Free Ann'l File Discl. NPRM '09 SS FIN_mtd

Supporting Statement for Information Collection
Proposed Amendments to the Free Annual File Disclosures Rule
16 C.F.R. Part 610
(OMB Control No. 3084-0128)
1.

Necessity for and Use of the Information

The Credit CARD Act of 2009 (“the Act”) mandates that the Federal Trade Commission
(“FTC” or “Commission”) adopt a rule by February 22, 2010, requiring any advertisement for a
free credit report, in any medium, to disclose prominently that free credit reports are available
under federal law at “AnnualCreditReport.com.” The Commission intends to implement the
Act’s disclosure requirements by amending the current Free Annual File Disclosures Rule (“Free
Reports Rule” or “the Rule”), 16 C.F.R. Part 610, which requires nationwide consumer reporting
agencies (“CRAs”) and nationwide specialty CRAs to provide to consumers, upon request, one
free annual file disclosure. The Rule also requires the nationwide CRAs to provide consumers
with the ability to request this disclosure through a centralized source, including an Internet
website, a toll-free telephone number, and a postal address.
Section 610.4 of the proposed amended Rule implements the Act’s advertisement
disclosure requirements, requiring prominent disclosures for television, radio, print, Internet
websites, Internet-hosted multi-media, and inbound and outbound telemarketing of “free credit
reports.” For example, television and radio advertisements must have the following disclosure:
“This is not the free credit report provided for by Federal law.” Moreover, the disclosure for
television must be in both the audio and visual portions of the advertisement. Proposed section
610.4 also contains general specifications to ensure that the required disclosures are sufficiently
prominent, such as requiring all audio disclosures to be delivered in a slow and deliberate
manner. The required information about how and where to obtain truly free credit reports and
their required visual and/or oral prominence will help prevent consumer deception regarding the
marketing of “free credit reports.”
The Commission also proposes to amend section 610.2 of the current Rule to prevent
interference with consumer ability to obtain free annual file disclosures through the centralized
source, as permitted by federal law. Specifically, proposed section 610.2(g)(1) provides that if a
nationwide CRA chooses to advertise products and services through the centralized source
website, such as credit scores or credit monitoring, it can do so only after the consumer has
obtained his or her free annual file disclosure. In addition, proposed section 610.2(h) prohibits
three practices that may interfere with or undermine consumer ability to obtain free annual file
disclosures: (1) placing hyperlinks on AnnualCreditReport.com that transport consumers away
from the centralized source to the nationwide CRAs’ commercial websites; (2) requiring
consumers to establish an account to obtain a free annual file disclosure; and (3) imposing any
“terms and conditions” on consumers’ access to free annual file disclosures. These requirements
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.

3.

Consideration of Using Improved Information Technology to Reduce Burden

Section 610.4 of the Proposed Amended Rule
The proposed section 610.4 amendments implement section 205 of the Act, requiring
prominent disclosures in advertisements for free credit reports. Consistent with the aims of the
Government Paperwork Elimination Act, 44 U.S.C. § 3504 note, the disclosures are tailored to
the specific medium in which the advertisements appear. Accordingly, the proposed amended
Rule is flexible, permitting each covered entity to choose the form of advertising that it considers
best, without the need to acquire any expensive new technology in order to comply with the
Rule.
Section 610.2 of the Proposed Amended Rule
The proposed section 610.2 amendments address interference with consumer ability to
obtain free credit reports through AnnualCreditReport.com, the only recognized source of free
credit reports under federal law. These proposed amendments are designed to make it easier for
consumers to take advantage of information technology to obtain their free credit reports.
Ultimately, facilitating the dissemination of credit reports through AnnualCreditReport.com
reduces compliance costs for covered entities.
4.

Efforts to Identify Duplication/Availability of Similar Information

FTC staff has not identified any other federal or state statutes, rules, or policies that
duplicate, overlap, or conflict with the proposed amendments to the Free Reports Rule.
5.

Efforts to Minimize Burdens on Small Businesses

Section 610.4
As discussed above, the proposed section 610.4 amendments implement section 205 of
the Act. 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. In addition, there also
may be a small number of independently operating credit reporting agencies or resellers of
consumer reports, that, in theory, might advertise for “free credit reports.” Based upon its
knowledge of the industry, Commission staff believes that the number of such entities is likely to
be fewer than 30. Accordingly, the economic impact of section 610.4 is unlikely to be
significant.
Section 610.2
The proposed amendments to this section pertain solely to nationwide CRAs that provide
annual file disclosures through the centralized source. Accordingly, these proposed amendments
will not impact any small entity.
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6.

Consequences of Conducting Collection Less Frequently

The proposed section 610.4 advertising disclosures implement the express intent of
section 205 of the Act. The requirement that any advertisement for a free credit report in any
medium carry proscribed disclosures does not permit less frequent disclosure. In addition, the
section 610.2 requirements pertaining to advertising on the centralized source are intended to
facilitate consumer ability to obtain free credit reports, as intended by federal law.
7.

Circumstances Requiring Disclosures Inconsistent with Guidelines

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

Consultation Outside the Agency

Before finalizing revisions to the Rule, the FTC will seek and review public comments
and consider any recommendations to modify the proposed amendments.
9.

Payments/Gifts to Respondents
Not applicable.

10. & 11.

Assurances of Confidentiality/Matters of a Sensitive Nature

Not applicable. The proposed amendments do not require any covered entities to register
or file any documents with the Commission.
12.

Estimated Hours Burden:

Section 610.4
Affected Public: Nationwide CRAs, nationwide specialty CRAs, and independent
resellers of consumer information
Proposed section 610.4 requires all advertisements for “free credit reports” to contain
certain prescribed disclosures tailored to the medium used. As such, those disclosures are not a
“collection of information,” as defined by OMB’s regulations that implement the PRA,1 for
which to accord associated PRA “burden.”

1

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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Section 610.2
Affected Public: Nationwide CRAs
Estimated Hours Burden: 36 hours, cumulatively
Section 610.2 of the proposed amended Rule is designed to prevent interference by the
nationwide CRAs with consumer ability to obtain free annual file disclosures through the
centralized source, as permitted by federal law. Specifically, the nationwide CRAs must remove
hyperlinks on the centralized source to their commercial websites. In addition, nationwide
CRAs must delay advertising through the centralized source until after the consumer has
obtained requested annual file disclosures. The proposed amendments do not modify the
nationwide CRAs’ obligation under the current Rule to provide consumers with annual file
disclosures upon request.2 Nor are the proposed amendments likely to increase or decrease the
estimated number of annual file disclosures made available to consumers free of charge, whether
through the Internet, telephone, or mail.
The administrative costs associated with the proposed amendments to section 610.2
should present 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 tasks will require approximately 36 hours (12 hours per CRA), cumulatively,
to complete.
Estimated Labor Cost: $1,419, cumulatively
As noted above, the proposed amendments to section 610.2 should impose no more than
a de minimis, one-time burden for the three nationwide CRAs to reconfigure the centralized
source and their own proprietary websites. Commission staff assumes that professional technical
personnel and/or management personnel will implement the proposed amendments, at an hourly
rate of $39.42.3 Accordingly, estimated total labor cost for each of the three nationwide CRAs to
comply with the proposed Rule amendments is $473.00 (12 hours x $39.42) or, cumulatively,
$1,419.
13.

Estimated Capital and Other Non-Labor Costs

The proposed Rule amendments should not impose any capital or other non-labor costs.
Nationwide CRAs likely will continue their current practice of using third-party contractors
2

The burden estimates for those obligations have already been accounted for and are subsumed within the
FTC’s existing clearance for OMB Control No. 3084-0128.

3

See http://www.bls.gov/ncs/ncswage2008.htm#Wage_Tables (National Compensation Survey: Occupational
Earnings in the United States 2008, U.S. 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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(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 estimated, these costs
likely will be incurred on a continuing basis, and will be calculated based on the number of
annual file disclosures requested by consumers. Again, staff believes that the proposed
amendments 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 it is likely that
consumers will merely be redirected from websites that require consumers to pay for their “free
credit report” to the centralized source.
14.

Estimated Cost to the Federal Government

FTC staff believes that the proposed amendments to the Rule will impose no additional
costs on the federal government. In the 2007 clearance for the current Rule, staff estimated that
the fiscal year cost to the FTC Bureau of Consumer Protection of enforcing the Rule’s disclosure
requirements would be approximately $160,000 per year. This estimate was based on the
assumption that 1.5 full attorney work years would be expended to enforce the Rule’s
requirements relating to disclosure. Clerical and other support services were also included in
this estimate. Staff believes that enforcement of the proposed amendments will require no
additional attorney work years.
15.

Program Changes or Adjustments

The proposed amendments under section 610.4 do not give rise to any “collection of
information” under the PRA. The proposed amendments to section 610.2 should impose no
more than a de minimis, one-time burden for the three nationwide CRAs to reconfigure the
centralized source and their own proprietary websites at an estimated 36 hours (12 hours per
CRA), cumulatively, to complete, at an estimated labor cost of $1,419 ($473 per CRA). As
stated above, the proposed Rule amendments should not impose any capital or other non-labor
costs.
16.

Publishing Results of the Collection of Information

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

Display of Expiration Date for OMB Approval
Not applicable.

18.

Exceptions to the Certifications for PRA Submissions
Not applicable.

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