2012-8748. Rescission of Rules

AGENCY:

Federal Trade Commission (“FTC” or “Commission”).

ACTION:

Final rule; rescission of regulations.

SUMMARY:

Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act transferred rulemaking authority for a number of consumer financial protection laws to the Consumer Financial Protection Bureau (“CFPB”). As a result, the Commission is rescinding the following rules under the Fair Credit Reporting Act: “[Identity Theft] Definitions”; “Free Annual File Disclosures Rule”; “Prohibition Against Circumventing Treatment as a Nationwide Consumer Reporting Agency”; “Duration of Active Duty Alerts”; and “Appropriate Proof of Identity.” In addition, the Commission is rescinding two rules addressing mortgage advertising and mortgage assistance relief services under the 2009 Omnibus Appropriations Act: “Mortgage Acts and Practices-Advertising Rule” and “Mortgage Assistance Relief Services Rule.” The Commission is also rescinding its rules governing “Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance” under the Federal Deposit Insurance Corporation Improvement Act and its “Procedures for State Application for Exemption from the Provisions of the [Federal Debt Collection Practices] Act.” These rules have been republished by the CFPB.

DATES:

Effective Date: April 13, 2012.

ADDRESSES:

Copies of this document are available from: Public Reference Branch, Room 130, Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580. Copies of this document are also available on the Internet at the Commission's Web site: http://www.ftc.gov.

FOR FURTHER INFORMATION CONTACT:

FCRA Rules: Katherine Armstrong, Senior Attorney, Division of Privacy and Identity Protection, Bureau of Consumer Protection, [phone], Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.

Mortgage Rules: For the Mortgage Acts and Practices—Advertising Rule, contact Laura Johnson, Senior Attorney, Financial Practices Division, Bureau of Consumer Protection, [phone], Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580. For the Mortgage Assistance Relief Services Rule, contact Evan Zullow, Senior Attorney, Financial Practices Division, Bureau of Consumer Protection, [phone], Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.

Deposit Insurance: Hampton Newsome, Senior Attorney, Enforcement Division, Bureau of Consumer Protection, [phone], Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.

Debt Collection: Thomas Kane, Senior Attorney, Financial Practices Division, Bureau of Consumer Protection, [phone], Federal Trade Commission, 600 Pennsylvania Avenue NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

I. Background

On July 21, 2010, President Obama signed into law the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”).^[1] The Dodd-Frank Act substantially changed the federal legal framework for financial services providers. Among the changes, the Dodd-Frank Act transferred to the CFPB the Commission's rulemaking authority under the Fair Debt Collection Practices Act (“FDCPA”),^[2] section 43 of the Federal Deposit Insurance Act (“FDIA”),^[3] section 626 of the 2009 Omnibus Appropriations Act,^[4] and portions of the Fair Credit Reporting Act (“FCRA”) (collectively, “the Acts”),^[5] on July 21, 2011.^[6]

As a result, the Commission is rescinding the following nine rules issued under the Acts, which have been republished by the CFPB:

• Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance, 16 CFR Part 320 (republished by the CFPB at 12 CFR part 1009);
• Mortgage Acts and Practices—Advertising Rule, 16 CFR part 321 (republished by the CFPB at 12 CFR part 1014);
• Mortgage Assistance Relief Services Rule, 16 CFR part 322 (republished by the CFPB at 12 CFR part 1015);
• [Identity Theft] Definitions, 16 CFR Part 603 (republished by the CFPB at 12 CFR 1022.3);
• Free Annual File Disclosures Rule, 16 CFR Part 610 (republished by the CFPB at 12 CFR 1022.130);
• Prohibition Against Circumventing Treatment as a Nationwide Consumer Reporting Agency, 16 CFR Part 611 (republished by the CFPB at 12 CFR 1022.140);
• Duration of Active Duty Alerts, 16 CFR part 613 (republished by the CFPB at 12 CFR 1022.121);
• Appropriate Proof of Identity, 16 CFR part 614 (republished by the CFPB at 12 CFR 1022.123); and
• Procedures for State Application for Exemption from the Provisions of the [Fair Debt Collection Practices] Act, 16 CFR part 901 (republished by the CFPB at 12 CFR part 1006).

The CFPB republished these rules on an interim final basis and the CFPB rules became effective on December 30, 2011.^[7] Accordingly, the FTC is rescinding its version of these rules effective immediately.

The FTC will retain rulemaking authority for other rules promulgated under the Acts to the extent the rules apply to motor vehicle dealers described in section 1029(a) of the Dodd-Frank Act that are predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both.^[8] These seven rules are:

• Privacy of Consumer Financial Information Privacy Rule, 16 CFR part 313;
• Duties of Creditors Regarding Risk-Based Pricing, 16 CFR part 640;
• Duties of Users of Consumer Reports Regarding Address Discrepancies, 16 CFR part 641;
• Prescreen Opt-Out Notice, 16 CFR part 642;
• Duties of Furnishers of Information to Consumer Reporting Agencies, 16 CFR part 660;
• Affiliate Marketing, 16 CFR part 680; and
• Model Forms and Disclosures, 16 CFR part 698.

The Commission is authorized to maintain these rules pursuant to section 1029(c) of the Dodd-Frank Act and section 504(a) of the Gramm-Leach-Bliley Act.^[9] These rules remain in effect to the extent that they apply to motor vehicle dealers and will remain in Title 16 of the Code of Federal Regulations.

Under the Dodd-Frank Act, the FTC also retains its authority to bring law enforcement actions to enforce the Acts and FTC and CFPB rules issued under the Acts.

A. Rules Under the Fair Credit Reporting Act

The FCRA governs the collection, assembly, and use of consumer report information and provides the framework for the credit reporting system in the United States.^[10] Since enactment of the FCRA in 1970, the FTC has played a key role in its implementation, oversight, enforcement, and interpretation.

On July 21, 2011, the Dodd-Frank Act transferred to the CFPB most of the Commission's rulemaking authority under the FCRA.^[11] As a result, the Commission is rescinding the rules discussed below, which the CFPB republished on an interim final basis on December 21, 2011. The republished rules became effective on December 30, 2011.^[12]

1. 16 CFR Part 603: [Identity Theft] Definitions

The Fair and Accurate Credit Transactions Act of 2003 (“FACT Act”) amended the FCRA and included requirements for consumer reporting agencies, creditors, and others to help remedy identity theft. The FTC issued final rules to define the terms “identity theft” and “identity theft report.” ^[13]

2. 16 CFR Part 610: Free Annual File Disclosures Rule

The FACT Act required consumer reporting agencies to provide consumers with one free copy of their file disclosure annually. (These free annual file disclosures are commonly known as “free credit reports.”) As required by the FACT Act, the FTC issued a rule requiring the establishment of a centralized source through which consumers may request these free annual file disclosures from each nationwide consumer reporting agency; a standardized form for such requests; and a streamlined process for consumers to request free annual file disclosures from nationwide specialty consumer reporting agencies.^[14] Pursuant to the Credit Card Accountability Responsibility and Disclosure Act of 2009 (“Credit CARD Act”),^[15] the FTC amended the rule to require that certain advertisements for “free credit reports” include prominent disclosures, and to prohibit other practices that may interfere with the free annual file disclosure process.^[16]

3. 16 CFR Part 611: Prohibition Against Circumventing Treatment as a Nationwide Consumer Reporting Agency

The FCRA imposes certain specific requirements on “nationwide consumer reporting agencies.” As required by the FACT Act, the FTC promulgated an interim final rule prohibiting consumer reporting agencies from avoiding treatment as nationwide consumer reporting agencies through any means, including corporate structuring or technological methods.^[17]

4. 16 CFR Part 613: Duration of Active Duty Alerts

Active Duty Alerts help service members who are deployed and may find it difficult to monitor their financial accounts. These service members can place alerts on their credit reports, which require that users of such reports have reasonable policies and procedures to verify the identity of the person requesting credit. As required by the FACT Act, the FTC issued a final rule establishing that the duration of active duty alerts shall be twelve months.^[18]

5. 16 CFR Part 614: Appropriate Proof of Identity

As required by the FACT Act, the FTC established requirements for what constitutes appropriate proof of identity for purposes of who can place fraud or active duty alerts or request truncation of social security numbers on credit reports.^[19] The rule helps to ensure that identity thieves cannot easily access another person's credit report.

B. Mortgage Rules

Section 626 of the 2009 Omnibus Appropriations Act,^[20] as clarified by the Credit CARD Act,^[21] directed the Commission to initiate rulemakings with respect to unfair or deceptive acts or practices involving mortgage loans. To implement the Act, the Commission issued two rules on mortgage loan practices: the Mortgage Acts and Practices-Advertising (“MAP-Ad”) Rule and the Mortgage Assistance Relief Services (“MARS”) Rule.

Because the Dodd-Frank Act transferred to the CFPB the Commission's rulemaking authority under Section 626, the Commission is rescinding its MAP-Ad and MARS rules. The CFPB republished these rules on an interim final basis on December 16, 2011. The republished rules became effective on December 30, 2011.^[22]

1. 16 CFR Part 321: Mortgage Acts and Practices—Advertising

The MAP-Ad Rule prohibits deceptive marketing of mortgage loans.^[23]

2. 16 CFR Part 322: Mortgage Assistance Relief Services Rule

The MARS Rule addresses the practices of entities (other than mortgage servicers) who offer assistance to consumers in dealing with owners or servicers of their loans to modify them or avoid foreclosure.^[24] The rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. The rule also requires mortgage relief companies to disclose key information to consumers to protect them from being misled and to help them make better informed purchasing decisions. In addition, the rule prohibits mortgage relief companies from making false or misleading claims about their services.

C. Deposit Insurance

The Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) added a new section 43 (12 U.S.C. 1831t) to the FDIA, which directed the Commission to prescribe disclosures for depository institutions that lack federal deposit insurance.^[25] Under Section 43, the Commission issued a rule requiring covered institutions to include a disclosure about the lack of federal deposit insurance on periodic statements and account records.^[26] In addition, the rule requires most advertising for these institutions to include disclosures about the lack of federal insurance. The covered institutions also must obtain signed acknowledgments from new depositors about the fact that the institution is not federally insured.

The Dodd-Frank Act transferred the Commission's rulemaking authority under the FDIA to the CFPB. As a result, the Commission is rescinding its Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance, which the CFPB republished on an interim final basis on December 16, 2011. The republished rules became effective on December 30, 2011.^[27]

D. Debt Collection

The FDCPA provided the Commission with rulemaking authority to promulgate procedures for granting states exemptions from the FDCPA.^[28] Pursuant to Section 817 of the FDCPA, the Commission promulgated Procedures for State Application for Exemption from the Provisions of the [Fair Debt Collection Practices] Act (“Procedures”).^[29]

Under the Procedures, any state may apply to the Commission for a determination that debt collection practices within the state are subject to requirements under the laws of the state that are substantially similar to, or provide greater protection for consumers than, those imposed under sections 803 through 812 of the FDCPA, and that there is adequate provision for state enforcement of those requirements.^[30] If the Commission determines that a state has met these criteria, the Commission must exempt the class of debt collection practices in that state from the requirements of sections 803 through 812.^[31]

Because the Dodd-Frank Act transferred to the CFPB the Commission's authority under the FDCPA to grant exemptions by regulation, the Commission is rescinding its Procedures for State Application for Exemption from the Provisions of the [Fair Debt Collection Practices] Act. The CFPB republished rules governing these procedures on an interim final basis on December 16, 2011. The republished rules became effective on December 30, 2011.^[32]

II. Procedural Requirements

Under the Administrative Procedure Act,^[33] an agency may promulgate or rescind a rule without prior notice and an opportunity for public comment if the agency finds for good cause that notice and comment are unnecessary.^[34] Public comment on the rescission of these rules is unnecessary because the FTC's rulemaking authority has transferred to the CFPB pursuant to the statutory mandate of the Dodd-Frank Act. Thus, the FTC has no discretion to maintain these rules, and there is no reason for public comment on this regulatory action. The CFPB's regulations went into effect on December 30, 2011. Therefore, rescission of the FTC rules will help avoid confusion as to which rules are now in effect. Accordingly, the Commission finds that public notice and comment is unnecessary.

In addition, the Commission has determined that the rescissions may take effect immediately upon publication of this notice in the Federal Register, as permitted by the Administrative Procedure Act.^[35] The removal of the regulations is exempt from the usual 30-day notice requirement as it merely “relieves a restriction” from FTC requirements.^[36] The 30-day notice requirement does not apply under these circumstances, in which the Dodd-Frank Act transferred authority to issue these rules to the CFPB as of the designated transfer date. Therefore, affected persons do not need time to prepare for or take any action with regard to the rescission.^[37]

III. Paperwork Reduction Act

The Free Annual File Disclosures Rule and the mortgage rules contain information requirements that have been approved by the Office of Management and Budget (“OMB”) under the Paperwork Reduction Act of 1995 (“PRA”).^[38] Because the FTC and CFPB share enforcement authority for these rules, the CFPB has assumed half of the FTC's previously cleared burden estimates for these rules and OMB has approved the CFPB's request for emergency clearance. In turn, the FTC has submitted associated adjustment requests to OMB to reduce by half the FTC's previously cleared estimates under the PRA assigned to these rules.

IV. Regulatory Flexibility Act

Because the Commission has determined that it may remove these regulations without public comment, the Commission is also not required to publish any initial or final regulatory flexibility analysis under the Regulatory Flexibility Act as part of such action.^[39]

List of Subjects

16 CFR Part 320

• Credit unions
• Depository institutions, and Federal deposit insurance

16 CFR Part 321

• Advertising
• Communications
• Consumer protection
• Credit
• Mortgages
• Trade practices

16 CFR Part 322

• Consumer protection
• Trade practices
• Telemarketing

16 CFR Part 603

• Fair Credit Reporting Act
• Consumer reports
• Consumer reporting agencies
• Credit
• Information furnishers
• Identity theft
• Trade practices

16 CFR Part 610

• Fair Credit Reporting Act
• Consumer reports
• Consumer reporting agencies
• Credit
• Trade practices

16 CFR Part 611

• Consumer reports
• Consumer reporting agencies
• Credit
• Information furnishers
• Identity theft
• Trade practices

16 CFR Part 613

• Fair Credit Reporting Act
• Consumer reports
• Consumer reporting agencies
• Credit
• Information furnishers
• Identity theft
• Trade practices

16 CFR Part 614

• Fair Credit Reporting Act
• Consumer reports
• Consumer reporting agencies
• Credit
• Information furnishers
• Identity theft
• Trade practices

16 CFR Part 901

• Administrative practice and procedure
• Consumer protection
• Credit
• Intergovernmental relations

Accordingly, for the reasons set forth above, the Commission amends Chapter I of Title 16, Code of Federal Regulations, as follows:

1. Revise part 320 to read as follows:

PART 320—DISCLOSURE REQUIREMENTS FOR DEPOSITORY INSTITUTIONS LACKING FEDERAL DEPOSIT INSURANCE

Authority: 12 U.S.C. 1831t; 15 U.S.C. 41 et seq.

§ 320.1

Cross-reference.

The rules formerly at 16 CFR part 320 have been republished by the Consumer Financial Protection Bureau at 12 CFR part 1009, “Disclosure Requirements for Depository Institutions Lacking Federal Deposit Insurance (Regulation I).”

2. Revise part 321 to read as follows:

PART 321—MORTGAGE ACTS AND PRACTICES—ADVERTISING

Authority: Pub. L. 111-8, section 626, 123 Stat. 524, as amended by Pub. L. 111-24, section 511, 123 Stat. 1734.

§ 321.1

Cross-reference.

The rules formerly at 16 CFR part 321 have been republished by the Consumer Financial Protection Bureau at 12 CFR part 1014, “Mortgage Acts and Practices Advertising (Regulation N).”

3. Revise part 322 to read as follows:

PART 322—MORTGAGE ASSISTANCE RELIEF SERVICES

Authority: Pub. L. 111-8, section 626, 123 Stat. 524, as amended by Pub. L. 111-24, section 511, 123 Stat. 1734.

§ 322.1

Cross-reference.

The rules formerly at 16 CFR part 322 have been republished by the Consumer Financial Protection Bureau at 12 CFR part 1015, “Mortgage Assistance Relief Services (Regulation O).”

4. Revise part 603 to read as follows:

PART 603—DEFINITIONS

Authority: Pub. L. 108-159, sec. 111; 15 U.S.C. 1681a.

§ 603.1

Cross-reference.

The rules formerly at 16 CFR part 603 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1022.3, “Fair Credit Reporting (Regulation V).”

5. Revise part 610 to read as follows:

PART 610—FREE ANNUAL FILE DISCLOSURES

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.

§ 610.1

Cross-reference.

The rules formerly at 16 CFR part 610 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1022.130, “Fair Credit Reporting (Regulation V).”

6. Revise part 611 to read as follows:

PART 611—PROHIBITION AGAINST CIRCUMVENTING TREATMENT AS A NATIONWIDE CONSUMER REPORTING AGENCY

Authority: Pub. L. 108-159, sec. 211(b); 15 U.S.C. 1681x.

§ 611.1

Cross-reference.

The rules formerly at 16 CFR part 611 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1022.140, “Fair Credit Reporting (Regulation V).”

7. Revise part 613 to read as follows:

PART 613—DURATION OF ACTIVE DUTY ALERTS

Authority: Pub. L. 108-159, sec. 112(a); 15 U.S.C. 1681c-1.

§ 613.1

Cross-reference.

The rules formerly at 16 CFR part 613 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1022.121, “Fair Credit Reporting (Regulation V).”

8. Revise part 614 to read as follows:

PART 614—APPROPRIATE PROOF OF IDENTITY

Authority: Pub. L. 108-159, sec. 112(b).

§ 614.1

Cross-reference.

The rules formerly at 16 CFR part 614 have been republished by the Consumer Financial Protection Bureau at 12 CFR 1022.123, “Fair Credit Reporting (Regulation V).”

9. Revise part 901 to read as follows:

PART 901—PROCEDURES FOR STATE APPLICATION FOR EXEMPTION FROM THE PROVISIONS OF THE ACT

Authority: Pub. L. 95-109, 91 Stat. 874, 15 U.S.C. 1692o; 5 U.S.C. 552.

§ 901.1

Cross-reference.

The rules formerly at 16 CFR part 901 have been republished by the Consumer Financial Protection Bureau at 12 CFR part 1006, “Fair Debt Collection Practices Act (Regulation F).”

By direction of the Commission.

Donald S. Clark,

Secretary.

Footnotes

1.  Public Law 111-203, 124 Stat. 1376 (2010).

2.  15 U.S.C. 1692-1692p.

3.  12 U.S.C. 1831t(c)-(f).

4.  Public Law 111-8, section 626, 123 Stat. 524 (Mar. 11, 2009).

5.  15 U.S.C. 1681 et seq. The Dodd-Frank Act does not transfer to the CFPB rulemaking authority for FCRA sections 615(e) (“Red Flag Guidelines and Regulations Required”) and 628 (“Disposal of Records”). See 15 U.S.C. 1681s(e); Public Law 111-203, section 1088(a)(10)(E). Accordingly, the Commission retains rulemaking authority for its “Identity Theft Rules,” 16 CFR part 681, and its rules governing “Disposal of Consumer Report Information and Records,” 16 CFR Part 682. See 15 U.S.C. 1681m, 1681w. In addition, the Commission retains rulemaking authority under FCRA over any motor vehicle dealer described in Section 1029(a) of the Dodd-Frank Act that is predominantly engaged in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles, or both. See Dodd-Frank Act, § 1029(a), (c).

6.  Dodd-Frank Act, § 1061. This date is the “designated transfer date” established by the Treasury Department under the Dodd-Frank Act. See Dep't of the Treasury, Bureau of Consumer Financial Protection; Designated Transfer Date, 75 FR 57252, 57253 (Sept. 20, 2010); see also Dodd-Frank Act, § 1062.

7.  See 76 FR 78121 (Dec. 16, 2011); 76 FR 78126 (Dec. 16, 2011); 76 FR 78130 (Dec. 16, 2011); 76 FR 79308 (Dec. 21, 2011).

8.  See Dodd-Frank Act, § 1029(a), (c).

9.  15 U.S.C. 6804(a).

10.  15 U.S.C. 1681 et seq.

11.  See supra note 5.

12.  See 76 FR 79308 (Dec. 21, 2011); see also 12 CFR part 1022.

13.  69 FR 63922 (Nov. 3, 2004).

14.  69 FR 35468 (June 24, 2004).

15.  Public Law 111-24, 123 Stat. 1734.

16.  75 FR 9726 (Mar. 3, 2010).

17.  69 FR 29061 (May 20, 2004).

18.  69 FR 63922 (Nov. 3, 2004).

19.  Id.

20.  Omnibus Appropriations Act, 2009, Public Law 111-8, 123 Stat. 524.

21.  Credit Card Act § 511(a)(1)(B).

22.  76 FR 78130 (Dec. 16, 2011); see also 12 CFR parts 1014 and 1015.

23.  76 FR 43826 (July 22, 2011); see also 16 CFR part 321.

24.  75 FR 75092 (Dec. 1, 2010); see also 16 CFR part 322.

25.  See Public Law 102-242, 105 Stat. 2236.

26.  16 CFR part 320; see also 75 FR 31682 (June 4, 2010). These disclosure requirements do not apply to depository institutions that do not receive initial deposits of less than the standard maximum insurance amount for federal deposit insurance. That amount is currently $250,000.

27.  See 76 FR 78126 (Dec. 16, 2011); see also 12 CFR part 1009.

28.  FDCPA, § 817, 15 U.S.C. 1692o.

29.  16 CFR part 901; see also 44 FR 21005 (Apr. 9, 1979).

30.  16 CFR 901.2.

31.  16 CFR 901.6.

32.  76 FR 78121 (Dec. 16, 2011); see also 12 CFR Part 1006.

33.  5 U.S.C. 553(b)(B).

34.  Nat'l Customs Brokers & Forwarders Ass'n v. United States, 59 F.3d 1219, 1223-1224 (Fed. Cir. 1995).

35.  5 U.S.C. 553(d)(1).

36.  5 U.S.C. 553(d)(1); see also Indep. U.S. Tanker Owners Comm. v. Skinner, 884 F.2d 587, 591 (DC Cir. 1989).

37.  See Daniel Int'l Corp. v. Occupational Safety & Health Review Com., 656 F.2d 925, 931 (4th Cir. 1981) (“The purpose of the 30-day notice requirement in § 553(d) is to `afford persons affected a reasonable time to prepare for the effective date of a rule or rules or to take any other action which the issuance of rules may prompt.' Administrative Procedure Act Legislative History, 79th Cong., 2d Sess. 201 (1946)”).

38.  44 U.S.C. 3501 et seq.

39.  See 5 U.S.C. 603(a), 604(b).