[Federal Register: August 7, 2007 (Volume 72, Number 151)]
[Notices]
[Page 44140-44144]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07au07-53]
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FEDERAL TRADE COMMISSION
Agency Information Collection Activities; Proposed Collection;
Comment Request; Extension
AGENCY: Federal Trade Commission (``FTC'' or ``Commission'').
ACTION: Notice.
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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. The FTC is seeking
public comments on its proposal to extend through November 30, 2010 the
current OMB clearance for the information collection requirements
contained in the Commission's Rule Concerning Disclosure of Written
Consumer Product Warranty Terms and Conditions. The clearance is
scheduled to expire on November 30, 2007. The FTC is also seeking
public comments on its proposal to extend through December 31, 2010 the
current OMB clearances for the information collection requirements
contained in the Commission's Rule Governing Pre-Sale Availability of
Written Warranty Terms and the Informal Dispute Settlement Procedures
Rule. Those clearances are scheduled to expire on December 31, 2007.
DATES: Comments must be filed by October 9, 2007.
ADDRESSES: Interested parties are invited to submit written comments.
Comments should refer to ``Warranty Rules: Paperwork Comment, FTC File
No. P044403'' to facilitate the organization of comments. A comment
filed in paper form should include this reference both in the text and
on the envelope, and should be mailed or delivered, with two complete
copies, to the following address: Federal Trade Commission, Room H-135,
600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Because paper
mail in the Washington area and at the Commission is subject to delay,
please consider submitting your comments in electronic form, as
prescribed below. However, if the comment contains any material for
which confidential treatment is requested, it must be filed in paper
form, and the first page of the document must be clearly labeled
``Confidential.''\1\ The FTC is requesting that any comment filed in
paper form be sent by courier or overnight service, if possible.
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\1\ Commission Rule 4.2(d), 16 CFR 4.2(d). The comment must be
accompanied by an explicit request for confidential treatment,
including the factual and legal basis for the request, and must
identify the specific portions of the comment to be withheld from
the public record. The request will be granted or denied by the
Commission's General Counsel, consistent with applicable law and the
public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).
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Comments filed in electronic form should be submitted by using the
following weblink: https://secure.commentworks.com/ftc-warranrtypra
(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 weblink: https://secure.commentworks.com/ftc-warranrtypra.
If this notice appears at www.regulations.gov, you may
also file an electronic comment through that Web site. The Commission
will consider all comments that regulations.gov forwards to it.
The FTC Act and other laws the Commission administers permit the
collection of public comments to consider and use in this proceeding as
appropriate. All timely and responsive
[[Page 44141]]
public comments will be considered by the Commission, and will be
available to the public on the FTC Web site, to the extent practicable,
at http://www.ftc.gov. As a matter of discretion, the FTC 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.htm
.
FOR FURTHER INFORMATION CONTACT: Requests for additional information or
copies of the proposed information requirements should be addressed to
Allyson Himelfarb, Investigator, Division of Marketing Practices,
Bureau of Consumer Protection, Federal Trade Commission, Room H-292,
600 Pennsylvania Ave., N.W., Washington, D.C. 20580, (202) 326-2505.
SUPPLEMENTARY INFORMATION: Under the Paperwork Reduction Act (``PRA''),
44 U.S.C. 3501-3520, 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). As required by section
3506(c)(2)(A) of the PRA, the FTC is providing this opportunity for
public comment before requesting that OMB extend the existing paperwork
clearances for the FTC's (1) Rule Concerning Disclosure of Written
Consumer Product Warranty Terms and Conditions (OMB Control Number
3084-0111); (2) Rule Governing Pre-Sale Availability of Written
Warranty Terms (OMB Control Number 3084-0112); and (3) Informal Dispute
Settlement Procedures Rule (OMB Control Number 3084-0113)
(collectively, ``Warranty Rules'').
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 in
the ADDRESSES section above, and must be received on or before October
9, 2007.
The Warranty Rules implement the Magnuson-Moss Warranty Act, 15
U.S.C. 2301 et seq. (``Warranty Act'' or ``Act''), which required the
FTC to issue three rules relating to warranties on consumer products:
the disclosure of written warranty terms and conditions; pre-sale
availability of warranty terms; and rules establishing minimum
standards for informal dispute settlement mechanisms that are
incorporated into a written warranty.\2\
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\2\ 40 FR 60168 (December 31, 1975).
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Consumer Product Warranty Rule (``Warranty Rule''): The Warranty
Rule, 16 CFR 701, specifies the information that must appear in a
written warranty on a consumer product costing more than $15. The Rule
tracks Section 102(a) of the Warranty Act,\3\ specifying information
that must appear in the written warranty and, for certain disclosures,
mandates the exact language that must be used.\4\ Neither the Warranty
Rule nor the Act requires that a manufacturer or retailer warrant a
consumer product in writing, but if they choose to do so, the warranty
must comply with the Rule.
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\3\ 15 U.S.C. 2302(a).
\4\ 40 FR 60168, 60169-60170.
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The Rule Governing Pre-Sale Availability of Written Warranty Terms
(``Pre-Sale Availability Rule''): The Pre-Sale Availability Rule, 16
CFR 702, requires sellers and warrantors to make the text of any
written warranty on a consumer product costing more than $15 available
to the consumer before sale. Among other things, the Rule requires
sellers to make the text of the warranty readily available either by
(1) displaying it in close proximity to the product or (2) furnishing
it on request and posting signs in prominent locations advising
consumers that the warranty is available. The Rule requires warrantors
to provide materials to enable sellers to comply with the Rule's
requirements and also sets out the methods by which warranty
information can be made available before the sale if the product is
sold through catalogs, mail order, or door-to-door sales.
Informal Dispute Settlement Rule: The Informal Dispute Settlement
Rule, 16 CFR 703, specifies the minimum standards which must be met by
any informal dispute settlement mechanism that is incorporated into a
written consumer product warranty and which the consumer must use
before pursuing legal remedies 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''
(``IDSMs'') and erected a framework for their establishment.\5\ 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.\6\ 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.\7\ Section
110(a)(2) of the Act directed the Commission to establish those minimum
standards.\8\
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\5\ 15 U.S.C. 2310(a).
\6\ 15 U.S.C. 2310(a)(3).
\7\ Id.
\8\ 15 U.S.C. 2310(a)(2).
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The Informal 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
warrantors establish written operating procedures and provide copies of
those procedures upon request.
The Informal 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
Informal Dispute Settlement Rule as long as the warranty does not
contain a prior resort requirement.
Warranty Rule Burden Statement:
Total annual hours burden: 107,000 hours, rounded to the nearest
thousand.
In its 2004 submission to OMB,\9\ the FTC estimated that the
information collection burden of including the disclosures required by
the Warranty Rule was approximately 34,000 hours
[[Page 44142]]
per year. Although the Rule's information collection requirements have
not changed, this estimate increases the number of manufacturers
subject to the Rule based on recent Census data. Nevertheless, because
most warrantors would now disclose this information even if there were
no statute or rule requiring them to do so, staff's estimates likely
overstate the PRA-related burden attributable to the Rule. Moreover,
the Warranty Rule has been in effect since 1976, and warrantors have
long since modified their warranties to include the information the
Rule requires.
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\9\ 69 FR 60877 (Oct. 13, 2004).
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Based on conversations with various warrantors' representatives
over the years, staff has concluded that eight hours per year is a
reasonable estimate of warrantors' PRA-related burden attributable to
the Warranty Rule. This estimate takes into account ensuring that new
warranties and changes to existing warranties comply with the Rule.
Based on recent Census data, staff now estimates that there are 134
large manufacturers and 13,235 small manufacturers covered by the
Rule.\10\ This results in an annual burden estimate of approximately
106,952 hours (13,369 total manufacturers x 8 hours of burden per
year).
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\10\ Because some manufacturer likely make products that are not
priced above $15 or not intended for household use--and thus would
not be subject to the Rules--this figure is likely an overstatement.
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Total annual labor costs: $14,118,000, rounded to the nearest
thousand
Labor costs are derived by applying appropriate hourly cost figures
to the burden hours described above. The work required to comply with
the Warranty Rule--ensuring that new warranties and changes to existing
warranties comply with the Rule--requires a mix of legal analysis and
clerical support. Staff estimates that half of the total burden hours
(53,476 hours) requires legal analysis at an average hourly wage of
$250 for legal professionals,\11\ resulting in a labor cost of
$13,369,000. Assuming that the remaining half of the total burden hours
requires clerical work at an average hourly wage of $14, the resulting
labor cost is approximately $748,664. Thus, the total annual labor cost
is approximately $14,117,664 ($13,369,000 for legal professionals +
$748,664 for clerical workers).
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\11\ Staff has derived an hourly wage rate for legal
professionals based upon industry knowledge. The remaining wage
rates used throughout this Notice reflect recent data from the
Bureau of Labor Statistics National Compensation Survey.
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Total annual capital or other non-labor costs: $0
The Rule imposes no appreciable current capital or start-up costs.
As stated above, warrantors have already modified their warranties to
include the information the Rule requires. Rule compliance does not
require the use of any capital goods, other than ordinary office
equipment, which providers would already have available for general
business use.
Pre-Sale Availability Rule Burden Statement:
Total annual hours burden: 2,328,000 hours, rounded to the nearest
thousand.
In its 2004 submission to OMB, FTC staff estimated that the
information collection burden of making the disclosures required by the
Pre-Sale Availability Rule was approximately 2,760,000 hours per year.
Although there has been no change in the Rule's information collection
requirements since 2004, staff has adjusted its previous estimate of
the number of manufacturers subject to the Rule based on recent Census
data. As discussed above, staff now estimates that there are
approximately 134 large manufacturers and 13,235 small manufacturers
subject to the Rule. Census data suggests that the number of retailers
subject to the Rule has remained largely unchanged since 2004.
Therefore, staff continues to estimate that there are 6,552 large
retailers and 422,100 small retailers impacted by the Rule.
Since 2001, online retailers have been posting warranty information
on their web sites, reducing their burden of providing the required
information.\12\ While some online retailers make warranty information
directly available on their web sites, the majority of them instead
provide consumers with instructions on how to obtain that information.
Moreover, some online retailers provide warranty information
electronically in response to a consumer's request for such
information. After reviewing the 20 top online retailers' websites for
availability of warranty information, staff determined that a
significant percentage of retailers (40% of the sample size) have begun
to incorporate online methods of complying with the Rule--either by
posting warranty information online or sending that information to
consumers electronically. Accordingly, staff estimates that retailers'
annual hourly burden has decreased by twenty percent.\13\
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\12\ Staff took note of this change in 2004 but, due to the
small number of retailers engaging in the practice at that time,
declined to make an adjustment to its burden estimate.
\13\ This conservative estimate takes into account that staff
reviewed a limited number of websites. Moreover, some online
retailers also operate ``brick-and-mortar'' operations and still
provide paper copies of warranties for review by customers who do
not do business online.
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In 2004, staff estimated that large retailers spend an average of
26 hours per year and small retailers spend an average of 6 hours per
year to comply with the Rule. Applying a 20% reduction to the FTC's
previous estimates, staff assumes that large retailers spend an average
of 20.8 hours per year and small retailers spend an average 4.8 hours
per year to comply with the Rule. Accordingly, the total annual burden
for retailers is approximately 2,162,362 hours ((6,552 large retailers
x 20.8 burden hours) + (422,100 small retailers x 4.8 burden hours)).
Staff retains its previous estimate that large manufacturers spend
an average of 52 hours per year and small manufacturers spend an
average of 12 hours per year to comply with the Rule. Accordingly, the
total annual burden incurred by manufacturers is approximately 165,788
hours ((134 large manufacturers x 52 hours) + (13,235 small
manufacturers x 12 hours)).
Thus, the total annual burden for all covered entities is
approximately 2,328,150 hours (2,162,362 hours for retailers + 165,788
hours for manufacturers).
Total annual labor cost: $32,594,000, rounded to the nearest
thousand.
The work required to comply with the Pre-Sale Availability Rule is
predominantly clerical, e.g., providing copies of manufacturer
warranties to retailers and retailer maintenance of them. Applying a
clerical wage rate of $14/hour, the total annual labor cost burden is
approximately $32,594,100 (2,328,150 hours x $14 per hour).
Total annual capital or other non-labor costs: De minimis.
The vast majority of retailers and warrantors already have
developed systems to provide the information the Rule requires.
Compliance by retailers typically entails keeping warranties on file,
in binders or otherwise, and posting an inexpensive sign indicating
warranty availability.\14\ Manufacturer compliance entails providing
retailers with a copy of the warranties included with their products.
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\14\ Although some retailers may choose to display a more
elaborate or expensive sign, that is not required by the Rule.
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Informal Dispute Settlement Rule Burden Statement:
Total annual hours burden: 17,000 hours, rounded to the nearest
thousand.
The primary burden from the Informal Dispute Settlement Rule comes
from the
[[Page 44143]]
recordkeeping requirements that apply to IDSMs, the use of which is
incorporated into a consumer product warranty. In its 2004 submission
to OMB, staff estimated that the recordkeeping and reporting burden was
24,625 hours per year and 9,235 hours per year for disclosure
requirements or, cumulatively, approximately 30,000 hours. Although the
Rule's information collection requirements have not changed since 2004,
the audits filed by the IDSMs indicate that on average fewer disputes
were handled over the previous three years. In addition,
representatives of the IDSMs indicate that relatively few consumers
request a copy of their complete case file, and even fewer request a
copy of the annual audit. These factors result in a decreased annual
hours burden estimate for the IDSMs. The calculations underlying
staff's new estimates follow.
Recordkeeping: The Rule requires IDSMs to maintain individual case
files. 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. The 2005 audit report
for the BBB AUTO LINE states that, during calendar year 2005, it
handled 23,672 warranty disputes on behalf of 12 manufacturers
(including General Motors, Honda, Ford, Saturn, Volkswagen, Isuzu, and
Nissan).\15\ The BBB AUTO LINE audits from calendar years 2004 and 2003
indicate warranty disputes totaling 19,793 and 21,859, respectively.
Thus, the average number of disputes filed annually through BBB AUTO
LINE over this three-year period is 21,775 disputes.\16\ According to
the 2005 audit report for the BBB AUTO LINE, ten out of the twelve
manufacturers reviewed include a ``prior resort'' requirement in their
warranties, and thus are covered by the Informal Dispute Settlement
Rule. Therefore, staff assumes that virtually all of the average 21,775
disputes handled by the BBB fall within the Rule.
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\15\ So far as staff is aware, all or virtually all of the IDSMs
subject to the Rule are within the auto industry.
\16\ Because the number of annual disputes filed has fluctuated,
staff believes that taking the average number of disputes filed
between 2003 and 2005 (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.
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Apart from the BBB audit report, audit reports were submitted on
behalf of the National Center for Dispute Settlement (NCDS), the
mechanism that handles dispute resolutions for Toyota, Lexus,
DaimlerChrysler, Mitsubishi, and Porsche, all of which are covered by
the Rule. The 2005 audit of the NCDS operations show that 2,154
disputes were filed in 2005. In addition, the NCDS audit shows that in
2004 and 2003, it handled 2,246 and 3,722 disputes, respectively. Thus,
the NCDS handled an average of 2,707 disputes each year from 2003
through 2005.
Based on the above figures, staff estimates that the average number
of disputes handled annually by IDSMs covered by the Rule is
approximately 24,482 (21,775 disputes handled by BBB AUTO LINE + 2,707
disputes handled by NCDS). Accordingly, staff estimates the total
annual recordkeeping burden attributable to the Rule to be
approximately 12,241 hours (24,482 disputes x 30 minutes of burden / 60
minutes).
Reporting: The Rule requires IDSMs to update indexes, complete
semi-annual 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 4,080 hours (24,482 disputes
x 10 minutes of burden / 60 minutes).
Disclosure: The Rule requires that information about the IDSM be
disclosed in the written warranty. Any incremental costs to the
warrantor of including this additional information in the warranty are
negligible. The majority of disclosure burden would be borne by the
IDSM, which is required to provide to interested consumers upon request
copies of the various types of information the IDSM possesses,
including annual audits. Consumers who have dealt 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, staff
estimates that the burden imposed by the disclosure requirements is
approximately 408 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 (24,482) and the
assumption that twenty percent of consumers individually request copies
of the records pertaining to their disputes, or approximately 4,896
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.\17\ Thus, the IDSMs currently
operating under the Rule have an estimated total disclosure burden of
408 hours (4,896 consumers x 5 minutes of burden / 60 minutes).
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\17\ 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.
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Accordingly, the total PRA-related annual hours burden attributed
to the Rule is approximately 16,729 hours (12,241 hours for
recordkeeping + 4,080 hours for reporting + 408 hours for disclosures).
Total annual labor cost: $266,000, rounded to the nearest thousand.
Recordkeeping: Staff assumes that IDSMs use skilled clerical or
technical support staff to comply with the recordkeeping requirements
contained in the Rule at an hourly rate of $16. Thus, the labor cost
associated with the 12,241 annual burden hours for recordkeeping is
approximately $195,856 (12,241 burden hours x $16 per hour).
Reporting: Staff assumes that IDSMs also use skilled clerical
support staff at an hourly rate of $16 to comply with the reporting
requirements. Thus, the labor cost associated with the 4,080 annual
burden hours for reporting is approximately $65,280 (4,080 burden hours
x $16 per hour).
Disclosure: Staff assumes that IDSMs use clerical support at an
hourly rate of $12 to reproduce records and, therefore, the labor cost
associated with the 408 annual burden hours for disclosures is
approximately $4,896 (408 burden hours x $12 per hour).
Accordingly, the combined total annual labor cost for PRA-related
burden under the Rule is approximately $266,032 ($195,856 for
recordkeeping + $65,280 for reporting + $4,896 for disclosures).
Total annual capital or other non-labor costs: $329,000
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
[[Page 44144]]
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
start-up 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 each of the IDSMs
currently operating under the Rule, 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
estimated a combined cost of $300,000 for both IDSMs currently
operating under the Rule
Other non-labor costs: $29,000 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 4,896 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 1,224 consumers) will request a
copy of the IDSM's audit report.
Thus, the total annual copying cost for dispute-related files is
approximately $11,995 (35 pages per file x $.07 per page x 4,896
consumer requests) and the total annual copying cost for annual audit
reports is approximately $17,136 (200 pages per audit report x $.07 per
page x 1,224 consumer requests). Accordingly, the total cost attributed
to copying under the Rule is approximately $29,131 and the total non-
labor cost under the Rule is approximately $329,131 ($300,000 for
auditor fees + $29,131 for copying costs).
William Blumenthal
General Counsel
[FR Doc. E7-15328 Filed 8-6-07: 8:45 am]
BILLING CODE 6750-01-S