Free Ann'l File Disclosures '07 SS FIN

Supporting Statement for
Information Collection Provisions of the
Free Annual File Disclosures Rule
16 C.F.R. Parts 610 & 698
(OMB Control # 3084-0128)
(1) & (2)

Necessity for and Use of the Information Collected

The Fair and Accurate Credit Transactions Act of 2003 (FACT Act or the Act), Pub. L.
No. 108-159, required the Federal Trade Commission to adopt rules to require the establishment
of (1) a centralized source through which consumers may request a free annual file disclosure
from each nationwide consumer reporting agency; (2) a standardized form for such requests; and
(3) a streamlined process for consumers to request free annual file disclosures from nationwide
specialty consumer reporting agencies. These file disclosures are commonly known as credit
reports.
The Act directed the Commission to issue these rules in final form no later than six
months after the enactment of the FACT Act. Accordingly, the Commission issued a final rule
on June 4, 2004. As mandated by the Act, the Rule requires nationwide consumer reporting
agencies and nationwide specialty consumer reporting agencies to disclose information to third
parties by requiring those consumer reporting agencies to provide to consumers, upon request,
one annual file disclosure. The extent to which these requirements are subject to the Paperwork
Reduction Act, 44 U.S.C. Chapter 35 (“PRA”), is described below.
The centralized source required by the Rule provides consumers with the ability to
request their free annual file disclosures from each of the nationwide consumer reporting
agencies through a centralized Internet website, toll-free telephone number, and postal address.
The Rule also requires the nationwide consumer reporting agencies to establish a standardized
form for Internet and mail requests for annual file disclosures, and provides a model standardized
form that may be used to comply with that requirement.
(3)

Consideration of the Use of Information Technology to Reduce Burden

The Act and Rule require nationwide consumer reporting agencies to use information
technologies in complying with their disclosure obligations under the Act by requiring those
consumer reporting agencies to establish a centralized internet web site for consumers to request
a free annual file disclosure. The Rule also contemplates that nationwide specialty consumer
reporting agencies may use information technologies in complying with their disclosure
obligations under the Act. Such technologies may help reduce the burden of information
collection imposed by the Act. In addition, nothing in the Act or Rule prohibits regulated entities
from using the least burdensome information technology to reduce compliance burdens.
Consistent with the Government Paperwork Reduction Elimination Act., Pub L. No. 105227, Title XVII, 112 Stat. 2681-749, nothing in the Rule prescribes that the disclosures be made,
records filed or kept, or signatures executed, on paper or in any particular format that would

preclude the use of electronic methods to comply with the Rule’s requirements.
(4)

Efforts to Identify Duplication

The Rule’s disclosure requirements do not duplicate any other information collection
requirements imposed by the Commission. To the extent some state laws also require free
annual file disclosures, similar to that required by the Act and Rule, nationwide and nationwide
specialty consumer reporting agencies can comply with such state laws by complying with the
Act and Rule, thereby avoiding duplication.1
(5)

Efforts to Minimize Burden on Small Organizations

The Rule’s disclosure requirements are designed to impose the minimum burden on all
affected members of the industry, regardless of size.
The Commission does not anticipate that the Rule will have a significant economic
impact on a substantial number of small entities. As noted above, the Rule applies to two types
of consumer reporting agencies: (1) nationwide consumer reporting agencies, and (2) nationwide
specialty consumer reporting agencies. The Commission has not identified any nationwide
consumer reporting agencies that are small entities. Furthermore, the Commission estimates,
based on industry sources, that there are fewer than 50 nationwide specialty consumer reporting
agencies currently doing business in the U.S. The Commission has been unable to find data on
which to estimate how many of these nationwide specialty consumer reporting agencies, if any,
are small entities. Based on industry sources, however, the Commission believes that the number
of such agencies that are small entities, if any, is insubstantial. While the economic impact of the
Rule on a particular small entity could be significant, overall the Rule will not have a significant
economic impact on a substantial number of small entities.
The Rule contains provisions that reduce burden on all entities. The Rule provides that,
during periods of extraordinary request volume, nationwide and nationwide specialty consumer
reporting agencies may redirect, or decline to accept, some requests, provided that those
consumer reporting agencies implement reasonable procedures to anticipate and respond to
consumer demand for annual file disclosures.
(6)

Consequences of Conducting the Collection Less Frequently

Less frequent “collection” would violate the express statutory language of the Act.
Specifically, the Act’s requirement that nationwide and nationwide specialty consumer reporting
agencies make a free annual file disclosure upon request of the consumer, does not permit less
frequent disclosure. FACT Act § 211(a).

1

The FACT Act does not preempt existing state laws which allow a consumer to obtain
a free file disclosure more than once a year. See FACT Act § 212(e)(4).
2

(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

Before promulgating the Rule, the FTC sought public comments on the Rule, received
and considered comments from entities covered by the Rule’s disclosure requirements. In
seeking renewal of OMB clearance, on December 29, 2006, the FTC again sought public
comments on the information collection requirements associated with the Rule. No comments
were received.
(9)

Payments and Gifts to Respondents
Not applicable.

(10)

Assurances of Confidentiality

Not applicable. No assurance of confidentiality is necessary because although the Rule
requires regulated entities to disclose records, it does not require the submission of any such
records with the agency.
(11)

Matters of a Sensitive Nature

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

Estimated Annual Hours and Labor Cost Burden
Estimated total annual hours burden: 311,000 hours (rounded to the nearest thousand)

In its 2004 PRA-related Federal Register Notices2 and corresponding submission to
OMB, FTC staff estimated that consumer reporting agencies would receive an average of 16.6
million new annual file disclosure requests per year during the three-year period from May 1,
2004 through April 30, 2007.3 Estimated average annual disclosure burden for those three years

2

69 FR 13192 (Mar. 19, 2004); 69 FR 35468 (Jun. 24, 2004).

3

Staff predicted that nationwide and nationwide specialty consumer reporting agencies would receive
19.9 million new annual file disclosure requests per year. However, the nationwide and nationwide specialty
consumer reporting agencies were not required to provide annual file disclosures under the Rule until

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was approximately 199,000 hours.4
No provisions in the Rule have been amended since staff’s prior submission to OMB.
However, the Consumer Data Industry Association recently stated that since December 1, 2004,
the nationwide consumer reporting agencies have provided over 52 million free annual file
disclosures through the centralized Internet website, toll-free telephone number, and postal
address required to be established by the FACT Act and the Rule.5 Applying this data, staff
estimates that the average annual disclosure burden for the three-year period for which the
Commission seeks OMB clearance is approximately 311,000 hours, as detailed below, and that
the nationwide and the nationwide specialty consumer reporting agencies will receive 26.69
million requests per year from consumers for free annual file disclosures.6
Annual File Disclosures Provided Through the Internet
Both nationwide and nationwide specialty consumer reporting agencies will likely handle
the overwhelming majority of consumer requests through internet websites.7 The annual file
disclosure requests processed through the internet will not impose any hours burden per request
on the nationwide and nationwide specialty consumer reporting agencies, even though there will
be some periodically recurring time and investment required to adjust the internet capacity
needed to handle the new changing request volume. Consumer reporting agencies likely will
make such adjustments by negotiating or renegotiating outsourcing service contracts annually or
as conditions change. Negotiating and renegotiating such contracts requires the time of trained

December 2004, 6 months after the Rule was published. On that basis, staff predicted there would be 9.45
million new requests for annual file disclosures for the first year of the clearance (19.9 million/2). Thus, staff
projected that consumer reporting agencies would receive an average of 16.6 million new requests per year
during the requested clearance period. [(9.45 million + 19.9 million + 19.9 million)/3 = 16.6 million]
4

This total included estimated time to increase call center and internet capacity to handle heightened
request volume, alternate use of live operators in limited instances, and processing mail requests.
5

Letter from Stuart K. Pratt, President & CEO, Consumer Data Industry Association, to Rep. Barney
Frank, Committee on Financial Services, U.S. House of Representatives (Dec. 1, 2006).
6

This figure annualizes the Consumer Data Industry Association's estimate of 52 million new
requests for the two-year period from December 1, 2004 to December 1, 2006 and revises it upward over the
next three years based on population growth projections issued by the U.S. Census Bureau. See U.S. Census
Bureau Interim Projections by Age, Sex, Race, and Hispanic Origin, available at
http://www.census.gov/ipc/www/usinterimproj/.
7

According to a HarrisInteractive poll, the percentage of households that have access to the internet
is currently over 60% and increasing. See The Harris Poll #8, February 5, 2003, available at
http://www.harrisinteractive.com/harris_poll/index.asp?PID=356. In addition, internet users are probably
more likely to request an annual file disclosure. Accordingly, staff estimates that annually, 75% of the 26.69
million new requests (or approximately 20 million) will be made online.

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personnel. Staff estimates that negotiating such contracts will require a cumulative total of 8,320
hours and $425,318 in setup and/or maintenance costs.8 Such activity is treated as an annual
burden of maintaining and adjusting the changing internet capacity requirements.
Annual File Disclosures Requested over the Telephone
Most of the telephone requests for annual file disclosures will also be handled in an
automated fashion, without any additional personnel needed to process the requests. As with the
internet, additional time and investment will be needed to increase and administer the automated
telephone capacity for the expected increase in request volume. The nationwide and nationwide
specialty consumer reporting agencies will likely make such adjustments by negotiating or
renegotiating outsourcing service contracts annually or as conditions change. Staff estimates that
this will require a total of 6,240 hours at a cost of $301,205 in setup and/or maintenance costs.9
This also is treated as an annual recurring burden necessary to obtain, maintain, and adjust
automated call center capacity.
A small percentage of those consumers who telephone the centralized source or the
nationwide speciality consumer reporting agencies will not have telephone equipment compatible
with an automated system and may need to be processed by a live operator.10 Based on their
knowledge of the industry, staff estimates that each of these requests will take 5 minutes to
process, for a total of 5,334 additional hours of operator time. [(64,008 x 5 minutes)/60 minutes
= 5,334 hours]

8

Based on the time necessary for similar activity in the federal government (including at the FTC),
staff estimates that such contracting and administration will require approximately 4 full-time equivalent
employees (“FTE”) for the web service contract. Thus, staff estimates that administering the contract will
require 4 FTE, which is 8,320 hours per year (4 FTE x 2080 hrs/yr). The cost is based on the reported Bureau
of Labor Statistics (BLS) rate ($48.03) for computer programmers for 2005 (most recently available BLS data)
multiplied by 6.426% (approximate wage inflation for 2005 and 2006 based on the BLS Employment Cost
Index), resulting in a wage of $51.12 per hour. Thus, the estimated setup and maintenance cost for an internet
system is $425,318 per year (8,320 hours x $51.12/hour).
9

Staff estimates that recurrent contracting for automated telephone capacity will require
approximately 3 FTE, a total of 6,240 hours (3 x 2,080 hours). Applying a wage rate of $48.27 based on the
2005 BLS rate for marketing managers ($45.36/hr), the estimate for setup and maintenance cost is $301,205
(6,240 x $48.27) per year.
10

Based on their knowledge of the industry, staff estimates that consumers will submit 24% (6.4
million) of the average 26.69 million new requests for annual file disclosures by telephone. Of those, an
estimated 1% (or 64,056) will not have telephone equipment compatible with an automated system and may
need to be serviced by live personnel.

5

Annual File Disclosures that Require Processing by Mail
Based on their knowledge of the industry, staff believes that no more than 1% of
consumers (1% x 26.69 million, or 266,900) will request an annual file disclosure through US
postal service mail. Staff estimates that 10 minutes per request is required to handle these
requests, thereby totaling 44,483 hours of time by clerical personnel. [(266,900 x 10 minutes)/60
minutes = 44,483 hours]
In addition, whenever the requesting consumer cannot be identified using an automated
method (a website or automated telephone service), it will be necessary to redirect that consumer
to send identifying material along with the request by mail. Staff estimates that this will occur in
about 5% of the new requests (or 1,321,155) that were originally placed over the internet or
telephone. Staff estimates that inputting and processing those redirected requests will consume
approximately 10 minutes apiece at a cumulative total of 220,193 clerical hours. [(1,321,155 x
10 minutes)/60 minutes = 220,193 hours]
Instructions to consumers
The Rule also requires that certain instructions be provided to consumers. See Rule
sections 610.2(b)(2)(iv)(A,B), 610.3(a)(2)(iii)(A,B). Minimal associated time or cost is
involved, however. Internet instructions to consumers are embedded in the centralized source
website and do not require additional time or cost for the nationwide consumer reporting
agencies. Similarly, regarding telephone requests, the automated phone systems provide the
requisite instructions when consumers select certain options. Some consumers who request their
credit reports by mail may additionally request printed instructions from the nationwide and
nationwide specialty consumer reporting agencies. Staff estimates that there will be a total of
1,588,055 requests each year for free annual file disclosures by mail.11 Based on their knowledge
of the industry, staff estimates that of the predicted 1,588,055 mail requests 10% (or 158,806)
will request instructions by mail. If printed instructions are sent to each of these consumers by
mail, requiring 10 minutes of clerical time per consumer, this will total 26,468 hours. [(158,806
instructions x 10 minutes)/60 minutes per hour]
Labor costs: $5.19 million
Labor costs are derived by applying hourly cost figures to the burden hours described
above. Accordingly, staff estimates that it will cost $70,195 to provide annual file disclosures for

11

This figure includes both the estimated 1% of 26.69 million requests that will be made by mail each
year (266,900), and the estimated 5% of the requests initially made over the internet or telephone that will be
redirected to the mail process (5% of 99% of 26.69 million = 1,321,155).

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requests that require a telephone service representative (5,338 hours x $13.15 per hour).12 The
remaining processing of requests for annual file disclosures and instructions will be performed by
clerical personnel, which will require 291,144 hours at a cost of $4,390,452. [(44,483 hours for
handling initial mail request + 220,193 hours for handling requests redirected to mail + 26,468
hours for handling instructions mailed to consumers) x $15.08 per hour13] As elaborated on
above, staff estimates that a total of 14,560 labor hours (8,320 internet contract hours + 6,240
telephone capacity contract hours) will be needed to obtain, maintain, and adjust the new
capacity requirements for the automated telephone call center and the internet web services. This
will result in approximately $726,523 per year in labor costs. [(8,320 hours x $51.12 per hour for
automated phone service) + (6,240 hours x $48.27 per hour for web services)]14 Thus, staff
estimates that all non-contract labor will cost $5.19 million each year.
(13)

Capital and Other Non-labor Costs
Estimated annual non-labor cost burden: $8.39 million.

Staff believes it is likely that the consumer reporting agencies will use third-party
contractors (instead of their own employees) to increase the capacity of their systems. 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 requests handled by the systems.
Staff estimates that the total annual amount to be paid for services delivered under these
contracts is $8.39 million.15
(14)

Estimated Cost to the Federal Government

Staff estimates that the fiscal year cost to the FTC Bureau of Consumer Protection of
enforcing the Rule’s disclosure requirements will be approximately $160,000 per year. This
estimate is based on the assumption that 1.5 full attorney work years will be expended to enforce
the Rule’s requirements relating to disclosure. Clerical and other support services are also
included in this estimate.

12

The 2005 BLS wage rate for telephone operators, $12.36, increased by 6.426% for compounded
wage inflation, is $13.15.
13

The 2005 BLS wage rate for employees in administrative support, clerical (level 4 of 9), $14.17,
multiplied by 6.426% for compounded wage inflation, is $15.08.
14

The 2005 BLS wage rate for top-level computer programmers, $48.03, multiplied by 6.426% for
compounded wage inflation, is $51.12. The 2005 BLS wage rate for marketing managers, averaged overall, is
$45.36; compounded for wage inflation at 6.426% it becomes $48.27.
15

This consists of an estimated $7.69 million for automated telephone cost ($1.20 per request x 6.41
million requests) and an estimated $700,000 ($0.035 per request x 20 million requests) for internet web service
cost. Per unit cost estimates are based on staff’s knowledge of the industry.

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(15)

Program Changes or Adjustments

There are no program changes posed by the final Rule. Increased estimates for burden
hours and labor costs from the FTC’s prior clearance request are due to a sharp increase in staff’s
estimated average number of annual file disclosure requests per year (previously estimated at
16.6 million, now 26.69 million) and, additionally regarding labor costs, an increase in estimated
hourly wage rates.
(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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