[Federal Register Volume 75, Number 41 (Wednesday, March 3, 2010)]
[Rules and Regulations]
[Pages 9726-9746]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-4273]
[[Page 9725]]
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Part IV
Federal Trade Commission
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16 CFR Part 610
Free Annual File Disclosures; Final Rule
Federal Register / Vol. 75, No. 41 / Wednesday, March 3, 2010 / Rules
and Regulations
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FEDERAL TRADE COMMISSION
16 CFR Part 610
RIN 3084-AA94
Free Annual File Disclosures
AGENCY: Federal Trade Commission.
ACTION: Final rule.
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SUMMARY: Section 205 of the Credit Card Accountability Responsibility
and Disclosure Act of 2009 requires the Federal Trade Commission to
issue a rule to prevent deceptive marketing of free credit reports. To
that end, the Commission amends the Free Annual File Disclosures Rule
to require certain advertisements for ``free credit reports'' to
include prominent disclosures designed to prevent consumers from
confusing these ``free'' offers with the federally mandated free annual
file disclosures available through the single centralized source. In
addition, the final amended Rule requires nationwide consumer reporting
agencies to delay advertisements for products and services through the
centralized source until after consumers receive their free annual file
disclosures, and prohibits other practices that may interfere with the
free annual file disclosure process. The final amended Rule also
implements certain technical changes to the original Rule.
DATES: The effective date is April 2, 2010, except for Sec.
610.4(b)(1)(i) and (2), which are effective September 1, 2010.
ADDRESSES: Requests for copies of the final amended Rule and this
document should be sent to: Public Records Branch, Room 130, Federal
Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.
The public record of this proceeding is also available at that address.
Relevant portions of the proceeding, including the final amended Rule
and this document, are available at (http://www.ftc.gov).
FOR FURTHER INFORMATION CONTACT: Katherine Armstrong, Steven Toporoff,
or Tiffany George, Attorneys, Division of Privacy and Identity
Protection, Federal Trade Commission, 600 Pennsylvania Avenue, N.W.,
Washington, DC 20580, (202) 326-2252.
SUPPLEMENTARY INFORMATION:
I. Background
This final Rule amends the Free Annual File Disclosures Rule
(``Free Reports Rule'' or ``original Rule''),\1\ which went into effect
in 2004. The original Rule set out the procedures that nationwide
consumer reporting agencies (``CRAs'')\2\ and nationwide specialty
CRAs\3\ must follow to comply with section 612 of the Fair Credit
Reporting Act (``FCRA''),\4\ which gives consumers the right to obtain
free annual file disclosures from the nationwide CRAs through a single
centralized source. The final amended Rule modifies the original Rule
by implementing section 205 of the Credit Card Accountability
Responsibility and Disclosure Act of 2009 (``Act''), which directs the
Federal Trade Commission (``FTC'' or ``Commission'') to promulgate a
rule, within nine months from the date of enactment of the Act,
requiring certain disclosures in the advertising for ``free credit
reports'' to reduce consumer confusion.\5\ The final amended Rule also
addresses certain practices that interfere with or detract from
consumers' ability to obtain their free annual file disclosures and
makes certain technical changes to the original Rule described below.
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\1\ 16 CFR Part 610.
\2\ Section 603(p) of the FCRA defines a ``nationwide consumer
reporting agency'' as a consumer reporting agency that compiles and
maintains files on consumers on a nationwide basis. 15 U.S.C.
1681a(p). At this time, there are three nationwide consumer
reporting agencies - Equifax Inc. (``Equifax''), Experian
Information Solutions, Inc. (``Experian''), and TransUnion LLC
(``TransUnion'').
\3\ Nationwide specialty consumer reporting agencies are defined
in section 603(w) of the FCRA. 15 U.S.C. 1681a(w). Specifically,
section 603(w) defines ``nationwide specialty consumer reporting
agency'' as a CRA that compiles and maintains files on consumers on
a nationwide basis relating to: (1) medical records or payments; (2)
residential or tenant history; (3) check writing history; (4)
employment history; or (5) insurance claims.
\4\ 15 U.S.C. 1681j.
\5\ Pub. L. 111-24, 123 Stat. 1734 (May 22, 2009).
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A. The Free Annual File Disclosures Rule
The Fair and Accurate Credit Transactions Act of 2003 (``FACT
Act'') amended the FCRA and directed the Commission to promulgate a
rule specifying the procedures for consumers to obtain free annual file
disclosures from nationwide CRAs and nationwide specialty CRAs.\6\ To
carry out this directive, the Commission promulgated the Free Reports
Rule, which took effect in a structured roll-out beginning on the West
Coast in December 2004 and ending on the East Coast in September
2005.\7\ The purpose of the original Rule was to enable consumers to
detect and dispute inaccurate or incomplete information in the files of
nationwide CRAs by providing consumers with the opportunity to obtain
annual file disclosures free of charge.
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\6\ Prior to the FACT Act, consumers could purchase file
disclosures from consumer reporting agencies, but could receive a
free file disclosure only under limited circumstances. For example,
section 615 of the FCRA provides that consumers denied credit or
employment based upon information contained in a consumer report may
obtain a free file disclosure from the CRA that provided the report.
15 U.S.C. 1681m.
\7\ 16 CFR 610.2(h). The Commission staggered implementation of
the original Rule across the country to manage requests for free
annual file disclosures.
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The original Rule required that the nationwide CRAs jointly
establish and operate a centralized source from which consumers can
obtain free annual file disclosures through a single dedicated Internet
website (AnnualCreditReport.com),\8\ a toll-free telephone number, or a
postal address.\9\ Consumers may request and obtain their free annual
file disclosures from each nationwide CRA at one time or stagger their
requests throughout the year.
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\8\ Most requests for free annual file disclosures through the
centralized source occur through the AnnualCreditReport.com website.
AnnualCreditReport.com is the only federally authorized website for
obtaining free annual file disclosures.
\9\ 16 CFR 610.2(a).
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B. The Advertising of ``Free Credit Reports''
As discussed in the Notice of Proposed Rulemaking (``NPRM'') in
this proceeding,\10\ since issuance of the original Rule, there has
been a proliferation of confusing advertising regarding where consumers
can obtain their free annual file disclosures. Some nationwide CRAs and
others have advertised ``free credit reports'' in connection with the
purchase of products and services, such as credit scores and credit
monitoring. Although some advertising predated the original Rule, the
bulk of the advertising for ``free credit reports'' now takes advantage
of consumers' general knowledge that free annual file disclosures are
available under federal law. These advertisements direct consumers not
to AnnualCreditReport.com, the authorized source for free annual file
disclosures, but to commercial websites operated by nationwide CRAs or
others that sell a variety of products and services. Further, when a
consumer uses an Internet search engine to locate the website for free
annual file disclosures, the search engine will usually list
``sponsored'' links - again, selling products and services - such as
``FreeCreditReport.com'' first.\11\
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\10\ 74 FR 52915 (Oct. 15, 2009).
\11\ ``FreeCreditReport.com'' is owned and operated by
Consumerinfo.com, Inc., an Experian company.
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As a result of this advertising, consumers are often misled and
confused about where to obtain the free annual file disclosure mandated
by federal law. Indeed, the Commission has received numerous consumer
[[Page 9727]]
complaints demonstrating confusion and frustration about how and where
to obtain a free annual file disclosure. As discussed below, comments
received during this proceeding further illustrate both consumer
confusion with and frustration in obtaining ``free annual file
disclosures'' and ``free credit reports.''\12\
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\12\ As discussed in the NPRM, the Commission has undertaken
enforcement and extensive education to address these practices. For
example, in 2005, the Commission filed an action against
Consumerinfo.com, Inc., a marketer of ``free credit reports.'' FTC
v. Consumerinfo.com, Inc., SACV05-801 AHS (MLGx) (C.D. Cal. Aug. 15,
2005). In that action, the Commission alleged that Consumerinfo.com,
Inc., which advertised ``free credit reports'' to consumers on the
Internet, through emails, and through television and radio
advertisements, engaged in deceptive acts or practices in violation
of section 5 of the FTC Act. 15 U.S.C. 45(a). These deceptive
practices included failing to disclose or to disclose adequately
that the ``free'' credit reports they were offering were not
associated with the federally-mandated annual free credit report
program, but rather were part of a commercial promotion. The
settlement required Consumerinfo.com, Inc., to pay consumer redress,
prohibited it from making deceptive and misleading claims about
``free'' reports, and required disclosure of the terms and
conditions of any ``free'' offers. The defendant also agreed to
forgo $950,000 in ill-gotten gains. Two years later, the Commission
entered a second order with Consumerinfo.com, Inc., settling
allegations that it violated the 2005 order. FTC v.
Consumerinfo.com, Inc., SACV05-801 AHS (MLGx) (C.D. Cal., Jan. 8,
2007) (prohibiting defendant from failing to make required
disclosures mandated by the 2005 order and requiring $300,000
payment for consumer redress).
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C. Section 205 of the Act
To dispel this consumer confusion, Congress enacted section 205 of
the Act (``section 205''). Section 205 directs the Commission to
promulgate a rule, within nine months from the date of enactment of the
Act, that would require advertisements for ``free credit reports'' in
any medium to include certain prominent disclosures. For television and
radio advertisements, section 205 specifies the language for the
required disclosure: ``This is not the free credit report provided for
by Federal law.'' This disclosure must appear in both the audio and
visual portion of the advertisement. For all other media, section 205
directs the Commission to issue a rule determining the content and
placement of the disclosures. Finally, section 205 requires the
following interim advertising disclosure if a rule is not finalized
within nine months: ``Free credit reports are available under Federal
law at: AnnualCreditReport.com.''
II. Overview of the Proposed Rule and Comments Received
On October 15, 2009, the Commission published an NPRM, setting
forth the text of a proposed amended Rule.\13\ The NPRM sought to
achieve three goals.
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\13\ 74 FR 52915 (Oct. 15, 2009). The Commission released a
version of the NPRM on its website on October 7, 2009.
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First, it implemented section 205 of the Act by proposing a new
section 610.4 in the Free Reports Rule that would require prominent
disclosures to prevent consumer confusion and deceptive marketing of
``free credit reports.''\14\ The proposed section 610.4 included
general requirements to ensure that the disclosures were sufficiently
prominent; it also included media-specific requirements for the
disclosures. For example, the NPRM proposed that the required
disclosures for Internet websites offering ``free credit reports''
appear on a separate landing page.
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\14\ Id. at 52918-22.
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Second, the NPRM proposed amendments to section 610.2 of the
original Rule to prohibit practices that interfere with consumers'
ability to obtain free annual file disclosures from the centralized
source. Specifically, it required a delay in advertising for products
and services through the centralized source until after the consumer
obtained his or her free annual file disclosure. It also: (1)
prohibited the placement of hyperlinks to the nationwide CRAs' websites
that transported consumers away from the AnnualCreditReport.com
website; (2) prohibited the nationwide CRAs from requiring consumers to
establish an account to obtain a file disclosure through the
centralized source; and (3) prohibited the nationwide CRAs from
imposing any ``terms and conditions'' on consumers' access to their
file disclosures.
Third, the NPRM proposed technical amendments that would eliminate
now obsolete roll-out provisions in the original Rule.\15\
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\15\ Id. at 52922.
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In response to the NPRM, the Commission received over 1,080
comments, submitted by consumers; nationwide CRAs; consumer report
resellers; businesses and trade organizations; State Attorneys General;
consumer advocates; law firms; members of Congress; and academics.\16\
Of the comments submitted, over 1,000 came from consumers. Appendix A
contains a list of each of the non-consumer commenters, with the
abbreviations used to identify them in this document. Some general
comments are summarized below. Comments addressing particular issues
relating to the proposed Rule are discussed in greater detail in the
Section-by-Section discussion below.
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\16\ The comments are available at (http://www.ftc.gov/os/comments/freeannualfilenprm/index.shtm).
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Overall, industry and business groups, as well as Representatives
Boozman and Ross, opposed one or more of the NPRM's proposals, such as
the delay in advertising on AnnualCreditReport.com until after the
consumer has obtained a free annual file disclosure, the prohibition on
hyperlinks on the AnnualCreditReport.com website, and the proposed
separate landing page requirement for Internet websites.
In contrast, consumer advocates, NAAG, the States of Florida and
Minnesota, and Senators Levin and Schumer either supported the proposed
Rule or urged the Commission to strengthen it. For example, some
commenters asserted that the Commission should ban all advertising on
AnnualCreditReport.com, rather than delaying it as the Commission had
proposed.\17\ These commenters also generally supported the proposed
disclosures for ``free credit report'' advertisements, as well as the
separate landing page proposal for disclosures on Internet websites.
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\17\ NCLC at 3; State of Florida at 4; State of Minnesota at 3.
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Almost all individual consumers responding to the NPRM urged
Commission action in this area.\18\ Many consumers explicitly supported
the proposed Rule, in many instances relating personal stories of
confusion when trying to obtain their free annual file disclosure.
Similarly, many consumers said that they unwittingly paid various sums
for unwanted services when they attempted to obtain what they thought
was their free annual file disclosure.\19\ Other consumers stated that
the current process for
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obtaining a free annual file disclosure is confusing.\20\
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\18\ Only a few consumers stated that Commission action is
unnecessary. See M. Buckley; K. Hix; P. Johnson.
\19\ E.g., C. Thompson (``I signed up for freecreditreport.com,
and couldn't find out [how] to cancel the membership I didn't want
in the first place because I had to join just to get 1 report, and
never could get all 3 reports.''); B. Meyer (``Experian
automatically signs you up for a $14.95/month credit report with the
provision you have seven days to cancel the subscription . . . .
Please end the ability of these companies to sign consumers to a
contract/subscription they have no interest in.''); E. Julbar (``I
was deceptively led into providing my credit card number (falsely
understanding that it was needed to prove identity) and then
received multiple billings on my credit card from the `service'
provider.''); K. Foster (``I was charged $14.99. This is NOT FREE,
this is a lie, I was deceived . . . .''); L. Falk (``I have a
Master's degree and I got scammed by these people. Free does not
mean you pay $14.95!''); LaRosa (``I consider myself a generally
savvy consumer, yet I still fell into their trap and was
fraudulently charged over $100 by them before I realized what
happened.'').
\20\ E.g., M. Neal (``The phony `free' credit report come-ons
are confusing and thwart citizens who are trying to exercise their
right to obtain an annual credit report.''); G. Albelo (``[T]he free
credit report site is guaranteed to manipulate one into paying for a
service that should be free. The site is a maze of confusing sites,
words and suggestions that the average person probably won't get
through without paying for something, or falling prey to identity
theft.'').
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Many consumers agreed that there should be no advertising on
AnnualCreditReport.com until after consumers have received the
requested file disclosure.\21\ Consumers also agreed with the proposal
that hyperlinks from AnnualCreditReport.com to the CRAs' proprietary
websites should be eliminated.\22\ In addition, several consumers
agreed with the proposed Internet website disclosures for free credit
reports.\23\ In particular, over 170 consumers supported the proposed
separate landing page for Internet websites offering free credit
reports.\24\
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\21\ E.g., F. Colantuono (``Have you ever tried to get your
`free' credit report online? . . . [Y]ou are bombarded with sales
offers to sign up for ALL MANNER of products before you can request
your credit report . . . . [B]anning all advertising until AFTER you
make your request for your free report. This one is a winner!''); J.
Ellis (``[A]gencies should be able to ask those requesting reports
if they wish to receive additional information or services for a fee
. . . only . . . after the fact . . . .''); F. Martin (``If
advertising is allowed at all, it should be AFTER the consumer
obtains the free report.'').
\22\ E.g., J. Matey (``The link from the main annual report page
should NOT LINK to anything except the free report.''). Mr. Matey
added that he would agree to ``a single link [on] the form `FOR
ADDITIONAL SERVICES FOR WHICH YOU WILL BE CHARGED, PRESS THIS
BUTTON.''' Otherwise, ``[t]here should be absolutely NO INTERWEAVING
between the free report and any other service.''); S. Ratkowski
(``There should be . . . no hyperlinks to commercial sites.''); see
also M. Neal (``The links to the big three credit reporting agencies
only serve to distract or confuse consumers in their quest to obtain
their credit reports.''); J. Nielsen (``It should be criminal to
attach links away from the free website.'').
\23\ M. Neal (``Any website purporting to offer a free credit
report should be required to display a disclaimer that it is NOT the
official site, and to give user a link to the real site.''); see
also K. Morris (``Requiring ads for sites that are not the
centralized free access site to carry prominent notice that they are
advertising a for-profit site is a good idea.''); C. Thompson (``All
advertisements for `free credit reporting' should be clearly stated
that they are private firms and not Government mandated.''); D.
Enfield (``[T]here should be a clear warning to me that I have
landed on a page that is irrelevant to the task of getting my free
report.''); Young (``I also support that certain blatantly
misleading ADS for `free credit reports' be required to include
PROMINENT disclosures about the official source to prevent confusion
and/or to stop indicating that the advertised credit reports are in
fact free.'').
\24\ E.g., M. Baldissero; Professor K. Guenther; S. McGechie; B.
Miller; C. Peltz; M. Ronsonette; Dr. J. Sitomer (``I support your
proposal to require a separate landing page on sites that advertise
free reports which explains that the reports are NOT the free
reports guaranteed by the federal government.'').
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In addition to commenting on the proposed changes and additions to
the original Rule, many consumers, as well as certain States, urged the
Commission to prohibit the advertising of ``free'' credit reports,
unless such reports come with no strings attached.\25\ A typical
consumer comment is: ``These reports should not be marketed as `free'
if they are contingent upon the purchase of a product.''\26\
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\25\ See, e.g., State of Minnesota at 3. Cf. Professor D.
Friedman (attaching Free Offers: A New Look, 38 N.M.L. Rev. 49
(2008), which suggests the Commission reconsider approaches
addressing free offers).
\26\ W. Marciniak; see also T. Rusch (``[I] find it personally
disgusting and certainly unethical that some company can advertise
`free credit reports' on the backstop of a Dodgers' baseball game
when I know that there's not much free about it.''); D. Wadsworth
(``Websites that use the word `free' should in fact be free, no
charge for any services.''); Miller (``Either credit reports are
free or they are not free. The current advertising which relates to
`free credit reports' is misleading at best, in truth such ads are
disingenuous, false and dishonest on their face.''); A. Drew (``I
REALLY don't think the credit report companies should try and
bamboozle people into paying for their free report!''); M. Kramer
(``These services are NOT FREE and extremely DECEPTIVE.''). Numerous
other consumers complained about deceptive or misleading advertising
by credit companies. E.g., H. Bagao (``The hidden trap of a free
trial with automatic charges is tantamount to fraud and thievery. In
fact, deceiving names such as FreeCreditReport should be prohibited,
as it is a clear, blatant form of false advertisement.''); K. Noreen
(``Getting people to sign up for surprise credit-card charges is
predatory lending, pure and simple.''); M. Wunderli (``False
advertising regarding free financial services that are not free
perpetuates mistrust of financial systems.'').
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The Commission acknowledges the many comments questioning the use
of the word ``free'' when associated with the offer of ``free credit
reports'' that require the purchase of additional products and
services. In response, the Commission notes that it will continue to
scrutinize offers for ``free credit reports'' on a case-by-case basis
to determine whether such offers are unfair or deceptive under the FTC
Act.\27\
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\27\ Cf. FTC v. Berkeley Premium Nutraceuticals, Inc., No. 1:06-
CV-51 (S.D. Ohio Feb. 2, 2006) (alleging that marketers offered
consumers ``free'' samples of dietary supplements only to enroll
them in an automatic shipment program and bill them without their
authorization); FTC v. Conversion Marketing, Inc., No. SACV 04-1264
(C.D. Cal. Jan 17, 2006) (alleging that advertisers offered ``free
samples'' of weight loss and tooth-whitening products and then
debited consumers' accounts and enrolled them in automatic shipment
programs without their knowledge or authorization).
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The Commission does not, however, have the authority to ban
advertising of ``free credit reports'' altogether under the Act.
Congress was aware of the consumer confusion in the marketplace over
use of the phrase ``free credit reports.''\28\ It chose to enact a
disclosure law, directing the Commission to prescribe specific
disclosures in advertisements for ``free credit reports.'' Congress did
not, however, prohibit the advertising of ``free credit reports;'' nor
did it authorize the Commission to prohibit such advertising.
Therefore, the Commission declines to do so. In any event, the
Commission believes that the prominent disclosure requirements of
section 610.4, as described below, will alleviate much of the consumer
confusion in connection with the offer of ``free credit reports.''
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\28\ See 155 Cong. Rec. S6178, S6179 (June 4, 2009) (statement
of Sen. Levin) (``Mandatory disclosures will help ensure that
consumers are given accurate information about how to obtain a free
credit report with no strings attached. It is an effort to end the
deceptive activities of companies that attempt to trick people into
buying something that they are entitled by Federal law to receive
for free.'').
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III. Section-by-Section Discussion of Final Amended Rule
A. Section 610.2(g): Communications provided through centralized source
Section 610.2 of the original Free Reports Rule permitted the
nationwide CRAs to advertise their proprietary products and services
through the centralized source. When it promulgated the original Rule,
the Commission recognized the potential for confusion from such
advertising and marketing, but chose not to forbid it.\29\ Instead, to
address concerns about confusion from such advertising, the Commission
restricted communications on the centralized source to the extent that
they ``interfere with, detract from, contradict, or otherwise undermine
the purpose of the centralized source.''\30\
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\29\ Among other things, the Commission reasoned that the FACT
Act required nationwide CRAs to inform consumers of the availability
of credit scores when providing file disclosures to them and that
there was a benefit to those consumers wishing to purchase a credit
score to do so at the same time that they obtain their annual file
disclosures. See Statement of Basis and Purpose for Original Free
Reports Rule, 69 FR 35468, 35486 (June 24, 2004).
\30\ 16 CFR 610.2(g)(1).
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Section 610.2(g) of the proposed Rule retained this requirement
from the original Rule.\31\ It proposed to modify the original Rule,
however, by requiring that the nationwide CRAs delay advertising or
marketing for products or services through the centralized source until
after the consumer has obtained his or her free annual file disclosure.
The final amended Rule adopts section 610.2(g) as proposed with certain
modifications discussed below.
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\31\ The original restriction found in section 610.2(g)(1) has
been renumbered as section 610.2(g)(2) in the final amended Rule.
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1. Delay in advertising
The Commission's proposal to amend section 610.2(g)(1) of the
original Rule to delay advertising on the centralized source until
after the consumer has
[[Page 9729]]
obtained his or her free annual file disclosure generated a substantial
number of comments. Consumer advocates and many consumers either
supported the proposal, or stated that it did not go far enough. For
example, NAAG, as well as over 255 consumers, supported the
proposal.\32\ Others, including NCLC, the States of Florida and
Minnesota, as well as over 250 consumers, recommended a complete ban of
all advertising on the centralized source. A typical consumer comment
stated: ``The FTC should remove all advertising and marketing by the
credit bureaus before, during and even after the process of getting a
free credit report. People should be able to get their reports and exit
the Web site without having to go through a gauntlet of sales
pitches.''\33\ Similarly, another consumer stated: ``Why aren't the
free reports on a commercial-free site where I can go in, give the
information I need without worrying who I'm giving it to, without a
gauntlet of commercials and confusing links that send me to more places
that want to get my money?''\34\
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\32\ See, e.g., NAAG at 2; see also Empire Justice at 4 (urging
the Commission to ``[r]emove all `pop-up ads' and any other
advertising on the pages that a consumer must use to access his or
her credit report.'').
\33\ N. Guzman.
\34\ B. Irwin; see also, J. Matey (``There should be NO
ADVERTISING on the free report pages.''); R. Robinson (``[P]lease
make them take all forms of advertising for a paid service
completely off the `free' website.''); P. Wilson (``There should be
no selling involved with the request for a free credit file review.
There is no need to sell anything. Let's make the process
transparent and just provide what is requested.''); B. Meyer
(``AnnualCreditReport.com should be commercial free!''); C. Epley
(``Remove all advertisements! This page exists for me, the public,
not for the firms who sell credit reports.''); Munsch (``Remove all
advertising and marketing by credit bureaus entirely before, during
and after the process of getting the free credit report. One should
be able to obtain the report(s) and exit without enduring sales
pitches.'').
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Industry and business groups, in contrast, opposed the proposal.
One CRA noted that the centralized source is a springboard for
providing consumers with beneficial credit-related products and
services.\35\ This commenter also argued that the proposed delay of
advertising would prevent CRAs from complying with section 609(a)(6) of
the FCRA, which requires CRAs to provide a statement that consumers can
request a credit score when a consumer requests a credit file.\36\ CDIA
suggested that a better approach would be to require that
advertisements for additional products or services on the centralized
source be ``no more conspicuous'' than the centralized source's
features for obtaining free annual file disclosures.\37\
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\35\ TransUnion at 3.
\36\ Id.
\37\ CDIA at 5.
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The Commission has carefully considered these comments and has
retained the restriction on advertising until after the consumer has
obtained his or her file disclosure. As noted in the NPRM, the general
standard contained in the original Rule, that advertising not
``interfere with, detract from, contradict, or otherwise undermine''
the centralized source, has not been effective in ensuring that
consumers have an unfettered, easy-to-use mechanism for obtaining their
free annual file disclosure. Consumers have been subjected to
substantial amounts of advertising for the nationwide CRAs' proprietary
products or services while navigating AnnualCreditReport.com to obtain
their free annual file disclosures. Indeed, when consumers access the
website, they encounter offers for a variety of add-on goods or
services - such as credit scores and credit monitoring services - which
they must purchase or decline, one by one, before obtaining their free
annual file disclosures. These advertisements make it cumbersome and
time consuming for consumers to exercise their right to obtain their
free annual file disclosures.\38\
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\38\ 74 FR at 52917. The Commission also noted that consumers
reported feeling compelled to purchase the advertised products or
services in order to obtain their free annual file disclosure.
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A substantial number of commenters confirmed that existing
advertising impedes consumers' ability to obtain their free annual file
disclosures on AnnualCreditReport.com. As one consumer noted, ``[a]s a
user of the annualcreditreport website, I feel it is like tiptoeing
through a minefield to try to get past all the paid offers to the
actual free credit report guaranteed by Federal law.''\39\ Another
consumer stated that ``If you are not extremely careful it is almost
impossible to avoid ordering a product that is available only for a
fee.''\40\ The comments confirm the problems the Commission articulated
in the NPRM, and thus, the Commission continues to believe that a delay
in advertising is necessary to ensure that consumers can exercise their
federal right to obtain their free annual file disclosures, without
unnecessary obstruction and delay.
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\39\ See T. Hillegass.
\40\ See W. Stuart; see also K. Graham (``This site is currently
the best example of `limiting access by obfuscation' that I have
ever seen.'').
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The Commission recognizes that prohibiting all advertising on
AnnualCreditReport.com would advance the Commission's interest in
restricting aggressive advertising that impedes consumers' ability to
obtain free file disclosures. The Commission believes, however, that
the less restrictive approach of delaying advertising would achieve its
goal of improving ``the ease by which consumers should be able to
contact consumer reporting agencies with respect to access to such
consumer reports.''\41\ Delaying such advertising or other
communications\42\ enables consumers to focus first on obtaining their
free annual file disclosure and decide thereafter whether to purchase
additional products or services, including credit scores pursuant to
section 609(a)(6) of the FCRA.\43\
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\41\ 15 U.S.C. 1681j(a)(1)(C)(ii)(III). CDIA asserted that the
Commission lacks any statutory authority to implement the proposal
to delay advertising. CDIA at 3 (``The FTC lacks the authority to
prescribe rules that prohibit the consumer reporting agency's
advertising or marketing of products or services after the
consumer's request has been received and when the consumer reporting
agency is fulfilling that request.''). In response, the Commission
notes that its authority for amending this provision in the original
Rule derives from the rulemaking authority in the FACT Act
amendments to the FCRA and the Commission's authority to amend its
rules under the Administrative Procedure Act. 15 U.S.C. 1681j; 5
U.S.C. 551(5) and 553. Congress initially authorized the Commission
to promulgate the Free Reports Rule to establish the centralized
source. In promulgating this Rule, Congress required the Commission
to consider ``the ease by which consumers should be able to contact
consumer reporting agencies . . . .'' The proliferation of
distracting or confusing advertising and marketing on the
centralized source affects its ``ease'' of use, and it is therefore
within the Commission's authority to amend the original Rule to
address this issue.
\42\ As discussed below, the final amended Rule revises proposed
section 610.2(g)(1) to restrict any request by a CRA to establish an
account until after the consumer has obtained his or her file
disclosure.
\43\ The Commission will monitor and evaluate the effectiveness
of this provision and may take additional action, as necessary.
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2. Definition of ``obtained''
Proposed section 610.2(g)(1)(i) clarified when consumers have
``obtained'' a free annual file disclosure for purposes of the delay in
advertising by providing that, for telephone and written requests for
free annual file disclosures, the consumer ``has obtained'' the file
disclosure when the file disclosure is mailed to the consumer.
Similarly, proposed section 610.2(g)(1)(ii) provided that, for free
annual file disclosures requested through the Internet, the consumer
``has obtained'' the file disclosure when it is delivered to the
consumer through the Internet.\44\
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\44\ As stated in the NPRM, a file disclosure is ``delivered''
for purposes of this section when it is provided in a form that
permits the consumer to store, download, print, or otherwise
maintain the file disclosure for future reference. 74 FR at 52917-
918. Cf. Franchise Rule, 16 CFR 436.6(b) (addressing disclosure in
an online environment).
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[[Page 9730]]
Some commenters objected to the NPRM's proposed definition of when
a consumer has ``obtained'' his or her free annual file disclosure.
Schwartz & Ballen, a law firm, asserted that the CRAs should be
prohibited from promoting additional products and services during the
same telephone or website session or in the same envelope as the
requested file disclosure because consumers may misinterpret the
importance of material that accompanies information requested pursuant
to a federally mandated right.\45\ NCLC asserted that, for Internet
requests, consumers should only be shown advertising after they have
their ``report in hand,'' so that ``there is a clear separation in time
and activity that gives the consumer adequate chance to reflect on
whether he or she really wants to purchase other products.''\46\ In
contrast, TransUnion objected to the proposal with respect to mail or
telephone requests, asserting that CRAs should be permitted to
advertise other products or services after the consumer has requested
his or her file disclosure and the CRA has indicated that it will
provide the file disclosure through the mail, asserting that it is
easier for consumers to request products such as credit scores at the
time of their request for their file disclosure.\47\
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\45\ Schwartz & Ballen at 3.
\46\ NCLC at 4.
\47\ TransUnion at 4.
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The final amended Rule adopts section 610.2(g)(1) as proposed. The
Commission believes that the final amended Rule strikes the appropriate
balance, by minimizing the risk that consumers may be misled before
obtaining their free annual file disclosure, while still allowing the
CRAs to offer additional products and services. The approach proposed
by Schwartz & Ballen - that CRAs be prohibited from advertising during
the same ``website session'' - would essentially ban advertising
through the centralized source. As discussed above, the Commission
believes a ban is more restrictive than necessary at this time.\48\ The
approach proposed by NCLC would require a CRA to be sure that the
consumer has his or her report ``in hand'' before delivering
advertising to that consumer. The Commission questions the feasability
of this approach, as it is unclear whether a CRA would be able to
ascertain, in all instances, when the consumer has the report ``in
hand.'' With respect to TransUnion's request to modify the proposal for
mail and telephone requests to allow advertising before the report is
placed in the mail, the Commission believes that, for example, allowing
advertising messages to be relayed in the same telephone call during
which the free credit report order is placed would cause the same
consumer confusion and obfuscation described above. In addition, the
Commission notes that the final amended Rule applies a consistent
approach regardless of how the consumer obtains his or her report -
advertising may be provided at the time the report is delivered or
later. Therefore, the final amended Rule adopts section 610.2(g)(1) as
proposed, with minor non-substantive changes.\49\
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\48\ The Commission will continue to monitor carefully
consumers' experiences with the centralized source. If the
Commission finds that the delayed advertising permitted by the final
amended Rule results in significant consumer confusion, it will
revisit the issue of a ban.
\49\ The Commission changed the language of proposed section
610.2(g)(1)(ii) to make it parallel with section 610.2(g)(1)(i). As
in the proposed Rule, sections 610.2(g)(2) and (3) of the final
amended Rule retain the original Rule requirement that any
advertising on the centralized source shall not ``interfere with,
detract from, contradict, or otherwise undermine the purpose of the
centralized source.''
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B. Section 610.2(h): Additional prohibited practices
Proposed section 610.2(h) prohibited three types of conduct on the
centralized source: (1) hyperlinks to commercial or proprietary
websites on the centralized source Internet website; (2) any request or
requirement that consumers establish an account in order to obtain
their free annual file disclosures; and (3) any request or requirement
that consumers agree to terms and conditions in order to obtain their
free annual file disclosures. In the NPRM, the Commission proposed to
prohibit these types of conduct because they interfere with and
undermine consumers' ability to obtain their free annual file
disclosures through the centralized source. The final amended Rule
adopts section 610.2(h) with certain modifications discussed below.
1. Section 610.2(h)(1): Prohibition on hyperlinks to commercial
websites
In the NPRM, the Commission noted that, currently, the initial page
of AnnualCreditReport.com contains hyperlinks to the websites of the
three nationwide CRAs. If a consumer clicks on one of the CRA's
hyperlinks on the initial page of AnnualCreditReport.com, the consumer
is transported to that CRA's commercial website, where the consumer is
unable to obtain his or her free annual file disclosure provided by
federal law. For these reasons, the Commission proposed to prohibit
such hyperlinks to reduce the possibility that consumers attempting to
obtain their free annual file disclosures will be transferred to
commercial websites that do not provide the federally mandated free
annual file disclosures but instead sell various products or services.
A number of comments addressed the proposed prohibition of
hyperlinks on the centralized source. Several commenters noted that the
proposal will better protect consumers and reduce confusion as
consumers attempt to access their free annual file disclosures.\50\
Industry commenters objected to the proposal, asserting that the
hyperlinks do not confuse consumers.\51\ CDIA noted that, from a
technical standpoint, the centralized source must transfer consumers to
each of the CRA's individual websites to facilitate the fulfillment of
the free annual file disclosures requests.\52\
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\50\ See, e.g., NAAG at 2; see also J. Smallwood (``at every
turn there were confusing links, questions, and other chaff tossed
in my way all designed to confuse and confound a consumer who simply
wanted what was promised: an honest to goodness free credit
report.'').
\51\ TransUnion at 5-6; CDIA at 5-6.
\52\ CDIA at 5.
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In response to the comments, the final amended Rule retains the
prohibition of hyperlinks, with two clarifications. First, it permits
hyperlinks to a fulfillment web page on which consumers can order their
annual file disclosure. Aside from fulfillment, the Commission finds no
reason why hyperlinks should appear on the centralized source web site
before a consumer orders his or her annual file disclosure, and in view
of the potential for confusion, believes that the restriction is
necessary. Second, consistent with the provision allowing advertising
after the consumer has obtained his or her annual file disclosure, the
CRAs may include hyperlinks in such advertising.
2. Section 610.2(h)(2): Prohibition on requiring the establishment of
accounts
Proposed section 610.2(h)(2) prohibited nationwide CRAs from
requesting or requiring a consumer to establish an account as a
prerequisite to obtaining a free annual file disclosure through the
centralized source. A number of commenters, including the BBB and NAAG,
supported this proposal. The BBB noted that it has received thousands
of complaints from consumers who complain about having to set up
accounts before obtaining their free annual file disclosure:
``Permitting this practice to continue places an
[[Page 9731]]
unnecessary barrier between consumers and their free annual credit
report.''\53\
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\53\ BBB at 3; see also NAAG at 2; E-Commerce at 2 (supporting a
provision barring sites from requiring consumers to register in
order to obtain the annual file disclosure).
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In contrast, TransUnion and CDIA noted that the setting up of
accounts could be beneficial to consumers. TransUnion stated that,
among other things, establishing an account allows consumers to access
their free annual file disclosure online for a period of time and makes
the authentication process easier when consumers seek to obtain their
file disclosures the following year.\54\
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\54\ TransUnion at 6-7; see also CDIA at 6.
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The Commission has determined that requiring the establishment of
an account as a prerequisite to obtaining a free annual file disclosure
interferes with the intent of the original Rule because it imposes a
condition on the consumer's ability to obtain free annual file
disclosures.\55\ Further, because creating an account generally
necessitates the collection of additional personally identifiable
information, ``requiring'' such an account runs counter to the
prohibition in section 610.2(2)(b)(ii) of the original Rule, which
limits the collection of information to that which is reasonably
necessary to properly identify the consumer and to process the
consumer's transaction(s). Accordingly, the Commission has determined
to retain the proposed prohibition against CRAs requiring consumers to
set up an account to obtain a free annual file disclosure.
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\55\ Requiring the establishment of an account is contrary to
existing Commission commentary on the provision of file disclosures.
See FTC Commentary on the Fair Credit Reporting Act, 16 CFR 600
Appendix, comment 610-2 (``A consumer reporting agency may not add
conditions not set out in the FCRA as a prerequisite to the required
disclosure.'').
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The Commission, however, agrees with TransUnion that consumers may
derive a benefit from the establishment of accounts with CRAs when they
obtain their free annual file disclosures and does not want to
foreclose this option. As a result, the final amended Rule eliminates
the NPRM's proposed prohibition on ``asking'' consumers to set up an
account and allows CRAs to give consumers the option to establish an
account. The Commission believes that such an option should be provided
only after the consumer has obtained his or her file disclosure, in
order to reduce the potential that a consumer may be confused into
believing that an account is required to access his or her free file
disclosure. Accordingly, the Commission has amended section 610.2(g)(1)
to allow CRAs to provide an option to establish an account, but only
after a consumer has obtained his or her file disclosure.
3. Section 610.2(h)(3): Prohibition on requiring terms or conditions
Proposed section 610.2(h)(3) prohibited CRAs from requesting or
requiring consumers to agree to terms and conditions as a prerequisite
to obtaining their free annual file disclosures through the centralized
source. NAAG and Schwartz & Ballen supported prohibiting terms and
conditions on consumers' access to their file disclosures.\56\ CDIA and
TransUnion objected to the proposal. TransUnion asserted that the terms
and conditions required for consumers requesting their free annual file
disclosure via the Internet are intended to deter consumers from
accessing someone else's file disclosure.\57\
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\56\ NAAG at 2; Schwartz & Ballen at 3-4.
\57\ TransUnion at 7 (asserting that terms and conditions are
justified because consumers are obtaining immediate access to file
disclosure).
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The Commission believes that a consumer's right to obtain a free
annual file disclosure should be unfettered and without any
restrictions or conditions, apart from providing appropriate
identifying information, as is required under the FCRA.\58\ Further,
after reviewing the comments, the Commission does not believe that
there is any reason to permit CRAs to ask or require consumers,
including those who attempt to access their free annual file
disclosures through the Internet, to agree to terms and conditions.\59\
The Commission has determined, therefore, to retain the proposed Rule's
prohibition on requiring or requesting that consumers agree to terms
and conditions in connection with obtaining a free annual file
disclosure.
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\58\ See 15 U.S.C. 1681h(a)(1).
\59\ In response to TransUnion's comment, if a consumer is
determined to access someone else's file disclosure, it is unclear
how requiring that person to agree to terms and conditions will
serve as a deterrent. In any event, TransUnion does not require
terms and conditions for mail or telephone requests for free credit
reports; thus, requiring such terms and conditions does not seem
necessary for Internet transactions.
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The final amended Rule, however, revises the proposed language in
two respects. First, consistent with comments received, it eliminates
the term ``prerequisite'' to clarify that any request or requirement to
agree to terms or conditions in connection with obtaining free annual
file disclosures is prohibited, even one made after the consumer
obtains his or her file disclosure. The Commission believes that, even
if such terms and conditions are presented after the consumer obtains
his or her file disclosure, the consumer might reasonably believe that
accepting the terms and conditions is required. Second, the final
amended Rule substitutes ``terms or conditions'' for ``terms and
conditions.'' The Commission believes this revision is necessary to
clarify that the prohibition does not extend only to documents or text
labeled ``terms and conditions.'' Rather, it extends to any legal
impediment on consumers' access to a free annual file disclosure,
regardless of whether that impediment is presented as ``terms and
conditions,'' ``notice,'' ``legal notice,'' or another term.
C. Section 610.4: Prevention of deceptive marketing of ``free credit
reports''
Section 610.4 implements the Congressional directive in section 205
of the Act to combat the deceptive marketing of ``free credit reports''
through ``prominent'' disclosures in advertisements for ``free credit
reports.'' Proposed section 610.4 included general requirements to
ensure that the disclosures are sufficiently prominent, such as
requiring that all audio disclosures be delivered in a slow and
deliberate manner and providing specific guidance to ensure that visual
disclosures are prominent. This section also included disclosure
requirements specific to each of the various media in which advertising
may occur. Where possible, the disclosure standards in the proposed
Rule were drawn from comparable FTC or other federal law addressing the
prominence of specific required disclosures - in particular the
Prescreen Opt Out Notice Rule\60\ and the Trade Regulation Rule
Pursuant to the Telephone Disclosure and Dispute Resolution Act of 1992
(``Pay Per Call Rule'').\61\ The standards also were drawn from
relevant Commission law enforcement actions and business education
materials. Proposed section 610.4 consisted of three sections:
definitions, general disclosure requirements, and media-specific
requirements. These are discussed below in turn.
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\60\ 16 CFR Part 642.
\61\ 16 CFR Part 308.
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1. Definitions
a. Section 610.4(a)(1): The term ``AnnualCreditReport.com and 877-322-
8228''
Proposed section 610.4 defined the term ``AnnualCreditReport.com
and 877-322-8228'' to mean the Uniform Resource Locator and toll-free
telephone number currently used by the
[[Page 9732]]
centralized source. Proposed section 610.4 also provided that if the
centralized source's website (currently AnnualCreditReport.com) or
toll-free telephone number (currently 877-322-8228) were to change, the
centralized source must substitute the new website or toll-free
telephone number in all disclosures required by this section of the
Rule. In response to the NPRM, the Commission received only one
comment. CDIA agreed with the proposed definition, but urged the
Commission to include a reference to a ``reasonable time'' in order to
provide the centralized source an opportunity to update the
disclosures.\62\ The Commission believes this modification is
appropriate and has revised the proposed Rule accordingly.
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\62\ CDIA at 9 (``[T]he FTC should clarify in the Rule that
covered entities will be provided with a reasonable opportunity to
update the information.'').
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b. Section 610.4(a)(2): The term ``free credit report''
Proposed section 610.4 set forth the following definition of ``free
credit report'':
Free credit report. For the purposes of this section, ``free credit
report'' means a consumer report or file disclosure that is prepared by
or obtained, directly or indirectly, from a nationwide consumer
reporting agency (as defined in section 603(p) of the Fair Credit
Reporting Act); that is represented, either expressly or impliedly, to
be available to the consumer free of charge; and that is, in any way,
tied to the purchase of a product or service.
As noted in the NPRM, the term ``free credit report'' is undefined
in section 205 of the Act, the FCRA, or the Free Reports Rule.\63\ The
Commission defined the phrase in the proposed Rule, however, in order
to clarify the scope of the Rule's disclosure requirements. As
explained more fully below, based on the comments received, the
Commission has revised the proposed definition of ``free credit
reports'' as follows:
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\63\ 74 FR at 52918.
Free credit report means a file disclosure prepared by or obtained,
directly or indirectly, from a nationwide consumer reporting agency (as
defined in section 603(p) of the Fair Credit Reporting Act), that is
represented, either expressly or impliedly, to be available to the
consumer at no cost if the consumer purchases a product or service, or
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agrees to purchase a product or service subject to cancellation.
i. Scope of the term ``free credit report''
Proposed section 610.4 defined ``free credit report'' to include
``a consumer report or file disclosure prepared by or obtained . . .
from a nationwide consumer reporting agency (as defined in section
603(p) of the Fair Credit Reporting Act).'' NCLC and TransUnion urged
the Commission to broaden the definition to include reports offered by
nationwide specialty CRAs.\64\ In that regard, TransUnion stated: ``As
a general matter, it is not clear why this provision pertains to Free
Reports involving only nationwide CRAs. If an entity is advertising a
`free credit report,' it would seem that the disclosures are
appropriate regardless of the provider or source of information.''\65\
NCLC also observed that the statutory language of the Act is not
limited to nationwide CRAs.\66\
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\64\ NCLC at 4; TransUnion at 8. At the same time, NCLC noted
that the disclosures set forth in the Act for nationwide CRAs would
have to be modified if applied to nationwide specialty CRAs by
omitting references to AnnualCreditReport.com. NCLC at 4.
\65\ TransUnion at 8.
\66\ NCLC at 4.
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On the other hand, several commenters, including CDIA and Experian,
urged the Commission to narrow the definition of ``free credit
report,'' asserting that section 610.4 should cover only file
disclosures of the type that the nationwide CRAs must make available
through the centralized source. For example, Experian's comment states:
[The statute] seeks to assure that consumers will be able to
distinguish between a free credit report offered by a commercial entity
and the free annual file disclosures available at
[AnnualCreditReport.com]. The statute does not cover other aspects of
the consumer credit system such as credit scores or the many other
types of information that can qualify as `consumer reports' under the
FCRA.\67\
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\67\ Experian at 28-29; see also Schwartz & Ballen at 2 (``CRAs
. . . offer their services in connection with their sponsorship of
the website AnnualCreditReport.com, which is where consumers may
obtain their free credit reports under Federal law.''); CDIA at 8
(asserting that the proposed definition would ``apply to many
products and services that are not in direct competition with the
credit file disclosures required to be made available through the
centralized source because the Free Annual File Disclosures Rule
cannot and does not require similar options.'').
The Commission agrees that the NPRM's inclusion of the term
``consumer report'' in the proposed definition of ``free credit
report'' was too broad, sweeping in the offer of reports that go beyond
the requirements of section 205 of the Act, and potentially adding to
consumer confusion. Section 205 was intended to address the confusion
between the information offered through the centralized source and
similar information offered from private or other commercial sources.
Indeed, the disclosures contemplated by section 205 of the Act would
not be useful, for example, for advertising of offers of consumer
reports from nationwide specialty CRAs, as those reports are not
available through the centralized source. Similarly, the term
``consumer report'' would include ``credit scores;'' thus, under the
proposed Rule, an advertisement for a ``free credit score'' would have
triggered the requirement to disclose the existence of
AnnualCreditReport.com. Consumers seeing an advertisement for a free
credit score might be confused if they are directed to
AnnualCreditReport.com, only to find that they could not get a free
credit score on that site. Accordingly, section 610.4 of the final
amended Rule is limited in scope to reports of the type disseminated
through the centralized source.
ii. Applicability of the term ``free credit report'' to trial offers
The definition of ``free credit report'' in proposed section 610.4
applied to an offer of free credit reports ``that is, in any way, tied
to the purchase of a product or service.'' Several commenters objected
to the use of the phrase ``in any way, tied to the purchase of a
product or service.'' NAAG suggested that the term ``purchase'' might
be interpreted to exclude negative option offers, where the consumer
may cancel the purchase before having paid anything: ``If a consumer
receives a free credit report and cancels any service within the
allotted time without paying anything, some may argue that the report
is not technically `tied to the purchase of a product or
service.'''\68\
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\68\ NAAG at 2-3. Similarly, the States of Florida and Minnesota
urged that the definition cover trial offers or trial periods. State
of Florida at 6 (``The definition of `free credit report' should
encompass . . . trial subscriptions to make it abundantly clear that
trial offers are covered.''); State of Minnesota at 3 (``The FTC
should adopt a broad definition of `free credit report' that
explicitly covers . . . `trial periods.'''). Other commenters
expressed confusion about the phrase ``tied to'' the purchase of a
product or service. For example, NCLC noted that the term ``tied
to'' could be confused with the antitrust concept of ``tying,''
where a seller conditions the sale of one product or service on the
customer's agreement to take a second product or service. NCLC at 5.
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The Commission agrees and has changed the definition of ``free
credit report'' to better clarify the types of ``free credit report''
offers intended to be covered by the Rule - those ``represented, either
expressly or
[[Page 9733]]
impliedly, to be available to the consumer at no cost if the consumer
purchases a product or service, or agrees to purchase a product or
service subject to cancellation.'' This language clarifies that a
``free credit report'' offered in connection with a trial offer of
another product or service will fall within the scope of the Rule and
trigger the disclosure requirement.\69\
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\69\ Section 610.4(a) of the final amended Rule makes clear that
representations made both expressly and impliedly about an offer of
a ``free credit report'' will trigger the Rule's disclosure
obligations. Schwartz & Ballen contended that the word ``impliedly''
is vague, ambiguous, and ``will unnecessarily result in significant
uncertainty in its application.'' Schwartz & Ballen at 4. The
Commission believes that the use of the term ``impliedly'' is
consistent with well-established advertising law under section 5 of
the FTC Act. See generally FTC Policy Statement on Deception
(``Deception Statement''), Appended to Cliffdale Associates, Inc.,
103 F.T.C. 110, 174 (1984) (``In cases of implied claims, the
Commission will often be able to determine meaning through an
examination of the representation itself, including an evaluation of
such factors as the entire document, the juxtaposition of various
phrases in the document, the nature of the claim, and the nature of
the transactions. In other situations, the Commission will require
extrinsic evidence that reasonable consumers reach the implied
claims.'').
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iii. Bundled offerings that include credit reports
Several commenters urged the Commission to clarify that section
610.4 does not apply to advertisements for every bundle of products or
services that may include a ``free credit report.''\70\ For example,
CDIA contended that ``where a company offers a package of services
together with a credit report - such as combined credit monitoring,
identity theft assistance, or other products or services - the
disclosure requirements should not apply if a complimentary credit
report is not a dominant part of the offer.''\71\ These commenters
asserted that there is no confusion between the offering of bundled
products and services and the federally mandated dissemination of free
annual file disclosures through the centralized source. In that regard,
Intersections, a business commenter, stated: ``If a consumer were to
compare an offer for a free trial of Intersection's Bundled Products
with the annual federally mandated disclosure, it would be clear to the
consumer even upon a cursory review that he or she was reviewing
separate and wholly unrelated products.''\72\ In addition, American
Express noted that it offers a complimentary credit score and report
once a year as part of a package of Cardmember services and that the
disclosure requirement should not apply to this service.\73\
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\70\ See Intersections at 1; American Express at 2; Schwartz &
Ballen at 4; TransUnion at 8.
\71\ CDIA at 9 (``The FTC does not further the goal of
preventing consumer confusion between the federally mandated annual
disclosure and commercial `free credit report' offers by applying
these disclosures to advertisements for these packages.'').
\72\ Intersections at 2 and 7.
\73\ American Express at 1.
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The Commission declines to modify the proposed Rule in response to
these comments. The Commission disagrees that the types of bundled
products mentioned by commenters do not cause consumer confusion.
Indeed, the Commission believes that advertising for bundled products
that promote free credit reports, in addition to other products and
services, such as credit monitoring, is the very type of advertising
that is likely to confuse consumers. Thus, the final amended Rule does
not include any type of exemption for bundled products. With respect to
the free credit reports offered by American Express as a benefit of
membership, the Commission notes that the advertising of a free credit
report to a non-member in this instance would fall within the Rule's
definition of ``free credit report.'' However, once a consumer becomes
a member, a statement that a no-strings-attached ``free credit report''
is a benefit of membership does not fall within the Rule's definition
because such a free credit report is not being advertised ``in
connection with the purchase of a product or service.''\74\
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\74\ An offer of a ``free credit report if you extend your
membership'' would be made ``in connection with a purchase'' and
therefore covered by the Rule.
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2. Section 610.4(a)(3): General requirements for disclosures
Section 610.4(a)(3) of the final amended Rule implements the Act's
mandate that the required disclosures for ``free credit reports'' be
``prominent.'' It also sets forth general requirements for, among other
things, visual, audio, and program-length advertisements.\75\ These
requirements are designed to ensure that the mandated disclosures can
be readily seen and/or heard by consumers.\76\ In addition, the final
amended Rule clarifies that the disclosures must be limited to the
prescribed text with no other content to ensure that the consumer is
not distracted from the message contained in the disclosure.
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\75\ These general disclosure standards are drawn from several
Commission trade regulation rules. See Pay Per Call Rule, 16 CFR
Part 308; Rule Concerning Cooling-Off Period for Sales Made at Homes
or at Certain Other Locations (``Cooling-Off Rule''), 16 CFR Part
429; Franchise Rule, 16 CFR Part 436; Business Opportunity Rule, 16
CFR Part 437; and Regulations under the Fair Packaging and Labeling
Act, 16 CFR Part 500.
\76\ The Commission also recognizes that States and individuals
have the ability to enforce parts of the FCRA. By setting forth
these requirements, section 610.4(a)(4) of the final amended Rule is
intended to avoid a patchwork of differing interpretations of what
constitutes ``prominent'' disclosures.
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a. Section 610.4(a)(3)(i): Prominent
Section 610.4(a)(3)(i) of the final amended Rule revises the NPRM
by adding a new section incorporating the statutory mandate that all
disclosures for ``free credit reports'' be ``prominent.'' In response
to the NPRM, the Commission received numerous comments on how the final
Rule should address prominence, including comments on the placement,
format, and timing of the required disclosures, as discussed in detail
below. Accordingly, the Commission has added in the final amended Rule
a general requirement that all disclosures must be ``prominent,''
consistent with the language of section 205.\77\ This general
``prominence'' requirement applies to all disclosures in any medium.
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\77\ Commission precedent establishes that disclosures in fine
print or buried in dense blocks of text are not prominent. The
mandate that disclosures be ``clear and conspicuous'' or ``clear and
prominent'' dates back more than 60 years. See, e.g., Hillman
Periodicals v. FTC, 174 F.2d 122 (2d Cir. 1949) (upholding
Commission order that company selling shortened versions of books
disclose that its publications are abridged ``in immediate
connection with the title and in clear, conspicuous type'').
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b. Section 610.4(a)(3)(iii): Language usage
Proposed section 610.4 required that any disclosure mandated by
this section be provided in the same language as that principally used
in the advertisement. The proposed requirement drew from identical
language in section 308.3(a)(1) of the Pay Per Call Rule and the
Commission's belief that a disclosure in a language different from that
which is principally used in an advertisement would be deceptive.\78\
No comments addressed this issue. Accordingly, the final amended Rule
adopts this section, as proposed in the NPRM.
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\78\ See also 16 CFR 429.1(a) (requiring disclosure of right to
cancel door-to-door sales ``in the same language, e.g., Spanish, as
that principally used in the oral sales presentation'').
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c. Section 610.4(a)(3)(iii): Visual disclosures
Proposed section 610.4(a)(4) provided that visual disclosures
``shall be of a color or shade that readily contrasts with the
background of the advertisement, in a font easily read by a reasonable
consumer, and be parallel to the base of the advertisement.'' The
proposed section drew from the Pay Per Call Rule, which requires
disclosures to be (1) in ``a color or shade that readily contrasts with
the background of the
[[Page 9734]]
advertisement'' and (2) ``parallel to the base of the
advertisement.''\79\
---------------------------------------------------------------------------
\79\ See also In re Swisher Int'l, Inc., C-3964 (2000)
(requiring warnings on cigar advertisements to appear ``parallel . .
. to the base of the advertisement''); Regulation under Section 4 of
the Fair Packaging and Labeling Act, 16 CFR 500.4 (requiring
statement of identity for packaged goods to appear ``in lines
generally parallel to the base on which the packaging or commodity
rests as it is designed to be displayed''). ``Parallel to the base''
means that a consumer need not turn his or her head in order to read
the disclosure. Accordingly, swirling or diagonal text, for example,
will not be parallel to the base of the advertisement or screen.
---------------------------------------------------------------------------
Several commenters offered suggestions on how to add specificity to
ensure that the visual disclosures are prominent. For example, the
State of Florida recommended that print and Internet disclosures appear
within ``a border similar to the Surgeon General's cigarette warning. .
. .''\80\ NYCPB recommended that print disclosures ``be presented in a
box and/or in a contrasting color to help ensure its prominence.''\81\
The Commission agrees that more specificity is required to ensure that
all visual disclosures are prominent.
---------------------------------------------------------------------------
\80\ See State of Florida at 7.
\81\ See NYCPB at 2.
---------------------------------------------------------------------------
Thus, the Commission has modified the proposed section to add
specific requirements to strengthen the prominence of visual
disclosures. First, the Commission has added a general requirement that
visual disclosures be easily readable. For example, as noted in the
NPRM, a disclosure in an Old English Text font would not be ``easily
readable,'' even if it were sufficiently large. In addition,
manipulating the letter width, letter spacing, word spacing, or line
height so that the letters of the disclosure appear to be condensed in
comparison to the rest of the text on the page or screen would violate
the requirement for the disclosure to be ``easily readable.''\82\
Similarly, a disclosure presented in all italics or underlined would
likely be difficult to read; if so, it would not comply with the
requirement to be ``easily readable.''
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\82\ See Final Model Privacy Form Under the Gramm Leach Bliley
Act, 74 FR 62889, at 62899 -900 (Dec. 1, 2009) (setting forth
general guidance for easily readable type).
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Second, instead of merely requiring visual disclosures that
``readily contrast with the background'' of the disclosure, the final
amended Rule requires that there be a ``high degree of contrast.'' The
Commission believes that such a clarification is necessary to ensure
prominence. As an example, a disclosure in which the text contrasts
slightly with the background (e.g., light gray on dark gray) would not
constitute a sufficiently ``high degree of contrast'' to satisfy this
requirement.\83\
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\83\ The Pay Per Call Rule required only that the disclosure
``readily contrast'' with the background. In this rulemaking,
modification of the Pay Per Call Rule standard is warranted in light
of changes in technology that have developed since promulgation of
that rule. Indeed, as CDIA noted, the Pay Per Call Rule does not
address Internet disclosures at all. CDIA at 12-13.
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Third, drawing from the Commission's Prescreen Opt-Out Rule, the
final amended Rule requires that visual disclosures be distinct from
other text, such as inside a border.\84\ Fourth, the final Rule
requires that the disclosure be ``in a distinct type style, such as
bold.''\85\ Finally, because the final amended Rule addresses
disclosures beyond print, such as television and Internet websites, the
Commission has modified the requirement that the disclosure be
``parallel to the base of the advertisement'' to state that the
disclosure must be ``parallel to the base of the advertisement or
screen.''\86\
---------------------------------------------------------------------------
\84\ See 16 CFR 642.3(a)(2).
\85\ As noted above, although text in, italics, or underlined
may be ``in a distinct type style,'' if they are difficult to read,
they would not satisfy the ``easily readable'' requirement.
\86\ The final amended Rule also eliminates the term ``color''
in recognition of the fact that certain advertising, such as
newspaper advertising, often contains no color.
---------------------------------------------------------------------------
d. Section 610.4(a)(3)(iv): Audio disclosures
Proposed section 610.4 required that audio disclosures be delivered
in a slow and deliberate manner and in a reasonably understandable
volume. In response to the NPRM, a few commenters suggested additional
specificity for this section, such as requirements for pitch and a
particular volume level.\87\ The Commission agrees that adding a
requirement that the audio disclosure be at a reasonable pitch will
further ensure that audio disclosures can be heard by consumers. The
Commission has modified the final amended Rule accordingly. The
Commission, however, believes that adding a specific volume level is
unnecessary, given that the Rule already requires the disclosure to be
made at ``a reasonably understandable volume.''
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\87\ See NAAG at 4 (suggesting that audio disclosure be made
``every time the triggering term is used and at the same decibel'');
State of Florida at 7 (suggesting that ``audio disclosures should
parallel the volume and approximate pitch of the primary
advertisement or be at least as audible as the primary
advertisement'').
---------------------------------------------------------------------------
One commenter suggested that the audio disclosure be made each time
the triggering term ``free credit report'' is used.\88\ The Commission
believes that multiple disclosures in a short audio advertisement could
make all of the messages in the advertisement (including the
disclosure) difficult for consumers to understand; therefore, the
Commission declines to make this change. For program-length
advertisements, however, section 610.4(a)(3)(v) of the final amended
Rule does require multiple audio disclosures, as discussed below.
---------------------------------------------------------------------------
\88\ See NAAG at 4 (suggesting that audio disclosure be made
``every time the triggering term is used . . .'').
---------------------------------------------------------------------------
e. Section 610.4(a)(3)(v): Program-length advertisements
Proposed section 610.4 required that any program-length television,
radio, or Internet-hosted multi-media advertisement for ``free credit
reports'' provide the required disclosures at the beginning, near the
middle, and at the end of the advertisement. No substantive comments
addressed this provision. Accordingly, the final amended Rule adopts
this proposal.\89\
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\89\ The Commission notes that this provision is identical to
section 308.3(a)(6) of the Pay Per Call Rule, and is designed to
enable consumers tuning in to the program-length advertisement at
different stages of the broadcast to receive the required
disclosure. Cf. In re Synchronal Corp., 116 FTC 1189 (1993)
(requiring video or commercial advertisements 15 minutes or longer
to disclose that program is a paid advertisement within the first 30
seconds and immediately before presentation of ordering
instructions).
---------------------------------------------------------------------------
f. Section 610.4(a)(3)(vi): Inconsistent and contrary information
Proposed section 610.4 provided that ``nothing contrary to,
inconsistent with, or in mitigation of the required disclosures shall
be used in any advertisement in any medium . . . .'' The proposed
section also prohibited any audio, visual, or print technique that is
likely to detract significantly from the communication of any required
disclosure. This provision was drawn from section 308.3(a)(5) of the
Pay Per Call Rule and was designed to prevent circumvention of the Rule
requirements through the conveyance of contrary or inconsistent
information, or other actions that undermine the disclosures to
consumers.\90\
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\90\ Cf. Franchise Rule, 16 CFR 436.9(a) and Business
Opportunity Rule, 16 CFR 437.1(a)(21) (prohibiting the making of any
claim or representation, orally or visually, or in writing, that
contradicts the information required to be disclosed by the Rule);
Guides for Environmental Marketing Claims, 16 CFR 260.6(a) (noting
that an absence of contrary claims will help make disclosures clear
and prominent).
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In its comment, Schwartz & Ballen asserted that the phrase ``in
mitigation'' fails to provide sufficient guidance as to what language
is prohibited by this section.\91\ The Commission agrees that the term
``in mitigation'' is vague; thus, the final amended Rule substitutes
the
[[Page 9735]]
phrase ``that undermines'' for the phrase ``in mitigation.''\92\
Accordingly, the relevant portion of section 610.4(a)(3)(vi) of the
final amended Rule reads, ``nothing that is contrary to, inconsistent
with, or undermines the required disclosures shall be used in any
advertisement in any medium . . . .''
---------------------------------------------------------------------------
\91\ Schwartz & Ballen at 5.
\92\ Further, the phrase ``that undermines'' is drawn from and
parallel to other sections of the original Rule. See 16 CFR
610.2(g)(1), renumbered as section 610.2(g)(2) in the final amended
Rule (prohibiting ``communications . . . [that] undermine the
purpose of the centralized source'').
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3. Section 610.4(b): Medium-specific advertising disclosures
Proposed section 610.4(b) set forth the statutory requirements
relating to prominence in specific media. The wording and presentation
of required disclosures for each medium are described below.
a. Section 610.4(b)(1): Disclosures for television advertisements
Section 205 of the Act prescribes the specific wording of the
disclosures for television, requires that the disclosures be made in
both audio and video formats, and requires the audio and video
disclosures to be made at the same time.\93\ Accordingly, consistent
with the Act, proposed section 610.4(b)(1) required that all
advertisements for ``free credit reports'' broadcast on television
include the following disclosure: ``This is not the free credit report
provided for by Federal law'' in the audio and visual parts of the
advertisement at the same time. Proposed section 610.4(b)(1) also
required that the disclosure be at least four percent of the vertical
picture height, and appear for a minimum of four seconds. This
requirement is consistent with comparable Federal Election Commission
requirements for the disclosure of the funding source of a political
advertisement on television.\94\
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\93\ Section 205(a)(2): ``In the case of an advertisement
broadcast by television or radio, the disclosure required under
paragraph (1) ''shall be included in the audio and visual part of
such advertisement.''
\94\ See 11 CFR 110.11(c)(3)(iii)(B).
---------------------------------------------------------------------------
The Commission received few comments on this proposed section. NAAG
suggested that the Commission add the following statement to the
disclosure: ``This report is only free if you make a purchase.''\95\ As
noted above, however, the statute specifies the wording of the
disclosure for television and radio advertisements, and the
Commission's Rule follows this wording.
---------------------------------------------------------------------------
\95\ NAAG at 3.
---------------------------------------------------------------------------
One commenter disagreed with the proposed Rule's use of the Federal
Election Commission requirements for the size of the visual disclosure,
asserting that the standard is ``overly rigid and excessively
burdensome.''\96\ The commenter did not provide any additional
information or support; nor did it offer an alternative standard. The
Commission continues to believe that the Federal Election Commission
requirements provide a useful standard for prominent disclosures in
television advertisements. Accordingly, the Commission retains this
standard in the final amended Rule.
---------------------------------------------------------------------------
\96\ Schwartz & Ballen at 5.
---------------------------------------------------------------------------
In addition, NAAG, the State of Florida, and NYCPB offered several
suggestions regarding the timing of the disclosure. For example, the
State of Florida suggested that the visual disclosure appear throughout
the entire advertisement and that the size of the disclosure be at
least as large as the company name.\97\ NYCPB suggested that the
disclosure ``should be provided at the front or beginning of the
advertisement'' to be consistent with the proposed Internet website
disclosure.\98\ NAAG suggested that the disclosure be ``equally
prominent and in close proximity to the triggering claim . . . .''\99\
---------------------------------------------------------------------------
\97\ State of Florida at 7.
\98\ NYCPB at 2.
\99\ NAAG at 3.
---------------------------------------------------------------------------
The Commission agrees that, consistent with long-standing
Commission interpretations of prominence, the audio and video
disclosure should appear in close proximity to the first mention of a
free credit report. Indeed, as FTC staff has stated in its prior
business guidance, ``[a] disclosure is more effective if it is placed
near the claim it qualifies or other relevant information. Proximity
increases the likelihood that consumers will see the disclosures and
relate it to the relevant claim or product.''\100\ In keeping with this
principle, section 610.4(b)(1)(i) now reads, ``all advertisements for
free credit reports broadcast on television shall include the following
disclosure in close proximity to the first mention of a free credit
report: `This is not the free credit report provided for by Federal
law.'''\101\
---------------------------------------------------------------------------
\100\ See Federal Trade Commission Guidance, Dot Com
Disclosures: Information about Online Advertising, at 6, available
at (http://www.ftc.gov/bcp/edu/pubs/business/ecommerce/bus41.pdf)
(``Dot Com Disclosures'').
\101\ In response to commenters' additional suggestions to
address prominence in television advertising, the Commission notes
that, rather than adding specific requirements to this section, it
has tried to tighten the prominence requirements for all
disclosures, as discussed above.
---------------------------------------------------------------------------
b. Section 610.4(b)(2): Disclosures for radio advertisements
Proposed section 610.4(b)(2) also incorporated the section 205
disclosure for all advertisements for ``free credit reports'' broadcast
on radio: ``This is not the free credit report provided for by Federal
law.''
Similar to the television disclosure, NAAG suggested that the
Commission add to the disclosure the following statement: ``This report
is only free if you make a purchase.''\102\ As noted above, the statute
specifies the wording of the disclosure for television and radio
advertisements, and the Commission's Rule follows this wording.
---------------------------------------------------------------------------
\102\ NAAG at 3.
---------------------------------------------------------------------------
With respect to the timing of the disclosure, NAAG suggested that
it appear ``in close proximity to the triggering claim . . . .''\103\
Another commenter suggested that the disclosure ``should be provided at
the front or beginning of the advertisement'' to be consistent with the
proposed Internet website disclosure.\104\ The Commission agrees that a
timing requirement would be appropriate. Rather than mandating the
disclosure up front, however, the Commission has decided to add a
requirement that the disclosure be made in close proximity to the first
mention of ``free credit report,'' consistent with the requirement for
television advertising discussed above. Thus, the final amended Rule
section 610.4(b)(2) states that ``all advertisements for free credit
reports broadcast on radio shall include the following disclosure in
close proximity to the first mention of free credit report: `This is
not the free credit report provided for by Federal law.'''
---------------------------------------------------------------------------
\103\ Id. In addition, NAAG and the State of Florida offered
suggestions regarding the placement and/or audibility of the
disclosures. These comments are addressed in the discussion of the
general requirements for prominent advertising disclosures above.
\104\ NYCPB at 2.
---------------------------------------------------------------------------
c. Section 610.4(b)(3): Disclosures for print advertisements
Proposed section 610.4(b)(3) provided that all print advertisements
for ``free credit reports'' include the following disclosure: ``This is
not the free credit report provided for by Federal law. To get your
free report, visit (www.AnnualCreditReport.com) or call 877-322-8228.''
Further, it required that each letter of the disclosure be, at a
minimum, one half the size of the largest letter or numeral used in the
name of the website or the telephone number to which consumers are
referred
[[Page 9736]]
to receive what is advertised as a free credit report.\105\
---------------------------------------------------------------------------
\105\ As noted in the NPRM, this approach is identical to that
of the Pay Per Call Rule, section 308.3(b)(v)(2)(i).
---------------------------------------------------------------------------
States and consumer advocates generally supported the proposal and
offered suggestions to make the disclosure more prominent. For example,
NAAG suggested that the disclosure should be equally prominent and in
close proximity to the triggering claim of ``free'' or ``free credit
report.''\106\ The State of Florida and NYCPB suggested that the Rule
include formatting requirements, such as the use of a border or
contrasting color.\107\ NCLC suggested that the Rule include placement
requirements for the disclosure, such as near the most prominent
listing of the website or telephone number for the commercial entity
and, for multi-page advertisements, on the front side of the first page
of the principal promotional document.\108\ In addition, Schwartz &
Ballen suggested that the second sentence of the disclosure should be
the same as the language for the interim disclosure specified in the
Act because it is more clear than the disclosure proposed in the
NPRM.\109\
---------------------------------------------------------------------------
\106\ NAAG at 4.
\107\ State of Florida at 7; NYCPB at 2.
\108\ NCLC at 5.
\109\ Schwartz & Ballen at 6. Section 205(b)(3) of the Act
provides that the interim disclosure shall include ``Free credit
reports are available under Federal law at:
`AnnualCreditReport.com'.''. In addition, CDIA commented that the
proposed disclosure exceeds the Commission's statutory authority
because of the inclusion of the first sentence and suggested that
the disclosure should be limited to the second sentence. CDIA at 13.
As stated in the NPRM, section 205 of the Act does not specify the
wording of the advertising disclosure required in print
advertisements. Rather, it only requires that the disclosure be
``prominent'' and authorizes the Commission to determine the
appropriate wording of the advertising disclosure through this
rulemaking.
---------------------------------------------------------------------------
The Commission agrees that the print disclosures should be made
more prominent, and accordingly has modified the proposal in several
ways. First, the Commission has added a general prominence requirement
and strengthened the general requirements for visual disclosures in the
final amended Rule, as discussed above. All of these requirements apply
to print advertising.
Second, proposed section 610.4(d)(3) required only that the
disclosure text be one-half the size of the largest letter or numeral
used in the website address or telephone number to which consumers are
referred to obtain their ``free credit report'' listed in the print
advertisement. Section 610.4(b)(3) of the final amended Rule provides
that each letter of the disclosure text shall be, at minimum, one-half
the size of the largest character used in the advertisement. Linking
the type size of the disclosure to the largest character used in the
entire advertisement (as opposed to only the website address or the
telephone number), combined with the general requirements of section
610.4(a) of the final amended Rule, will strengthen the prominence of
the print disclosure.
Third, the Commission agrees with the comments suggesting inclusion
of a requirement that the disclosure be in close proximity to the free
report claim. As with the radio and television disclosures, this
modification is consistent with longstanding FTC practice requiring
disclosures be made in close proximity to the triggering claim. Thus,
the final amended Rule provides that the required disclosure appear in
close proximity to the first mention of a ``free credit report.''\110\
---------------------------------------------------------------------------
\110\ For example, a print advertisement that features a ``free
credit report'' offer at the top of the page, intervening text, and
the disclosure at the bottom of the page would not satisfy the close
proximity requirement.
---------------------------------------------------------------------------
With respect to the comment on the text of the disclosure, the
Commission agrees that the text could be clearer. Particularly when the
disclosure is made in close proximity to the offer of a free credit
report, the consumer might be confused by conflicting messages. For
example, a consumer might see an advertisement saying ``get a free
credit report'' and, in close proximity, the consumer would see the
disclosure that begins with the phrase ``This is not the free credit
report . . . .'' The Commission believes that the juxtaposition of the
two messages - particularly when placed in close proximity - would
likely cause consumer confusion, and has changed the disclosure text in
two respects to address this issue.
First, the Commission has added a requirement that the disclosure
include the following header centered on the first line of the
disclosure: ``THIS NOTICE IS REQUIRED BY LAW.'' This header clarifies
that the disclosure is coming from a source other than the commercial
entity advertising a free credit report. In addition, the requirement
to include a header is consistent with numerous other Commission rules
that title disclosures to alert consumers to the importance of the
message delivered.\111\
---------------------------------------------------------------------------
\111\ See, e.g., Cooling Off Rule, 16 CFR Part 429 (requiring a
form captioned either ``NOTICE OF RIGHT TO CANCEL'' or ``NOTICE OF
CANCELLATION''); Prescreen Rule, 16 CFR Part 642 (requiring a form
captioned ``PRESCREEN AND OPT-OUT NOTICE'').
---------------------------------------------------------------------------
Second, rather than starting the disclosure with the sentence
``This is not the free credit report provided by federal law.'', the
final amended Rule's disclosure includes only the affirmative
statement: ``You have the right to a free credit report from
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source
under federal law.'' The Commission notes that beginning the disclosure
with the phrase ``This is not the free credit report'' could be
confusing in that it may be unclear what the term ``this'' refers to.
Thus, the Commission believes that these changes make the required
disclosure clearer for consumers.\112\
---------------------------------------------------------------------------
\112\ The potential for confusion with the disclosure in the
proposed Rule text is also discussed in the section on Internet
website disclosures below. The text of the disclosure for all media,
except for television and radio (for which the text of the
disclosure is statutorily mandated), has been modified in a similar
way, for consistency.
---------------------------------------------------------------------------
d. Section 610.4(b)(4): Disclosures for Internet websites
Proposed section 610.4(b)(4) required any website offering ``free
credit reports'' to first display on a separate landing page the
following visual disclosure: ``This is not the free credit report
provided for by Federal law. To get your free report, visit
(www.AnnualCreditReport.com) or call 877-322-8228.'' Proposed section
610.4(b)(4) also required that the separate landing page contain no
other information aside from the statement: ``Go to [hyperlink to
company's website.]'' Further, the disclosure was to: (1) be visible to
consumers without requiring them to scroll down the webpage; (2)
contain an operational hyperlink directing consumers to
(www.AnnualCreditReport.com) that appears before the hyperlink to the
advertised company's commercial website; and (3) be in a type at least
twice the size as the hyperlink to the company's website or display of
the company's Uniform Resource Locator. Finally, proposed section
610.4(b)(4) provided that the separate landing page must occupy the
full screen and that no other information, graphics, or material could
be shown to the consumer unless and until the consumer affirmatively
selected one of the two hyperlinks described above.\113\
---------------------------------------------------------------------------
\113\ 74 FR at 52927.
---------------------------------------------------------------------------
Consumer advocates such as NCLC, as well as NAAG, the States of
Florida and Minnesota, Senator Levin, and many individual consumers
generally supported the proposed separate landing page requirement.
Some consumer advocates recommended strengthening the proposed separate
landing page. For example, NCLC commented that the separate landing
page should appear in multiple
[[Page 9737]]
locations, including on the purchase confirmation page, to prevent
circumvention.\114\
---------------------------------------------------------------------------
\114\ NCLC at 6; see also State of Florida at 8.
---------------------------------------------------------------------------
Businesses and industry groups, as well Representatives Boozman and
Ross, opposed the separate landing page.\115\ These commenters raised
one or more arguments, including that requiring a separate landing
page: (1) exceeds the FTC's statutory authority; (2) impermissibly
restricts truthful commercial speech, thereby implicating First
Amendment concerns; (3) departs from longstanding FTC policy on
``prominent'' disclosures in close proximity to the relevant advertised
claim; and (4) would confuse consumers or may discourage them from
seeking their file disclosure. As to this final point, Experian
submitted market research that tested consumers' experiences with a
separate landing page similar to what was proposed in the NPRM.
Experian presented research suggesting a high rate of consumer
confusion as evidenced by, among other things, consumers spending a
long time on the landing page, few consumers continuing on to
AnnualCreditReport.com, and indeed, many consumers abandoning the
separate landing page without continuing on either to
AnnualCreditReport.com or Experian's commercial website.\116\ In
addition, some commenters noted that consumers unfamiliar with a
separate landing page may believe it is suspect, such as an illegal
``phishing site.''\117\
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\115\ See, e.g., Experian, CDIA, TransUnion, IAB, ANA,
Intersections, Schwartz & Ballen, E-Commerce, and U.S. Chamber of
Commerce, Representatives Boozman and Ross.
\116\ Experian at 9-12; see also AOL, Microsoft, Yahoo!
(jointly) at 2 (``Because the separate landing page is unprecedented
and unfamiliar, it will perplex consumers who visit an affected
website for the first time.''); DMA at 2 (``[R]equiring a separate
landing page . . . could actually increase consumer confusion.'');
Schwartz & Ballen at 6 (``[S]eparate landing page will prove
confusing to consumers.''); IAB at 5 (asserting that a separate
landing page ``will likely confuse and annoy consumers.'');
TransUnion at 9 (asserting that consumers seeing an ``unrelated
splash page'' will be confused).
\117\ Representatives Boozman and Ross at 1; CDIA at 11
(asserting that consumers may simply think that they clicked on a
faulty link, or even a phishing site, and shut down their browser);
U.S. Chamber of Commerce at 3 (``When presented with such a landing
page that covers the entire screen, consumers could think they run
[sic] into a scam or could be concerned that such a page is
malware.'').
---------------------------------------------------------------------------
The Commission is particularly concerned with the data suggesting
that the separate landing page, as proposed, would cause consumer
confusion. Indeed, based on the comments submitted, the Commission is
persuaded that the separate landing page, which would not be in close
proximity to the relevant claims, has the potential to confuse
consumers and create suspicion about the legitimacy of the disclosure
in this context.\118\ Because the very purpose of section 205 of the
Act and the amendments to section 610.2 of the original Rule is to
reduce such confusion, the Commission has determined to eliminate the
separate landing page in favor of a prominent disclosure on the website
page(s) where the free credit report claim appears, as well as on each
page of the ordering process.\119\
---------------------------------------------------------------------------
\118\ The Commission notes that the decision to abandon the
separate landing page in this rulemaking is based on the existing
record at this time. It may revisit the concept of a separate
landing page in this or other contexts at a later time.
\119\ Although the Act contemplated that the disclosures could
appear on Internet advertisements, the Commission believes that a
disclosure on the website would be more useful to consumers in this
instance. As noted in the NPRM, based on its experience in designing
disclosures, the Commission has found that certain disclosures are
most effective when given at the moment that a consumer is making a
decision regarding a product or service. 74 FR at 52920. In
addition, some Internet advertising, such as buttons, ``sponsored
links,'' and banner ads, are size restricted. In light of such
restrictions, it would be difficult to design a disclosure in this
context that would satisfy the statutory ``prominence'' requirement.
The Commission notes, however, that Internet-hosted multi-media
advertising will require disclosures under section 610.4(b)(5), as
this type of advertising is similar to television advertising
because it contains both audio and visual components. Finally, the
Commission will monitor and evaluate the effectiveness of
disclosures on Internet websites and will consider additional
changes as necessary, including requiring disclosures on Internet
advertisements, to achieve the purpose of the Act.
---------------------------------------------------------------------------
As described below, the Commission also has added certain specific
requirements to ensure the prominence of the Internet website
disclosures. Given that the final amended Rule does not require a
separate landing page, the disclosure will now compete with additional
content on an existing Internet web page, such as eye-catching
graphics, banners, buttons, images, colors, and text. Thus, the final
amended Rule contains several additional requirements, which are
necessary to strengthen prominence. Finally, as with print disclosures,
the Commission has modified the text of the disclosure to make it
clearer for consumers. Taken together, the Commission believes that the
requirements for Internet website disclosures in the final amended Rule
provide clearer, more prominent, and, ultimately, a more effective
disclosure than that of the proposed Rule.
(i) Placement of the disclosure
With respect to placement, section 610.4(b)(4) of the final amended
Rule requires that any website offering free credit reports make the
required disclosure on ``each page that mentions a free credit report
and on each page of the ordering process.'' As discussed in the NPRM,
based on its experience, the Commission has found that certain
disclosures are most effective when given at the moment that a consumer
is making a decision regarding a product or service.\120\ Here, the
disclosure will occur both at the moment that a vendor is making a
claim about a ``free credit report''\121\ and at the moment that a
consumer is seeking to place an order for a ``free credit report''
online\122\ - critical times to prevent deception and the possible
purchase of unwanted goods and services. The final amended Rule's
requirement that the disclosure appear on each page mentioning ``free
credit reports'' also ensures that consumers seeking a ``free credit
report'' will see the disclosure regardless of their point of entry
into a website.\123\ The requirement to provide the disclosure on each
page of the ordering process will further ensure that consumers receive
a prominent disclosure. Requiring the disclosure to be displayed to the
consumer at multiple locations on the website is similar to the Act's
requirement for dual-modality disclosures for television
advertisements, which ``have been found to achieve much higher levels
of message recall than single-modality disclosures.''\124\ The
Commission has determined that the required disclosures for Internet
websites must reflect the same clarity and prominence that are the
hallmarks of the dual-modality disclosure Congress mandated for
television advertisements.\125\
---------------------------------------------------------------------------
\120\ See Dot Com Disclosures at 11 (disclosures are more likely
to be effective if they are provided when the consumer is
considering the purchase).
\121\ See generally FTC v. TALX Corp., Civ. No. 4:09-cv-01071
(E.D. Mo. 2009) (requiring ``clear and prominent'' disclosures on
the principal website screen or landing page where the disclosures
are most relevant).
\122\ The requirement that the disclosure appear on the first
page of the ordering process applies to any website, including order
fulfillment websites, where a request for a ``free credit report''
is processed.
\123\ See NCLC at 6 (``The proposed rule should have a goal of
placing the disclosure in multiple locations so as to prevent
concealment of the consumer's right to obtain a free consumer report
from the centralized source. . .'').
\124\ Michael B. Mazis and Louis A. Morris, Channel, in Warnings
and Risk Communication, 106 (Michael S. Wogalter, et al., eds.,
1999) (citations omitted).
\125\ See Dot Com Disclosures at 3 (noting that general
advertising law principles apply regardless of the medium used).
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Further, section 610.4(b)(4) requires that the disclosure be
visible across the top of each web page where the
[[Page 9738]]
disclosure is required to appear.\126\ ``Visible'' means that the
disclosure must be unavoidable. Thus, it must appear in the viewable
portion of the screen when the consumer opens the web page. Similarly,
it must not be obscured by other features such as pop-ups or graphics
and cannot be a flashing or dissolving image. ``Across the top'' means
that the disclosure shall appear before any content, such as
advertisements, other text, images, logos, or navigation links.
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\126\ The Commission has deleted the requirement that the
disclosure be ``visible to consumers without requiring them to
scroll down the webpage.'' The Commission believes that the general
``prominence'' requirement addresses this point; in addition, the
Commission understands that, as computer devices get smaller,
consumers may have to scroll to view any content on a web page.
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(ii) Content of the disclosure
In order to ensure that the disclosure is prominent, consumers must
be drawn to it and must be able to distinguish the federally mandated
free credit report contained in the disclosure from the competing
commercial offers on the website. To achieve these goals, the
Commission has modified the content of the disclosure, as described
below.\127\ To assist in designing disclosures that will comply with
this section, the Commission has provided examples for Internet website
disclosures at (www.ftc.gov/freereportsdisclosure).
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\127\ See 155 Cong. Rec. S6178, S6179 (June 4, 2009) (statement
of Sen. Levin) (``The goal of section 205 is to eliminate consumer
confusion and deception by preventing commercial promotions from
posing as the Federal free annual report program, and by ensuring
that consumers know how to get their truly free annual reports.'').
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First, the final amended Rule requires that the disclosure appear
inside a box; that the background of the box be a solid color in a high
degree of contrast from the background of the web page; and that the
color of the box not appear elsewhere on the page. These requirements
strengthen prominence of the disclosure. If the disclosure were not in
a box, or if the background color of the box were to blend in with
other colors on the page, the Commission believes that the disclosure
would likely not catch the viewer's eye. Second, the Rule requires that
all text contained in the disclosure be displayed as plain text, not as
an image or banner, and be in a sans serif font, such as Arial. This
requirement ensures that entities subject to the Rule do not use
highly-stylized or highly-condensed fonts that would be difficult to
read. Third, the Rule includes specific requirements for line spacing
and top, bottom, left, and right margins for the disclosures, to ensure
readability.\128\ Finally, all text contained in the box must be in a
high degree of contrast with the immediate background on which it is
placed, to strengthen prominence and readability.
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\128\ See Final Model Privacy Form Under the Gramm Leach Bliley
Act, 74 FR 62889, at 62898 (stating that ``the guidance from
communications experts and form designers is that appropriate white
space between the text and the margins . . . make a more effective,
readable notice'').
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Beyond these requirements, the disclosure contained in the final
amended Rule consists of three elements: a disclosure header,
disclosure text, and a disclosure button. This section describes
requirements applicable to each in turn.
(A) Disclosure Header
As set forth in paragraph 610.4(b)(4)(i), the first element of the
disclosure shall consist of the following header: ``THIS NOTICE IS
REQUIRED BY LAW. Read more at FTC.GOV''. The reference to FTC.GOV shall
be an operational hyperlink to (www.ftc.gov/freereports). As discussed
in the print disclosures section above, the use of a header: (1) alerts
the viewer that the message being delivered is from a source other than
the commercial entity offering free credit reports on the page; and (2)
is consistent with other Commission rules that title disclosures to
alert consumers to the importance of the message delivered.
In addition, for Internet websites, the Commission has added a
second sentence to the header informing consumers that they can ``Read
more at FTC.GOV''. The Rule requires that FTC.GOV be an operational
hyperlink to an FTC web page where consumers can obtain more
information about the availability of free credit reports under federal
law. The Commission believes that adding a .gov domain name in the
header - that consumers can click immediately to reach an official
government website - will add to consumer confidence that the
disclosure is coming from the federal government. Indeed, in arguing
that the centralized source itself should use a .gov domain name,
several commenters suggested that the .gov domain name creates
legitimacy.\129\ Although the centralized source is operated by the
nationwide CRAs and is thus not eligible for a .gov domain name,\130\
the Commission is persuaded that adding a .gov domain name to the
disclosure will bolster the legitimacy of the message.
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\129\ See Empire Justice at 4 (urging the Commission to exert
oversight of the centralized source and to use a .gov domain name
for the centralized source); see also R. Lang (noting generally that
a .gov URL ``would help people to know for certain that they are on
the correct site'').
\130\ See 15 U.S.C. 1681j(a)(1)(B).
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The header must be centered on its own line and be one-half the
size of the rest of the required disclosure text. These requirements
are intended to enhance readability of the disclosure in a medium where
there will be a multiplicity of competing text, fonts, content, and
images. A smaller header centered on its own line will ensure
sufficient negative space around the text to enhance readability of the
header, and at the same time, will ensure that the header does not
overpower the text of the disclosure.\131\ Having most of the text of
the header in all capital letters, in contrast with the actual
disclosure text, which will be primarily in lower-case, will further
enhance readability of the header.
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\131\ The size of the disclosure header varies between print
advertisements and Internet websites. For print advertisements, the
main disclosure text can be half the size of the largest character
in the advertisement; for Internet websites, the disclosure is
required to be larger, in relation to other characters on the page.
Because the main disclosure text on print advertisements can be
smaller, the Commission is concerned that the header might not be
readable if it were smaller than the main disclosure text.
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(B) Disclosure Text
As set forth in paragraph 610.4(b)(4)(ii), the second element of
the disclosure shall contain the following language and appear below
the header: ``You have the right to a free credit report from
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source
under federal law.''\132\ The Commission believes that the text of this
disclosure - which is identical to the disclosure for print
advertisements - is clearer than that of the proposed Rule, for the
reasons stated above. In particular, because the Internet website
disclosure requirement has moved from a separate landing page to an
existing web page, the disclosure will be in close proximity to other
mentions of ``free'' reports; to avoid confusion, the Commission
believes the more straightforward, simpler disclosure telling consumers
where they can obtain the free annual file disclosures authorized by
law will be more effective.
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\132\ As in the proposed Rule, the reference to
AnnualCreditReport.com shall be an operational hyperlink to the
centralized source.
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The final amended Rule contains two additional requirements
applicable specifically to the disclosure text. First, to emphasize the
hyperlink to AnnualCreditReport.com, the final amended Rule requires it
to be underlined and in a color that is in a high degree of contrast to
both the color
[[Page 9739]]
of the other disclosure text and background of the box. Second, because
the disclosure will now appear with other text and eye-catching
graphics on an existing web page, the Commission has determined that
the best way to ensure prominence is to require that the text be at
least as large as the largest character on the page. For example, if
the largest character on the page is 24 point type size, then all of
the characters in the disclosure must be at a minimum 24 point type
size.\133\
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\133\ A few commenters questioned the different type size
requirements for print advertisements and Internet websites. See
AOL, Microsoft, Yahoo! at 2; IAB at 4. The Commission reviewed these
comments and concludes that the different nature of these media
demands different type size requirements for the disclosure.
Specifically, an Internet website requires a larger type size for
the disclosure because it is the location from which consumers have
the ability to place an order for a ``free credit report.'' In
contrast, print advertisements direct consumers to another source,
such as a telephone number or Internet website, to order a ``free
credit report'' and consumers will receive another disclosure at
that time. In addition, there may be greater space limitations in
some print media that do not exist on Internet websites.
The final amended Rule also clarifies that ``characters''
includes those in an image or graphic banner - not just characters
technically coded on the Internet website as text.
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(C) Disclosure Button
As set forth in paragraph 610.4(b)(4)(v), the third element of the
disclosure shall be a distinct button below the disclosure text, which
hyperlinks to AnnualCreditReport.com. The Commission has added this
requirement, recognizing that websites may use distinctive ``order''
buttons to draw the viewer's eye. Because the disclosure now must
appear on an existing web page, it may compete with these ``order''
buttons for the viewer's attention. To compete effectively, the
Commission believes that including a button in the disclosure is
necessary.
The final amended Rule requires that the button contain the text
``Take me to the authorized source''. This text, in conjunction with
the disclosure text described above, will inform consumers that they
can click to obtain easily the free credit report they are entitled to
under federal law. The text's specific reference to ``the authorized
source'' will also avoid the possibility of having two identical
buttons on the page, which might lead a consumer to believe that
clicking on either button will take him or her to the same place.
Finally, the final amended Rule includes additional requirements to
strengthen prominence of the button, including requirements that: (1)
the background of the button must be the same color as the hyperlink to
AnnualCreditReport.com contained in the disclosure;\134\ (2) the text
``Take me to the authorized source'' must be in a high degree of
contrast to the background of the button; (3) the button must be
centered on its own line; and (4) the text of the button must be the
same size as the disclosure text (i.e., at least the same size as the
largest character on the web page).\135\
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\134\ The final amended Rule already requires that the hyperlink
to AnnualCreditReport.com be in a high degree of contrast to the
background of the box containing the disclosure; linking the color
of the button to the color of the hyperlink will ensure that both
elements will appear in high contrast to the background color of the
box. In addition, tying the two colors together will create a visual
cue that clicking on either link will get the consumer to the
authorized source. The Commission notes further that the requirement
that the two links be the same color applies to the page as the
consumer initially views it. For example, the Rule is not violated
if the two links appear initially in the same color, a consumer
clicks the hyperlink, returns to the site, and finds that the
hyperlink subsequently appears in a different color.
\135\ This requirement will ensure the prominence of the button
because the button must be large enough to accommodate the required
text in the required size.
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In sum, the Commission believes that the placement, content and
size requirements of the Internet website disclosure, coupled with the
general requirements for visual disclosures, will help ensure
prominence.\136\ Further, these requirements will make it easier for
consumers to distinguish the disclosure from competing messages on a
website and will enable consumers to easily access
AnnualCreditReport.com. The Commission will monitor and evaluate the
effectiveness of the disclosure required under the final amended Rule
and will consider additional changes, including revisiting the separate
landing page concept, as necessary to achieve the statutory purpose and
minimize consumer confusion.
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\136\ As discussed in the NPRM, Congress' use of the word
``prominent'' must be viewed as an expression of intent that the new
disclosures be more noticeable and more effective than those
currently required or used in advertising for ``free credit
reports.''
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e. Section 610.4(b)(5): Disclosures for Internet-hosted multi-media
advertising
Proposed section 610.4(b)(5) required Internet-hosted multi-media
advertisements for ``free credit reports'' disseminated in both audio
and visual formats to include the same disclosure as proposed for
Internet websites. It further required that the disclosure appear
simultaneously in the audio and visual part of the advertisement and
that the visual disclosure be in a type at least the same size as the
largest hyperlink to the company's website, display of the Uniform
Resource Locator of the company's website, or display of the company's
telephone number. This section was intended to address innovative forms
of advertising for ``free credit reports'' in multi-media platforms,
such as smart phone applications, YouTube.com, and comparable visual
and audio mechanisms, that may not be captured by other medium-specific
provisions of the Rule.
Several commenters offered suggestions regarding placement and
format of disclosures for Internet-hosted multi-media. For example,
NAAG suggested that the disclosure should be equally prominent and in
close proximity to the triggering claim of ``free'' or ``free credit
report.''\137\ NCLC suggested that the visual disclosures should be
displayed for the entire duration of the advertisement due to the wide
variation in the duration of advertisements in this medium.\138\ In
addition, Schwartz & Ballen opposed the type size requirement because
it is inconsistent with the requirement for television advertisements.
---------------------------------------------------------------------------
\137\ NAAG at 4-5.
\138\ NCLC at 6.
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In response to the comments, the Commission has modified the
proposal in a number of ways. Consistent with changes to the other
sections, the Commission has added a requirement that the disclosure be
made in close proximity to the first mention of a free credit report.
In addition, the Commission notes that the strengthened requirements
for prominence in section 610.4(a) of the final amended Rule address
the comments offering placement, format, and timing suggestions.\139\
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\139\ In response to Schwartz & Ballen's comment about the
inconsistencies between the size of the television and multi-media
disclosures, the Commission notes that the Internet-hosted multi-
media disclosures will likely be on smaller screens; therefore, the
differences in the specific type-size requirements are appropriate.
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Further, the Commission has modified the language of the disclosure
to be consistent with the changes to the print and Internet website
disclosures discussed in detail above. Accordingly, the Commission has
determined that the disclosure must include ``THIS NOTICE IS REQUIRED
BY LAW'' as a header followed by: ``You have the right to a free credit
report from AnnualCreditReport.com or 877-322-8228, the ONLY authorized
source under federal law.'' Finally, the Commission notes that not all
Internet-hosted multi-media ads will include text; thus, the final
amended Rule clarifies that the specific size requirement for the
visual disclosure applies only if there are characters on the
advertisement. In other instances,
[[Page 9740]]
the Rule's general prominence requirement applies.\140\
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\140\ The Commission notes that this section applies to
Internet-hosted multi-media advertising, as opposed to Internet
websites. Internet websites with audio and visual components must
comply with the disclosures for Internet websites.
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The Commission will monitor and evaluate the effectiveness of this
section and innovations in technology and advertising and will consider
additional changes as necessary to achieve the statutory mandate.
f. Section 610.4(b)(6): Disclosures for telephone requests
Proposed section 610.4(b)(6) addressed the content and timing of
the disclosures for when consumers call any telephone number, other
than the number of the centralized source, appearing in an
advertisement for ``free credit reports.'' Proposed section 610.4(b)(6)
required that companies offering ``free credit reports'' via telephone
make the disclosure at the beginning of the telephone call and include
the introductory sentence: ``You have reached [name of company or
service].''\141\
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\141\ The timing requirement drew from the Commission's
Telemarketing Sales Rule, which, among other things, prohibits
telemarketers from failing to disclose that the purpose of the call
is to sell goods or services and the nature of the goods or
services. 16 CFR 310.3.
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One commenter opposed the timing of the disclosure, asserting that
a telephone disclosure should be provided not at the beginning of the
call, but at the first mention of a ``free credit report,'' which
triggers the need for the disclosure.\142\ The Commission agrees. In
certain circumstances consumers may be making telephone requests about
advertisements for bundled products, and may want to ask about an
advertised product other than the ``free credit report.'' In this case,
a disclosure about ``free credit reports'' at the outset of the call
could be confusing. Instead, the Commission has decided to modify the
proposed section to make it consistent with the approach taken
throughout section 610.4 of the final amended Rule, which requires the
disclosure in close proximity to the triggering claim. Thus, section
610.4(b)(6) now requires the disclosures for inbound telemarketing to
be made at the first mention of a ``free credit report.'' In addition,
the final amended Rule modifies the language of the disclosure
consistent with the changes for print advertisements and Internet
websites, with one minor change. The required disclosure for inbound
telemarketing is: ``The following notice is required by law. You have
the right to a free credit report from AnnualCreditReport.com or 877-
322-8228, the only authorized source under federal law.'' The Internet
website and print disclosure text begins with the header ``This notice
is required by law''. Because the disclosure here is an audio one, it
would be difficult for the consumer to understand what the ``this'' in
``this notice'' is referring to. The ``following notice'' language will
provide a cue for the consumer that he or she is about to hear a
message required by law.
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\142\ Schwartz & Ballen at 7 (asserting that consumers will
likely interpret the required disclosure at the beginning of a
telephone call to mean that they have dialed an incorrect telephone
number and will likely terminate the telephone call).
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g. Section 610.4(b)(7): Telemarketing solicitations
Proposed section 610.4(b)(7) also required outbound telemarketers
to include the required disclosures at the beginning of their
telemarketing solicitations. Similar to the modifications made to
section 610.4(b)(6), the final amended Rule requires that any
telemarketing call made to a consumer that offers a ``free credit
report'' include, at the first mention of a ``free credit report,'' the
following disclosure: ``The following notice is required by law. You
have the right to a free credit report from AnnualCreditReport.com or
877-322-8228, the only authorized source under federal law.''\143\
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\143\ The Commission notes that the word ``free'' was
inadvertently omitted in the proposed Rule. Indeed, the Section-by-
Section discussion of the NPRM correctly defined the trigger as
``the first mention of `free credit report.''' 74 FR 52921-22. In
addition, as with the language for telephone requests, the language
of the disclosure required by this section has been modified
consistent with the changes for print advertisements.
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D. Elimination of Obsolete ``Roll-out'' Provisions of the Original Rule
As proposed in the NPRM, the final amended Rule eliminates the
``roll-out'' provisions contained in sections 610.2(i) and 610.3(g) of
the original Rule. When the Commission promulgated the original Rule,
it provided for a structured ``roll-out'' of the availability of free
annual file disclosures, beginning in the western states on December 1,
2004, and concluding with eastern states on September 1, 2005. This
original Rule provision is now obsolete and serves no useful purpose.
No comments were submitted on this issue. Accordingly, the final
amended Rule deletes sections 610.2(i) and 610.3(g) of the original
Rule.\144\
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\144\ In addition to the proposed revisions and additions
discussed above, proposed section 610.2(b)(2)(iv)(D) removes an
erroneous reference to ``national credit reporting agencies.''
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E. Effective Date and Interim Disclosures
The effective date of the Rule amendments shall be April 1, 2010,
except for the wording of the disclosures for television and radio
advertisements in sections 610.4(b)(1)(i) and (2), which shall be
September 1, 2010.
Section 205(b)(3) of the Act provides for interim disclosures for
advertisements in the event that the Rule is not ``finalized'' before
the nine-month deadline specified in the Act:
If an advertisement subject to section 612(g) of the [FCRA], as added
by this section, is made public after the 9-month deadline specified in
paragraph (1), but before the rule . . . is finalized, such
advertisements shall include the disclosure: ``Free credit reports are
available under Federal law at: `AnnualCreditReport.com.'''
The Commission has determined that the final amended Rule is
``finalized'' upon its effective date. The effective date is April 1,
2010, except for the wording of the disclosures for television and
radio advertisements. Prior to April 1, 2010, covered entities must
make the interim disclosures required by the Act in a prominent manner,
as required by the statute.
The Commission believes that a delay in the effective date for the
wording of the disclosures in television and radio advertisements is
warranted beyond April 2010. As one commenter noted, compliance with
the required interim disclosures followed by compliance with the
different final disclosures will impose additional costs for television
and radio advertisers: ``[I]t would require advertisers and advertising
agencies to create two sets of commercials: one set to run beginning on
February 22, 2010, and the second set to run when the Rule goes into
effect. This would substantially and unnecessarily increase the costs
to provide television and radio commercials.''\145\
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\145\ Manatt, Phelps & Phillips at 4-5.
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In order to reduce the cost burden on television and radio
advertisers, the Commission believes flexibility is warranted, and has
provided a later effective date for the wording of the disclosures for
television and radio advertisements. Accordingly, prior to September 1,
2010, television and radio advertisers must make the interim
disclosures required by the Act in a prominent manner, as required by
the statute and the final amended Rule. On and after September 1, 2010,
all television and radio advertisements
[[Page 9741]]
must include only the disclosures set forth in section 610.4(b)(1) and
(2) of the final amended Rule. The Commission notes, however, that
because the other provisions of the final amended Rule take effect on
April 1, 2010, television and radio advertisers must comply with those
provisions as of that date.\146\
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\146\ Manatt, Phelps & Phillips urged the Commission to make
clear that only the section 610.4(b)(1) and (2) disclosures - drawn
from section 205(a)(2) of the Act - should apply during the interim
period. The statute, however, sets forth the disclosures required
during the interim period. Further, the Commission believes that the
delayed effective date will ensure that television and radio
advertisers have ample time to come into compliance with the final
amended Rule, thus reducing compliance costs.
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IV. Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (``RFA'')\147\ requires the
Commission to provide an Initial Regulatory Flexibility Analysis
(``IRFA'') with a proposed rule, and a Final Regulatory Flexibility
Analysis (``FRFA'') with a final rule, unless the Commission certifies
that the rule will have no significant economic impact on a substantial
number of small entities.\148\
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\147\ 5 U.S.C. 601-612.
\148\ 5 U.S.C. 603-605.
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The Commission anticipates that the final amended Rule will have no
significant economic impact on a substantial number of small entities.
As discussed above, section 610.2 of the amended final Rule will apply
exclusively to the nationwide CRAs that currently operate and maintain
the centralized source pursuant to section 612(a) of the FCRA, 15
U.S.C. 1681j(a). None of the three nationwide CRAs is a small entity.
Further, section 610.4 of the final amended Rule sets forth disclosures
concerning the advertising or marketing of ``free credit reports,''
pursuant to section 205 of the Act. The Commission believes that the
universe of entities offering ``free credit reports'' is likely to be
small, comprised mostly of the three nationwide CRAs and their
subsidiaries and affiliates. As explained more fully below, the
Commission believes the number of small entities offering ``free credit
reports'' is likely to be insubstantial and, therefore, the overall
economic impact of the final amended Rule is not likely to have a
significant impact on a substantial number of small entities.
Accordingly, the Commission certifies that the final amended Rule will
have no significant impact on a substantial number of small entities.
Nonetheless, to ensure that no such impact, if any, has been
overlooked, the Commission had conducted the following FRFA, as
follows.
A. Need for and objectives of the final amended Rule
The final amended Rule implements section 205 of the Act, which
mandates that advertisements offering ``free credit reports'' contain
prominent disclosures informing consumers that federally mandated free
annual file disclosures are available at AnnualCreditReport.com.
Further, the Free Reports Rule requires, among other things, a
centralized source through which consumers may request a free annual
file disclosure from each nationwide CRA. Amendments to the Rule
eliminate practices that interfere with consumers' ability to obtain
free annual file disclosures through the centralized source, in
violation of section 610.2(g) of the original Rule. Finally, the final
amended Rule eliminates obsolete provisions from the original Rule that
no longer serve any purpose.
B. Significant issues raised by public comment, summary of agency's
assessment of these issues, and changes, if any, made in response to
such comments
The Commission received over 1,080 comments in response to the
NPRM, mostly from consumers who either supported the proposed Rule, or
urged the Commission to take additional action to stem the deceptive
and confusing marketing of ``free credit reports.'' In particular, many
consumers and consumer advocates supported the proposed delay in
advertising of ``free credit reports'' on the centralized source until
after consumers received their free annual file disclosures. Although
the Commission considered the view of business interests opposing a
delay in advertising on the centralized source, the Commission has
adopted this proposal in the final amended Rule because the record
reveals that consumers seeking their free credit report are confused by
such advertising. The Commission, however, did not ban advertising in
connection with the dissemination of free annual file disclosures, a
position advocated by some consumers and consumer advocates. As
explained in the Statement of Basis and Purpose, delaying advertising
is a less restrictive means of addressing consumer confusion.
Accordingly, the Commission believes that the delay in advertising on
the centralized source strikes the appropriate balance between ensuring
consumers' unfettered right to receive free annual file disclosures and
the desire on the part of business to advertise other useful products
and services (such as credit scores) to consumers.
The Commission also received comments both supporting and opposing
the proposal that disclosures in connection with Internet
advertisements appear on a separate landing page. The arguments for and
against such a requirement are discussed in depth above in the Section-
by-Section discussion. After considering these comments, the Commission
agreed with many of the commenters that the ``separate landing page''
requirement may be confusing to consumers, some of whom may believe the
unexpected appearance of such a page means it is a scam, such as an
unauthorized pop-up or, worse, a ``phishing'' website - one that mimics
a true website in order to capture consumers' information. The
Commission has decided that the ``separate landing page'' requirement
is unnecessary to accomplish the goal of reducing deceptive marketing
of ``free credit reports;'' rather, for Internet websites, disclosures
on each page on which the triggering claims for ``free credit reports''
appear, as well as on each page of the ordering process, are sufficient
to accomplish that goal.
The Commission also received comments on the scope of the proposed
definition of ``free credit report,'' as well as the language of the
specific proposed required disclosures. The Commission has revised both
the definition of ``free credit report'' and the required disclosures
in light of these comments. Specifically, the definition of ``free
credit report'' in the final amended Rule makes clear that it pertains
only to file disclosures obtained directly or indirectly from a
nationwide CRA (as opposed to a specialty CRA, for example) and that
the definition covers free credit reports bundled with trial offers of
other products. Further, as discussed at length in the Section-by-
Section discussion above, the language of the required disclosures has
been clarified in several instances, adding greater consistency and
precision and tracking more closely Commission precedent in this field.
C. Description and estimate of the number of small entities subject to
the final amended Rule or explanation why no estimate is available
As noted above, section 610.2 of the final amended Rule limits
advertising through the centralized source and prohibits other conduct
in connection with the provision of annual file disclosures to
consumers. By its terms, amended section 610.2 will apply exclusively
to the nationwide CRAs that currently operate and maintain the
[[Page 9742]]
centralized source pursuant to section 612(a) of the FCRA, 15 U.S.C.
1681j(a). None of the three nationwide CRAs is a small entity.\149\
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\149\ Covered entities are classified as small businesses if
they satisfy the Small Business Administration's relevant size
standards, as determined by the Small Business Size Standards
component of the North American Industry Classification System
(``NAICS''). The closest NAICS size standard relevant to the final
amended Rule is for ``credit bureaus,'' which is $7 million maximum
in annual receipts. See (http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sstd_tablepdf.pdf). See also 69 FR
34568, at 35494-95 (June 24, 2004) (``[T]he Commission is aware of
three entities that meet the rule definition . . . . of a
`nationwide consumer reporting agency.' The Commission has concluded
that none of these is a small entity.''). In the original Notice of
Proposed Rulemaking for the Free Reports Rule, the Commission
specifically asked several questions related to the existence,
number and nature of small business entities covered by the proposed
Free Reports Rule. The Commission received no comments responsive to
those questions. 69 FR 35495. No additional data has been provided
in response to the NPRM.
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In addition, section 610.4 of the final amended Rule sets forth
disclosures concerning the advertising or marketing of ``free credit
reports,'' pursuant to section 205 of the Act. The universe of entities
offering ``free credit reports'' is small, comprised mostly of the
three nationwide CRAs and their subsidiaries and affiliates. Based upon
its knowledge of industry practices and members, Commission staff
estimates that there may also be a small number of independently
operating CRAs or resellers of consumer reports that, in theory, might
offer ``free credit reports'' subject to the final amended Rule. For
example, when the original Rule was first implemented, several
resellers of reports appeared, using imposter websites, such as those
misspelling AnnualCreditReport.com, or using sound-alike websites names
that did not link to AnnualCreditReport.com. In 2005, the Commission
staff sent warning letters to the known operators of those suspect
sites, totaling 29 operators. This suggests that the total number of
independent resellers of reports may be small and that the number of
small entities offering ``free credit reports'' is likely to be
insubstantial.
Nonetheless, the Commission specifically sought comment in the NPRM
``on the number of entities likely to be affected by the proposed
section 610.4 to the Rule and the number of those, if any, that are
small entities.''\150\ The Commission received no responsive comments.
The lack of additional evidence on both the number of small entities
offering ``free credit reports'' and how the proposed Rule might impact
small entities, tends to support the Commission staff's initial
assessment that few, if any, independently operating sellers or
resellers of credit reports are likely to be small entities.
---------------------------------------------------------------------------
\150\ 74 FR at 52923-24.
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D. Description of the projected reporting, recordkeeping, and other
compliance requirements of the final amended Rule, including an
estimate of the classes of small entities that will be subject to the
final amended Rule and the type of professional skills that will be
necessary to comply
Section 610.2 of the final amended Rule limits advertising by the
CRAs on the centralized source until after consumers have obtained
their free annual file disclosures, and prohibits practices that
interfere with consumers' ability to obtain free annual file
disclosures through the centralized source. As discussed more fully
below in connection with the Paperwork Reduction Act, these amendments
to the Rule will impose no more than a de minimis, one-time burden of
12 hours to be completed by professional technical personnel and/or
management personnel.
Further, section 610.4 of the final amended Rule sets forth
statutorily-mandated advertising disclosures for offering of ``free
credit reports'' in television and radio advertisements, as well as
other media, including print and Internet advertising. The amendments
to the original Rule pertain to all advertisements for ``free credit
reports'': the Act does not distinguish between large and small
entities that advertise for ``free credit reports,'' nor does the Act
contemplate any exemptions to the disclosure requirements. Most likely,
these disclosures will be prepared by professional and management
personnel. At the same time, section 610.4 imposes no reporting or
recordkeeping obligations.
E. Steps the agency has taken to minimize any significant economic
impact on small entities, consistent with the stated objectives of the
applicable statutes, including the factual, policy, and legal reason(s)
for selecting alternative(s) finally adopted, and why each of the
significant alternatives, if any, was rejected.
The Commission believes that the Rule amendments are likely to have
an insignificant impact on small entities. Nonetheless, the Commission
solicited comment on alternatives that would minimize compliance costs.
The Commission received no information or suggestions in response to
those questions. As explained in the statement of basis and purpose
above, however, the Commission has made certain changes to the amended
Rule that will reduce costs for all covered entities, including any
small entities that may be subject to the final amended Rule. These
include elimination of the proposed separate landing page requirement
for advertisements for free annual file disclosures on Internet
websites.
VI. Paperwork Reduction Act
In conjunction with the NPRM, the Commission submitted the proposed
amended Rule and a Supporting Statement for Information Collection
Provisions to the Office of Management and Budget (``OMB'') for review
under the Paperwork Reduction Act (``PRA''), 44 U.S.C. 3501-3521. The
OMB has approved the Rule's information collection requirements through
November 30, 2012 (OMB Control No. 3084-0128).
In the NPRM, the Commission invited comments to: (1) evaluate
whether the proposed collections of information are necessary for the
proper performance of the functions of the Commission, including
whether the information will serve a useful purpose; (2) evaluate the
accuracy of the Commission's estimate of the burden of the proposed
collection of information, including the validity of the methodology
and assumptions used; (3) enhance the quality, utility, and clarity of
the information to be collected; and (4) minimize the burden of the
collections of information on those who must comply, including through
the use of appropriate automated, electronic, mechanical, or other
technological techniques, or other forms of information technology.
While commenters questioned the appropriateness of various proposals in
the NPRM, no commenters specifically sought to answer the data
collection questions posed above.
A. Original Rule
The original Rule required nationwide CRAs and nationwide specialty
CRAs to disclose information to third parties by requiring those
consumer reporting agencies to provide to consumers, upon request, one
free annual file disclosure. It also required the nationwide CRAs to
provide consumers with the ability to request this disclosure through a
centralized Internet website, a toll-free telephone number, and a
postal address. In addition, the original Rule required the nationwide
CRAs to establish a standardized form for Internet and mail requests,
and it provided a model standardized form that may be used to comply
with that requirement.
[[Page 9743]]
B. Section 610.4 of the Final Amended Rule
Section 610.4 of the final amended Rule requires all advertisements
for ``free credit reports'' to contain certain prescribed disclosures
tailored to the medium used. As such, these disclosures do not
constitute a collection of information, as defined by OMB's regulations
that implement the PRA.\151\ Accordingly, implementation of section 205
of the Act presents no associated PRA collection of information burden.
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\151\ See 5 CFR 1320.3(c)(2) (excluding from the definition of
``collection of information'' the ``public disclosure of information
originally supplied by the Federal government to the recipient for
the purpose of disclosure to the public'').
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C. Amended Section 610.2 of the Final Amended Rule
Section 610.2 of the final amended Rule is designed to prevent
interference with consumers' ability to obtain their free annual file
disclosures through the centralized source, as permitted by law.
Amended section 610.2 does not modify the nationwide CRAs' original
obligation to provide consumers with free annual file disclosures upon
request. Nor is amended section 610.2 likely to increase or decrease
the estimated number of annual file disclosures made available to
consumers, whether through the Internet, telephone, or mail. Rather,
the amendments are intended to make it easier for consumers to obtain
their free annual file disclosures from the centralized source without
distracting advertising, including advertising leading consumers to
commercial websites.
Moreover, amended section 610.2 is unlikely to increase
significantly the administrative burden on the nationwide CRAs
providing consumers with annual file disclosures through the
centralized source. As discussed above, amended section 610.2 requires
the nationwide CRAs to remove links on the initial page of the
centralized source website to their commercial or proprietary websites.
Finally, if a nationwide CRA chooses to advertise products and services
- such as credit scores or credit monitoring - through the centralized
source, it can do so only after the consumer has obtained his or her
free annual file disclosure. Accordingly, in order to advertise through
the centralized source, the nationwide CRAs must establish a mechanism
to verify that consumers have completed their transaction.
1. Estimated Hours Burden and Associated Labor Cost
The above-noted administrative amendments to section 610.2 will
impose no more than a de minimis, one-time burden, as the three
nationwide CRAs reconfigure the centralized source and their own
proprietary websites. Commission staff estimates that these steps will
take approximately 12 hours to complete per CRA.\152\
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\152\ This figure derives from consultation with FTC staff
experienced in web design and operations.
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Commission staff estimates labor costs by applying appropriate
estimated hourly cost figures to the burden hours described above. It
is difficult to calculate with precision the labor costs associated
with the final amended Rule, because they entail varying compensation
levels of management (e.g., administrative services, computer and
information systems, systems analysts, and network and computer system
administrators). Commission staff assumes that professional technical
personnel and/or management personnel will implement the amendments, at
an hourly rate of $39.42.\153\
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\153\ See (http://www.bls.gov/ncs/ncswage2008.htm#Wage_Tables)
(National Compensation Survey: Occupational Earnings in the United
States 2008, US Department of Labor released August 2009, Bulletin
2720, Table 3) (``Full-time civilian workers,'' mean and median
hourly wages). The above amount is an average of the mean hourly
wages of administrative services managers, computer and information
systems managers, computer systems analysts, and network and
computer systems administrators.
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Based upon the above estimates and assumptions, the total labor
cost for each of the three nationwide CRAs to comply with the
amendments to the Rule is $473.00 (12 hours x $39.42) or, cumulatively,
$1,419.
2. Estimated Capital/Other Non-Labor Cost Burden
Commission staff believes that the Rule amendments will not impose
any capital or other non-labor costs. Commission staff assumes that the
nationwide CRAs will continue their current practice of using third-
party contractors (instead of their own employees) to fulfill consumer
requests for annual file disclosures, pursuant to the Rule. Because of
the way these contracts are typically established, these costs will
likely be incurred on a continuing basis, and will be calculated based
on the number of annual file disclosures requested by consumers. As
discussed above, Commission staff believes that the amendments, while
making it easier for consumers to obtain their free annual file
disclosures from the centralized source, will not increase the burden
on industry to supply such file disclosures, nor affect the overall
number of file disclosures provided to consumers annually, because
consumers will likely be redirected from websites that require
consumers to pay for their ``free credit report'' to the centralized
source.
Appendix A
List of Non-Consumer NPRM Commenters
American Express Company (``American Express'')
AOL, Microsoft, Yahoo! (``AOL, Microsoft, Yahoo!'')
Association of National Advertisers (``ANA'')
Representative John Boozman (``Representative Boozman'')
Chamber of Commerce of the United States of America (``U.S. Chamber
of Commerce'')
Consumer Data Industry Association (``CDIA'')
Council of Better Business Bureaus (``BBB'')
Direct Marketing Association (``DMA'')
Empire Justice Center (``Empire Justice'')
Evergreen Credit Reporting, Inc. (``Evergreen'')
Experian Information Solutions, Inc. (``Experian'')
Bill McCollum, Attorney General, State of Florida (``State of
Florida'')
Professor David A. Friedman (``Friedman'')
Interactive Advertising Bureau (``IAB'')
Intersections Inc. (``Intersections'')
Senator Carl Levin (``Senator Levin'')
Lori Swanson, Attorney General, State of Minnesota (``State of
Minnesota'')
Mannatt, Phelps & Phillips (``Mannatt, Phelps & Phillips'')
National Association of Attorneys General (``NAAG'')
National Business Coalition for E-Commerce and Privacy (``E-
Commerce'')
National Consumer Law Center (``NCLC'')
Mindy A. Bockstein, Chairperson and Executive Director, State of New
York, Consumer Protection Board (``NYCPB'')
Representative Mike Ross (``Representative Ross'')
Senator Charles Schumer (``Senator Schumer'')
Schwartz & Ballen LLP (``Schwartz & Ballen'')
TransUnion (``TransUnion'')
FINAL RULE
List of Subjects in 16 CFR Part 610
Consumer reporting agencies, Consumer reports, Credit, Fair Credit
Reporting Act, Trade practices.
Authority and Issuance
0
For the reasons discussed in the statement of basis and purpose, the
Federal Trade Commission amends title
[[Page 9744]]
16, Chapter I, Subchapter F, of the Code of Federal Regulations, part
610, as follows:
PART 610--FREE ANNUAL FILE DISCLOSURES
0
1. The authority citation for part 610 is revised to read as follows:
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.
0
2. Revise Sec. 610.2 to read as follows:
Sec. 610.2 Centralized source for requesting annual file disclosures
from nationwide consumer reporting agencies.
(a) Purpose. The purpose of the centralized source is to enable
consumers to make a single request to obtain annual file disclosures
from all nationwide consumer reporting agencies, as required under
section 612(a) of the Fair Credit Reporting Act, 15 U.S.C. 1681j(a).
(b) Establishment and operation. All nationwide consumer reporting
agencies shall jointly design, fund, implement, maintain, and operate a
centralized source for the purpose described in paragraph (a) of this
section. The centralized source required by this part shall:
(1) Enable consumers to request annual file disclosures by any of
the following request methods, at the consumers' option:
(i) A single, dedicated Internet website,
(ii) A single, dedicated toll-free telephone number; and
(iii) Mail directed to a single address;
(2) Be designed, funded, implemented, maintained, and operated in a
manner that:
(i) Has adequate capacity to accept requests from the reasonably
anticipated volume of consumers contacting the centralized source
through each request method, as determined in accordance with paragraph
(c) of this section;
(ii) Collects only as much personally identifiable information as
is reasonably necessary to properly identify the consumer as required
under the Fair Credit Reporting Act, section 610(a)(1), 15 U.S.C.
1681h(a)(1), and other applicable laws and regulations, and to process
the transaction(s) requested by the consumer;
(iii) Provides information through the centralized source website
and telephone number regarding how to make a request by all request
methods required under Sec. 610.2(b)(1) of this part; and
(iv) Provides clear and easily understandable information and
instructions to consumers, including, but not necessarily limited to:
(A) Providing information on the progress of the consumer's request
while the consumer is engaged in the process of requesting a file
disclosure;
(B) For a website request method, providing access to a ``help'' or
``frequently asked questions'' screen, which includes specific
information that consumers might reasonably need to request file
disclosures, the answers to questions that consumers might reasonably
ask, and instructions whereby a consumer may file a complaint with the
centralized source and with the Federal Trade Commission;
(C) In the event that a consumer requesting a file disclosure
through the centralized source cannot be properly identified in
accordance with the Fair Credit Reporting Act, section 610(a)(1), 15
U.S.C. 1681h(a)(1), and other applicable laws and regulations,
providing a statement that the consumers' identity cannot be verified;
and directions on how to complete the request, including what
additional information or documentation will be required to complete
the request, and how to submit such information; and
(D) A statement indicating that the consumer has reached the
website or telephone number for ordering free annual credit reports as
required by federal law; and
(3) Make available to consumers a standardized form established
jointly by the nationwide consumer reporting agencies, which consumers
may use to make a request for an annual file disclosure, either by mail
or on the Internet website required under Sec. 610.2(b)(1) of this
part, from the centralized source required by this part. The form
provided at 16 CFR Part 698, Appendix D, may be used to comply with
this section.
(c) Requirement to anticipate. The nationwide consumer reporting
agencies shall implement reasonable procedures to anticipate, and to
respond to, the volume of consumers who will contact the centralized
source through each request method, to request, or attempt to request,
a file disclosure, including developing and implementing contingency
plans to address circumstances that are reasonably likely to occur and
that may materially and adversely impact the operation of the
nationwide consumer reporting agency, a centralized source request
method, or the centralized source.
(1) The contingency plans required by this section shall include
reasonable measures to minimize the impact of such circumstances on the
operation of the centralized source and on consumers contacting, or
attempting to contact, the centralized source.
(i) Such reasonable measures to minimize impact shall include, but
are not necessarily limited to:
(A) The extent reasonably practicable under the circumstances,
providing information to consumers on how to use another available
request method;
(B) The extent reasonably practicable under the circumstances,
communicating, to a consumer who attempts but is unable to make a
request, the fact that a condition exists that has precluded the
centralized source from accepting all requests, and the period of time
after which the centralized source is reasonably anticipated to be able
to accept the consumers' request for an annual file disclosure; and
(C) Taking all reasonable steps to restore the centralized source
to normal operating status as quickly as reasonably practicable under
the circumstances.
(ii) Reasonable measures to minimize impact may also include, as
appropriate, collecting request information but declining to accept the
request for processing until a reasonable later time, provided that the
consumer is clearly and prominently informed, to the extent reasonably
practicable under the circumstances, of when the request will be
accepted for processing.
(2) A nationwide consumer reporting agency shall not be deemed in
violation of Sec. 610.2(b)(2)(i) of this part if a centralized source
request method is unavailable to accept requests for a reasonable
period of time for purposes of conducting maintenance on the request
method, provided that the other required request methods remain
available during such time.
(d) Disclosures required. If a nationwide consumer reporting agency
has the ability to provide a consumer report to a third party relating
to a consumer, regardless of whether the consumer report is owned by
that nationwide consumer reporting agency or by an associated consumer
reporting agency, that nationwide consumer reporting agency shall, upon
proper identification in compliance with section 610(a)(1) of the Fair
Credit Reporting Act, 15 U.S.C. 1681h(a)(1), provide an annual file
disclosure to such consumer if the consumer makes a request through the
centralized source.
(e) High request volume and extraordinary request volume - (1) High
request volume. Provided that a nationwide consumer reporting agency
has implemented reasonable procedures developed in accordance with
paragraph (c) of this section, entitled
[[Page 9745]]
``requirement to anticipate,'' the nationwide consumer reporting agency
shall not be deemed in violation of paragraph (b)(2)(i) of this section
for any period of time in which a centralized source request method,
the centralized source, or the nationwide consumer reporting agency
experiences high request volume, if the nationwide consumer reporting
agency:
(i) Collects all consumer request information and delays accepting
the request for processing until a reasonable later time; and
(ii) Clearly and prominently informs the consumer of when the
request will be accepted for processing.
(2) Extraordinary request volume. Provided that the nationwide
consumer reporting agency has implemented reasonable procedures
developed in compliance with paragraph (c) of this section, entitled
``requirement to anticipate,'' the nationwide consumer reporting agency
shall not be deemed in violation of paragraph (b)(2)(i) of this section
for any period of time during which a particular centralized source
request method, the centralized source, or the nationwide consumer
reporting agency experiences extraordinary request volume.
(f) Information use and disclosure. Any personally identifiable
information collected from consumers as a result of a request for
annual file disclosure, or other disclosure required by the Fair Credit
Reporting Act, made through the centralized source, may be used or
disclosed by the centralized source or a nationwide consumer reporting
agency only:
(1) To provide the annual file disclosure or other disclosure
required under the FCRA requested by the consumer;
(2) To process a transaction requested by the consumer at the same
time as a request for annual file disclosure or other disclosure;
(3) To comply with applicable legal requirements, including those
imposed by the Fair Credit Reporting Act and this part; and
(4) To update personally identifiable information already
maintained by the nationwide consumer reporting agency for the purpose
of providing consumer reports, provided that the nationwide consumer
reporting agency uses and discloses the updated personally identifiable
information subject to the same restrictions that would apply, under
any applicable provision of law or regulation, to the information
updated or replaced.
(g) Communications provided through centralized source.
(1) Any advertising or marketing for products or services, any
communications or instructions that advertise or market any products or
services, or any request to establish an account through the
centralized source must be delayed until after the consumer has
obtained his or her annual file disclosure.
(i) In the case of requests made by mail or telephone, the consumer
``has obtained his or her annual file disclosure'' when the file
disclosure is mailed, and the nationwide consumer reporting agency may
include advertising for other products or services with the file
disclosure.
(ii) In the case of requests made through the centralized source
Internet website, the consumer ``has obtained his or her annual file
disclosure'' when the file disclosure is delivered to the consumer
through the Internet, and the nationwide consumer reporting agency may
include advertising for other products or services with the file
disclosure.
(2) Any communications, instructions, or permitted advertising or
marketing shall not interfere with, detract from, contradict, or
otherwise undermine the purpose of the centralized source stated in
paragraph (a) of this section.
(3) Examples of interfering, detracting, inconsistent, and/or
undermining communications include:
(i) Centralized source materials that represent, expressly or by
implication, that a consumer must purchase a paid product or service in
order to receive or to understand the annual file disclosure;
(ii) Centralized source materials that represent, expressly or by
implication, that annual file disclosures are not free, or that
obtaining an annual file disclosure will have a negative impact on the
consumers' credit standing; and
(iii) Centralized source materials that falsely represent,
expressly or by implication, that a product or service offered
ancillary to receipt of a file disclosure, such as a credit score or
credit monitoring service, is free, or fail to clearly and prominently
disclose that consumers must cancel a service, advertised as free for
an initial period of time, to avoid being charged, if such is the case.
(h) Other practices prohibited through the centralized source. The
centralized source shall not:
(1) Contain hyperlinks to commercial or proprietary websites until
after the consumer has obtained his or her annual file disclosure,
except for technical transfers to a web page on which consumers can
request their free annual file disclosure; provided, however, that no
hyperlinks to commercial websites shall appear on the initial page of
the centralized source.
(2) Require consumers to set up an account in connection with
obtaining an annual file disclosure; or
(3) Ask or require consumers to agree to terms or conditions in
connection with obtaining an annual file disclosure.
Sec. 610.3 [Amended]
0
3. In Sec. 610.3, remove paragraph (g).
0
4. Add Sec. 610.4 to read as follows:
Sec. 610.4 Prevention of deceptive marketing of free credit reports.
(a) For purposes of this section:
(1) AnnualCreditReport.com and 877-322-8228 means the Uniform
Resource Locator address ``AnnualCreditReport.com'' and toll-free
telephone number, 877-322-8228. These are the locator address and toll-
free telephone number currently used by the centralized source. If the
locator address or toll-free telephone number changes in the future,
the new address or telephone number shall be substituted within a
reasonable time.
(2) Free credit report means a file disclosure prepared by or
obtained from, directly or indirectly, a nationwide consumer reporting
agency (as defined in section 603(p) of the Fair Credit Reporting Act),
that is represented, either expressly or impliedly, to be available to
the consumer at no cost if the consumer purchases a product or service,
or agrees to purchase a product or service subject to cancellation.
(3) General requirements for disclosures. The disclosures covered
by paragraph (b) of this section shall contain only the prescribed
content and comply with the following requirements:
(i) All disclosures shall be prominent;
(ii) All disclosures shall be made in the same language as that
principally used in the advertisement;
(iii) Visual disclosures shall be easily readable; in a high degree
of contrast from the immediate background on which it appears; in a
format so that the disclosure is distinct from other text, such as
inside a border; in a distinct type style, such as bold; and parallel
to the base of the advertisement or screen;
(iv) Audio disclosures shall be delivered in a slow and deliberate
manner and in a reasonably understandable volume and pitch;
(v) Program-length television, radio, or Internet-hosted multi-
media advertisement disclosures shall be made at the beginning, near
the middle, and at the end of the advertisement; and
[[Page 9746]]
(vi) Nothing contrary to, inconsistent with, or that undermines the
required disclosures shall be used in any advertisement in any medium,
nor shall any audio, visual, or print technique be used that is likely
to detract significantly from the communication of any disclosure.
(b) Medium-specific disclosures. All offers of free credit reports
shall prominently include the disclosures required by this section.
(1) Television advertisements.
(i) All advertisements for free credit reports broadcast on
television shall include the following disclosure in close proximity to
the first mention of a free credit report: ``This is not the free
credit report provided for by Federal law.''
(ii) The disclosure shall appear at the same time in the audio and
visual part of the advertisement. The visual disclosure shall be at
least four percent of the vertical picture height and appear for a
minimum of four seconds.
(2) Radio advertisements. All advertisements for free credit
reports broadcast on radio shall include the following disclosure in
close proximity to the first mention of a free credit report: ``This is
not the free credit report provided for by Federal law.''
(3) Print advertisements. All advertisements for free credit
reports in print shall include the following disclosure in the form
specified below and in close proximity to the first mention of a free
credit report. The first line of the disclosure shall be centered and
contain only the following language: ``THIS NOTICE IS REQUIRED BY
LAW''. Immediately below the first line of the disclosure the following
language shall appear: ``You have the right to a free credit report
from AnnualCreditReport.com or 877-322-8228, the ONLY authorized source
under federal law.'' Each letter of the disclosure text shall be, at
minimum, one-half the size of the largest character used in the
advertisement.
(4) Internet websites. Any website offering free credit reports
must display the disclosure set forth in paragraphs 610.4(b)(4)(i),
(ii), and (v) of this section on each page that mentions a free credit
report and on each page of the ordering process. This disclosure shall
be visible across the top of each page where the disclosure is required
to appear; shall appear inside a box; and shall appear in the form
specified below:
(i) The first element of the disclosure shall be a header that is
centered and shall consist of the following text: ``THIS NOTICE IS
REQUIRED BY LAW. Read more at FTC.GOV''. Each letter of the header
shall be one-half the size of the largest character of the disclosure
text required by 610.4(b)(4)(ii). The reference to FTC.GOV shall be an
operational hyperlink to (www.ftc.gov/freereports), underlined, and in
a color that is a high degree of contrast from the color of the other
disclosure text and background color of the box;
(ii) The second element of the disclosure shall appear below the
header required by paragraph 610.4(b)(4)(i) and shall consist of the
following text: ``You have the right to a free credit report from
AnnualCreditReport.com or 877-322-8228, the ONLY authorized source
under federal law.'' The reference to AnnualCreditReport.com shall be
an operational hyperlink to the centralized source, underlined, and in
the same color as the hyperlink to FTC.GOV required in paragraph
610.4(b)(4)(i);
(iii) The color of the text required by paragraphs 610.4(b)(4)(i)
and (ii) shall be in a high degree of contrast with the background
color of the box;
(iv) The background of the box shall be a solid color in a high
degree of contrast from the background of the page and the color shall
not appear elsewhere on the page;
(v) The third element of the disclosure shall appear below the text
required by paragraph 610.4(b)(4)(ii) and shall be an operational
hyperlink to AnnualCreditReport.com that appears as a centered button
containing the following language: ``Take me to the authorized
source''. The background of this button shall be the same color as the
hyperlinks required by paragraphs 610.4(b)(4)(i) and (ii) and the text
shall be in a high degree of contrast to the background of the button;
(vi) Each character of the text in paragraphs 610.4(b)(4)(ii) and
(v) shall be, at minimum, the same size as the largest character on the
page, including characters in an image or graphic banner;
(vii) Each character of the disclosure shall be displayed as plain
text and in a sans serif font, such as Arial; and
(viii) The space between each element of the disclosure required in
paragraphs 610.4(b)(i), (ii), and (v) shall be, at minimum, the same
size as the largest character on the page, including characters in an
image or graphic banner. The space between the boundaries of the box
and the text or button required in paragraphs 610.4(b)(i), (ii), and
(v) shall be, at minimum, twice the size of the vertical height of the
largest character on the page, including characters in an image or
graphic banner.
(5) Internet-hosted multi-media advertising. All advertisements for
free credit reports disseminated through Internet-hosted multi-media in
both audio and visual formats shall include the following disclosure in
the form specified below and in close proximity to the first mention of
a free credit report. The first line of the disclosure shall be
centered and contain only the following language: ``THIS NOTICE IS
REQUIRED BY LAW.''. Immediately below the first line of the disclosure
the following language shall appear: ``You have the right to a free
credit report from AnnualCreditReport.com or 877-322-8228, the ONLY
authorized source under federal law.'' The disclosure shall appear at
the same time in the audio and visual part of the advertisement. If the
advertisement contains characters, the visual disclosure shall be, at
minimum, the same size as the largest character on the advertisement.
(6) Telephone requests. When consumers call any telephone number,
other than the number of the centralized source, appearing in an
advertisement that represents free credit reports are available at the
number, consumers must receive the following audio disclosure at the
first mention of a free credit report: ``The following notice is
required by law. You have the right to a free credit report from
AnnualCreditReport.com or 877-322-8228, the only authorized source
under federal law.''
(7) Telemarketing solicitations. When telemarketing sales calls are
made that include offers of free credit reports, the call must include
at the first mention of a free credit report the following disclosure:
``The following notice is required by law. You have the right to a free
credit report from AnnualCreditReport.com or 877-322-8228, the only
authorized source under federal law.''
(c) Effective date. This section is effective April 2, 2010, except
for the wording of the disclosures for television and radio
advertisements (paragraphs 610.4(b)(1)(i) and (2)), which are effective
on September 1, 2010.
By direction of the Commission.
Donald S. Clark
Secretary
[FR Doc. 2010-4273 Filed 3-2-10: 8:45 am]
BILLING CODE 6750-01-S