CUNA Regulatory Comment Call


October 5, 2004

FTC Proposed Rule on Opt-Out Disclosures Relating to Prescreened Offers for Credit or Insurance
(Not a Major Rule)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.coop and to Assistant General Counsel Jeff Bloch at jbloch@cuna.coop; or mail them to Mary and Jeff in c/o CUNA's Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6732, if you would like a copy of the proposed rule, or you may access it on the Internet at the following address:
http://www.ftc.gov/os/2004/09/040927prescreenfrn.pdf

BACKGROUND

President Bush last December signed into law the FACT Act that permanently extends the federal preemptions for credit reporting under the FCRA. The new law also creates a number of important new consumer protections designed to help prevent identity theft and assist consumers who become victims of this rapidly growing crime. It also contains new restrictions on information sharing and creates a new federal commission that will coordinate financial education efforts at the national, state, and local levels.

The FACT Act will be implemented through a number of new rules that will be issued this year. Access below for a special issue of RegWatch that describes the significant provisions of the FACT Act:

http://www.cuna.org/reg_advocacy/member/regwatch/regwatch.html

Under the provisions of the FCRA that existed prior to the FACT Act, when an entity uses a consumer report to make an unsolicited, or "prescreened" offer of credit or insurance, that entity is required to include a clear and conspicuous statement that the consumer has a right to prohibit information contained in the credit file with a consumer reporting agency from being used in connection with prescreened offers, along with a toll-free telephone number that may be used to exercise the opt-out. The FACT Act adds additional requirements to these provisions by mandating that such disclosures be presented in a format, type size, and manner that is simple and easy to understand. The FACT Act requires the FTC to issue a rule that implements and provides additional information regarding these new provisions.

DESCRIPTION OF THE PROPOSED RULE

The proposed rule requires entities engaged in prescreened solicitations to provide "layered" notices to consumers consisting of an initial, prominent statement that provides the basic opt-out information, followed by a separate, longer explanation that provides additional details. The short notice must be a simple and easy to understand statement that the consumer has a right to opt-out of receiving prescreened solicitations, and it must include a toll-free telephone number the consumer may call to opt-out. The proposed rule will prohibit additional information in the short notice and will define "simple and easy to understand" as plain language designed to be understood by ordinary consumers. Factors that will be considered in this determination include using clear and concise sentences, active voice, avoiding legal and technical terminology, and avoiding multiple negatives.

The short notice must also direct the consumer to the location of the long notice and must be:

The long notice must also be a "simple and easy to understand statement," under the same definition that applies to the short notice, and must provide the information currently required under the FCRA for prescreened solicitations. This includes statements that:

The long notice must also:

The long notice must appear within the solicitation, and the short notice must direct the consumer to the long notice. However, the long notice does not necessarily have to be in the same document as the short notice. The long notice may also include additional information, as long as it does not detract, contradict, or undermine the purpose of the opt-out notice.

The FTC has also proposed model language that may be used to comply with the rule that is in both English and Spanish. The effective date of this rule will be sixty days after it becomes final.

QUESTIONS TO CONSIDER REGARDING THE FTC's PROPOSED RULE ON OPT-OUT NOTICES RELATING TO PRESCREENED OFFERS FOR CREDIT OR INSURANCE

(The FTC has specifically requested comments on these issues)
Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com