FTC Seeks Comments on Proposed Free Credit Report Regulation

The Federal Trade Commission is seeking public comment on a proposed rule regarding free annual credit reports under the Fair and Accurate Credit Transactions Act (FACTA) and the Fair Credit Reporting Act (FCRA). FACTA, which was enacted on December 4, 2003, amends the FCRA and requires, among other things, that nationwide consumer reporting agencies (CRAs) provide to consumers, upon request, a free copy of their credit reports once every 12 months. The proposed rule is subject to a 30-day public comment period. At the close of the comment period, the Commission will review the comments, modify the proposed rule as appropriate, and issue the rule as final.

Congress has directed the FTC to issue regulations to establish a “centralized source” and standardized form for credit report requests to nationwide CRAs. There are currently three nationwide CRAs – i.e., Equifax, Experian, and TransUnion. The centralized source is intended to enable consumers to order all three reports at one time. The FTC’s proposed rule requires that the centralized source for free credit report requests to the three nationwide CRAs be available to consumers through an Internet Web site, a toll-free telephone number, and a postal address.

As required by FACTA, the FTC’s proposed rule provides for an orderly transition to full operation of the centralized source. The transition is intended to protect the nationwide CRAs from receiving a volume of free credit report requests beyond their capacity to process, and to ensure that consumers can get timely credit reports for other purposes. The FTC proposes a cumulative, regional roll-out over nine months, from west to east, beginning December 1, 2004. Under this plan, consumers will become eligible on the following schedule: Western states (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming) will become eligible on December 1, 2004; Midwestern states (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) will become eligible on March 1, 2005; Southern states (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, Oklahoma, South Carolina, Tennessee, and Texas ) will become eligible on June 1, 2005; and Eastern states (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, Vermont, Virginia, and West Virginia), Puerto Rico, and all U.S. territories become eligible on September 1, 2005. Therefore, the entire transition would be complete by September 1, 2005.

The proposed rule also provides that in operating the centralized source, nationwide CRAs must:

• Have adequate capacity to accept requests from the reasonably anticipated volume of consumers making requests;
• Collect only as much information as necessary to process requests;
• Provide clear and easily understandable information and instructions on how to make requests;
• Comply with the FTC Safeguards Rule for Information Security; and
• Ensure that any communications made through the centralized source, including any advertising or marketing, does not interfere with, detract from, contradict, or undermine the centralized source.

The Commission is seeking comment on the adequacy and appropriateness of these provisions of the proposed rule.

The proposed rule gives nationwide CRAs relief from the requirement that they have adequate capacity to provide consumers free reports during times when there is an extraordinary volume of requests. In those circumstances, the proposed rule would permit nationwide CRAs to ask consumers to return to the centralized source at a reasonable later time, or to place the request in a queue for later processing.

FACTA similarly requires nationwide specialty CRAs to provide consumers, upon request, a free copy of their file disclosures once every 12 months. Nationwide specialty CRAs are CRAs that maintain specific types of files on consumers, such as employment history, tenant history, medical records, and insurance claims. The FTC’s proposed rule establishes a “streamlined process” by which consumers may request free file disclosures from nationwide specialty CRAs. Under the proposed rule, each nationwide specialty CRA is required to maintain a toll-free telephone number for such consumer requests.

The Commission’s proposed rule does not require CRAs that “compile and maintain files on consumers on substantially a nationwide basis” to provide consumers with free reports. The Commission seeks comment on those entities and whether they should be required to give consumers free reports.

Beginning Friday, March 19, comments can be filed electronically at http://www.regulations.gov. Commentors should select “Federal Trade Commission” at “Search for Open Regulations,” locate the summary of this Notice, click on “Submit a Comment on this Regulation,” and complete the form. Comments must be received by April 16, 2004. Written comments should refer to “FACTA Free File Disclosures Proposed Rule, Matter No. R411005 ” on both the envelope and the text, and should be mailed to the following address: Federal Trade Commission, FACTA Free Reports, Post Office Box 1031, Merrifield, VA 22116-1031. Please note that courier and overnight deliveries cannot be accepted at this address. Courier and overnight deliveries should be delivered to the following address: Federal Trade Commission/Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments containing confidential material must be filed in paper form. Comments on any proposed filing, recordkeeping, or disclosure requirements that are subject to paperwork burden review under the Paperwork Reduction Act should additionally be submitted to: Office of Information and Regulatory Affairs, Office of Management and Budget, New Executive Office Building, Room 10102, Washington, DC 20503, Attention: Desk Officer for Federal Trade Commission. Such comments should also be mailed to the following address: Federal Trade Commission, FACTA Free Reports, Post Office Box 1031, Merrifield, VA 22116-1031. Because courier and overnight deliveries cannot be accepted at this address, they should instead be delivered to the following address: Federal Trade Commission/Office of the Secretary, Room 159-H, 600 Pennsylvania Avenue, N.W., Washington, DC 20580.

The Commission vote approving publication of the Federal Register Notice was 5-0.

Copies of the Federal Register Notice are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1 877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. R411004)