consumer reporting agency 
has implemented reasonable procedures developed in accordance with 
paragraph (c) of this section, entitled

[[Page 9745]]

``requirement to anticipate,'' the nationwide consumer reporting agency 
shall not be deemed in violation of paragraph (b)(2)(i) of this section 
for any period of time in which a centralized source request method, 
the centralized source, or the nationwide consumer reporting agency 
experiences high request volume, if the nationwide consumer reporting 
agency:
    (i) Collects all consumer request information and delays accepting 
the request for processing until a reasonable later time; and
    (ii) Clearly and prominently informs the consumer of when the 
request will be accepted for processing.
    (2) Extraordinary request volume. Provided that the nationwide 
consumer reporting agency has implemented reasonable procedures 
developed in compliance with paragraph (c) of this section, entitled 
``requirement to anticipate,'' the nationwide consumer reporting agency 
shall not be deemed in violation of paragraph (b)(2)(i) of this section 
for any period of time during which a particular centralized source 
request method, the centralized source, or the nationwide consumer 
reporting agency experiences extraordinary request volume.
    (f) Information use and disclosure. Any personally identifiable 
information collected from consumers as a result of a request for 
annual file disclosure, or other disclosure required by the Fair Credit 
Reporting Act, made through the centralized source, may be used or 
disclosed by the centralized source or a nationwide consumer reporting 
agency only:
    (1) To provide the annual file disclosure or other disclosure 
required under the FCRA requested by the consumer;
    (2) To process a transaction requested by the consumer at the same 
time as a request for annual file disclosure or other disclosure;
    (3) To comply with applicable legal requirements, including those 
imposed by the Fair Credit Reporting Act and this part; and
    (4) To update personally identifiable information already 
maintained by the nationwide consumer reporting agency for the purpose 
of providing consumer reports, provided that the nationwide consumer 
reporting agency uses and discloses the updated personally identifiable 
information subject to the same restrictions that would apply, under 
any applicable provision of law or regulation, to the information 
updated or replaced.
    (g) Communications provided through centralized source.
    (1) Any advertising or marketing for products or services, any 
communications or instructions that advertise or market any products or 
services, or any request to establish an account through the 
centralized source must be delayed until after the consumer has 
obtained his or her annual file disclosure.
    (i) In the case of requests made by mail or telephone, the consumer 
``has obtained his or her annual file disclosure'' when the file 
disclosure is mailed, and the nationwide consumer reporting agency may 
include advertising for other products or services with the file 
disclosure.
    (ii) In the case of requests made through the centralized source 
Internet website, the consumer ``has obtained his or her annual file 
disclosure'' when the file disclosure is delivered to the consumer 
through the Internet, and the nationwide consumer reporting agency may 
include advertising for other products or services with the file 
disclosure.
    (2) Any communications, instructions, or permitted advertising or 
marketing shall not interfere with, detract from, contradict, or 
otherwise undermine the purpose of the centralized source stated in 
paragraph (a) of this section.
    (3) Examples of interfering, detracting, inconsistent, and/or 
undermining communications include:
    (i) Centralized source materials that represent, expressly or by 
implication, that a consumer must purchase a paid product or service in 
order to receive or to understand the annual file disclosure;
    (ii) Centralized source materials that represent, expressly or by 
implication, that annual file disclosures are not free, or that 
obtaining an annual file disclosure will have a negative impact on the 
consumers' credit standing; and
    (iii) Centralized source materials that falsely represent, 
expressly or by implication, that a product or service offered 
ancillary to receipt of a file disclosure, such as a credit score or 
credit monitoring service, is free, or fail to clearly and prominently 
disclose that consumers must cancel a service, advertised as free for 
an initial period of time, to avoid being charged, if such is the case.
    (h) Other practices prohibited through the centralized source. The 
centralized source shall not:
    (1) Contain hyperlinks to commercial or proprietary websites until 
after the consumer has obtained his or her annual file disclosure, 
except for technical transfers to a web page on which consumers can 
request their free annual file disclosure; provided, however, that no 
hyperlinks to commercial websites shall appear on the initial page of 
the centralized source.
    (2) Require consumers to set up an account in connection with 
obtaining an annual file disclosure; or
    (3) Ask or require consumers to agree to terms or conditions in 
connection with obtaining an annual file disclosure.


Sec.  610.3  [Amended]

0
3. In Sec.  610.3, remove paragraph (g).

0
4. Add Sec.  610.4 to read as follows:


Sec.  610.4  Prevention of deceptive marketing of free credit reports.

    (a) For purposes of this section:
    (1) AnnualCreditReport.com and 877-322-8228 means the Uniform 
Resource Locator address ``AnnualCreditReport.com'' and toll-free 
telephone number, 877-322-8228. These are the locator address and toll-
free telephone number currently used by the centralized source. If the 
locator address or toll-free telephone number changes in the future, 
the new address or telephone number shall be substituted within a 
reasonable time.
    (2) Free credit report means a file disclosure prepared by or 
obtained from, directly or indirectly, a nationwide consumer reporting 
agency (as defined in section 603(p) of the Fair Credit Reporting Act), 
that is represented, either expressly or impliedly, to be available to 
the consumer at no cost if the consumer purchases a product or service, 
or agrees to purchase a product or service subject to cancellation.
    (3) General requirements for disclosures. The disclosures covered 
by paragraph (b) of this section shall contain only the prescribed 
content and comply with the following requirements:
    (i) All disclosures shall be prominent;
    (ii) All disclosures shall be made in the same language as that 
principally used in the advertisement;
    (iii) Visual disclosures shall be easily readable; in a high degree 
of contrast from the immediate background on which it appears; in a 
format so that the disclosure is distinct from other text, such as 
inside a border; in a distinct type style, such as bold; and parallel 
to the base of the advertisement or screen;
    (iv) Audio disclosures shall be delivered in a slow and deliberate 
manner and in a reasonably understandable volume and pitch;
    (v) Program-length television, radio, or Internet-hosted multi-
media advertisement disclosures shall be made at the beginning, near 
the middle, and at the end of the advertisement; and

[[Page 9746]]

    (vi) Nothing contrary to, inconsistent with, or that undermines the 
required disclosures shall be used in any advertisement in any medium, 
nor shall any audio, visual, or print technique be used that is likely 
to detract significantly from the communication of any disclosure.
    (b) Medium-specific disclosures. All offers of free credit reports 
shall prominently include the disclosures required by this section.
    (1) Television advertisements.
    (i) All advertisements for free credit reports broadcast on 
television shall include the following disclosure in close proximity to 
the first mention of a free credit report: ``This is not the free 
credit report provided for by Federal law.''
    (ii) The disclosure shall appear at the same time in the audio and 
visual part of the advertisement. The visual disclosure shall be at 
least four percent of the vertical picture height and appear for a 
minimum of four seconds.
    (2) Radio advertisements. All advertisements for free credit 
reports broadcast on radio shall include the following disclosure in 
close proximity to the first mention of a free credit report: ``This is 
not the free credit report provided for by Federal law.''
    (3) Print advertisements. All advertisements for free credit 
reports in print shall include the following disclosure in the form 
specified below and in close proximity to the first mention of a free 
credit report. The first line of the disclosure shall be centered and 
contain only the following language: ``THIS NOTICE IS REQUIRED BY 
LAW''. Immediately below the first line of the disclosure the following 
language shall appear: ``You have the right to a free credit report 
from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source 
under federal law.'' Each letter of the disclosure text shall be, at 
minimum, one-half the size of the largest character used in the 
advertisement.
    (4) Internet websites. Any website offering free credit reports 
must display the disclosure set forth in paragraphs 610.4(b)(4)(i), 
(ii), and (v) of this section on each page that mentions a free credit 
report and on each page of the ordering process. This disclosure shall 
be visible across the top of each page where the disclosure is required 
to appear; shall appear inside a box; and shall appear in the form 
specified below:
    (i) The first element of the disclosure shall be a header that is 
centered and shall consist of the following text: ``THIS NOTICE IS 
REQUIRED BY LAW. Read more at FTC.GOV''. Each letter of the header 
shall be one-half the size of the largest character of the disclosure 
text required by 610.4(b)(4)(ii). The reference to FTC.GOV shall be an 
operational hyperlink to (www.ftc.gov/freereports), underlined, and in 
a color that is a high degree of contrast from the color of the other 
disclosure text and background color of the box;
    (ii) The second element of the disclosure shall appear below the 
header required by paragraph 610.4(b)(4)(i) and shall consist of the 
following text: ``You have the right to a free credit report from 
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source 
under federal law.'' The reference to AnnualCreditReport.com shall be 
an operational hyperlink to the centralized source, underlined, and in 
the same color as the hyperlink to FTC.GOV required in paragraph 
610.4(b)(4)(i);
    (iii) The color of the text required by paragraphs 610.4(b)(4)(i) 
and (ii) shall be in a high degree of contrast with the background 
color of the box;
    (iv) The background of the box shall be a solid color in a high 
degree of contrast from the background of the page and the color shall 
not appear elsewhere on the page;
    (v) The third element of the disclosure shall appear below the text 
required by paragraph 610.4(b)(4)(ii) and shall be an operational 
hyperlink to AnnualCreditReport.com that appears as a centered button 
containing the following language: ``Take me to the authorized 
source''. The background of this button shall be the same color as the 
hyperlinks required by paragraphs 610.4(b)(4)(i) and (ii) and the text 
shall be in a high degree of contrast to the background of the button;
    (vi) Each character of the text in paragraphs 610.4(b)(4)(ii) and 
(v) shall be, at minimum, the same size as the largest character on the 
page, including characters in an image or graphic banner;
    (vii) Each character of the disclosure shall be displayed as plain 
text and in a sans serif font, such as Arial; and
    (viii) The space between each element of the disclosure required in 
paragraphs 610.4(b)(i), (ii), and (v) shall be, at minimum, the same 
size as the largest character on the page, including characters in an 
image or graphic banner. The space between the boundaries of the box 
and the text or button required in paragraphs 610.4(b)(i), (ii), and 
(v) shall be, at minimum, twice the size of the vertical height of the 
largest character on the page, including characters in an image or 
graphic banner.
    (5) Internet-hosted multi-media advertising. All advertisements for 
free credit reports disseminated through Internet-hosted multi-media in 
both audio and visual formats shall include the following disclosure in 
the form specified below and in close proximity to the first mention of 
a free credit report. The first line of the disclosure shall be 
centered and contain only the following language: ``THIS NOTICE IS 
REQUIRED BY LAW.''. Immediately below the first line of the disclosure 
the following language shall appear: ``You have the right to a free 
credit report from AnnualCreditReport.com or 877-322-8228, the ONLY 
authorized source under federal law.'' The disclosure shall appear at 
the same time in the audio and visual part of the advertisement. If the 
advertisement contains characters, the visual disclosure shall be, at 
minimum, the same size as the largest character on the advertisement.
    (6) Telephone requests. When consumers call any telephone number, 
other than the number of the centralized source, appearing in an 
advertisement that represents free credit reports are available at the 
number, consumers must receive the following audio disclosure at the 
first mention of a free credit report: ``The following notice is 
required by law. You have the right to a free credit report from 
AnnualCreditReport.com or 877-322-8228, the only authorized source 
under federal law.''
    (7) Telemarketing solicitations. When telemarketing sales calls are 
made that include offers of free credit reports, the call must include 
at the first mention of a free credit report the following disclosure: 
``The following notice is required by law. You have the right to a free 
credit report from AnnualCreditReport.com or 877-322-8228, the only 
authorized source under federal law.''
    (c) Effective date. This section is effective April 2, 2010, except 
for the wording of the disclosures for television and radio 
advertisements (paragraphs 610.4(b)(1)(i) and (2)), which are effective 
on September 1, 2010.
    By direction of the Commission.

Donald S. Clark
Secretary
[FR Doc. 2010-4273 Filed 3-2-10: 8:45 am]
BILLING CODE 6750-01-S