2010-29607. Agency Information Collection Activities; Proposed Collection; Comment Request

AGENCY:

Federal Trade Commission (FTC or Commission).

ACTION:

Notice.

SUMMARY:

The information collection requirements described below will be submitted to the Office of Management and Budget (OMB) for review, as required by the Paperwork Reduction Act (PRA). The FTC is seeking public comments on its proposal to extend through February 28, 2014, the current PRA clearance for information collection requirements contained in its Informal Dispute Settlement Procedures Rule. That clearance expires on February 28, 2011.

DATES:

Comments must be received on or before January 24, 2011.

ADDRESSES:

Interested parties are invited to submit written comments electronically or in paper form, by following the instructions in the Request for Comments part of the SUPPLEMENTARY INFORMATION section below. Comments in electronic form should be submitted by using the following Web link: (https://ftcpublic.commentworks.com/​ftc/​idsrpra) (and following the instructions on the Web-based form). Comments in paper form should be mailed or delivered to the following address: Federal Trade Commission, Office of the Secretary, Room HB-113 (Annex J), 600 Pennsylvania Avenue, NW., Washington, DC 20580, in the manner detailed in the SUPPLEMENTARY INFORMATION section below.

FOR FURTHER INFORMATION CONTACT:

Requests for copies of the collection of information and supporting documentation should be addressed to Allyson Himelfarb, Investigator, Division of Marketing Practices, Bureau of Consumer Protection, Federal Trade Commission, Room H-286, 600 Pennsylvania Ave., NW., Washington, DC 20580, [phone].

SUPPLEMENTARY INFORMATION:

Proposed Information Collection Activities

Under the PRA, 44 U.S.C. 3501-3521, Federal agencies must obtain approval from OMB for each collection of information they conduct or sponsor. “Collection of information” means agency requests or requirements that members of the public submit reports, keep records, or provide information to a third party. 44 U.S.C. 3502(3), 5 CFR 1320.3(c). Because the number of entities affected by the Commission's requests will exceed ten, the Commission plans to seek OMB clearance under the PRA. As required by § 3506(c)(2)(A) of the PRA, the Commission is providing this opportunity for public comment before requesting that OMB extend the existing paperwork clearance for the information collection requirements associated with the Commission's regulations under the FTC's Informal Dispute Settlement Procedures Rule (the Dispute Settlement Rule or Rule) (OMB Control Number 3084-0113), 16 CFR 703.

The Dispute Settlement Rule is one of three rules ^[1] that the FTC implemented pursuant to requirements of the Magnuson-Moss Warranty Act, 15 U.S.C. 2301 et seq. (Warranty Act or Act).^[2] The Dispute Settlement Rule, 16 CFR 703, specifies the minimum standards which must be met by any informal dispute settlement mechanism (IDSM) that is incorporated into a written consumer product warranty and which the consumer must use before pursuing legal remedies under the Act in court. In enacting the Warranty Act, Congress recognized the potential benefits of consumer dispute mechanisms as an alternative to the judicial process. Section 110(a) of the Act sets out the Congressional policy to “encourage warrantors to establish procedures whereby consumer disputes are fairly and expeditiously settled through informal dispute settlement mechanisms” and erected a framework for their establishment.^[3] As an incentive to warrantors to establish IDSMs, Congress provided in Section 110(a)(3) that warrantors may incorporate into their written consumer product warranties a requirement that a consumer must resort to an IDSM before pursuing a legal remedy under the Act for breach of warranty.^[4] To ensure fairness to consumers, however, Congress also directed that, if a warrantor were to incorporate such a “prior resort requirement” into its written warranty, the warrantor must comply with the minimum standards set by the Commission for such IDSMs.^[5] Section 110(a)(2) of the Act directed the Commission to establish those minimum standards.^[6]

The Dispute Settlement Rule contains standards for IDSMs, including requirements concerning the mechanism's structure (e.g., funding, staffing, and neutrality), the qualifications of staff or decision makers, the mechanism's procedures for resolving disputes (e.g., notification, investigation, time limits for decisions, and follow-up), recordkeeping, and annual audits. The Rule requires that IDSMs establish written operating procedures and provide copies of those procedures upon request.

The Dispute Settlement Rule applies only to those firms that choose to be bound by it by requiring consumers to use an IDSM. Neither the Rule nor the Act requires warrantors to set up IDSMs. A warrantor is free to set up an IDSM that does not comply with the Rule as long as the warranty does not contain a prior resort requirement.

Request for Comments

The FTC invites comments on: (1) Whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (2) the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; (3) ways to enhance the quality, utility, and clarity of the information to be collected; and (4) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology, e.g., permitting electronic submission of responses. All comments should be filed as prescribed below, and must be received on or before January 24, 2011.

Please also note that because your comments will be made public, you are solely responsible for ensuring that it does not include any sensitive personal information, such as any individual'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. It is also your own responsibility to ensure 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 “[t]rade secret or any commercial or financial information which is obtained from any person and which is privileged or confidential * * *,” as provided in 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). No comment, whether it contains such material or not, will be given confidential treatment unless the comment has been filed with the FTC Secretary; the comment is accompanied by a written confidentiality request that complies fully with FTC Rule 4.9(c), 16 CFR 4.9(c); ^[7] and the General Counsel, in his or her sole discretion, has determined to grant the request in accordance with applicable law and the public interest.

Because paper mail addressed to the FTC is subject to delay due to heightened security screening, please consider submitting your comments in electronic form. Comments filed in electronic form should be submitted by using the following Web link: https://ftcpublic.commentworks.com/​ftc/​idsrpra (and following the instructions on the Web-based form). To ensure that the Commission considers an electronic comment, you must file it on the Web-based form at the Web link: https://ftcpublic.commentworks.com/​ftc/​idsrpra). If this Notice appears at http://www.regulations.gov/​search/​index.jsp,, you may also file an electronic comment through that Web site. The Commission will consider all comments that regulations.gov forwards to it. You may also visit the FTC Web site at http://www.ftc.gov to read the Notice and the news release describing it.

A comment filed in paper form should include the “Warranty Rules: Paperwork Comment, FTC File No. P044403” reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex J), 600 Pennsylvania Avenue, NW., Washington, DC 20580. The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

The FTC Act and other laws 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, whether filed in paper or electronic form. Comments received will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov/​os/​publiccomments.shtm. As a matter of discretion, the Commission makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/​ftc/​privacy.shtm.

Informal Dispute Settlement Rule Burden Statement

Total annual hours burden: 13,000 hours, rounded to the nearest thousand. The primary burden from the Dispute Settlement Rule comes from the recordkeeping requirements that apply to IDSMs that are incorporated into a consumer product warranty through a prior resort clause. In its 2007 submission to OMB, staff estimated that the recordkeeping burden was 12,241 hours per year, the reporting burden was 4,080 hours per year, and the disclosure requirements were 408 hours per year, or cumulatively, approximately 17,000 hours. Although the Rule's information collection requirements have not changed since 2007, staff has adjusted its previous estimates based on the following two factors. First, the annual audits filed by the two IDSMs currently operating under the Rule indicate that, on average, fewer disputes were handled since the previous submission to OMB in 2007. This factor results in a decreased annual hours burden estimate for the IDSMs. Second, staff has reevaluated the methodology used and the assumptions made in its previous submission with respect to the burden imposed on warrantors under the Rule, and now includes that analysis in its new estimates. This factor results in an increased annual burden estimate for warrantors. The calculations underlying staff's new estimates follow.

Recordkeeping: The Rule requires IDSMs to maintain records of each consumer warranty dispute that is referred to it. These case files must include information such as the consumer's contact information, the make and model of the product at issue, all letters or other correspondence submitted by the consumer or warrantor, and all evidence collected to resolve the dispute. Because maintaining individual case records is a necessary function for any IDSM, much of the burden would be incurred in the ordinary course of the IDSM's business. Nonetheless, staff retains its previous estimate that maintaining individual case files imposes an additional burden of 30 minutes per case.

The amount of work required will depend on the number of dispute resolution proceedings undertaken in each IDSM. A review of the annual audits completed since the prior submission to OMB in 2007 (audits for calendar years 2006 through 2009) indicates that currently there are two IDSMs operating under the Rule: the BBB AUTO LINE and the National Center for Dispute Settlement (NCDS). The BBB AUTO LINE audits from calendar years 2006 through 2009 indicate that it handled an average of 16,187 disputes each year.^[8] Audit reports submitted on behalf of NCDS, which most recently handled disputes on behalf of six automobile manufacturers, indicate that an average of 2,040 disputes were closed each year for calendar years 2006 through 2009.^[9]

Based on the above figures, staff estimates that the average number of disputes handled annually by IDSMs covered by the Rule is approximately 18,227 (an average of 16,187 disputes handled by BBB AUTO LINE + an average of 2,040 disputes handled by NCDS).^[10] Accordingly, staff estimates the total annual recordkeeping burden attributable to the Rule to be approximately 9,114 hours (18,227 disputes × 30 minutes of burden) ÷ 60 minutes).

Reporting: The Rule requires IDSMs to update indexes, complete semiannual statistical summaries, and submit an annual audit report to the FTC. Staff retains its previous estimate that covered entities spend approximately 10 minutes per case for these activities, resulting in a total annual burden of approximately 3,038 hours (18,227 disputes × 10 minutes of burden ÷ 60 minutes).

Disclosure

(a) Warrantors' Disclosure Burden

The Rule requires warrantors that elect to incorporate the use of an IDSM into their warranties to disclose in their warranties the following: a statement about the availability of the IDSM, the contact information for the IDSM, and any “prior resort requirement.” ^[11] In its 2007 submission to OMB, staff noted that any incremental costs to the warrantor of including this additional information in the warranty would be negligible, and thus, did not account for warrantors' disclosure burden in its previous submission. While staff continues to agree with that assessment, upon further review, staff has determined that it would be appropriate to account for the disclosure burden as it relates to warrantors based on two types of additional information that warrantors are required to disclose under the Rule: (1) More detailed information concerning the IDSM and its procedures; and (2) information that makes consumers aware of the existence of the IDSM.

First, the Rule requires that warrantors include, either in the warranty or in a separate document accompanying the warranted product, more detailed information concerning the IDSM. Among other things, this information may include: a form addressed to the IDSM with spaces to be filled out by the consumer to provide the IDSM with information needed to resolve consumer disputes, a brief description of IDSM procedures, the time limits adhered to by the IDSM, and the types of information the IDSM might require for prompt resolution of the consumer dispute.^[12] Because warrantors have the option of providing this additional information in materials separate from the warranty, warrantors likely will bear an additional burden that is separate and apart from whatever burden already is imposed on warrantors from drafting warranty terms that comply with Rule 701, the rule on the disclosure of warranty terms.

Second, the Rule requires that warrantors take steps reasonably calculated to make consumers aware of the IDSM's existence at the time consumers experience warranty disputes.^[13] The annual audits—which are required to assess how well warrantors comply with this requirement—demonstrate the different steps warrantors take to inform consumers of the existence of the IDSM procedures. For example, some warrantors create separate pamphlets that deal specifically with the IDSM process. Other warrantors publish entire warranty manuals or booklets, within which several pages are dedicated to the IDSM. Still other warrantors have created posters to alert consumers to the existence of the informal dispute settlement process. Based on this information, it is clear that warrantors bear more than a negligible disclosure burden under the Rule. Accordingly, staff now includes an assessment of the disclosure burden for warrantors in its estimates as follows.

A review of the annual audits of the BBB AUTO LINE and the NCDS indicates that currently there are approximately twenty-seven automobile manufacturers covered by the Rule. Staff assumes that each manufacturer spends an average of thirty hours a year creating, revising, and distributing the informational materials necessary to comply with the Rule, resulting in an annual disclosure burden of 810 hours (27 manufacturers × 30 hours).

(b) IDSMs' Disclosure Burden

Under the Rule, a portion of the disclosure burden would be borne by the IDSM itself, which is required to provide to interested consumers upon request copies of the various types of information the IDSM possesses, including its annual audits. In addition, consumers who have filed disputes with the IDSM also have a right to copies of their records. (IDSMs are permitted to charge for providing both types of information.)

Based on discussions with representatives of the IDSMs over the years, staff estimates that the burden imposed by the disclosure requirements is approximately 304 hours per year for the existing IDSMs to provide copies of this information. This estimate draws from the average number of consumers who file claims each year with the IDSMs (18,227) and the assumption that twenty percent of consumers individually request copies of the records pertaining to their disputes, or approximately 3,645 consumers. Staff estimates that copying such records would require approximately 5 minutes per consumer, including a negligible number of requests for copies of the annual audit.^[14] Thus, the IDSMs currently operating under the Rule have an estimated total disclosure burden of 304 hours (3,645 consumers × 5 minutes of burden ÷ 60 minutes).

Accordingly, the total PRA-related annual hours burden attributed to the Rule is approximately 13,266 hours (9,114 hours for recordkeeping + 3,038 hours for reporting + 1,114 hours for disclosures).

Total annual labor cost: $265,000 rounded to the nearest thousand.

Recordkeeping: Staff assumes that IDSMs use clerical staff to comply with the recordkeeping requirements contained in the Rule at an hourly rate of $15.^[15] Thus, the labor cost associated with the 9,114 annual burden hours for recordkeeping is approximately $136,710 (9,114 burden hours × $15 per hour).

Reporting: Staff assumes that IDSMs also use clerical support staff at an hourly rate of $15 to comply with the reporting requirements. Thus, the labor cost associated with the 3,038 annual burden hours for reporting is approximately $45,570 (3,038 burden hours × $15 per hour).

Disclosure: Staff assumes that the work required to comply with the warrantors' disclosure requirements entails an equal mix of legal, clerical, and graphic design work. The legal work entails ensuring that the warranty information and other materials contain the information required to be disclosed by the Rule, as well as reviewing the annual audits for any recommendations for how to improve the warrantors' materials, and implementing those recommended changes as appropriate. The graphic design work entails creating pamphlets, brochures, posters, or other materials that are aimed at making consumers aware of the existence of the IDSM and its procedures. The clerical work entails copying and distributing those informational materials. Staff assumes that one third of the total disclosure hours for warrantors (270 hours) requires legal work at a rate of $250 an hour, one third requires graphic design at a rate of $23 an hour, and one third requires clerical work at a rate of $15 an hour. This results in a disclosure labor burden of $77,760 for warrantors ((270 × $250) + (270 × $23) + (270 × $15).

In addition, staff assumes that IDSMs use clerical support at an hourly rate of $15 to reproduce records and, therefore, the labor cost associated with the 304 annual hours of disclosure burden for IDSMs is approximately $4,560 (304 burden hours × $15 per hour).

Accordingly, the combined total annual labor cost for PRA-related burden under the Rule is approximately $264,600 ($136,710 for recordkeeping + $45,570 for reporting + $82,320 for disclosures).

Total annual capital or other nonlabor costs: $322,000, rounded to the nearest thousand.

Total capital and start-up costs: The Rule imposes no appreciable current capital or start-up costs. The vast majority of warrantors have already developed systems to retain the records and provide the disclosures required by the Rule. Rule compliance does not require the use of any capital goods, other than ordinary office equipment, to which providers would already have access. In addition, according to a representative of one IDSM, it has already developed systems to collect and retain information needed to produce the indexes and statistical summaries required by the Rule, and thus, estimated very low capital or startup costs.

The only additional cost imposed on IDSMs operating under the Rule that would not be incurred for other IDSMs is the annual audit requirement. According to representatives of the IDSMs, the vast majority of costs associated with this requirement are the fees paid to the auditors and their staffs to perform the annual audit. Representatives of the IDSMs previously estimated a combined cost of $300,000 for both IDSMs currently operating under the Rule, and staff retains that estimate.

Other non-labor costs: $22,000 in copying costs. This total is based on estimated copying costs of 7 cents per page and several conservative assumptions. Staff estimates that the average dispute-related file is 35 pages long and that a typical annual audit file is approximately 200 pages in length. As discussed above, staff assumes that twenty percent of consumers using an IDSM currently operating under the Rule (approximately 3,645 consumers) request copies of the records relating to their disputes.

Staff also estimates that a very small minority of consumers request a copy of the annual audit. This assumption is based on (1) the number of consumer requests actually received by the IDSMs in the past; and (2) the fact that the IDSMs' annual audits are available online. For example, annual audits are available on the FTC's Web site, where consumers may view and or print pages as needed, at no cost to the IDSM. In addition, the Better Business Bureau makes available on its Web site the annual audit of the BBB AUTO LINE. Therefore, staff conservatively estimates that only five percent of consumers using an IDSM covered by the Rule (approximately 911 consumers) will request a copy of the IDSM's audit report.

Thus, the total annual copying cost for dispute-related files is approximately $8,930 (35 pages per file × $.07 per page × 3,645 consumer requests) and the total annual copying cost for annual audit reports is approximately $12,754 (200 pages per audit report × $.07 per page × 911 consumer requests). Accordingly, the total cost attributed to copying under the Rule is approximately $21,684. Thus, the total non-labor cost under the Rule is approximately $321,684 ($300,000 for auditor fees + $21,684 for copying costs).

Willard K. Tom,

General Counsel.

Footnotes

1.  The other two rules relate to the information that must appear in any written warranty offered on a consumer product costing more than $15 and the pre-sale availability of warranty terms.

2.  40 FR 60168 (Dec. 31, 1975).

3.  15 U.S.C. 2310(a).

4.  15 U.S.C. 2310(a)(3).

5.  Id.

6.  15 U.S.C. 2310(a)(2).

7.  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), 16 CFR 4.9(c).

8.  According to its annual audits, the number of disputes filed each year with the BBB AUTO LINE are as follows: 20,658 in 2006; 17,365 in 2007; 14,958 in 2008; and 11,768 in 2009. As of its most recent audit in 2009, the BBB AUTO LINE handled disputes on a national basis for thirteen automobile manufacturers. An additional eight manufacturers utilized BBB AUTO LINE in some States, but not others.

9.  According to its annual audits, the number of disputes closed each year with NCDS are as follows: 1,836 in 2006; 1,759 in 2007; 2,110 in 2008; and 2,455 in 2009.

10.  Because the number of annual disputes filed has fluctuated, staff believes that taking the average number of disputes filed for years 2006 through 2009 (the most recent available data) is the best way to project what will happen over the next three years of the OMB clearance for the Rule.

11.  16 CFR 703.2(b).

12.  16 CFR 703.2(c).

13.  16 CFR 703.2(d).

14.  This estimate includes the additional amount of time required to copy the annual audit upon a consumer's request. However, because staff has determined that a very small minority of consumers request a copy of the annual audit, this estimate is likely an overstatement. In addition, at least a portion of case files are provided to consumers electronically, which further would reduce the paperwork burden borne by the IDSMs.

15.  The wage rates used in this Notice are based on recent data from the Bureau of Labor Statistics National Compensation Survey at http://www.bls.gov/​ncs/​ncswage2009.htm, with the exception of the hourly wage rate for legal professionals, which is based upon industry knowledge. Hourly rates are rounded to the nearest dollar.