[Federal Register Volume 83, Number 222 (Friday, November 16, 2018)]
[Proposed Rules]
[Pages 57693-57701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-24940]
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FEDERAL TRADE COMMISSION
16 CFR Part 609
RIN 3084-AB54]
Military Credit Monitoring
AGENCY: Federal Trade Commission.
ACTION: Notice of proposed rulemaking; request for public comment.
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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') is
publishing for comment a proposed rule to implement the credit
monitoring provisions applicable to active duty military consumers in
section 302 of the Economic Growth, Regulatory Relief, and Consumer
Protection Act, which amends the Fair Credit Reporting Act (FCRA). That
section requires nationwide consumer reporting agencies to provide a
free electronic credit monitoring service to active duty military
consumers, subject to certain conditions. The proposed rule defines
``electronic credit monitoring service,'' ``contact information,''
``material additions or modifications to the file of a consumer,'' and
``appropriate proof of identity,'' among other terms. It also contains
requirements on how nationwide consumer reporting agencies must verify
that an individual is an active duty military consumer.
DATES: Written comments must be received on or before January 7, 2019.
ADDRESSES: Interested parties may file a comment online or on paper by
following the Request for Comment part of the SUPPLEMENTARY INFORMATION
section below. Write ``Military Credit Monitoring Rulemaking, Matter
No. R811007'' on your comment and file your comment online at https://ftcpublic.commentworks.com/ftc/militarycreditmonitoringnprm following
the instructions on the web-based form. If you prefer to file your
comment on paper, mail your comment to the following address: Federal
Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW,
Suite CC-5610 (Annex B), Washington, DC 20580, or deliver your comment
to the following address: Federal Trade Commission, Office of the
Secretary, Constitution Center, 400 7th Street SW, 5th Floor, Suite
5610 (Annex B), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Amanda Koulousias (202-326-3334),
Division of Privacy and Identity Protection, Bureau of Consumer
Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW,
Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Background
The Economic Growth, Regulatory Relief, and Consumer Protection Act
(``the Act'') was signed into law on May 24, 2018. Public Law 115-174.
The Act, among other things, amends section 605A of the FCRA, 15 U.S.C.
1681c-1 to add a section 605A(k). Section 605A(k)(2) requires that
nationwide consumer reporting agencies provide free electronic credit
monitoring services to active duty military consumers.
Section 605A(k)(3) of the FCRA requires the Commission to issue a
[[Page 57694]]
regulation clarifying the meaning of certain terms used in section
605A(k)(2), including ``electronic credit monitoring service'' and
``material additions or modifications to the file of a consumer.'' In
addition, section 605A(k)(3) requires that the Commission's regulation
clarify what constitutes appropriate proof that an individual is an
active duty military consumer.
II. Summary of the Proposed Rule
The proposed rule applies to nationwide consumer reporting
agencies, as defined in section 603(p) of the Fair Credit Reporting
Act, 15 U.S.C. 1681a(p). The proposed rule requires the nationwide
consumer reporting agencies to provide a free electronic credit
monitoring service that notifies a consumer of material additions or
modifications to the consumer's file when the consumer provides (1)
contact information, (2) appropriate proof that the consumer is an
active duty military consumer, and (3) appropriate proof of identity.
The proposed rule specifies that the nationwide consumer reporting
agency must provide notification to the consumer within 24 hours of the
material addition or modification. The proposed rule also requires that
the notices to consumers include a hyperlink to a summary of the
consumer's rights under the Fair Credit Reporting Act, as prescribed by
the Bureau of Consumer Financial Protection under 15 U.S.C. 1681g(c).
The proposed rule defines certain key terms. Specifically, the
proposed rule defines ``electronic credit monitoring service'' as a
service through which nationwide consumer reporting agencies provide,
at a minimum, electronic notification of material additions or
modifications to a consumer's file. Electronic notification may include
notification by website, mobile application, email, or text message. In
addition, the proposed rule defines ``material additions or
modifications'' as significant changes to a consumer's file, including:
(1) New accounts opened in the consumer's name; (2) inquiries or
requests for a consumer report; (3) changes to a consumer's name,
address, or phone number; (4) changes to credit account limits; and (5)
negative information, which is separately defined to include
information concerning a customer's delinquencies, late payments,
insolvency, or any form of default. The term ``material additions or
modifications'' excludes requests for prescreened lists and requests to
review a consumer's account, as discussed further below.
The proposed rule also specifies what constitutes appropriate proof
that the consumer is an active duty military consumer. Under the
proposed rule, appropriate proof includes a copy of the consumer's
active duty orders; a certification of active duty status issued by the
Department of Defense; verification obtained through a method or
service approved by the Department of Defense; or a certification of
active duty status approved by the nationwide consumer reporting
agency.
Further, the proposed rule restricts nationwide consumer reporting
agencies' ability to use and disclose the information they collect from
consumers in order to provide the required electronic credit monitoring
service. The nationwide consumer reporting agencies may use and
disclose the information they collect from consumers only for the
following: (1) To provide the free electronic credit monitoring service
requested by the consumer; (2) to process a transaction requested by
the consumer at the same time as a request for the free electronic
credit monitoring service; (3) to comply with applicable legal
requirements; or (4) to update information already maintained by the
nationwide consumer reporting agency for the purpose of providing
consumer reports.
Additionally, the proposed rule contains some limitations on
communications surrounding enrollment in an electronic credit
monitoring service. First, the proposed rule prohibits any advertising
or marketing to a consumer who has indicated an interest in obtaining
the free electronic credit monitoring service for active duty military
consumers until after the consumer has enrolled in the service. Second,
the proposed rule does not allow any communications or instructions
that interfere with, detract from, contradict, or otherwise undermine
the purpose of the proposed rule. Prohibited communications include
materials that represent, expressly or by implication, that an active
duty military consumer must purchase a paid product or service in order
to receive the service required under Sec. 609.3(a). They also include
materials that falsely represent, expressly or by implication, that a
product or service offered ancillary to the free electronic credit
monitoring service, such as identity theft insurance, is free. The
proposed rule also prohibits any advertising or marketing for a free
service, without clearly and prominently disclosing that consumers must
cancel the service to avoid being charged, if such is the case.
Finally, the proposed rule prohibits asking or requiring an active
duty military consumer to agree to terms or conditions in connection
with obtaining a free electronic credit monitoring service.
III. Section-by-Section Analysis
Section 609.1 Scope of Regulations
Proposed Sec. 609.1 sets forth the scope of the Commission's rule
and generally tracks the statutory language in section 605A(k)(2) of
the Fair Credit Reporting Act. 15 U.S.C. 1681c-1(k)(2). It implements
the requirement that nationwide consumer reporting agencies, as defined
in section 603(p) of the Fair Credit Reporting Act, 15 U.S.C. 1681a(p),
provide a free electronic credit monitoring service to active duty
military consumers that, at a minimum, notifies them of any material
additions or modifications to their files.
Section 609.2 Definitions
Proposed Sec. 609.2 contains definitions for the following terms:
``active duty military consumer,'' ``appropriate proof of identity,''
``consumer,'' ``consumer report,'' ``contact information,'' ``credit,''
``electronic credit monitoring service,'' ``electronic notification,''
``file,'' ``firm offer of credit,'' ``free,'' ``material additions or
modifications,'' ``nationwide consumer reporting agency,'' and
``negative information.''
Active Duty Military Consumer, Consumer, Consumer Report, Credit, File,
Firm Offer of Credit, Nationwide Consumer Reporting Agency, and
Negative Information
Proposed paragraphs (a), (c), (d), (f), (i), (j), (m), and (n)
incorporate the FCRA's statutory definitions of ``active duty military
consumer,'' ``consumer,'' ``consumer report,'' ``credit,'' ``file,''
``firm offer of credit,'' ``nationwide consumer reporting agency,'' and
``negative information.'' Each of these terms is used in the proposed
rule.
Appropriate Proof of Identity
Proposed paragraph (b) defines ``appropriate proof of identity'' as
having the same meaning as set forth in 12 CFR 1022.123. Although the
statute requires only that consumer reporting agencies obtain contact
information and appropriate proof of active duty military status before
providing electronic credit monitoring to military consumers, the
proposed rule adds language that would permit the nationwide consumer
reporting agencies to request appropriate proof of identity before
providing a military consumer with the statutorily required credit
monitoring service.
The Commission believes that, before providing sensitive consumer
report information to a military consumer in
[[Page 57695]]
connection with credit monitoring, a consumer reporting agency should
be able to verify the consumer's identity. Consumer report information
is very sensitive and it is imperative that consumers only receive
credit monitoring with respect to their own credit file. For example,
under section 610 of the FCRA, consumer reporting agencies must obtain
``proper identification'' from a consumer before providing the consumer
with a disclosure of his or her credit file. More generally, consumer
reporting agencies are required to establish reasonable procedures
designed to limit the furnishing of consumer reports to legitimate
persons with legitimate purposes for obtaining the report. See 15
U.S.C. 1681e.
The proposed rule defines ``appropriate proof of identity'' by
cross-referencing 12 CFR 1022.123. This existing definition was
established to provide guidance on what information consumers should be
required to provide to constitute proof of identity for purposes of
FCRA sections 605A (obtaining a fraud alert), 605B (requesting that
information resulting from identity theft be blocked from one's
consumer report), and 609(a)(1) (requesting a file disclosure from a
consumer reporting agency). This definition is risk-based, meaning that
a consumer reporting agency's policy with respect to appropriate proof
of identity should be commensurate with the risk of harm to the
consumer resulting from misidentification, and should not unreasonably
restrict a consumer's access to statutorily required services.
Because consumer reporting agencies already are required to
implement procedures for obtaining appropriate proof of identity under
12 CFR 1022.123, the Commission believes it would be efficient to
permit consumer reporting agencies to comply with the proposed rule by
using the same requirements, already in place.
The Commission is soliciting comments on whether the rule should
cross-reference 12 CFR 1022.123, stay silent on the definition, or
develop a different approach.
Contact Information
Proposed paragraph (e) contains a definition of ``contact
information.'' The statute allows nationwide consumer reporting
agencies to condition provision of the free electronic credit
monitoring service to those consumers that provide both appropriate
proof that they are active duty military consumers and contact
information. The Commission believes that clarifying the term ``contact
information'' is beneficial to the nationwide consumer reporting
agencies and consumers. Nationwide consumer reporting agencies need a
minimal amount of information from a consumer in order to provide the
free credit monitoring service. Accordingly, the proposed rule defines
``contact information'' as information about a consumer, such as a
consumer's first and last name and email address, that is reasonably
necessary to collect in order to provide the electronic credit
monitoring service.
Electronic Credit Monitoring Service
Proposed paragraph (g) defines ``electronic credit monitoring
service'' as a service through which nationwide consumer reporting
agencies provide electronic notifications of material additions or
modifications to a consumer's file. Section 605A(k)(3) of the FCRA
specifically requires the Commission to define this term. The
Commission believes that this definition and the accompanying
definitions of ``material addition or modification'' and ``electronic
notification'' provide the detail necessary for nationwide consumer
reporting agencies to provide the credit monitoring required by the
statute.
Electronic Notification
Proposed paragraph (h) defines ``electronic notification'' as a
notice provided to the consumer via a website; mobile application;
email; or text message. The Commission wants to give the nationwide
consumer reporting agencies and consumers the flexibility to
communicate in a manner that is most convenient for them. Currently,
the nationwide consumer reporting agencies typically send customers of
their commercial credit monitoring services an email alerting them that
changes have been made to their files. Customers then log in to the
consumer reporting agency's website to see the specific changes that
have occurred. Other commercial credit monitoring services provide a
mobile application through which they notify customers of changes to
their consumer reports. In addition to these methods, the Commission
believes some consumers would find the option of receiving
notifications via text message convenient. However, the Commission
notes, that any nationwide consumer reporting agency electing to
provide consumers the option of receiving notifications via text
message must comply with Telephone Consumer Protection Act, 47 U.S.C.
227, and all other applicable laws and requirements. The Commission
welcomes comment on this proposed definition of electronic
notification.
Free
Proposed paragraph (k) defines ``free'' as being provided at no
cost to the consumer. This definition comes from Merriam-Webster's
Dictionary. The Commission seeks comment on whether a definition of
``free'' is necessary, and if so, whether it should include any
additional requirements.
Material Additions or Modifications
Proposed paragraph (l) defines ``material additions or
modifications'' as significant changes to a consumer's file, including:
(1) New accounts opened in the consumer's name; (2) inquiries or
requests for a consumer report (with the exceptions noted below); (3)
changes to a consumer's name, address, or phone number; (4) changes to
credit account limits; and (5) negative information.
The changes set forth in (1)-(5) above are material because they
can indicate that a consumer is the victim of identity theft or other
fraud. The sooner a consumer is alerted to these changes, the sooner
the consumer can begin to mitigate harm. Notifications of these changes
are included in many of the credit monitoring products available
commercially today.
The definition also includes any other ``significant changes to a
consumer's file.'' The enumerated list is not exhaustive, and
nationwide consumer reporting agencies may elect to provide
notification of other significant changes to a consumer's file. There
may be other information that is useful to particular types of
consumers or other significant changes that the Commission cannot
contemplate today. Therefore, the Commission believes that the
nationwide consumer reporting agencies should have discretion to
include additional significant changes to a consumer's file within
their free electronic credit monitoring service.
At the same time, the Commission proposes that the definition of
``material additions or modifications'' specifically exclude (1)
inquiries for a prescreened list obtained for the purpose of making a
firm offer of credit or insurance as described in 15 U.S.C.
1681b(c)(1)(B), and (2) inquiries for the purpose of reviewing an
account of the consumer (``account review''). As to inquiries for
prescreened lists, while most credit inquiries signal that a consumer
is affirmatively seeking credit and may affect their credit scores,
inquiries for prescreened lists are made without consumers' knowledge
or specific consent and do not affect their credit scores. Consumers
may opt out of
[[Page 57696]]
prescreening. The Commission does not believe that there would be any
benefit to active duty military consumers if they received notification
every time an inquiry for a prescreened list is made. In fact,
including inquiries for prescreened lists in the proposed rule's
notification requirement could result in over-notification to the
consumer, which could be confusing and make it difficult for consumers
to determine when an inquiry indicates that they are potentially the
victim of identity theft or other fraud.
Similarly, inquiries made for purposes of account review, such as
when a credit card issuer reviews a customer's credit file in order to
determine whether to change the annual percentage rate (``APR'') on a
credit card, also do not indicate that a consumer is shopping for
credit. These account review inquiries may not result in any changes to
the consumer's credit account. In cases where account review does
result in a change to the consumer's credit account, such as by
increasing the APR on a credit card, the creditor must send the
consumer a risk-based pricing notice. See 12 CFR 1022.70-1022.75. The
risk-based pricing notice contains information about the account review
and provides consumers with additional information and gives them a
right to obtain a free copy of their consumer report. The Commission
believes that requiring notification of account review inquiries could
result in over-notification and be confusing to consumers. For those
consumers for whom account review results in changes to their credit
accounts, the risk-based pricing notice is more informative and
valuable than a notification that simply indicates that a creditor has
reviewed their credit files.
Section 609.3 Requirement To Provide Free Electronic Credit Monitoring
Service
Proposed Sec. 609.3 establishes the basic rules surrounding the
provision of free electronic credit monitoring to active duty military
consumers. Paragraph (a) states the general requirement that nationwide
consumer reporting agencies must provide a free electronic credit
monitoring service to active duty military consumers.
Determining Whether a Consumer Must Receive Electronic Credit
Monitoring Service
Proposed Sec. 609.3(b) allows nationwide consumer reporting
agencies to condition the provision of the free electronic credit
monitoring service upon the consumer providing appropriate proof of
identity, contact information, and appropriate proof that the consumer
is an active duty military consumer. The Act itself specifically states
that nationwide consumer reporting agencies need only provide the free
electronic credit monitoring to consumers that provide contact
information and appropriate proof of active duty military status.
The Commission also proposes to include the condition that
consumers provide the nationwide consumer reporting agencies with
appropriate proof of identity. Consumer report information is very
sensitive and it is imperative that consumers only receive credit
monitoring of their own file. The Commission is proposing to define
``appropriate proof of identity'' by cross-referencing 12 CFR 1022.123,
as explained in further detail above.
Appropriate Proof of Active Duty Military Status
Proposed paragraph (c) fulfills the statutory requirement that the
Commission determine what constitutes appropriate proof of active duty
military status. The proposed rule allows active duty military status
to be verified through: (1) A copy of the consumer's active duty
military orders; (2) a copy of a certification of active duty status
issued by the Department of Defense; (3) a method or service approved
by the Department of Defense; or (4) a certification of active duty
status approved by the nationwide consumer reporting agency.
The first two methods require consumers to provide nationwide
consumer reporting agencies with documents verifying their active duty
status. The third method--one approved by the Department of Defense--
anticipates future developments in this area. The Commission
understands from the Department of Defense that there is not currently
an automated method by which nationwide consumer reporting agencies may
obtain notice of a consumer's active duty military status from the
Department of Defense for the purpose of fulfilling their obligations
under this proposed rule. If such a method does become available,
however, this language makes sure it would suffice as ``appropriate
proof of active duty military status'' under the proposed rule. The
Commission defers to the Department of Defense on what methods it may
determine are appropriate to prove active duty status.
The fourth method would allow any nationwide consumer reporting
agency to develop its own method for determining proof of active duty
military status. The Commission believes that it may be burdensome for
consumers and the nationwide consumer reporting agencies to have a
system that requires documents to be uploaded in order to confirm
active duty status. In an effort to provide nationwide consumer
reporting agencies the flexibility to design a less burdensome method
of proof, the proposed rule allows them to approve other certifications
of status. For example, the proposed rule would allow the nationwide
consumer reporting agencies to accept consumers' self-certification of
active duty military status, e.g., by allowing consumers to check a box
certifying active duty military status.
The Commission welcomes comment on the efficacy of these methods,
and whether there are other methods of determining active duty military
status that it should add to the definition.
Information Use and Disclosure
Proposed Sec. 609.3(d) limits nationwide consumer reporting
agencies' use and disclosure of information they collect from consumers
as a result of a consumer's request to obtain the free electronic
credit monitoring service. Specifically, the proposed rule allows
nationwide consumer reporting agencies to use and disclose information
collected from consumers only: (1) To provide the free electronic
credit monitoring service requested by the consumer; (2) to process a
transaction requested by the consumer at the same time as a request for
the free electronic credit monitoring service; (3) to comply with
applicable legal requirements; or (4) to update information already
maintained by the nationwide consumer reporting agency for the purpose
of providing consumer reports. Under (4), if a nationwide consumer
reporting agency updates information it maintains for consumer
reporting purposes, the updated information is subject to the same
restrictions that apply to the original, pre-updated data. These
restrictions on use and disclosure are identical to the requirements
placed on the nationwide consumer reporting agencies' collection of
personally identifiable information from consumers using the
centralized source found in 12 CFR 1022.136(f). Restricting
``secondary'' use and disclosure of information collected from active
duty military consumers seeking to obtain the free electronic credit
monitoring service ensures that these consumers will not be subjected
to unintended consequences, such as unwanted marketing. Additionally,
the Commission does not believe that it would be appropriate to make an
active duty military consumer's access to the free electronic credit
[[Page 57697]]
monitoring service contingent on the consumer's willingness to allow a
nationwide consumer reporting agency to use the consumer's information
for unrelated, secondary uses.
The proposed rule does allow information collected from consumers
as part of the free electronic credit monitoring enrollment process to
be used to process transaction requests made by consumers at the same
time. This provision allows consumers to avoid having to reenter
information in order to obtain products and services separate from the
free electronic credit monitoring. For example, a consumer would not
have to reenter information if, after enrolling in the free electronic
credit monitoring service, the consumer decided to also obtain identity
theft insurance. The proposed rule also permits nationwide consumer
reporting agencies to use and disclose information in order to comply
with all applicable legal requirements. Finally, the proposed rule
permits nationwide consumer reporting agencies to use the information
collected to update information they already maintain for consumer
reporting purposes, but does not permit them to add additional
information that they do not already collect from other sources. The
Commission seeks comments on whether these restrictions are appropriate
and whether any modifications to the proposed restrictions are
necessary.
Communications Surrounding Enrollment in Electronic Credit Monitoring
Service
Proposed Sec. 609.3(e) places limitations on the types of
communications that may surround enrollment in the electronic credit
monitoring service. Section 609.3(e)(1) restricts any advertising or
marketing for products or services, or any communications or
instructions that advertise or market any products and services to a
consumer that has indicated an interest in signing up for the free
electronic credit monitoring service until after the consumer has
enrolled in the service. This restriction is similar to the restriction
on advertising on the annual credit report website found in 12 CFR
1022.136(g). The goal of including a similar requirement is to ensure
that the Act's purpose of providing active duty military consumers with
a free electronic credit monitoring service is not thwarted by
confusing advertisements or communications that dissuade active duty
military consumers from enrolling in the free service. The proposed
requirement is not intended to ban advertising on all web pages of the
nationwide consumer reporting agencies. Instead, it seeks to limit
advertising directed to those consumers who have indicated that they
want to enroll in the free credit monitoring for active duty military
consumers. Thus, for example, the proposed requirement would apply only
to the pages on a nationwide consumer reporting agency's website or app
dedicated to providing active duty military consumers with their rights
under this regulation. The Commission appreciates that this restriction
on advertising may increase costs to the nationwide consumer reporting
agencies by, among other things, requiring them to create separate
enrollment processes for active duty military consumers. The Commission
requests comment on whether this restriction is consistent with the
authority granted under the Act and necessary to ensure that active
duty military consumers are able to enroll easily in the free
electronic credit monitoring service.
Section 609.3(e)(2) of the proposed rule specifies that any
communications, instructions, or permitted advertising or marketing may
not interfere with, detract from, contradict, or otherwise undermine
the purpose of providing a free electronic credit monitoring service to
active duty military consumers. The proposed rule provides examples of
conduct that would interfere with, detract from, contradict, or
undermine the purpose of the rule. For example, a nationwide consumer
reporting agency would be prohibited from providing materials that
represent, expressly or by implication, that in order to obtain the
free credit monitoring service, active duty military consumers must
also purchase identity theft insurance. This limitation on
communications is identical to 12 CFR 1022.136(g)'s requirements for
the centralized source for free annual file disclosures.
Sections 609.3(e)(1) and (2) are complementary and are designed to
ensure that active duty military consumers are not confused or deceived
by communications related to a nationwide consumer reporting agency's
products and services. Using the example of the identity theft
insurance product described above, section 609.3(e)(1) would prohibit
any advertising of such a product from the time the consumer indicates
an interest in obtaining free credit monitoring for active duty
military until after that consumer has enrolled in the service. Section
609.3(e)(2) applies to any advertising before the consumer indicates
such an interest, or after the consumer has enrolled in the service. It
also applies to non-advertising communications or instructions relating
to the free electronic credit monitoring service.
The Commission recognizes that if done appropriately, access to
some identity theft services--such as identity theft insurance--may be
beneficial and convenient for consumers. The Commission wants to
ensure, however, that these additional services are not offered in a
way that is confusing to active duty military consumers or dissuades
them from enrolling in the free electronic credit monitoring service
that they are entitled to under the Act. The Commission solicits
comment on whether this restriction is consistent with the authority
granted under the Act and necessary to ensure that active duty military
consumers can easily obtain the free credit monitoring service.
Other Prohibited Practices
Proposed Sec. 609.3(f) prohibits asking or requiring an active
duty military consumer to agree to terms or conditions in connection
with obtaining a free electronic credit monitoring service. This
restriction is similar to the restriction for the annual credit report
website found in 12 CFR 1022.136(h). The Commission believes that an
active duty military consumer's right to obtain a free electronic
credit monitoring service should be unfettered and without any
restrictions or conditions, apart from providing appropriate proof of
identity, contact information, and appropriate proof that the consumer
is an active duty military consumer. The Commission solicits comment on
whether this restriction is consistent with authority granted under the
Act and necessary to ensure that active duty military consumers can
easily obtain the free credit monitoring service.
Section 609.4 Timing of Credit Monitoring Notices
Proposed Sec. 609.4 requires that the notices required under Sec.
609.3(a) be provided within 24 hours of any material additions or
modifications to a consumer's file. Advertisements for commercial
credit monitoring services that are currently on the market suggest
that consumers can be notified of changes to their files as soon as
those changes are detected. Therefore, the Commission believes that 24
hours provides ample time for the nationwide consumer reporting
agencies to give an electronic notification to affected consumers.
[[Page 57698]]
Section 609.5 Additional Information To Be Included in Electronic
Credit Monitoring Notices
Proposed Sec. 609.5 states that the electronic notifications shall
include a hyperlink to a summary of the consumer's rights under the
Fair Credit Reporting Act, as prescribed by the Bureau of Consumer
Financial Protection under 15 U.S.C. 1681g(c). The Commission believes
that it will be useful for consumers to be able to easily access
information about their rights to, for example, obtain consumer reports
and dispute information on their reports. Including a link to the
summary with each electronic notification will ensure that consumers
can find that information when it may be most useful to them. The
Commission welcomes comment on this proposed requirement.
Section 609.6 Severability
Proposed Sec. 609.6 states that the provisions of the proposed
rule are separate and severable from one another, so that if any
provision is stayed or determined to be invalid, it is the Commission's
intention that the remaining provisions shall continue in effect.
IV. Request for Comment
The Commission seeks comment on various aspects of the proposed
rule. Without limiting the scope of issues on which it seeks comment,
the FTC is particularly interested in receiving comments on the
questions that follow. In responding to these questions, please include
detailed factual supporting information if possible.
Section 609.2 Definitions
1. Does the definition of ``electronic credit monitoring service''
adequately describe the service that the proposed rule should cover? If
not, how should the definition be modified?
2. Does the definition of ``material additions or modifications''
adequately cover the changes to a consumer's file that should require
notification? If not, what other elements should be added to the
definition? Should changes to credit account limits remain in the
definition? What benefits to consumers would notifications of account
limit changes provide?
3. The proposed rule does not require notice to be given if an
inquiry was made for a prescreened list obtained for the purpose of
making a firm offer of credit or insurance as described in 15 U.S.C.
1681b(c)(1)(B) or for the purpose of account review. Are these
exceptions appropriate? Are there other exceptions that should be added
to the proposed rule?
4. The proposed rule requires notice to be given if an inquiry is
made for the purpose of collection of an account of the consumer. Do
nationwide consumer reporting agencies have the ability to
differentiate between inquiries made for the purposes of account review
and collection?
5. Is the definition of ``electronic notification'' adequate? Are
there other methods of notification that should be included in the
definition?
6. Is the definition of ``appropriate proof of identity''
necessary? Is the current definition, referencing the requirements of
12 CFR 1022.123 appropriate? Is there a better approach to determining
what constitutes ``appropriate proof of identity?'' What procedures are
consumer reporting agencies currently employing to comply with 12 CFR
1022.123? Do consumer reporting agencies currently require customers of
commercial credit monitoring services to provide appropriate proof of
identity? If so, what proof of identity is being required?
Section 609.3 Requirement To Provide Electronic Credit Monitoring
Service
1. The proposed rule states that ``appropriate proof of active duty
military status'' can be verified through: (1) A copy of the consumer's
active duty orders; (2) a copy of a certification of active duty status
issued by the Department of Defense; (3) a method or service approved
by the Department of Defense; or (4) a certification of active duty
status approved by the nationwide consumer reporting agency. Are these
methods adequate? Are there other methods of verifying active duty
status that should be included? What is the most efficient method for
providing nationwide consumer reporting agencies with proof of active
duty military status? Is it burdensome for consumers to provide
appropriate proof? Is there a way to minimize the burden?
2. Proposed Sec. 609.3(d) restricts secondary uses and disclosures
of information collected from a consumer requesting to obtain the
service required under Sec. 609.3(a). Is this limitation necessary to
ensure that consumers seeking to obtain the free electronic credit
monitoring service are not forced to provide personal information for
unrelated, secondary purposes?
3. Proposed Sec. 609.3(d) allows nationwide consumer reporting
agencies to use and disclose information collected from consumers
requesting to obtain the service required under Sec. 609.3(a) only:
(1) To provide the free electronic credit monitoring service requested
by the consumer; (2) to process a transaction requested by the consumer
at the same time as a request for the free electronic credit monitoring
service; (3) to comply with specific legal requirements; or (4) to
update 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 information subject to the same restrictions that
would apply, under any applicable provision of law or regulation, to
the information updated or replaced. Are these approved uses
appropriate? Are there additional uses that should be permitted?
4. Proposed Sec. 609.3(e)(1) bans marketing until after a consumer
who has indicated an interest in obtaining the service required under
Sec. 609.3(a) has enrolled in the free electronic credit monitoring
service. Is this limitation necessary to ensure that active duty
military consumers are able easily to obtain their free electronic
credit monitoring service? Does this limitation impose undue burdens on
nationwide consumer reporting agencies? If so, is there a way to
minimize these burdens?
5. Proposed Sec. 609.3(e)(2) prohibits any communications,
instructions, or permitted advertising or marketing from interfering
with, detracting from, contradicting, or otherwise undermining the
purpose of providing a free electronic credit monitoring service to
active duty military consumers. Is this prohibition necessary?
6. Section 609.3(e)(3) provides the following examples of
prohibited conduct: (1) Any representation that an active duty military
consumer must purchase a paid product or service in order to obtain the
free electronic credit monitoring service required by Sec. 609.3(a);
(2) a false representation that a product or service ancillary to
receipt of the free electronic credit monitoring service, such as
identity theft insurance, is free; or (3) the offering of an ongoing
service without a clear and prominent disclosure that the consumer must
cancel the service to avoid being charged. Are there more examples of
prohibited conduct that should be included in the proposed rule? Should
``clearly and prominently'' be defined?
7. Proposed Sec. 609.3(f) prohibits asking or requiring an active
duty military consumer to agree to terms or conditions in connection
with obtaining a free electronic credit monitoring service. Is this
prohibition necessary to ensure that active duty military consumers are
able easily to obtain their free electronic credit monitoring service?
Do consumer reporting agencies currently require customers of
[[Page 57699]]
commercial credit monitoring services to agree to terms or conditions?
If so, does this prohibition impose undue burdens on nationwide
consumer reporting agencies? If so, is there a way to minimize these
burdens?
Section 609.4 Timing of Credit Monitoring Services
1. The proposed rule also requires that these notices be provided
within 24 hours of any material additions or modifications to a
consumer's file. Is this time requirement appropriate?
Section 609.5 Additional Information To Be Included in Electronic
Credit Monitoring Notices
1. The proposed rule requires that the electronic notifications
include a link to the summary of the consumer's rights under the Fair
Credit Reporting Act. Will requiring this link provide useful
information to consumers or is there different information that would
be more useful? Is there a different method of providing this
information that would be more effective?
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 7, 2019.
Write ``Military Credit Monitoring Rulemaking, Matter No. R811007'' on
the comment. Your comment--including your name and your state--will be
placed on the public record of this proceeding, including, to the
extent practicable, on the public FTC website, at https://www.ftc.gov/policy/public-comments.
Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/militarycreditmonitoringnprm by following the instructions on the
web-based form. If this Notice appears at https://www.regulations.gov,
you also may file a comment through that website.
If you file your comment on paper, write ``Military Credit
Monitoring Rulemaking, Matter No. R811007'' on your comment and on the
envelope, and mail your comment to the following address: Federal Trade
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite
CC-5610 (Annex B), Washington, DC 20580; or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610,
Washington, DC 20024. If possible, please submit your paper comment to
the Commission by courier or overnight service.
Because your comment will be placed on the publicly accessible FTC
website at https://www.ftc.gov, you are solely responsible for making
sure that your comment does not include any sensitive or confidential
information. In particular, your comment should not include any
sensitive personal information, such as your or anyone else's Social
Security number; date of birth; driver's license number or other state
identification number, or foreign country equivalent; passport number;
financial account number; or credit or debit card number. You are also
solely responsible for making sure that your comment does not include
any sensitive health information, such as medical records or other
individually identifiable health information. In addition, your comment
should not include any ``trade secret or any commercial or financial
information which . . . is privileged or confidential''--as provided by
section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2),
16 CFR 4.10(a)(2)--including in particular, competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
Comments containing material for which confidential treatment is
requested must be filed in paper form, must be clearly labeled
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular,
the written request for confidential treatment that accompanies the
comment must include the factual and legal basis for the request, and
must identify the specific portions of the comment to be withheld from
the public record. See FTC Rule 4.9(c). Your comment will be kept
confidential only if the General Counsel grants your request in
accordance with the law and the public interest. Once your comment has
been posted on the public FTC website--as legally required by FTC Rule
4.9(b)--we cannot redact or remove your comment from the FTC website,
unless you submit a confidentiality request that meets the requirements
for such treatment under FTC Rule 4.9(c), and the General Counsel
grants that request.
Visit the FTC website to read this Notice and the news release
describing it. The FTC Act and other laws that the Commission
administers permit the collection of public comments to consider and
use in this proceeding as appropriate. The Commission will consider all
timely and responsive public comments that it receives on or before
January 7, 2019. For information on the Commission's privacy policy,
including routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.
V. Communications by Outside Parties to the Commissioners or Their
Advisors
Written communications and summaries or transcripts of oral
communications respecting the merits of this proceeding, from any
outside party to any Commissioner or Commissioner's advisor, will be
placed on the public record.\1\
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\1\ See 16 CFR 1.26(b)(5).
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VI. Paperwork Reduction Act
The Paperwork Reduction Act (``PRA''), 44 U.S.C. chapter 35,
requires federal agencies to seek and obtain OMB approval before
undertaking a collection of information directed to ten or more
persons.\2\ Under the PRA, the Commission may not conduct, or sponsor,
and, notwithstanding any other provision of law, a person is not
required to respond to an information collection, unless the
information displays a valid control number assigned by OMB.
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\2\ 44 U.S.C. 3502(3)(A)(i).
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As the proposed notification requirements fall upon the three
nationwide consumer reporting agencies, it does not meet the PRA
threshold count of ten or more persons to constitute a ``collection of
information.'' Further, the proof of identity the proposed rule would
require of those for whom the rulemaking is designed to benefit,
consumers on active duty military status, falls within OMB's general
exception for disclosures that require persons to provide or display
only facts necessary to identify themselves.\3\
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\3\ See 5 CFR 1320.3(h)(1).
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VII. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), as amended by the Small
Business Regulatory Enforcement Fairness Act of 1996, requires an
agency to either provide an Initial Regulatory Flexibility Analysis
with a proposed rule, or certify that the proposed rule will not have a
significant impact on a substantial number of small entities.\4\ The
Commission does not expect the proposed Rule will have a significant
economic impact on small entities. The proposed Rule applies to
nationwide consumer reporting agencies. The Commission has not
identified any nationwide consumer reporting agencies
[[Page 57700]]
that are small entities.\5\ This document serves as notice to the Small
Business Administration of the agency's certification of no effect.
Nonetheless, the Commission has determined that it is appropriate to
publish an Initial Regulatory Flexibility Analysis in order to inquire
into the impact of the proposed Rule on small entities. The Commission
invites comment on the burden on any small entities and has prepared
the following analysis.
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\4\ 5 U.S.C. 603-605.
\5\ The size standard the Small Business Administration has
identified by the North American Industry Classification System code
for credit bureaus (code number 561450), i.e., consumer reporting
agencies, is $15 million. See 13 CFR 121.201. The Rule only applies
to nationwide consumer reporting agencies. There are currently only
three nationwide consumer reporting agencies, Equifax, Experian, and
TransUnion, and all exceed this size standard.
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1. Reasons for the Proposed Rule
The Economic Growth, Regulatory Relief, and Consumer Protection
Act, Public Law 115-174, directs the Commission to promulgate
regulations to implement section 302(d)(1) of the Act, which shall at a
minimum: (1) Define ``electronic credit monitoring service'' and
``material additions or modifications to the file of a consumer,'' and
(2) establish what constitutes appropriate proof that a consumer is an
active duty military consumer. In this action, the Commission proposes,
and seeks comment on, a rule that would fulfill the statutory mandate.
The Act requires that the Commission promulgate this rule not later
than one year after the date of enactment, or May 24, 2019.
2. Statement of Objectives and Legal Basis
The objectives of the proposed Rule are discussed above. The legal
basis for the proposed rule is section 302(d) of the Economic Growth,
Regulatory Relief, and Consumer Protection Act.
3. Description of Small Entities to Which the Rule Will Apply
The proposed rule will apply only to nationwide consumer reporting
agencies. The Commission has not identified any nationwide consumer
reporting agencies that are small entities.
4. Projected Reporting, Recordkeeping, and Other Compliance
Requirements
Under the proposed rule, nationwide consumer reporting agencies
will have to provide free electronic credit monitoring services to
active duty military consumers. There are no reporting or recordkeeping
requirements, or types of professional skills necessary for preparation
of any such report or record, under the proposed rule. In any event, as
noted earlier, the proposed rule applies only to nationwide consumer
reporting agencies, and they are not small entities.
5. Identification of Duplicative, Overlapping, or Conflicting Federal
Rules
The Commission has not identified any other federal statutes,
rules, or policies that would duplicate, overlap, or conflict with the
proposed rule. The proposed definitions and requirements of the
proposed rule have been designed to work in conjunction with the
existing definitions and requirements found in the Fair Credit
Reporting Act, 15 U.S.C. 1681 et seq., and Regulation V, 12 CFR part
1022. The Commission invites comment and information on that issue.
6. Discussion of Significant Alternatives
The Commission has not identified any particular alternative
methods of compliance as necessary to reduce burdens on small entities,
because the Commission does not believe any nationwide consumer
reporting agencies subject to the proposed rule are small entities, as
noted earlier.
List of Subjects in 16 CFR Part 609
Consumer reporting agencies, Consumer reports, Credit, Fair Credit
Reporting Act, Trade practices.
For the reasons stated in the preamble, the Federal Trade
Commission proposes to amend chapter I, title 16, Code of Federal
Regulations, as follows:
0
1. Revise the heading of subchapter F to read as follows:
SUBCHAPTER F--FAIR CREDIT REPORTING ACT
0
2. Add part 609 to subchapter F to read as follows:
PART 609--FREE ELECTRONIC CREDIT MONITORING FOR ACTIVE DUTY
MILITARY
Sec.
609.1 Scope of regulations in this part.
609.2 Definitions.
609.3 Requirement to provide free electronic credit monitoring
service.
609.4 Timing of electronic credit monitoring notices.
609.5 Additional information to be included in electronic credit
monitoring notices.
609.6 Severability.
Authority: 15 U.S.C. 1681c-1(k).
Sec. 609.1 Scope of regulations in this part.
This part implements Section 605A(k)(2) of the Fair Credit
Reporting Act, 15 U.S.C. 1681c-1(k)(2), which requires consumer
reporting agencies that compile and maintain files on consumers on a
nationwide basis to provide a free electronic credit monitoring service
to active duty military consumers that, at a minimum, notifies them of
any material additions or modifications to their files.
Sec. 609.2 Definitions.
For purposes of this part, the following definitions apply:
(a) Active duty military consumer means a consumer in military
service as defined in 15 U.S.C. 1681a(q)(1) and 1681c-1(k)(1).
(b) Appropriate proof of identity has the meaning set forth in 12
CFR 1022.123.
(c) Consumer has the meaning provided in 15 U.S.C. 1681a(c).
(d) Consumer report has the meaning provided in 15 U.S.C. 1681a(d).
(e) Contact information means information about a consumer, such as
a consumer's first and last name and email address, that is reasonably
necessary to collect in order to provide the electronic credit
monitoring service.
(f) Credit has the meaning provided in 15 U.S.C. 1681a(r)(5).
(g) Electronic credit monitoring service means a service through
which nationwide consumer reporting agencies provide, at a minimum,
electronic notification of material additions or modifications to a
consumer's file.
(h) Electronic notification means a notice provided to the consumer
via:
(1) A website;
(2) Mobile application;
(3) Email; or
(4) Text message.
(i) File has the meaning provided in 15 U.S.C. 1681a(g).
(j) Firm offer of credit has the meaning provided in 15 U.S.C.
1681a(l).
(k) Free means provided at no cost to the consumer.
(l) Material additions or modifications means significant changes
to a consumer's file, including:
(1) New accounts opened in the consumer's name;
(2) Inquiries or requests for a consumer report;
(i) However, an inquiry made for a prescreened list obtained for
the purpose of making a firm offer of credit or insurance as described
in 15 U.S.C. 1681b(c)(1)(B) or for the purpose of reviewing an account
of the consumer shall not be considered a material addition or
modification.
(ii) [Reserved].
(3) Changes to a consumer's name, address, or phone number;
(4) Changes to credit account limits; and
[[Page 57701]]
(5) Negative information.
(m) Nationwide consumer reporting agency has the meaning provided
in 15 U.S.C. 1681a(p).
(n) Negative information has the meaning provided in 15 U.S.C.
1681s-2(a)(7)(G)(i).
Sec. 609.3 Requirement to provide free electronic credit monitoring
service.
(a) General requirements. Nationwide consumer reporting agencies
must provide a free electronic credit monitoring service to active duty
military consumers.
(b) Determining whether a consumer must receive electronic credit
monitoring service. Nationwide consumer reporting agencies may
condition provision of the service required under paragraph (a) of this
section upon the consumer providing:
(1) Appropriate proof of identity,
(2) Contact information, and
(3) Appropriate proof that the consumer is an active duty military
consumer.
(c) Appropriate proof of active duty military status. A consumer's
status as an active duty military consumer can be verified through:
(1) A copy of the consumer's active duty orders;
(2) A copy of a certification of active duty status issued by the
Department of Defense;
(3) A method or service approved by the Department of Defense; or
(4) A certification of active duty status approved by the
nationwide consumer reporting agency.
(d) Information use and disclosure. Any information collected from
consumers as a result of a request to obtain the service required under
paragraph (a) of this section, may be used or disclosed by the
nationwide consumer reporting agency only:
(1) To provide the free electronic credit monitoring service
requested by the consumer;
(2) To process a transaction requested by the consumer at the same
time as a request for the free electronic credit monitoring service;
(3) To comply with applicable legal requirements; or
(4) To update 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 information subject to the same restrictions
that would apply, under any applicable provision of law or regulation,
to the information updated or replaced.
(e) Communications surrounding enrollment in electronic credit
monitoring service. (1) Once a consumer has indicated that the consumer
is interested in obtaining the service required under paragraph (a) of
this section, such as by clicking on a link for services provided to
active duty military consumers, any advertising or marketing for
products or services, or any communications or instructions that
advertise or market any products and services, must be delayed until
after the consumer has enrolled in that service.
(2) Any communications, instructions, or permitted advertising or
marketing shall not interfere with, detract from, contradict, or
otherwise undermine the purpose of providing a free electronic credit
monitoring service to active duty military consumers that notifies them
of any material additions or modifications to their files.
(3) Examples of interfering, detracting, inconsistent, and/or
undermining communications include:
(i) Materials that represent, expressly or by implication, that an
active duty military consumer must purchase a paid product or service
in order to receive the service required under paragraph (a) of this
section; or
(ii) Materials that falsely represent, expressly or by implication,
that a product or service offered ancillary to receipt of the free
electronic credit monitoring service, such as identity theft insurance,
is free, or that 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.
(f) Other prohibited practices. A nationwide consumer reporting
agency shall not ask or require an active duty military consumer to
agree to terms or conditions in connection with obtaining a free
electronic credit monitoring service.
Sec. 609.4 Timing of electronic credit monitoring notices.
The notice required in section 609.3(a) must be provided within 24
hours of any material additions or modifications to a consumer's file.
Sec. 609.5 Additional information to be included in electronic credit
monitoring notices.
The notice required in section 609.3(a) shall include a hyperlink
to a summary of the consumer's rights under the Fair Credit Reporting
Act, as prescribed by the Bureau of Consumer Financial Protection under
15 U.S.C. 1681g(c).
Sec. 609.6 Severability.
The provisions of this part are separate and severable from one
another. If any provision is stayed, or determined to be invalid, it is
the Commission's intention that the remaining provisions shall continue
in effect.
By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 2018-24940 Filed 11-15-18; 8:45 am]
BILLING CODE 6750-01-P