Prescreen Opt-Out '07 SS

Supporting Statement for the
Prescreen Opt-Out Disclosure Rule
16 C.F.R. Part 642
(OMB Control No. 3084-0132)
(1) & (2)

Necessity for and Use of the Information Collected

Section 213 of the Fair and Accurate Credit Transactions Act of 2003 (“FACT Act” or
“the Act”) required the Federal Trade Commission, in consultation with the federal banking
agencies and the National Credit Union Administration, to issue a rule to improve the required
notice to consumers of their right to opt out of solicitations for receiving firm offers of credit or
insurance (“prescreened” offers). A final Rule was published in the Federal Register on January
31, 2005 (70 FR 5022) with an effective date of August 1, 2005.
Under Section 615 of the Fair Credit and Reporting Act (“FCRA”), 15 U.S.C. § 1681m,
users of consumer reports have been required to provide consumers receiving prescreened offers
of credit or insurance with a notice of their right to elect to be excluded from the list of those
receiving such solicitations. In order to make the notice simple and easy to understand, as
mandated by the FACT Act, the Rule sets forth certain baseline requirements for the size,
placement, and format of the notice. The Rule also provides entities making prescreened
solicitations with model notices (16 C.F.R. Part 698, Appendix A) that they may use to comply
with the Rule.
(3)

Consideration of the Use of Information Technology to Reduce Burden

Not applicable. The required notices are standardized and machine-generated. The statute
applies only to “written” solicitations. 15 U.S.C. § 1681m(d)(1). In addition, prescreened
solicitations, by definition, are sent directly to consumers. Because prescreened solicitations are
based upon information received from consumer reporting agencies, entities making prescreened
solicitations typically only have physical mailing addresses, not e-mail addresses, for consumers
solicited. Nothing in the Rule precludes electronic solicitations from being accompanied by a
similar electronic notice. As such, the Rule is consistent with the Government Paperwork
Elimination Act, Pub. L. No.105-227, Title XVII, 112 Stat. 2681-749, which requires, in relevant
part, that agencies provide for the option of electronic maintenance, submission, or disclosure of
information, when practicable, as a substitute for paper.
(4)

Efforts to Identify Duplication

The Rule’s notice requirements do not duplicate any other information collection
requirements imposed under federal or state law.
(5)

Efforts to Minimize Burden on Small Organizations
The Rule’s notice requirements are designed to impose the minimum burden on all

affected members of the industry, regardless of size.
The Commission does not believe that the Rule has had a significant economic impact on
a substantial number of small entities. The FCRA, as noted, previously mandated the opt-out
notice. The FACT Act required the Commission to adopt a rule to make the required statement
simple and easy to understand. The Rule applies to any entity that makes prescreened offers of
credit or insurance. The Commission has been unable to determine the number of small entities
that purchase prescreened lists from consumer reporting agencies. The Commission believes,
however, that very few small entities make prescreened offers of credit or insurance. Although
there may be some small entities among the entities making prescreened offers, the economic
impact of the Rule is unlikely to be significant on a particular entity, nor is the Rule likely to
have a significant economic impact on a substantial number of small entities. The minimal
impact on creditors and insurers would likely consist of revising notices that they already give in
order to make the notices simple and easy to understand, and the Rule contains a model notice
form to assist in this process.
(6)

Consequences of Conducting the Collection Less Frequently

Less frequent “collection” would violate the express statutory language of the FCRA,
which requires that each prescreened offer of credit or insurance be accompanied by an opt-out
notice.
(7)

Circumstances Requiring Collection Inconsistent With Guidelines

The collection of information in the Rule is consistent with all applicable guidelines
contained in 5 C.F.R. § 1320.5(d)(2).
(8)

Public Comments/Consultation Outside the Agency

During the rulemaking, the FTC received approximately 60 comments concerning the
proposed Rule. Most commenters expressed general support for a Rule requiring an improved
and more understandable opt-out notice, but commenters disagreed on what manner and format
would be best to accomplish the goals of the FACT Act. Moreover, as required by the FACT
Act, during the rulemaking, the Commission staff consulted with the other affected federal
agencies on drafting the Rule. In addition, Commission staff conducted discussions with various
trade associations. In July 2007, the Commission specifically sought public comment to extend
through November 30, 2010, the current OMB clearance for information collection requirements
contained in the Rule. No comments were received in response to that request. 72 FR 42091
(Aug 1, 2007).
(9)

Payments and Gifts to Respondents
Not applicable.
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(10) & (11)

Assurances of Confidentiality/Matters of a Sensitive Nature

Not applicable. The Rule does not require the disclosure or production of sensitive or
confidential respondent or customer information.
(12)

Estimated Annual Hours and Labor Cost Burden
Annual Hours

The FTC staff estimates that the information collection burden for the notice
requirements mandated by the Act and the Rule will be between 1,000 to 1,500 hours.
When issuing the final Rule, the Commission estimated that the annual burden to industry
would be between 43,600 and 45,600 hours. This estimate was comprised of 500 - 750
companies each spending 8 hours to revise an existing solicitation, plus 100 companies each
needing an additional 396 hours to revise multiple solicitations ((500 companies x 8 burden
hours + 39,600 burden hours = 43,600 burden hours); (750 companies x 8 burden hours + 39,600
burden hours = 45,600 burden hours)).
Since the OMB’s approval of the final Rule in 2004, the requirements of the Rule have
not changed. The previous estimates included a one-time burden to reprogram and update
systems to revise existing notices and to re-format solicitations to comply with the Rule.
Because the Rule has been in effect since August 1, 2005, covered entities have already incurred
the one-time costs of transition to compliant notice formats. Accordingly, the annual PRArelated burden associated with the Rule is now reduced. FTC staff believes that the primary cost
of continuing to comply with the Rule is limited to the legal review each entity determines is
necessary to remain in compliance.
The Commission staff continues to estimate that between 500 and 750 entities make
prescreened solicitations. Because no addition revision or reformatting is necessary, however,
staff has lowered the estimate of the burden hours to approximately 2 hours (one quarter of one
business day), rather than the 8 hours that was the estimate to revise and reformat solicitations
when the Rule was promulgated. Accordingly, the total annual burden is between 1,000 and
1,500 hours (500 to 750 x 2 hours of annual burden).
Labor costs
The Commission staff estimate assumes that in-house legal counsel will handle most of
the compliance review and has applied an average hourly wage of $250/hour for their labor.
Accordingly, the total cost for all affected entities would be between $250,000 and $375,000
(1,000 to 1,500 burden hours x $250 per hour of legal review time).

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(13)

Capital and Other Non-labor Costs: 0 or minimal.
Covered entities are now equipped to provide the required notice.

(14)

Estimated Cost to the Federal Government

As part of its ongoing responsibilities for FCRA enforcement, staff currently monitors
compliance with the prescreen opt-out notice requirement by those limited number of affected
entities that fall under the Commission’s jurisdiction. Consequently, the additional costs
incurred from monitoring the Rule’s notice requirements are estimated to be 0 or minimal.
(15)

Program Changes or Adjustments

There are no program changes. The estimated total annual hours burden has decreased to
1,500 hours from the 45,600 hours estimate in 2004. This decrease is due to staff’s updated
burden estimate, which no longer includes the one-time burden to reprogram and update systems
to comply with the Rule. For the same reason, the estimated total labor hours burden has also
decreased to $375,000 from $1,213,329.
(16)

Statistical Use of Information/Publication of results

Not applicable. There are no plans to publish for statistical use any information required
by the Rule.
(17)

Display of the Expiration Date for OMB Approval
Not applicable.

(18)

Exceptions to the “Certification for Paperwork Reduction Act Submissions”
Not applicable.

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