[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Proposed Rules]
[Pages 9123-9137]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4987]
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FEDERAL TRADE COMMISSION
16 CFR Part 601
Proposed Notices of Rights and Duties Under the Fair Credit
Reporting Act
AGENCY: Federal Trade Commission.
ACTION: Publication of proposed guidance for forms, and request for
public comment.
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SUMMARY: The Federal Trade Commission is publishing for public comment
three notices that it is required to prescribe under recent amendments
to the Fair Credit Reporting Act. Under those amendments, which become
effective September 30, 1997, consumer reporting agencies will be
required to provide: A summary of rights under the law to consumers; a
notice of responsibilities under the law to parties who regularly
furnish such agencies with consumer information, and a notice of
responsibilities under the law to parties who obtain consumer reports
from the agency. Under the statute, a consumer reporting agency will be
in compliance with these requirements if it provides notice forms
substantially similar to those prescribed by the Commission.
DATES: Comments must be received on or before March 31, 1997.
ADDRESSES: Comments should be addressed to: Office of the Secretary,
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Federal Trade Commission, Room H-159, Sixth Street and Pennsylvania
Avenue NW, Washington, DC 20580. Submissions should be marked
``Proposed Notices of Rights and Duties under the Fair Credit Reporting
Act, 16 CFR Part 601--Comment.''
FOR FURTHER INFORMATION CONTACT: Clarke Brinckerhoff or William Haynes,
Attorneys, Division of Credit Practices, Federal Trade Commission,
Washington, DC 20580, 202-326-3224.
SUPPLEMENTARY INFORMATION:
I. Background
A major revision of the Fair Credit Reporting Act (``FCRA'') was
included in the Omnibus Consolidated Appropriations Act for Fiscal Year
1997 (Pub. L. 104-208), signed by the President on September 30, 1996.
The revisions of the FCRA are set forth in a portion of the omnibus
bill (Title II, Subtitle D, Chapter 1), the ``Consumer Credit Reporting
Reform Act of 1996'' (CCRRA). The provisions discussed in this
publication become effective on September 30, 1997.
The amended FCRA requires each consumer reporting agency (``CRA,''
usually a credit bureau) to provide certain notices, and mandates that
the Federal Trade Commission (``Commission'' or ``FTC'') prescribe the
content of all three notices and the form of one notice.
The FCRA amendments require each CRA to provide as part of its file
disclosure to consumers a written summary of consumer rights
(``summary'' or ``consumer summary'') under the FCRA ((CCRRA Section
2408(d), FCRA Section 609(c)).1 Section 2408(d)(1) of the CCRRA
adds a new Section 609(c) to the FCRA that describes the required
summary of consumer rights and the FTC's mandate with respect to it.
The new section specifies certain items that must be in the summary,
requires the Commission to prescribe the form and content of the
disclosure, and states that the provision will not take effect until
the Commission has prescribed the summary.
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\1\ The CRA must also provide the consumer summary to any party
to whom it provides a consumer report for employment purposes (CCRRA
Section 2403(b), FCRA Section 604(o)(1)(B)), and the employer must
in turn provide the report and the summary to the consumer before
taking adverse action against him or her (FCRA Section 604(o)(3)).
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Each CRA must also provide a notice of responsibilities under the
FCRA to persons who buy consumer information from the CRA (``user
notice''), and a notice of responsibilities under the FCRA to persons
who regularly furnish consumer information to the CRA (``furnisher
notice'') (CCRRA Section 2407(b), FCRA Section 607(d)(1)). The amended
law states that the ``Commission shall prescribe the content of the
notices'' to be provided (FCRA Section 607(d)(2)).
For each of the three required disclosures, a CRA complies with the
law if it provides the applicable person with a notice that is
substantially similar to that prescribed by the Commission (FCRA
Sections 607(d)(2) and 609(c)(3)).
II. Opportunity for Public Comment
The Commission welcomes comments related in any way to the proposed
consumer summary, user notice, or furnisher notice. The Commission is
particularly interested in comments in the following areas.
A. Consumer Summary
1. Balancing brevity and completeness
The statute gives conflicting guidance as to whether the summary
should be brief or comprehensive. It is described as a ``summary of all
the rights the consumer has under'' the FCRA (Section 609(c)(1)(A))
that includes ``a brief description of * * * all rights of consumers''
provided by that law (Section 609(c)(2)(A)). Arguably, no document that
is actually a ``summary''--or that constitutes a ``brief description''
of FCRA consumer rights--could literally include ``all'' of them. The
proposal seeks to meet these various statutory goals by prescribing a
summary that is both reasonably comprehensive and user friendly for
consumers. Is the proposed notice too long in any way to be effective
as a summary, and if so, how should it be abbreviated? Conversely, are
there important consumer rights that are not included in the proposed
form or are discussed too briefly? Please identify any specific
sections of the proposed summary that are viewed as too lengthy or
incomplete.
2. Statutorily-required items
Section 609(c)(2) mandates that the summary include an explanation
of how the consumer may assert his or her rights, list all federal
agencies with administrative authority under the FCRA in a form that
will help consumers find the appropriate agency, and include specific
statements concerning (1) state laws and authorities that may assist
consumers, and (2) the fact that verifiable accurate information that
is not outdated under Section 605 need not be removed. Are the
statutorily-required items accurately and understandably presented? In
what way, if any, could they be improved? Specifically, the Commission
has drafted the table of federal agencies at the end of the summary to
comply literally with Section 609(c)(2)(C) by including all agencies
granted enforcement authority by Section 621(b)(1). Is what way, if
any, could this table be shortened or made more understandable?
3. Terminology
Because the summary is a document intended to inform consumers, the
proposal is written in non-technical language, to the extent it is
possible to do so and also include in sufficient detail the large
number of important consumer rights conferred by the FCRA. Are there
sections which can be improved by simplifying the presentation to make
it easier for consumers to understand? Are there sections where the
language does not accurately convey the substance of the provision? How
could such sections be improved?
4. Form issues
The Commission is required to ``prescribe the form and content of''
the consumer summary (Section 609(c)(3)) (emphasis added). The goal is
to create a notice that sets forth all statutorily required items in a
form that is readable, understandable, and attractive. The Commission
proposes to prescribe that the text be provided on paper no smaller
than 8\1/2\x11 inches in size, in type size no smaller than 12-point
type (8-point for the chart of federal agencies), in a document
separate from the consumer report. Generally, is there a format that
would better convey the same information to consumers? If so, what is
it and what costs would it entail? Is there a format that would convey
the same information to consumers in a less expensive manner? If so,
what is it and what cost saving would it achieve?
5. Numeric changes
The Commission realizes that some of the numbers in the notice may
change over time. For example, the permissible charges for file
disclosures or telephone numbers of agencies may change. Such changes
will be incorporated in any revisions to the summary the Commission may
prescribe from time to time. In addition, the Commission proposes that
all notices issued prior to such revisions that contain accurate and
updated information concerning numeric changes will be considered
``substantially similar'' to the prescribed notice as to those items.
Is there a better way to accommodate such changes?
[[Page 9125]]
B. Furnisher Notice
1. Content of notice
The proposed notice summarizes the responsibilities imposed upon
furnishers of information to CRAs by Section 623 of the FCRA. Are all
statutory obligations of furnishers included? Is the presentation
accurate and understandable? In what way can it be improved? Is it
sufficient for the notice to refer furnishers to the complete text of
the FCRA at the Internet web site maintained by the Commission, or
would the notice be improved if it was expanded to add the complete
text of Section 623?
2. Scope of notice
The FCRA directs the Commission to prescribe a notice setting forth
the responsibilities of any party ``who regularly and in the ordinary
course of business furnishes (consumer) information to the agency'' and
requires each CRA to provide the notice to all such parties (CCRRA
Section 2407(b), FCRA Section 607(d)). Two of the listed duties apply
only to parties who furnish information to CRAs regularly, and thus by
inference, not to occasional information providers. Would some CRAs
send these notices to occasional as well as regular furnishers? If so,
would addition of a reference to the duties of occasional, as well as
regular, providers be helpful?
3. Terminology
The Commission's proposed notice summarizes the duties of
furnishers. This summary is written in non-technical language, but with
the expectation that regular providers of information to CRAs will be
relatively sophisticated and will be able to understand both the
language of the statute and the description of duties. Is the
description of duties accurate and understandable for this audience?
What improvements can be made?
C. User Notice
1. Number of Notices
The ``users'' of consumer reports fall into a number of categories,
and the duties imposed by the FCRA vary by user category. Accordingly,
CRAs could send out one notice to all users setting forth all of the
user requirements of the FCRA or they could send out notices that
contain only those responsibilities that pertain to the particular
user. The Commission is proposing a single notice, which first
specifies the general responsibilities that apply to all users of
consumer reports from a CRA (Part I). The proposed notice then lists
the responsibilities that are specific to certain categories of users:
users of consumer reports for employment purposes (Part II); users of
investigative consumer reports (Part III); users of medical information
(Part IV); users of ``prescreened'' lists (Part V); and users who are
resellers (Part VI). Should there be a single notice or multiple
notices? If multiple notices are appropriate, which types of users
should receive particularized notices? Can CRAs easily determine
through the certifications they receive from users which portions of
the proposed notice are applicable to which users?
2. Content of notice
The proposed notice discusses the principal portions of the FCRA
that impose specific obligations upon all those who receive consumer
reports and has included these in the six parts of the proposed notice.
Are there other statutory requirements that should be included? Should
additional information be included in the notice? Will the length of
the notice impose substantial burdens upon CRAs? Are there ways to
modify the notice to reduce this burden?
3. Terminology
The Commission expects that user notices will be sent to a wide
range of users and that these persons will have varying degrees of
legal sophistication. Are the duties set forth in the proposed notice
clear and understandable? Can they be improved upon?
D. Timing of Distribution of Notices
With respect to the consumer summary, Section 609(c) makes clear
that it must be provided every time a CRA makes a written file
disclosure under the section. With respect to the furnisher and user
notices, however, Section 607(d) provides no specific guidance. Is
there a need for advice from the Commission about the timing of the
distribution of furnisher and user notices to ensure that the documents
are distributed in such a way that they are meaningful and effective?
If so, when should the notices be distributed? Should the distribution
of the user notice vary based on the recipient's status (e.g., regular
and occasional users)?
E. Impact on Small Businesses
The Commission is seeking comments on the impact that its
prescription of these notices will have on small entities and for
suggestions as to any ways in which the Commission can both meet its
obligations under the FCRA and, if possible, lessen any burden imposed
on small businesses.
The FCRA itself requires three types of notices containing
specified types of information, and also specifies how one type (the
consumer notices) must be distributed. Accordingly, this discussion
does not cover the necessity for any of the notices or the distribution
requirements for the consumer notices.
The Commission is prescribing these notices at the direction of
Congress. The purpose of these notices is described in section I above.
There is no requirement that the notices used be exactly as prescribed
by the Commission. Rather, there is a presumption of compliance with
the FCRA if notices are used that are substantially similar to those
prescribed by the Commission. (FCRA Sections 607 and 609).
A search of proprietary data bases has revealed approximately 500
consumer reporting agencies that have sales of $5 million or less per
year--the threshold for ``small'' credit reporting businesses as
defined by the Small Business Administration. However, because the
consumer reporting industry is dominated by a number of large companies
who provide most of the information sold by smaller entities in the
industry, the Commission believes that most of these 500 companies
either are affiliated, or have contractual arrangements, with one of
the large consumer reporting agencies in the industry. These large
agencies, as well as industry trade associations, may make information
about the notice requirements and the Commission's prescribed forms
available to the smaller entities. The Commission's staff plans to make
information about complying with the new FCRA requirements available
through various means, including placing the prescribed forms on the
Commission's Internet home page.
The FCRA imposes no specific record keeping or reporting
requirements directly tied to the use of the notices prescribed by the
Commission. In addition, there are no federal rules or regulations that
conflict with or duplicate the notices prescribed by the Commission.
In these circumstances, the Commission does not believe that the
prescription of the notices will have a significant economic impact
upon small business. In fact, the Commission's ``prescription'' of
these notices may lessen the burden on small businesses, since these
entities can--but need not--adopt the Commission's forms and thereby
avoid the risk and expense of developing their notices independently.
To ensure that no significant economic impact is overlooked, however,
the Commission seeks comments on this issue. The Commission also seeks
[[Page 9126]]
comments on possible alternatives to the language of the proposed
notices to accomplish the stated objectives within the statutory
framework. Specifically, what benefits and costs to consumers and
businesses would result from the proposed notices? Would the proposed
notices have a significant economic impact on a substantial number of
small business entities? If so, explain the nature of any such impact.
F. Firm Timetable for Comments
The FTC intends to move promptly in order to allow time for (1) the
staff to review and consider comments on the proposed summary and
notices, (2) the agency to prescribe them in final form, and (3) the
industry to prepare and use the final versions of the documents when
the amendments take effect on September 30, 1997. The public should
therefore anticipate no extension of the 30-day comment period.
III. Review under the Paperwork Reduction Act
The FTC has reviewed the three notices that the FCRA amendments
require it to prescribe--the Summary of FCRA Rights, the Notice of User
Obligations, and the Notice of Furnisher Obligations--for the purpose
of determining whether the agency will ``conduct or sponsor'' any
``collection(s) of information'' as these terms are defined in the OMB
regulation that implements the Paperwork Reduction Act (44 U.S.C.
Chapter 35) (``PRA''), 5 C.F.R. Part 1320.
A. Conduct or Sponsor
The purpose of the PRA is to minimize the Federal paperwork burden
that agencies impose on individuals, businesses, State and local
governments, and others by collecting unnecessary or duplicative
information. 44 U.S.C. Section 3501; 5 C.F.R. Sec. 1320. Thus, an
agency must seek and obtain clearance from OMB before it ``conducts or
sponsors'' a ``collection of information'' from ten or more persons
during a 12 month period. 44 U.S.C. Section 3507; 5 C.F.R. 1320.5.
The FCRA amendments require the credit reporting agencies to
provide relevant parties with a Notice of User Obligations and a Notice
of Furnisher Obligations that describe certain investigation,
disclosure, and recordkeeping requirements. The amendments further
require the FTC to prescribe the ``content'' of the notices. So doing
will not trigger the application of the PRA. The PRA is triggered when
an agency ``conduct[s) or sponsor[s)'' a collection of information. The
investigation, disclosure, and recordkeeping requirements described in
the User and Furnisher Notices are imposed by the statute and the
notices merely describe the requirements of the new FCRA. Further, the
requirements contained in the notices become effective on October 31,
1997, regardless of whether the FTC has provided the language for these
forms by that time.
The FCRA amendments also require the Commission to prescribe the
content and form of a new Summary of Consumer Rights that must be
provided to consumers. Because the amended FCRA further provides that:
``[n)o disclosures shall be required under this subsection [discussing
the Summary of Consumer Rights) until the date on which the Federal
Trade Commission prescribes the form and content of such disclosures *
* *,'' it could be argued that the Commission's actions in prescribing
the manner and content of the Summary of Consumer Rights may be
considered to ``require'' or ``cause'' the disclosures to occur.
Nevertheless, as discussed below, we have determined that none of these
notices constitute a ``collection of information.''
B. Collection of Information
Because the three notices to be prescribed by the Commission
contain information that must be distributed to third parties, these
documents involve public disclosures that would otherwise constitute
``collections of information'' under the PRA. However, OMB has
recognized that some disclosures do not entail the ``collection of
information'' and are thus outside the Act's paperwork control
provisions. Specifically relevant here is OMB's determination that a
disclosure requirement is not a ``collection of information'' when the
information to be disclosed is supplied by the government. 5 C.F.R.
1320.3(c)(2). In such a situation, a mandate to disclose does not
impose any requirement to collect the information to be disclosed.
The information in the proposed FCRA notices will be supplied by
the government. The proposed notices supply all the information that
subject firms will be required to disclose. The FCRA requires credit
reporting agencies to provide these (or substantially similar) notices.
FCRA Sections 607(d)(2) and 609(c)(3). The latitude provided by the
statute to use language other than the precise language prescribed by
the FTC does not undercut this concept because the consumer reporting
agencies can simply adopt these notices for distribution without any
change to the language. We have concluded therefore that these notices
do not fall within the definition of ``collection of information''
because they are ``[t)he public disclosure of information originally
supplied by the Federal government to the recipient for the purpose of
disclosure to the public * * *'' 5 C.F.R. Sec. 1320.3(c)(2). Thus, the
PRA does not apply.
List of Subjects in 16 CFR Part 601
Credit, Trade practices.
Pursuant to 15 U.S.C. 1681g and 1681s, the FTC hereby proposes to
add to Subchapter F of Chapter I of 16 CFR a new Part 601 to read as
follows:
PART 601--SUMMARY OF CONSUMER RIGHTS, NOTICE OF USER
RESPONSIBILITIES, AND NOTICE OF FURNISHER RESPONSIBILITIES UNDER
THE FAIR CREDIT REPORTING ACT
Sec.
601.1 Authority and purpose.
601.2 Legal effect.
Appendix A to Part 601--Prescribed Summary of Consumer Rights
Appendix B to Part 601--Prescribed Notice of Furnisher
Responsibilities
Appendix C to Part 601--Prescribed Notice of User Responsibilities
Authority: 15 U.S.C. 1681g and 1681s.
Sec. 601.1 Authority and purpose.
(a) Authority. This part is issued by the Commission pursuant to
the provisions of the Fair Credit Reporting Act (15 U.S.C. 1681 et
seq.), as most recently amended by the Consumer Credit Reporting Reform
Act of 1996 (Title II, Subtitle D, Chapter 1, of the Omnibus
Consolidated Appropriations Act for Fiscal Year 1997), Public Law 104-
208, 110 Stat. 3009-426 (Sept. 30, 1996).
(b) Purpose. The purpose of this part is to comply with sections
607(c) and 609(c) of the Fair Credit Reporting Act, as amended. Section
609(c)(3) directs the FTC to prescribe the form and content of a
summary of consumers' legal rights under the FCRA that the amended law
requires each consumer reporting agency to provide when disclosing the
information in its file to consumers, and section 609(c)(4) provides
that the summary need not be provided until the FTC has in fact
prescribed its form and content. Section 607(d)(2) directs the FTC to
prescribe the content of notices that consumer reporting agencies are
required to provide to parties that supply information to, or purchase
consumer reports from, the agency. These notices will set forth the
responsibilities under the FCRA of all persons who furnish information
to consumer reporting agencies or use information subject to the FCRA.
[[Page 9127]]
Sec. 601.2 Legal effect.
The forms prescribed by the FTC do not constitute a trade
regulation rule. They carry out the directive in the statute that the
FTC prescribe the summary and notices. A consumer reporting agency that
provides notices substantially similar to those prescribed by the FTC
will be in compliance with Section 607(d) or 609(c) of the FCRA, as
applicable.
Appendix A to Part 601--Prescribed Summary of Consumer Rights
The prescribed form for this summary is as a separate document,
on paper no smaller than 8\1/2\x11 inches in size, with text no less
than 12-point type (8-point for the chart of federal agencies), in
bold or capital letters as indicated. The form in this appendix
prescribes both the content and the sequence of items in the
required summary. A consumer reporting agency that is not required
by law to have a toll-free number may omit the sentence inviting
consumers to call that number. A summary may accurately reflect
changes in numerical items that change over time (e.g., dollar
amounts, or phone numbers and addresses of federal agencies), and
remain in compliance.
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By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 97-4987 Filed 2-27-97; 8:45 am]
BILLING CODE 6750-01-C
